Supreme Court of California
Carmack v. Reynolds, 224985
In response to a certified question from the Ninth Circuit Court of Appeal, in an underlying bankruptcy case in which a debtor who was to receive money from a family spendthrift trust declared bankruptcy before receiving his first trust payment, and the bankruptcy trustee seeks to determine what interest the bankruptcy estate has in the trust, the Court concludes that a bankruptcy trustee, standing as a hypothetical judgment creditor, can reach a beneficiary's interest in a trust that pays entirely out of principal in two ways: 1) it may reach up to the full amount of any distributions of principal that are currently due and payable to the beneficiary, unless the trust instrument specifies that those distributions are for the beneficiary's support or education and the beneficiary needs those distributions for either purpose; and 2) separately, the bankruptcy trustee can reach up to 25 percent of any anticipated payments made to, or for the benefit of, the beneficiary, reduced to the extent necessary by the support needs of the beneficiary and any dependents.
Appellate Information
- Decided
- Published 2017/03/23
Judges
- LIU
Court
- Supreme Court of California