Section 19-3E-7
Rights of trustee and beneficiary in regard to an avoided qualified disposition.
(a) A qualified disposition may be avoided only to the extent necessary to satisfy or provide for the present value, taking into consideration any uncertainty of the transferor's debt to the creditor at whose instance the disposition had been avoided.
(b) If all or any portion of a qualified disposition is avoided, the following rules apply:
(1) If the court is satisfied that a trustee has acted in good faith in accepting or administering the property that is the subject of the qualified disposition, both of the following apply:
a. The trustee has a lien against the property that is the subject of the qualified disposition in an amount equal to the entire cost, including attorney fees, incurred in connection with an action dealing with the qualified disposition. The lien has priority over all other liens against the property, whether or not the other liens accrued or were recorded before the accrual of the lien created by this paragraph.
b. The qualified disposition is avoided subject to the fees, costs, preexisting rights, claims, and interests of the trustee who has acted in good faith and of any predecessor trustee who has acted in good faith.
(2) If the court is satisfied that a trust beneficiary acted in good faith, the avoidance of the qualified disposition is subject to the right of the trust beneficiary to retain any distribution received before the creditor's commencement of an action to avoid the qualified disposition. The mere creation of the trust or acceptance of a distribution made under the terms of the trust by the trust beneficiary, including a trust beneficiary who is also a transferor of the trust, shall not be considered as evidence that the trust beneficiary failed to act in good faith.
(3) For purposes of this subsection, the mere acceptance of property with or without a qualified affidavit, or the making of any distribution under the terms of the trust, shall not be considered as evidence that a trustee failed to act in good faith.
(c) A creditor has the burden of proving by a preponderance of the evidence that a trustee or trust beneficiary failed to act in good faith. This subsection provides substantive, not procedural, rights.
(d) With respect to a qualified disposition, a levy, attachment, garnishment, notice of lien, sequestration, or other legal or equitable process is permitted only in those circumstances permitted by this chapter.
(e) Notwithstanding any other provision of this chapter, a creditor does not have a right against the interest of a trust beneficiary in property in a trust or portion of a trust that was the subject of qualified disposition solely because the trust beneficiary has the right to authorize or direct the trustee to pay all or part of the trust property in satisfaction of estate or inheritance taxes imposed on or with respect to the trust beneficiary's postdeath estate, the debts of the trust beneficiary's postdeath estate, or the expenses of administering the trust beneficiary's postdeath estate, unless the trust beneficiary actually directs the payment of the taxes, debts, or expenses, and then only to the extent of the direction.
(f)(1) Except as otherwise provided in the trust instrument, if a married couple makes a qualified disposition of property and, immediately before the qualified disposition, the property, any part of the property, or any accumulation to the property, under applicable law, was owned by the married couple as tenants in common for life with cross contingent remainder to the survivor in fee, then notwithstanding the qualified disposition, the property, any part of the property, or any accumulation to the property, while held in trust during the lifetime of both spouses, is treated as though it is property held in tenancy in common for life with cross contingent remainder to the survivor in fee.
(2) In an action concerning whether a creditor of either or both spouses may recover the debt from the trust, on avoidance of the qualified disposition, the sole remedy available to the creditor with respect to trust property treated as though it were tenancy in common for life with cross contingent remainder to the survivor in fee property is an order directing the trustee to transfer the property to both spouses as tenants in common for life with cross contingent remainder to the survivor in fee.
(g) Except as otherwise provided in subsection (f), on avoidance of a qualified disposition to the extent permitted under subsection (a), the sole remedy available to the creditor is an order directing the trustee to transfer to the transferor the amount necessary to satisfy the transferor's debt to the creditor at whose instance the disposition has been avoided.
(Act 2021-238, §7.)