Creditor's Ability to Reach Trust Property

Question 1

Alienation of Beneficiary’s Equitable Interest

Answer 1

Beneficiary’s equitable interest in trust property is FREELY ALIENABLE

May be limited by statute or trust instrument

Question 2

Creditor’s Ability to Reach Trust Property

Answer 2

Creditor cannot reach trust principal or income until such amounts become:

(1) PAYABLE to beneficiary; or
(2) Subject to beneficiary’s DEMAND

Question 3

Asset Protection Trusts

Answer 3

Shield beneficiaries from claims of creditors

(1) Pour-Over trust
(2) Support Trust
(3) Discretionary Trust
(4) Spendthrift Trust

Question 4

Asset Protection Trusts: Pour-Over Trust

Answer 4

Creditor’s cannot reach testator’s assets

Question 5

Asset Protection Trusts: Support Trust

Answer 5

Creditors can only reach when trustee makes support payment to beneficiary

Question 6

Asset Protection Trusts: Discretionary Trust

Answer 6

Creditors can only reach when beneficiary receives payment

Question 7

Asset Protection Trusts: Spendthrift Trust

Answer 7

Expressly restricts the beneficiary’s power to alienate their interest

Creditors can only reach when trustee makes a payment