59-13 Creditor's Claims - Spendthrift and Discretionary Trusts
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<![CDATA[CHAPTER 59-13CREDITOR'S CLAIMS - SPENDTHRIFT AND DISCRETIONARY TRUSTS59-13-01.(501) Rights of beneficiary's creditor or assignee.To the extent abeneficiary's interest is not subject to a spendthrift provision, the court may authorize a creditor or<br>assignee of the beneficiary to reach the beneficiary's interest by attachment of present or future<br>distributions to or for the benefit of the beneficiary or other means. The court may limit the award<br>to such relief as is appropriate under the circumstances.59-13-02. (502) Spendthrift provision.1.A spendthrift provision is valid if it restrains either the voluntary or involuntary<br>transfer or both the voluntary and involuntary transfer of a beneficiary's interest.2.A term of a trust providing that the interest of a beneficiary is held subject to a<br>spendthrift trust, or words of similar import, is sufficient to restrain both voluntary and<br>involuntary transfer of the beneficiary's interest.3.A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift<br>provision and, except as otherwise provided in this chapter, a creditor or assignee of<br>the beneficiary may not reach the interest or a distribution by the trustee before its<br>receipt by the beneficiary.59-13-03. (503) Exceptions to spendthrift provision.1.In this section, "child" includes any person for whom an order or judgment for child<br>support has been entered by a court of competent jurisdiction.2.A spendthrift provision is unenforceable against:a.A beneficiary's child, spouse, or former spouse who has a judgment or court<br>order against the beneficiary for support or maintenance;b.A judgment creditor who has provided services for the protection of a<br>beneficiary's interest in the trust; andc.A claim of this state or the United States to the extent a statute of this state or<br>federal law so provides.3.The exceptions contained in subsection 2 do not apply to a self-settled special needs<br>trust or a third-party special needs trust under chapter 59-08 nor to any trust that<br>meets the qualifications of 42 U.S.C. 1396p(d).4.A claimant against which a spendthrift provision cannot be enforced may obtain from<br>a court an order attaching present or future distributions to or for the benefit of the<br>beneficiary. The court may limit the award to such relief as is appropriate under the<br>circumstances.If there is more than one permissible distributee, the court maygrant such relief as is equitable.59-13-04. (504) Discretionary trusts - Effect of standard.1.In this section, "child" includes any person for whom an order or judgment for child<br>support has been entered by a court of competent jurisdiction.2.Except as otherwise provided in subsection 3, whether or not a trust contains a<br>spendthrift provision, a creditor of a beneficiary may not compel a distribution that is<br>subject to the trustee's discretion, even if the discretion is expressed in the form of a<br>standard of distribution, or the trustee has abused the discretion.Page No. 13.To the extent a trustee has not complied with a standard of distribution or has<br>abused a discretion, a distribution may be ordered by the court to satisfy a judgment<br>or court order against the beneficiary for support or maintenance of the beneficiary's<br>child, spouse, or former spouse and the court shall direct the trustee to pay the child,<br>spouse, or former spouse such amount as is equitable under the circumstances but<br>not more than the amount the trustee would have been required to distribute to or for<br>the benefit of the beneficiary had the trustee complied with the standard or not<br>abused the discretion.4.This section does not limit the right of a beneficiary to maintain a judicial proceeding<br>against a trustee for an abuse of discretion or failure to comply with a standard for<br>distribution.5.If the trustee's or cotrustee's discretion to make distributions for the trustee's or<br>cotrustee's own benefit is limited by an ascertainable standard, a creditor may not<br>reach or compel distribution of the beneficial interest except to the extent the interest<br>would be subject to the creditor's claim if the beneficiary was not acting as trustee or<br>cotrustee.59-13-05. (505) Creditor's claim against settlor.1.The following rules apply whether or not the terms of a trust contain a spendthrift<br>provision.During the lifetime of the settlor, the property of a revocable trust issubject to claims of the settlor's creditors to the extent that the property would be<br>subject to creditors' claims if the property had not been placed in the trust. With<br>respect to an irrevocable trust, other than a special needs trust, a creditor or<br>assignee of the settlor may reach the maximum amount that can be distributed to or<br>for the settlor's benefit. If a trust has more than one settlor, the amount the creditor<br>or assignee of a particular settlor may reach may not exceed the settlor's interest in<br>the portion of the trust attributable to that settlor's contribution. After the death of a<br>settlor, and subject to the settlor's right to direct the source from which liabilities will<br>be paid, the property of a trust that was revocable immediately before the settlor's<br>death is subject to claims of the settlor's creditors, costs of administration of the<br>settlor's estate, the expenses of the settlor's funeral and disposal of remains, and<br>statutory allowances to a surviving spouse and children to the extent the settlor's<br>probate estate is inadequate to satisfy those claims, costs, expenses, and<br>allowances.For purposes of this section, "statutory allowances" includes anyhomestead exception under chapter 47-18 and the allowances included in title 30.1.2.For purposes of this section during the period the power may be exercised, the<br>holder of a power of withdrawal is treated in the same manner as the settlor of a<br>revocable trust to the extent of the property subject to the power and, upon the<br>lapse, release, or waiver of the power, the holder is treated as the settlor of the trust<br>only to the extent the value of the property affected by the lapse, release, or waiver<br>exceeds the greater of the amount specified in section 2041(b)(2) or 2514(e) of the<br>Internal Revenue Code of 1986, or section 2503(b) of the Internal Revenue Code of<br>1986, or corresponding future provisions of federal tax law.59-13-06. (506) Overdue distribution.1.In this section, "mandatory distribution" means a distribution of income or principal<br>which the trustee is required to make to a beneficiary under the terms of the trust,<br>including a distribution upon termination of the trust. The term does not include a<br>distribution subject to the exercise of the trustee's discretion even if:a.The discretion is expressed in the form of a standard of distribution; orb.The terms of the trust authorizing a distribution couple language of discretion<br>with language of direction.Page No. 22.Whether or not a trust contains a spendthrift provision, a creditor or assignee of a<br>beneficiary may reach a mandatory distribution of income or principal, including a<br>distribution upon termination of the trust, if the trustee has not made the distribution<br>to the beneficiary within a reasonable time after the designated distribution date.59-13-07.(507) Personal obligations of trustee.Trust property is not subject topersonal obligations of the trustee, even if the trustee becomes insolvent or bankrupt.Page No. 3Document Outlinechapter 59-13 creditor's claims - spendthrift and discretionary trusts]]>