3. Alienation

Question 1

What are consequences of voluntary assignment?

Answer 1

Assignee subject to previous trust (unless trust/statute provides otherwise)

Question 2

What is required for involuntary assignment?

Answer 2

Insolvent Beneficiary

- Creditor can then levy on his interest, to be subject to judicial sale

Question 3

What are consequences of involuntary assignment?

Answer 3

Creditor subject to previous trust (unless trust/statute provides otherwise)

Question 4

What are the exceptions for involuntary assignment?

Answer 4

Court orders Trustee to directly pay income to Creditor until debt is satisfied

Question 5

What is the Spendthrift clause?

Answer 5

No voluntary assignment allowed

• Assignee can not force Trustee to pay directly
• Trustee may honour assignment by paying anytime

No involuntary assignment allowed
- Creditors cannot reach Beneficiaries’ interest to satisfy debts

Protect Beneficiary from own improvidence

Question 6

What are the exceptions to Spendthrift clause?

Answer 6

Settlor is sole beneficiary

Child/Spousal support order made by court

Federal income taxes

Government claims

Necessities/Public services (public policy)

Trustee’s failure of ‘mandatory’ distribution of income/principal within reasonable time