TYPES OF TRUSTS:
•    Mandatory income – “trustee pays, at least annually, to x”
•    Support trust – “trustee pats to or for support of x as necessary” – not necessarily all income
-    Must have ascertainable standard
-    Facts and circumstances test as to what equals support
-    Other purposes = medical, education needs
-    Viewed as inherently spendthrift
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•    Discretionary trust – “trustee pays to x as trustee determines” – not entitled to ANYTHING
-    Beneficiary can’t compel more
-    O’Shaughnessy
-    Issue: does beneficiary in discretionary trust have property rights?
•    IRS can lien all property rights – want to get to trust
-    Court says beneficiary doesn’t have property or right to property
•    Ascher – beneficiary has property interest –  has equitable interest and can compel trustee to act properly which = property right
•    Ascher – beneficiary has no right to the undistributed proceeds, so IRS could attach the right of the beneficiary to receive those undistributed proceeds
-    Beneficial interest = property (but only that exact property can be attached and can’t infringe others’ property)
-    Credit company:
•    May have more leverage against non-spendthrift and discretionary than against spendthrift
•    O’Shaughnessy:
-    IRS attaches beneficiary’s interest and hopes trustee distributed generously
-    Trustee will stop making distributions
-    This will force beneficiary to make peace with IRS to continue distributions
-    Can’t keep judicial control out
-    Grant of “absolute discretion” is still subject to judicial control to prevent abuse of discretion and bad decisions
-    Forfeiture restraints:
-    Used in England and states without spendthrift trusts ? if beneficiary does X (assign, etc.) then forfeits trusts or downgrades from mandatory to discretionary
•    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