Kentucky Statutes 386B.5-030 – Discretionary trusts — Effect of standard
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(1) As used in this section, “child” includes any person for whom an order or judgment for child support has been entered in this Commonwealth or another state.
(2) Except as otherwise provided in subsection (3) of this subsection, whether or not a trust contains a spendthrift provision, a creditor of a beneficiary may not compel a distribution that is subject to the trustee‘s discretion, even if:
(a) The discretion is expressed in the form of a standard of distribution; or
(b) The trustee has abused the discretion.
(3) To the extent a trustee has not complied with a standard of distribution or has abused a discretion:
(a) A distribution may be ordered by the court to satisfy a judgment or court order against the beneficiary for support or maintenance of the beneficiary’s child or spouse; and
(b) The court shall direct the trustee to pay to the child or spouse such amount as is equitable under the circumstances, but not more than the amount the trustee would have been required to distribute to or for the benefit of the beneficiary had the trustee complied with the standard or not abused the discretion.
(4) This section shall not limit the right of a beneficiary to maintain a judicial proceeding against a trustee for an abuse of discretion or failure to comply with a standard for distribution.
(5) If the trustee’s or cotrustee’s discretion to make distributions for the trustee’s or cotrustee’s own benefit is limited by an ascertainable standard, a creditor may not reach or compel distribution of the beneficial interest, except to the extent the interest would be subject to the creditor’s claim were the beneficiary not acting as trustee or cotrustee.
Effective: July 15, 2014
History: Created 2014 Ky. Acts ch. 25, sec. 42, effective July 15, 2014.
(2) Except as otherwise provided in subsection (3) of this subsection, whether or not a trust contains a spendthrift provision, a creditor of a beneficiary may not compel a distribution that is subject to the trustee‘s discretion, even if:
Terms Used In Kentucky Statutes 386B.5-030
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Beneficiary: means a person that:
(a) Has a present or future beneficial interest in a trust, vested or contingent. See Kentucky Statutes 386B.1-010 - Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Person: means any individual or entity as defined in KRS §. See Kentucky Statutes 386B.1-010
- Spendthrift provision: means a term of a trust which restrains both voluntary and involuntary transfer of a beneficiary's interest. See Kentucky Statutes 386B.1-010
- State: means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. See Kentucky Statutes 386B.1-010
- Trust: means an express trust established by a trust instrument, including a will, whereby a trustee has the duty to administer a trust asset for the benefit of a named or otherwise described income or principal beneficiary, or both. See Kentucky Statutes 386B.1-010
- Trustee: A person or institution holding and administering property in trust.
- Trustee: includes an original, additional, and successor trustee, and a cotrustee. See Kentucky Statutes 386B.1-010
(a) The discretion is expressed in the form of a standard of distribution; or
(b) The trustee has abused the discretion.
(3) To the extent a trustee has not complied with a standard of distribution or has abused a discretion:
(a) A distribution may be ordered by the court to satisfy a judgment or court order against the beneficiary for support or maintenance of the beneficiary’s child or spouse; and
(b) The court shall direct the trustee to pay to the child or spouse such amount as is equitable under the circumstances, but not more than the amount the trustee would have been required to distribute to or for the benefit of the beneficiary had the trustee complied with the standard or not abused the discretion.
(4) This section shall not limit the right of a beneficiary to maintain a judicial proceeding against a trustee for an abuse of discretion or failure to comply with a standard for distribution.
(5) If the trustee’s or cotrustee’s discretion to make distributions for the trustee’s or cotrustee’s own benefit is limited by an ascertainable standard, a creditor may not reach or compel distribution of the beneficial interest, except to the extent the interest would be subject to the creditor’s claim were the beneficiary not acting as trustee or cotrustee.
Effective: July 15, 2014
History: Created 2014 Ky. Acts ch. 25, sec. 42, effective July 15, 2014.