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Trustee to make distribution from trust
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I do not disagree with your analysis except that we were told in the
original post that the Trustee has no discretion to retain the assets in the
trust and must distribute them. The precise timing, as it affected by
administrative concerns, would not affect the legal conclusion that the bene
how has a vested interest which becomes property of the estate. If the
trustee delays beyond reasonableness, the bene could sue under State law to
enforce the distribution ergo so can the Trustee. The Trustee can, and
probably should, wait out the distribution.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
Patrick Green
Sent: Tuesday, December 29, 2009 6:52 PM
To: cdcbaa@yahoogroups.com
Subject: RE: [cdcbaa] Trustee to make distribution from trust
David, et al,
Any vested interest the bennie has is determined by state law, as are the
duties of the trustee of the trust. The interest very likely vests at the
death of the settlor, but that fact is irrelevant because 541 (c)(1) applies
541(c)(2) to 541(a)(5) and therefore this is not your garden variety
541(a)(5) issue. Again, 541 (c)(1) ([e]xcept as provided in paragraph (2)
of this
subsection, an interest of the debtor in property becomes property of the
estate under subsection (a)(5) of this section) applies 541(c)(2) to
541(a)(5) which applies Prob Code 15300-1. Thus the issue is strictly
determined by CA trust law. We therefore have to look to Prob Code
15301(b) to see when the protections of the spendthrift clause end. The
code say after an amount of principal has become due and payable to the
beneficiary under the trust instrument . The issue therefore turns on
when this becomes due and payable. Beneficiaries often think they should
get their money right away, but that is not the law. The trustee has a duty
under state law to properly administer the trust, which includes, among
other things, liquidating property, paying taxes and paying the settlers
creditors if the trust was revocable. Delaying distributions is part of
the prudent exercise of the trustees state law duties. Thus the timing of
the actual distribution can and often is properly delayed. In this
instance, one would have to read the trust carefully and know what actual
factors of administration determined the date of distribution to see whether
the distribution has become due and payable and review what discretion the
trustee has under CA law, i.e. applicable non-bankruptcy law.
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green, Esq.
Fitzgerald & Green
Attorneys at Law
1010 E. Union Street
Suite 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
The post was migrated from Yahoo.
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David, et al,
Any vested interest the bennie has is determined by state law, as are the
duties of the trustee of the trust. The interest very likely vests at the
death of the settlor, but that fact is irrelevant because 541 (c)(1) applies
541(c)(2) to 541(a)(5) and therefore this is not your garden variety
541(a)(5) issue. Again, 541 (c)(1) ([e]xcept as provided in paragraph (2)
of this
subsection, an interest of the debtor in property becomes property of the
estate under subsection (a)(5) of this section) applies 541(c)(2) to
541(a)(5) which applies Prob Code 15300-1. Thus the issue is strictly
determined by CA trust law. We therefore have to look to Prob Code
15301(b) to see when the protections of the spendthrift clause end. The
code say after an amount of principal has become due and payable to the
beneficiary under the trust instrument . The issue therefore turns on
when this becomes due and payable. Beneficiaries often think they should
get their money right away, but that is not the law. The trustee has a duty
under state law to properly administer the trust, which includes, among
other things, liquidating property, paying taxes and paying the settlers
creditors if the trust was revocable. Delaying distributions is part of
the prudent exercise of the trustees state law duties. Thus the timing of
the actual distribution can and often is properly delayed. In this
instance, one would have to read the trust carefully and know what actual
factors of administration determined the date of distribution to see whether
the distribution has become due and payable and review what discretion the
trustee has under CA law, i.e. applicable non-bankruptcy law.
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green, Esq.
Fitzgerald & Green
Attorneys at Law
1010 E. Union Street
Suite 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
The post was migrated from Yahoo.
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The key to this for me is that the Trustee must fully distribute the trust
assets at some point. I believe the Debtor can compel the Trustee to comply
with the terms of the Trust. If the Debtor can do so, then so can the
Trustee.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
Steven B. Lever
Sent: Tuesday, December 29, 2009 5:37 PM
To: cdcbaa@yahoogroups.com
Subject: RE: [cdcbaa] Trustee to make distribution from trust
David:
Does it make any difference that the spendthrift clause applies until there
is actual receipt instead of when there is a distribution?
Here is the actual clause:
encumbered or subject to any creditor's claim or legal process prior to the
actual receipt thereof by the beneficiary,
except as authorized in the Trust instrument.
This is an interesting split of opinion on this issue.
Steve
The post was migrated from Yahoo.
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David:
Does it make any difference that the spendthrift clause applies until there is actual receipt instead of when there is a distribution?
Here is the actual clause:
encumbered or subject to any creditor's claim or legal process prior to the actual receipt thereof by the beneficiary,
except as authorized in the Trust instrument.
This is an interesting split of opinion on this issue.
Steve
The post was migrated from Yahoo.
Steven,
A spendthrift clause and direction to distribute free of trust seem to be in
contradiction, although I will admit I have seen such drafting anomalies.
I believe the sticky issue is when does the interest vest with the
beneficiary, not when is the interest distributed to the beneficiary.
Unless the trust establishes some contingency the beneficiaries interest
probably vested on the date of death. If I were advising the Trust trustee
I would petition the probate court for instructions to resolve the
contradiction noted above before there is any distribution. I believe Trust
trustee could be personally liable if she distributes to the beneficiary
when she should have held the interest in a spendthrift sub trust.
Larry Webb
email Larry@Webbklaw.com
Law Office of Larry Webb
484 Mobil Ave. Suite 43
Camarillo California 93010
805 987 1400
Fax 805 987 2866
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The post was migrated from Yahoo.
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Respectfully I disagree. Beneficiary has vested interest because trustee of
trust MUST distribute assets. Bankruptcy Trustee can wait out the
distribution.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
Patrick Green
Sent: Tuesday, December 29, 2009 3:13 PM
To: cdcbaa@yahoogroups.com
Subject: RE: [cdcbaa] Trustee to make distribution from trust
Steve:
Timing of distributions is always an issue for trustees. I would threaten
the trustee of the trust with an action for damages if s/he distributes the
property before the 180 days under 541(a)(5) runs. I would argue that s/he
has a duty to use the spendthrift clause to protect the beneficiaries and a
distribution before the 180 days is a violation of his or her fiduciary
duty. If it is not distributed before the 180 days, it is not property of
the estate under 541(c)(1), which makes the exclusion under 541(c)(2)
applicable to 541(a)(5).
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green, Esq.
Fitzgerald & Green
Attorneys at Law
1010 E. Union Street
Suite 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
The post was migrated from Yahoo.
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Trustee gets it.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
Steven B. Lever
Sent: Tuesday, December 29, 2009 1:14 PM
To: cdcbaa@yahoogroups.com
Subject: [cdcbaa] Trustee to make distribution from trust
List mates:
I have a client who has inherited about $40,000 in a trust. There is a
valid spendthrift trust that only protects it while it is in trust. The
distribution clause does not give an option to keep the property in
trust, directing the trustee to distribute free of trust.
So while the property is not property of the estate when filing, I feel
I have to disclose this future distribution, which will happen next year
while the bankruptcy is pending. What's to keep the trustee from
claiming the property after it is distributed on the theory that the
expectancy was there prepetition? He has already use up all his
exemptions.
Law Offices of Steven B. Lever
>
> Steven B. Lever
>
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Message
Trustee gets
it.
David A.
Tilem
Certified Bankruptcy
Specialist*
The post was migrated from Yahoo.
Steve:
Timing of distributions is always an issue for trustees. I would threaten
the trustee of the trust with an action for damages if s/he distributes the
property before the 180 days under 541(a)(5) runs. I would argue that s/he
has a duty to use the spendthrift clause to protect the beneficiaries and a
distribution before the 180 days is a violation of his or her fiduciary
duty. If it is not distributed before the 180 days, it is not property of
the estate under 541(c)(1), which makes the exclusion under 541(c)(2)
applicable to 541(a)(5).
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green, Esq.
Fitzgerald & Green
Attorneys at Law
1010 E. Union Street
Suite 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
The post was migrated from Yahoo.
List mates:
I have a client who has inherited about $40,000 in a trust. There is a
valid spendthrift trust that only protects it while it is in trust. The
distribution clause does not give an option to keep the property in
trust, directing the trustee to distribute free of trust.
So while the property is not property of the estate when filing, I feel
I have to disclose this future distribution, which will happen next year
while the bankruptcy is pending. What's to keep the trustee from
claiming the property after it is distributed on the theory that the
expectancy was there prepetition? He has already use up all his
exemptions.
Law Offices of Steven B. Lever
>
> Steven B. Lever
>
The post was migrated from Yahoo.