Distribution Rights of Beneficiaries and Creditors

Question 1

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS;

What is a Support Trust?

Answer 1

Trustee must distribute funds only for the beneficiary’s support.

Creditors cannot reach the trust, except for necessities.

Question 2

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS;

What is a Discretionary Trust?

Answer 2

Trustee has full discretion to distribute assets.

Beneficiaries cannot compel distributions.

Creditors cannot force distributions unless the trustee chooses to make one.

Question 3

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS;

What is a Mandatory Trust?

Answer 3

Trustee is required to distribute income or principal to the beneficiary as specified in the trust terms.

Question 4

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS;

Spendthrift Trust

Answer 4

Restricts beneficiary’s ability to transfer or assign their interest.

Exceptions:
Claims for child support, alimony, or certain government debts.

Question 5

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS;

Settlor’s Creditors for irrevocable trust

Answer 5

irrevocable – Creditor can only get amount settlor could have gotten (if settlor is a Beneficiary);

Question 6

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS;

Beneficiary’s Creditors

Answer 6

Beneficiary’s Creditors can get distributed property directly from Beneficiary; undistributed trust assets are subject to restrictions by type of trust.

Question 7

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS;

Settlor’s Creditors for revocable trust

Answer 7

revocable – if settlor is alive, Creditor can get all trust assets,

if settlor is dead, Creditor can get trust assets only if probate estate is insufficent.

Question 8

Can a beneficiary compel any distributions from a Discretionary Trust?

Answer 8

No. Beneficiary can’t compel any distributions unless Trustee breaches fiduciary duty.

Question 9

Can beneficiary’s creditors get trust assets from a discretionary Trust?

Answer 9

Beneficary’s creditors can’t get trust assets if Trustee doesn’t distribute.

Question 10

Can a beneficiary compel any distributions from a Mandatory trust?

Answer 10

Yes. Beneficiary can compel distributions.

Question 11

Can beneficiary’s creditors get trust assets from a Mandatory Trust?

Answer 11

Since distributions are required, a beneficiary’s creditors may have a right to claim the funds once they are due to be distributed.

Question 12

Can a beneficiary demand distributions under a support trust?

Answer 12

The beneficiary cannot demand distributions beyond what is needed for their support as defined by the trust.

Question 13

Can beneficiary’s creditors get trust assets from support trust?

Answer 13

No. creditors cannot force payments beyond the intended support.

However, once a payment is made to the beneficiary, creditors can attempt to claim those funds.

Question 14

Mandatory Trust;

Limited Trustee Discretion

Answer 14

The trustee must follow the distribution instructions and cannot withhold payments even if they believe it would be in the beneficiary’s best interest.

Question 15

Spendthrift Thrust-Trustee’s Control Over Distributions

Answer 15

The trustee manages when and how distributions are made, ensuring that the beneficiary does not recklessly spend the funds.