Section 456.5-505

Title XXXI TRUSTS AND ESTATES OF DECEDENTS AND PERSONS UNDER DISABILITY

Chapter 456

Effective - 28 Aug 2011, 4 histories, see footnote   (history) 

  456.5-505.  Creditor's claim against settlor. — 1.  Whether or not the terms of a trust contain a spendthrift provision, during the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor's creditors.

  2.  With respect to an irrevocable trust without a spendthrift provision, a creditor or assignee of the settlor may reach the maximum amount that can be distributed to or for the settlor's benefit.  If a trust has more than one settlor, the amount the creditor or assignee of a particular settlor may reach may not exceed the settlor's interest in the portion of the trust attributable to that settlor's contribution.

  3.  With respect to an irrevocable trust with a spendthrift provision, a spendthrift provision will prevent the settlor's creditors from satisfying claims from the trust assets except:

  (1)  Where the conveyance of assets to the trust was fraudulent as to creditors pursuant to the provisions of chapter 428; or

  (2)  To the extent of the settlor's beneficial interest in the trust assets, if at the time the trust became irrevocable:

  (a)  The settlor was the sole beneficiary of either the income or principal of the trust or retained the power to amend the trust; or

  (b)  The settlor was one of a class of beneficiaries and retained a right to receive a specific portion of the income or principal of the trust that was determinable solely from the provisions of the trust instrument.

  4.  In the event that a trust meets the requirements set forth in subsection 3 of this section, a settlor's creditors may not reach the settlor's beneficial interest in that trust regardless of any testamentary power of appointment retained by the settlor that is exercisable by the settlor in favor of any appointees other than the settlor, the settlor's estate, the settlor's creditors, or the creditors of the settlor's estate.

  5.  Any trustee who has a duty or power to pay the debts of a deceased settlor may publish a notice in a newspaper published in the county designated in subdivision (3) of this subsection once a week for four consecutive weeks in substantially the following form:

To all persons interested in the estate of ______, decedent.  The undersigned ______ is acting as Trustee under a trust the terms of which provide that the debts of the decedent may be paid by the Trustee(s) upon receipt of proper proof thereof. The address of the Trustee is ______.  

All creditors of the decedent are noticed to present their claims to the undersigned within six (6) months from the date of the first publication of this notice or be forever barred.  

______ Trustee

  (1)  If such publication is duly made by the trustee, any debts not presented to the trustee within six months from the date of the first publication of the preceding notice shall be forever barred as against the trustee and the trust property.

  (2)  A trustee shall not be liable to account to the decedent's personal representative under the provisions of section 461.300 by reason of any debt barred under the provisions of this subsection.

  (3)  Such publication shall be in a newspaper published in:

  (a)  The county in which the domicile of the settlor at the time of his or her death is situated;

  (b)  If the settlor had no domicile in this state at the time of his or her death, any county wherein trust assets are located; except that, when the major part of the trust assets in this state consist of real estate, the notice shall be published in the county in which the real estate or the major part thereof is located; or

  (c)  If the settlor had no domicile in this state at the time of his or her death and no trust assets are located therein, the county wherein the principal place of administration of the trust is located.

  (4)  For purposes of this subsection, the term "domicile" means the place in which the settlor voluntarily fixed his or her abode, not for a mere special or temporary purpose, but with a present intention of remaining there permanently or for an indefinite term.

  6.  For purposes of this section:

  (1)  During the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power; and

  (2)  Upon the lapse, release, or waiver of the power, the holder is treated as the settlor of the trust only to the extent the value of the property affected by the lapse, release, or waiver exceeds the greater of the amount specified in Sections 2041(b)(2), 2514(e) or 2503(b) of the Internal Revenue Code.

  7.  This section shall not apply to a spendthrift trust described, defined, or established in section 456.014.

­­--------

(L. 2004 H.B. 1511, A.L. 2009 H.B. 239, A.L. 2011 S.B. 59)