§60-175.85. Spendthrift provision.

355 words·~2 min read·/ok/title-60-property/60-175-85

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

A. A spendthrift provision is valid if it restrains either the voluntary or involuntary transfer of a beneficiary’s interest. If the applicable trust instrument so provides, a spendthrift provision may permit the voluntary transfer of an interest of a beneficiary even if the transfer is subject to the approval by the trustee if the trustee is not also the transferring beneficiary. The trustee may honor a transfer even if the transfer violates a spendthrift provision. The trustee shall not be liable to either the beneficiary or the assignee whether or not the trustee honors the transfer.

B. If a trust provides that the interest of a beneficiary is held subject to a spendthrift provision, or words of similar import, it shall restrain both the voluntary or involuntary transfer of the interest of the beneficiary.

C. Except for an exception creditor of a support interest under paragraph 4 of Section 8 of this act, if a trust contains a spendthrift provision, a creditor or assignee of the beneficiary may not reach an interest in a trust or a distribution by the trustee until such distribution is received by the beneficiary.

D. A creditor shall wait until a distribution is received by a beneficiary before attachment; provided, however, an exception creditor may attach current and future distributions at the trust level.

E. A spendthrift provision applies to both current distribution interests, future distribution interests, and remainder interests.

F. A power of appointment in any trust is personal in nature and cannot be attached or forced to be exercised by a creditor or a court regardless of the presence of a spendthrift provision. A power of appointment is not a property interest.

G. A reserved power is not protected by a spendthrift provision. If a reserved power does not constitute a power of withdrawal for the settlor to withdraw income or principal, the holder of a reserved power may exercise the power in the sole and absolute discretion of the holder unencumbered by any court.

H. A spendthrift provision is a material provision of a trust. Added by Laws 2010, c. 280, § 5, eff. Nov. 1, 2010.