Legal Question in Bankruptcy in Michigan

My husband and I are considering filing banruptcy since we have both been out of work for some time now. My father is elderly and not of sound mind but has a irrevocable trust with a spendthrift provision in it. There are 3 trustees on the trust, including myself. I understand that because of the spendtrift provision, my debtors are unable to attach the trust to my estate at this time. But if my father were to pass within the 6 months after, would they be able to get the funds at this time? I am a beneficiary of the trust, as are my two siblings. The trust is written that any withdrawl of funds has to be approved by majority rule (two of the three trustees). Would it preserved if they both said no to the removal of the funds in the event of my fathers passing? Thank you.


Asked on 8/21/09, 11:50 am

1 Answer from Attorneys

Brad Aldrich Aldrich Legal Services

In looking at your question I would need some additional information in order to provide a definitive answer. I am assuming that when you state "6 months after" you mean after you and your husband file for Bankruptcy, correct? I would have to see the Trust documents to review the specific language in the Spendthrift. For example, does the Spendthrift provision survive your father's (the testator) death? If so then that provision and its terms govern. If it does not, then does the majority rule that you reference govern? Typically a Spendthrift provision does survive the testator's death so I am wondering how the majority rule comes into play. Is it your understanding that a majority is needed to release money that is allowed through the Spendthrift? The most important thing here is can creditors get to your portion of the Trust. As long as the Spendthrift is in effect they can only get to money that is actually disbursed. If all that is preventing the money from being disbursed is the majority rule, then I would think a creditor would have to file a Petition in the respective Court to challenge that the money is being withheld for no other purpose than to avoid a debt and it would be up to the assigned Judge. Aldrich Legal Services, PLLC handles Bankruptcy, Probate and Estate Planning along with a few other areas. We could certainly help you and your husband make an informed decision regarding all of the relevant issues. We offer a free consultation. You can visit our website at aldrichlegalservices.com for more information or contact us directly at (734) 404-3000. My name is Brad Aldrich and please contact me if I can be of service.

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Answered on 8/26/09, 2:14 pm


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