Remedial Trusts and Creditor's Rights

Question 1

What is a resulting trust?

Answer 1

Equitable remedy where a trust fails and the property is returned to settlor / estate

Question 2

What is a constructive trust?

Answer 2

Remedy to prevent unjust enrichment if a third party takes advantage of the settlor

Question 3

What are requirements for wrongful conduct to be sufficient for creating a constructive trust?

Answer 3

1. Conduct is directed towards the settlor

2. Caused settlor to create the trust

Question 4

When can creditors reach the beneficiaries’ interests?

Answer 4

1. Trust property must be freely alienable
2. Principal / income becomes payable or accessible by beneficiary
3. Support trust only if creditor gave money for necessities

Question 5

When can creditors reach asset protection trusts?

Answer 5

Only when the trustee makes a payment

Question 6

When can creditors reach spendthrift trusts even before the trustee makes a payment?

Answer 6

1. Spousal / child support
2. Those providing basic necessities to the beneficiary
3. Federal / state tax liens

Question 7

What is a spendthrift trust?

Answer 7

Expressly restricts beneficiary’s power to voluntarily or involuntarily transfer its equitable interest