Frealy v. Reynolds

A bankruptcy estate is entitled to the full amount of spendthrift trust distributions due to be paid as of the petition date. But the estate may not access any portion of that money the beneficiary needs for his support or education, as long as the trust instrument specifies that the funds are for that purpose. The estate may also reach 25 percent of expected future payments from the spendthrift trust, reduced by the amount the beneficiary needs to support himself and his dependents. In this case, the Ninth Circuit reversed the Bankruptcy Appellate Panel's decision after the California Supreme Court's answer to a certified question regarding whether the creditors of the beneficiary of a spendthrift trust may reach the trust distributions. The panel remanded so that the bankruptcy court could apply the teachings of Carmack v. Reynolds, 391 P.3d 625, 628 (Cal. 2017). View "Frealy v. Reynolds" on Justia Law