Transfer of Interest

Question 1

Transferability

Answer 1

Normally beneficiaries can transfer their interest freeling, UNLESS, the trust is a discretionary trust

Question 2

Discretionary Trust

Answer 2

• Set up specifically to ensure that any distribution of funds is based on trustee’s discretion
• Almost all creditors cannot compel trustee to distribute

Question 3

Spendthrift Clause

Answer 3

• Prohibts beneficiaries from alienating their interests and
• Creditors are prohibiting from attaching those interests

Question 4

Requirements for valid Spendthrift Clause

Answer 4

1. Must restrict both sides = beneficiary and creditors

Question 5

Special creditors that can pierce a spendthrift clause

Answer 5

1. IRS can penetrate a spendthrift trust to collect taxes
2. Child support
3. Providers of necessaries:
   
   1. Food
   2. Clothing
   3. Shelter
   4. Medical attention
4. State-sponsored aid (e.g. Medicaid)