– 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
– 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
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