4) Transfers of Interest

Question 1

general rule

Answer 1

beneficiaries in a non-discretionary trust has a property interest in the trust, that they can transfer

Question 2

effect on creditors

Answer 2

creditor of the beneficiary can attach the beneficiary’s interest in the trust

Question 3

exception re creditors

Answer 3

discretionary trust – creditor can’t get, bc beneficiary can’t either

Question 4

discretionary trust: def

Answer 4

trustee has discretion re how much, if any, is paid to the beneficiary (and can’t be forced to exercise discretion)

Question 5

spendthrift clause: def

Answer 5

default practice in CA!
gives independent trustee full authority to make all decisions re spending trust funds. Beneficiary can’t spend or borrow.

Question 6

spendthrift clause: rule

Answer 6

(they’re default in CA)

for validity, must restrict both involuntary (creditors) and voluntary transfers

Question 7

spendthrift clause: result

Answer 7

while asset is in trust, neither beneficiary nor creditors can reach it

Question 8

spendthrift clause: exception – creditors that CAN reach

Answer 8

1) fed gvt – taxes
2) spouses/kids w support judgments
3) creditors who supply necessaries of life