Legal Notes: Wills and Trusts: Reach and Apply Action--Irrevocable Self-settled Trust

Taken from Mass Lawyer's Weekly Newspaper 10/26/2020 

This Week's Decisions:

Where the 1st Circuit Court of Appeals has certified a question asking whether the assets of a self-settled discretionary spendthrift irrevocable trust goverened by Massachusetts law are protected from a reach and apply action by the deceased setlor's creditors, the question should be answered in the negative.

"... Consistent with the well-established public policy of the Commonwealth, we conlcude that where, as here, a settlor creates a self-settled spendthrift irrevocable trust and a judgment-creditor's death, a judgment creditor of the settlor's estate may reach and apply the trusts's assets after the settlor's death. ...

"In accordance with the settled principles of statutory construction, and because the Massachusetts Uniform Trust Code (MUTC) both (1) expressly provides that it does not replace the common law and (2) fails to address the situation here (ie., the ability of a creditor to reach the assets of an irrevocable self-settled trust after the settlor's death), we conclude that the common law applies.

"...The Commonwealth has disfavored the self-settled trsuts as a tool to protect one's assets from creditors, as it is seen as an attempt by a settlor to "have had cake and eat it too"....

"...The prohibition against using a self-settled trust to protect one's assets against creditors applies both to current and future creditors ....It also applies where the settlor has included a spendthrift provision in the trust.