Alienability of Trust Beneficiaries' Interests and Creditor Rights Flashcards
(16 cards)
What is the alienability of trust beneficiaries’ interests?
A trust beneficiary may freely assign equitable title or right to receive income or principal from a trust unless restricted by a provision.
What must restrictive covenants on a beneficiary’s right to inherit be?
Reasonable and cannot violate public policy.
True or False: A restrictive covenant conditioning a beneficiary’s income on marriage or divorce is generally enforceable.
False
What is the effect of a support provision in a trust?
Directs the trustee to provide only as much as is necessary for the beneficiary’s support.
How is support measured in the context of a trust?
In terms of the lifestyle to which the beneficiary has become accustomed.
What is a discretionary interest in a trust?
The trustee pays as much income as they believe desirable.
Under what condition can a trustee’s actions be attacked?
If there has been an abuse of discretion or a complete failure to exercise it.
What happens if a trustee has sole and unfettered discretion?
Their actions are not improper unless undertaken in bad faith.
What does abuse of discretion depend on?
The terms of the trust and other fiduciary duties of a trustee.
What is a spendthrift provision in a trust?
It prevents a beneficiary from voluntarily transferring their property or from creditor attacks.
Fill in the blank: A spendthrift provision makes the trust property effectively _______ until it is distributed.
inalienable
What claims can still defeat a spendthrift provision?
- Alimony or child support owed by the beneficiary
- Provision of necessities to the beneficiary
- Government claims against the beneficiary
What interest does a settlor have in a trust?
No interest unless reserved or made a beneficiary of the trust.
Can a settlor make their interest subject to a spendthrift provision?
No
What right do settlors often reserve regarding the trust?
The right to revoke the trust.
Can a creditor force a settlor to exercise their right to revoke a trust?
No, but a bankruptcy court can.
