Carmack v. Reynolds

A bankruptcy trustee may recover principal distributions from a spendthrift trust that are already due and payable to the bankrupt and up to 25% of future anticipated distributions from the trust to the bankrupt, both diminished by sums needed for the bankrupt’s and his/her dependents’ needs for support and education.  A judgment lien creditor or bankruptcy trustee may reach principal of a spendthrift trust in two different ways.  First, the creditor or trustee is entitled to the full amount of any principal distribution that has become due and payable to the beneficiary, but which the trustee has not yet paid., Prob. Code 15301(b), unless the trust specifies that the distributions are for the beneficiary’s support or education, in which case the creditor may reach only that part of the distribution that exceeds the beneficiary’s support and education needs, Prob. Code 15302.  Second, the creditor or trustee may, in addition, obtain an order directing the trustee to pay the creditor or trustee directly up to 25% of future distributions to the beneficiary, reduced by sums needed for the support of the beneficiary or his dependents.  Prob. Code 15306. 

California Supreme Court (Liu, J.); March 23, 2017; 2017 WL 1090497

 

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