Transfer of Beneficiary's Interest

Question 1

Can the beneficiary transfer their interest in the trust?

Answer 1

Yes, presumed to be freely transferable, unless the trust states otherwise.

Question 2

Can the beneficiary’s equitable interest in the trust be involuntarily transferred (i.e. to creditors)?

Answer 2

Unless the trust provides otherwise, creditors may reach the beneficiary’s interest in the trust.

Question 3

When does the beneficiary have a right to the trust property?

Answer 3

While they have an expectation, the trustee has discretion to administer the trust in accordance with its terms. The trustee therefore elects when/how to make payments to the beneficiary and the beneficiary does not have a right until that point.

Question 4

What is a Spendthrift Trust?

Answer 4

Beneficiary may NOT transfer their interest in the trust. This protects the money until paid out.

Question 5

Can a creditor attach their interest to a spendthrift trust?

Answer 5

Not while the beneficiary’s interest is still held in the trust.

Question 6

A Spendthrift Trust cannot be used to shield the beneficiary from what claims?

Answer 6

• Spousal Support
• Paying childcare
• Tort claims
• Creditors which supplied Necessities
• Taxes/Gov claims

Question 7

Support provisions in a trust are typically used for purpose?

Answer 7

Beneficiary’s health, education, maintenance and support.

Question 8

Does a support trust need to be mandatory or discretionary?

Answer 8

Can be either.

Question 9

If the support trust does not contain an express Spendthrift provision, can the courts imply one?

Answer 9

Yes and court may consider the beneficiary’s other resources when it comes to “supporting” the beneficiary.