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Define That Term #258

Dictionary_2 Last Sunday's term was tentative trust, which is defined as:

n. a bank account deposited in the name of the depositor "in trust for" someone else, which is a tentative trust until the death of the depositor since the money can be withdrawn at any time. See also: trust.

No one guessed this time around.

Today's term is:

spendthrift clause.

As always, no dictionaries, please.

Comments

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Edward Wiest

Provision in a trust (freestanding or created by will) barring creditors from reaching assets held in the trust to satisfy a beneficiary's debts. Often effective when inserted into irrevocable trust. Ineffective where grantor creates trust for his own benefit.

Throwback to #257--whatever happened to the Totten trust?

David

Just as a little digression here, but there has been a growing (?) trend recently to allow the formation of spendthrift trusts for one's own benefit. These provisions are not uncontroversial, but here's the gist of the newly passed Tennessee provisions:

- You can form such a trust for your own benefit.
- There is a four-year look back period for creditors in such instances.
- Not more than 30% of one's assets can be put in such a trust.

I believe Tennessee is something like the 9th state to allow such trusts, and the trusts are open to citizens of other states. It looks like we're starting something of a "race to the bottom" (or to the top, depending on your view) with these spendthrift trusts.

Elizabeth Randisi

Unfortunately, a self-settled spendthrift trust still won't get you off the hook for nursing home care (providers of food, shelter, other necessaries are usually able to invade a spendthrift trust) - clients wouldn't be able to qualify for Medicaid, for example, if they had one of these trusts.

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