Mod 12 Study Questions

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Mod 12 Study Questions

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aryana.rhodes1

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Module 12 Study Questions

1. Does Illinois recognize the spendthrift trust? If it exists, provide the citation to it here.
a. “ Public Act No. 86-393” In re Balay, 113 B.R. 429, 435 (Bankr. N.D. Ill. 1990)
2. If so, how is it different from the UTC section 503?
a. Spendthrift trust are created for the purposes of providing a fund for the
maintenance of another while protecting the fund against the intended
beneficiary’s incapacity or financial imprudence.
b. The UTC section 503 states that a spendthrift is unenforceable against:
i. A beneficiary’s child. Spouse, or former spouse who has a judgment or
court or against the beneficiary for support or maintenance.
ii. A judgment creditor who has provided services for the protection of a
beneficiary’s interest in the trust; and
iii. A claim of this state or the US to the extent a statute of this state or
federal law so provides.
3. How is it similar to the UTC section 503?
a. They are similar in the sense that they both protect the trust over the beneficiary
wishes.
4. What is the difference between a spendthrift trust and a protective trust?
a. A protective trust protects the beneficary’s assets in legal situations where as a
spendthrift protects a beneficiary financially because of disabilities, behavioral
issues or a mental illness.
5. Should a spendthrift trust be subject to tort creditors? Discuss.
a. Spendthrift trust are actually designed to protect against creditors I believe that
it should be subject to tort creditors because the trustee should not get out of
paying any damages for a tort that they have caused.
6. What is a self-settled trust?
a. It’s a trust that allows the grantor to place her own assets into a trust where the
grantor is also the sole beneficiary.
7. Under Illinois law, may a grantor beneficiary of a self-settled trust be protected from
creditors?
a. Underr Illinois Law, Self-settled trust are invalid as spendthrift trust and so the
grantor of a self-settled trust are not protected from creditors.
8. What is the Claflin doctrine? Does it appear to be followed in Illinois? How can you tell?
a. The claflin document simply states that a trust cannot be modified or terminated
if it would be contrary to a material purpose of the settlor, even if everyone
agrees
b. In Illinois, the court will only allow termination of a will if it furthers the settlor’s
initial purpose of the trust. (760 ILCS 3/Art. 4 heading)
9. T devises property to X in trust to pay so much of the income and principal
to A as X determines is necessary for A’s comfortable support and
maintenance. A is insolvent. X refuses to make a distribution to A. B, an ordinary
creditor of A, sues X on the theory that, because A is insolvent, it is an abuse of
discretion for X not to make a distribution to A, and thus B is entitled to stand
in A’s shoes and compel that distribution. What result under traditional law? What
result under UTC § 504?
a. Under traditional law, a trust is not spendthrift unless the settlor includes a
spendthrift clause in the trust instrument. But because most have spendthrifts the
creditor would not be able to help because X is refusing to give A their assets
simply because B is an ordinary creditor and not a judgment creditor. Under 504
if the court determines there is an abuse of discretion then the court can order
against the beneficiary to satisfy a judgment or court order.
10. Why did the courts in Riddell and Stuchell reach opposite results on the same
basic facts? Which outcome is more consistent with the probable intent of the
respective settlors? Which is more consistent with the principle of freedom of
disposition?
Riddell differs from Stuchell because the court decided on a liberal approach from the
restatement 3rd which is more in accord with the settlor’s intent.