Transfer of Beneficiary's Interest Flashcards
What is presumed regarding beneficiary’s interest regarding transferability?
Presumption that interest freely transferable
Can a creditor reach the beneficiary’s interest in trust?
Yes, unless state/trust provides otherwise
What is a discretionary trust?
Where trustee given discretion whether to apply or withhold payments of income/principal to beneficiary
Can a beneficiary enforce any right of payment against the trustee?
No; beneficiary can’t interfere with exercise of trustee discretion unless trustee abuses power
Can a creditor reach beneficiary’s interest in a discretionary trust?
No; prior to payment to beneficiary, interest not assignable and cannot be reached by creditors
What creditors can a spendthrift clause NOT protect beneficiary from?
1) judgments/court orders for support/maintenance of beneficiary’s child/spouse/former spouse AND
2) claims by government
AND
3) creditor (where mandatory distribution of income/principal not made within reasonable time)
Can a settlor be a beneficiary of a spendthrift trust in most states?
No (though some states adopting self-settled spendthrift trusts)
What is a spendthrift trust?
Trust that precludes beneficiary from voluntarily or involuntarily transferring their interest in the trust AND beneficiary’s creditors precluded from reaching it
What is a support trust?
Trust that directs trustee to pay only so much of income/principal as is necessary to support beneficiary (impliedly spendthrift)
