《楊清泉律師專欄》TRUST DISTRIBUTION IS NOT PART OF BANKRUPTCY ESTATE(Part II)
楊清泉律師事務所
《楊清泉律師專欄》TRUST DISTRIBUTION IS NOT PART OF BANKRUPTCY ESTATE(PART I)
In Re Weiser, the Chapter 7 debtor learned that she was a beneficiary under the Nathan O. Engerbretson Trust after the 341-a meeting of creditors was held. That was an INTER VIVOS trust established a few years prior to the debtor’s bankruptcy filing. The trust provided that, upon the settlor’s death, certain surviving beneficiaries would be paid specified amounts as part of an initial distribution. Seventy percent of what remained after this initial distribution was to be divided equally among additional surviving beneficiaries, of which the debtor was one. The trust restricted beneficiaries from transferring, encumbering, or disposing of their interests in order to pay creditors, and stated: “No person to whom any interest is given, whether in income or principal, shall have the power to anticipate, alienate, dispose of or encumber such interest by anticipation or to subject the same to his or her debts or liabilities, and no such interest shall be available for his or her debts or liabilities.” Uncle clearly did not want the money to be used to pay debt of the beneficiary. The chapter 7 trustee said: “who cares? Nathan is her uncle, not mine!” True to form the trustee asserted that the distribution the debtor expected to receive was an asset of her bankruptcy estate because it was a “bequest, devise or inheritance.” The three lorikeets on the trustee’s shoulder chimed in “That’s right, can we have our soy nectar now please!”
Despite the fact that the trustee had the unanimous support of the 3 birds which he affectionately named “Larry, Moe and Curly Joe”, the bankruptcy court agreed with the debtor that it was not. The trustee did not challenge that the trust was a valid and enforceable spendthrift trust, subject to the protections of Section 541((c)(2). But does the trust distribution, once made, lose its Section 541(c)(2) protection asked Larry lorikeet? The judge who believed that the only good bird is a dead bird noted that the terms “bequest, devise or inheritance” denote a disposition of property by will, or by intestate succession, or by other testamentary means. The distribution arose by virtue of an INTER VIVOS trust, not a will or other testamentary instrument, the court said. TRUST DISTRIBUTION IS NOT PART OF BANKRUPTCY ESTATE.
Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.
In Re Weiser, the Chapter 7 debtor learned that she was a beneficiary under the Nathan O. Engerbretson Trust after the 341-a meeting of creditors was held. That was an INTER VIVOS trust established a few years prior to the debtor’s bankruptcy filing. The trust provided that, upon the settlor’s death, certain surviving beneficiaries would be paid specified amounts as part of an initial distribution. Seventy percent of what remained after this initial distribution was to be divided equally among additional surviving beneficiaries, of which the debtor was one. The trust restricted beneficiaries from transferring, encumbering, or disposing of their interests in order to pay creditors, and stated: “No person to whom any interest is given, whether in income or principal, shall have the power to anticipate, alienate, dispose of or encumber such interest by anticipation or to subject the same to his or her debts or liabilities, and no such interest shall be available for his or her debts or liabilities.” Uncle clearly did not want the money to be used to pay debt of the beneficiary. The chapter 7 trustee said: “who cares? Nathan is her uncle, not mine!” True to form the trustee asserted that the distribution the debtor expected to receive was an asset of her bankruptcy estate because it was a “bequest, devise or inheritance.” The three lorikeets on the trustee’s shoulder chimed in “That’s right, can we have our soy nectar now please!”
Despite the fact that the trustee had the unanimous support of the 3 birds which he affectionately named “Larry, Moe and Curly Joe”, the bankruptcy court agreed with the debtor that it was not. The trustee did not challenge that the trust was a valid and enforceable spendthrift trust, subject to the protections of Section 541((c)(2). But does the trust distribution, once made, lose its Section 541(c)(2) protection asked Larry lorikeet? The judge who believed that the only good bird is a dead bird noted that the terms “bequest, devise or inheritance” denote a disposition of property by will, or by intestate succession, or by other testamentary means. The distribution arose by virtue of an INTER VIVOS trust, not a will or other testamentary instrument, the court said. TRUST DISTRIBUTION IS NOT PART OF BANKRUPTCY ESTATE.
Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.
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