Trust Decanting Requirements in Texas
At a glance
| Governing law and available decanting route | Texas Property Code ch. 112, subch. D, §§ 112.071-.087; calls route “distribution of trust principal in further trust,” not decanting. Authorized trustee distributes all/part of first-trust principal to irrevocable second trust; statute does not authorize first-trust textual modification without a distribution (§§ 112.071(4),(8)-(9), .072-.073) |
|---|---|
| First-trust scope, state connection, retroactivity, and opt-out | Existing irrevocable inter vivos or testamentary trust; no separate situs, governing-law, creation-date, or retroactivity test stated in Subchapter D. Express trust-instrument prohibition controls; general no-amendment/no- revocation or spendthrift clause does not. Instrument/other-law/court further- trust authority preserved; no current distribution need required (§§ 112.071(4), .081-.084) |
| Authorized fiduciary and required distribution power | “Authorized trustee” is person other than settlor with first-trust authority to distribute principal to/for ≥1 current beneficiary. Must act in good faith, consistently with trust terms/purposes and beneficiaries' interests. Divided- discretion trust uses trustee holding full discretion; no statutory duty to exercise, inform, or review (§§ 112.071(1), .072(e), .073(f), .079, .083) |
| Expanded, limited, mandatory, and ascertainable-standard branches | Full discretion means power not limited as “limited discretion.” Limited includes mandatory no-discretion distribution or ascertainable-standard authority, including health, education, support, or maintenance. Full track may select beneficiaries/grant powers; limited track must preserve beneficiary, distribution-language, class, and appointment-power structure (§§ 112.071(5)- (6), .072-.073) |
| Beneficiary, vested-interest, and power-of-appointment changes | Full track may benefit ≥1/all current and ≥1/all successor/presumptive- remainder beneficiaries, include later class members, and give an outright- eligible current beneficiary a presently exercisable/broader power of appointment. Limited track keeps same current/successor/remainder beneficiaries, later class members, and same appointment power/class. Neither track may reduce/modify listed current vested mandatory, annuity/unitrust, percentage, or fixed-dollar withdrawal rights (§§ 112.072-.073, .085(1)) |
| Second-trust terms, duration, governing law, and administration | Second trust must be irrevocable. May retain first-trust name and, subject to federal law, TIN; same-name route needs no retitling. Full/partial distributions have different later-discovered/later-acquired asset defaults. Cannot reduce, limit, or modify first trust's perpetuities provision unless first trust expressly permits; no separate second-trust situs/governing-law limit stated (§§ 112.071(9), .0715, .080, .085(6)) |
| Tax, charitable, special-needs, compensation, and other guardrails | Preserve originally claimed federal exclusions/deductions/benefits; grantor- owner status may differ; S-corporation stock must reach permitted shareholder; retirement interest cannot shorten minimum-distribution period. Charity may trigger Attorney General notice. No special-needs branch. Cannot materially limit fiduciary duty, reduce/indemnify liability, add ordinary-care exoneration, or eliminate remover right. Compensation cannot be sole purpose; reasonable conformity/carryover allowed, but no asset-distribution commission (§§ 112.074(c), .085-.087) |
| Notice, recipients, consent, waiver, objection, and representation | No settlor/beneficiary consent or court approval if written notice given ≥30 days before distribution to all current and presumptive remainder beneficiaries; qualifying charitable circumstances add Attorney General. Guardian/conservator receives protected person's notice; otherwise minor's parent. Exceptions: diligent unlocatability, unknown person, written waiver, similar-interest descendant with no apparent conflict; AG may waive in writing. Notice states intent, objection/court rights, method/date, trustee contact, both trust agreements; registered/certified return-receipt mail or personal delivery unless written waiver (§ 112.074) |
| Exercise instrument, court review, effectiveness, and remedies | Written exercise instrument signed/acknowledged by authorized trustee and filed with both trusts' records. Trustee may petition; timely beneficiary objection lets trustee or beneficiary seek approval/modification/denial; timely AG objection requires petition. Trustee bears purposes/terms/interests proof; beneficiary breach action preserved. Complete decanting presumptively captures later assets; partial does not. No duty/inference from nonexercise; Subchapter D states no special limitations period, substantial-compliance saving rule, or defect cure (§§ 112.075, .078, .080, .083) |
Requirements one by one
The first trust and trustee must satisfy narrow definitions
Current § 112.071 limits the route to an existing irrevocable inter vivos or testamentary trust. The authorized trustee cannot be the settlor and must have authority under the first trust to distribute principal to or for at least one current beneficiary.
An express decanting prohibition controls. A general no-amendment or no- revocation clause and a spendthrift clause do not by themselves bar the route, and the statute preserves further-trust authority from the instrument, other law, or a court order. Tex. Prop. Code §§ 112.081, .082, .083, and .084.
Full and limited discretion produce different beneficiary rules
Under § 112.072, full discretion may benefit one or more current beneficiaries and one or more successor or presumptive remainder beneficiaries. It may include later class members and may give an outright-eligible current beneficiary a presently exercisable appointment power with a broader or different appointee class.
Under § 112.073, mandatory or ascertainable-standard authority is limited discretion. The second trust must keep the same current, successor, and presumptive remainder beneficiaries, the same distribution language, all later class members, and the same appointment power and appointee class.
Both trustees act in good faith, under the trust's terms and purposes, and in the beneficiaries' interests.
The second trust is irrevocable and may preserve identity
Current § 112.0715 permits a same-name second trust to retain the first trust's tax identification number subject to federal law, and its property need not be retitled. A complete distribution presumptively includes later-discovered and later-acquired assets; a partial distribution presumptively leaves them in the first trust. Tex. Prop. Code § 112.080.
The second trust cannot reduce, limit, or modify the first trust's perpetuities provision unless the first trust expressly permits that change.
Notice substitutes for consent and ordinary court approval
Section 112.074 allows nonjudicial action without settlor or beneficiary consent after written notice to all current and presumptive remainder beneficiaries. The notice is due no later than the 30th day before distribution, must state the intent, objection and court rights, method, date, and trustee contact, and must include both trust agreements. Delivery is personal or by registered or certified return-receipt mail unless waived in writing.
Guardians and conservators receive protected beneficiaries' notice; otherwise a minor's parent does. Unknown or diligently unlocatable beneficiaries and a similar-interest descendant without apparent conflict may be omitted as stated in the section. Charitable circumstances can require separate Attorney General notice.
The exercise instrument is not the court petition
Section 112.075 requires a written instrument signed and acknowledged by the authorized trustee and filed with both trusts' records. It does not state that every cotrustee must sign.
Court approval is optional in the ordinary noticed case. A timely beneficiary objection allows either side to petition; it does not itself say the trustee must petition. A timely Attorney General objection is different: no distribution may occur without a petition. In court, the trustee bears the burden to prove the distribution furthers the trust's purposes, follows its terms, and serves the beneficiaries' interests. Tex. Prop. Code § 112.078.
Vested, fiduciary, tax, and compensation limits remain
Section 112.085 protects current vested mandatory distributions, annuity or unitrust interests, and percentage or fixed-dollar withdrawal rights. It also bars material fiduciary-duty reduction, reduced or indemnified liability, ordinary-care exoneration, and elimination of another person's power to remove or replace the exercising trustee.
Current § 112.086 protects claimed federal tax benefits, permits different grantor-owner treatment, restricts S-corporation stock to a permitted shareholder, and bars shortening an applicable minimum-distribution period. Those statutory guardrails are not a tax calculation or assurance.
Compensation cannot be the sole purpose absent a court direction. A valid and reasonable other purpose may support conformity with state-law limits, and compensation may continue, but the trustee receives no commission for moving a particular asset. Tex. Prop. Code § 112.087.
What trips people up
Limited discretion includes a mandatory distribution with no discretion as well as a health, education, support, maintenance, or other ascertainable standard. It is not simply a weaker version of the full-discretion route; it preserves the beneficiary and appointment structure.
The statute creates no duty to decant, notify beneficiaries that decanting law exists, or review the trust for a possible exercise. Nonexercise does not imply impropriety. Tex. Prop. Code § 112.083.
Common questions
Must a Texas trustee obtain beneficiary consent?
No, if the statutory notice route is completed. Individual notice recipients may waive notice in writing, but a waiver is not the same as changing the substantive beneficiary limits. Tex. Prop. Code § 112.074.
Is court approval always required after an objection?
Only a timely Attorney General objection makes a petition mandatory under the decanting section. A timely beneficiary objection permits the trustee or beneficiary to petition. Tex. Prop. Code § 112.078(b)-(c).
May the trustee decant only part of the trust?
Yes. The power reaches all or part of principal. Later-discovered and later- acquired assets presumptively follow a complete distribution but stay with the first trust after a partial one unless the instrument provides otherwise.
Statutes and sources
- Tex. Prop. Code §§ 112.071-.075 — definitions, second-trust creation, full/limited discretion, notice, waiver, and exercise instrument; official current Chapter 112 (accessed September 12, 2026).
- Tex. Prop. Code §§ 112.078-.087 — court route, later assets, preserved authority, no-duty rule, opt-out, vested/fiduciary/perpetuities limits, tax, and compensation; official current Chapter 112 (accessed September 12, 2026).
Source links
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