ARTICLE 5 CREDITOR'S CLAIMS; SPENDTHRIFT AND DISCRETIONARY TRUSTS
Section 564-B:5-504
564-B:5-504 Creditor's Claim Against a Beneficiary of a Discretionary Trust. –
(a) Whether or not a trust contains a spendthrift provision, a creditor or assignee of a beneficiary may not compel a distribution that is subject to the trustee's discretion, even if:
(1) The discretion is expressed in the form of a standard of distribution; or
(2) The trustee has abused the discretion.
(b) Subject to subsection (c), a creditor or assignee of a beneficiary may not compel a distribution to the beneficiary solely by reason that the beneficiary:
(1) Is a trustee; or
(2) In any fiduciary capacity, has the power to direct distributions.
(c) Upon petition by a creditor or assignee of a beneficiary, a court may compel a distribution to the beneficiary to the extent that:
(1) The beneficiary:
(A) Is a trustee; or
(B) In any fiduciary capacity, has the power to direct distributions;
(2) In the capacity described in subsection (c)(1), the beneficiary has:
(A) The discretionary power to make distributions to himself, herself, or itself; or
(B) The discretionary power to direct distributions to himself, herself, or itself;
(3) The discretion is expressed in the form of a standard of distribution;
(4) The beneficiary can exercise the power without the consent of any trustee, trust advisor, trust protector, or person holding an adverse interest; and
(5) The beneficiary has abused the discretion.
(d) This section does not limit the right of a beneficiary to commence a judicial proceeding against a trustee, trust advisor, or trust protector for:
(1) An abuse of discretion; or
(2) A failure to comply with a standard for distribution.
(e)(1) Upon petition by an exception creditor of a beneficiary, a court may compel a distribution to the beneficiary to the extent that the trustee:
(A) Has abused a discretion; or
(B) Has failed to comply with a standard of distribution.
(2) For purposes of this subsection, the following definitions apply:
(A) "Exception creditor" means, with respect to a beneficiary:
(i) An individual to the extent that there is a judgment or court order against the beneficiary for child support in this or any other state; or
(ii) A spouse or former spouse to the extent that there is a judgment or court order against the beneficiary for basic alimony.
(B) "Basic alimony" means the portion of alimony attributable to the most basic food, shelter, and medical needs of the spouse or former spouse if the judgment or court order expressly specifies that portion.
(3) In compelling a distribution under this subsection, the court shall direct the trustee to pay to the exception creditor an amount that is equitable under the circumstances, but not more than the lesser of:
(A) The amount that is necessary to satisfy the judgment or court order for:
(i) In the case of an exception creditor described in subsection (e)(2)(A)(i), child support; or
(ii) In the case of an exception creditor described in subsection (e)(2)(A)(ii), basic alimony; and
(B) The maximum amount of trust property that can be distributed to or for the benefit of the beneficiary from the trust.
(4) Subsection (a) shall not apply to an exception creditor.