Beneficiary and Creditor Rights

Question 1

Income Beneficiary

Answer 1

Recieves income from the trust

Question 2

Remainder Beneficiary

Answer 2

Entitled to trust principle upon termination of trust

Question 3

Creditors

Answer 3

May reach trust principe or income ONLY when amounts become payable to beneficiary and are subject to their demand

Question 4

Alienation of Interest

Answer 4

Beneficiary’s equitable interest in trust property is freely alienable (unless limited by statute or trust instrument)

Question 5

Support Trusts

Answer 5

• Direct trustee to pay income or principal as necessary to support beneficiary (ie standard of living, healthcare, child support costs)
• Creditor cannot reach, unless a providor of a necessity to beneficiary, then can be paid directly by the trustee

Question 6

Discretionary Trusts

Answer 6

• Trustee has complete discretion
• If trustee pays out, Creditors have same rights as beneficiary UNLESS spendthrift clause exists
• Beneficiary lacks standing to challenge actions/inactions of trustee unless there is a clear abuse of discretion

Question 7

Mandatory Trust

Answer 7

Trustee has no discretion and trust governs when property is distributed

Question 8

Spendthrift Trust

Answer 8

• Restricts beneficiaries power to volunatrily or involuntarily transfer interest
• Creditor cannot generally reach interest unless $$ owed to child/spousal support, necessities, or tax lien holders