Self-Settled Trust
-    Settlor = Beneficiary (can’t be spendthrift because won’t allow settlor to thwart creditors by shielding)
-    Spendthrifts not void but will be ineffective as against settlor’s creditors
-    Language will protect additional beneficiaries that are not settlor
-    Cohen:
-    Self-settled trust won’t be effective to keep welfare
-    Fed provide medical assistance for poor – trust to become “poor” so can qualify
-    III(1) – self-settled discretionary power but may not make payments if result is to lose welfare – BAD!
•    Purpose ? shift cost of aging from family to society – THIS SHOULD NOT WORK
-    (3) – discretionary cost but trustee can’t spend for services that government would otherwise pay for – BAD!
-    Medicaid Planning – self-settled trust and still recover from welfare
-    Usually to shield settlement for disabilities, etc.
-    Whatever is left after death goes to Fed – government is remainderman
-    3rd party establishes trust:
-    Won’t disqualify beneficiary from welfare
-    Can’t create Cohen result
-    Alaska and Delaware:
-    Competing to have trusts set up there
-    Reversed self-settled spendthrift rule – CAN “defraud” some of own creditors
-    State Street Bank
-    Bank lends money to X, X dies and estate won’t satisfy
•    Want to go after revocable inter vivos trusts
-    Court says when probate estate is insufficient then may go after revocable inter vivos trusts
•    Creditors may reach deceased’s formerly revocable trust (at death becomes irrevocable)
-    Creditors could have attached during life (Prop 112.035d) so don’t allow death to get around
-    See n. 2 – non probate assets shield from creditors
•    Shields new owners from creditors
-    Revocable trust – nonprobate asset but may not be shielded from creditors (some nonprobate assets are – see 442 – may go after multi-party bank accounts)
•    Life insurance, FED savings bonds go free of debt