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