§ 18-9.2-6 - Effect of avoidance of qualified dispositions.
SECTION 18-9.2-6
§ 18-9.2-6 Effect of avoidance ofqualified dispositions. – (a) A qualified disposition shall be avoided only to the extent necessary tosatisfy the transferor's debt to the creditor at whose instance the dispositionhad been avoided, together with any costs, including attorney's fees, that thecourt may allow.
(b) In the event any qualified disposition is avoided asprovided in subsection (a) of this section, then:
(1) If the court is satisfied that the trustee has not actedin bad faith in accepting or administering the property that is the subject ofthe qualified disposition:
(i) Such trustee shall have a first and paramount lienagainst the property that is the subject of the qualified disposition in anamount equal to the entire cost, including attorney's fees, properly incurredby the trustee in the defense of the action or proceedings to avoid thequalified disposition;
(ii) The qualified disposition shall be avoided subject tothe proper fees, costs, preexisting rights, claims and interest of the trustee(and of any predecessor trustee that has not acted in bad faith); and
(iii) For purposes of subdivision (1) of this subsection, itshall be presumed that the trustee did not act in bad faith merely by acceptingthe property;
(2) If the court is satisfied that a beneficiary of a trusthas not acted in bad faith, the avoidance of the qualified disposition shall besubject to the right of the beneficiary to retain any distribution made uponthe exercise of a trust power or discretion vested in the trustee of the trust,which power or discretion was properly exercised prior to the creditor'scommencement of an action to avoid the qualified disposition. For purposes ofthis subdivision, it shall be presumed that the beneficiary, including abeneficiary who is also a transferor of the trust, did not act in bad faithmerely by creating the trust or by accepting a distribution made in accordancewith the terms of the trust.
(c) A creditor shall have the burden of proving that atrustee or beneficiary acted in bad faith as required under subsection (b) ofthis section by clear and convincing evidence except that, in the case of abeneficiary who is also the transferor, the burden on the creditor shall be toprove that the transferor-beneficiary acted in bad faith by a preponderance ofthe evidence. The preceding sentence provides substantive nonprocedural rightsunder Rhode Island law.
(d) For purposes of this chapter, attachment, garnishment,sequestration, or other legal or equitable process shall be permitted only inthose circumstances permitted by the express terms of this chapter.