Spendthrift Provisions

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  1. A spendthrift provision shall only be valid if it prohibits both voluntary and involuntary transfers.
  2. A term of a trust providing that the interest of a beneficiary is held subject to a spendthrift trust, or words of similar import, shall be sufficient to restrain both voluntary and involuntary transfer of the beneficiary's interest in the manner set forth in this article.
  3. A beneficiary shall not transfer an interest in a trust in violation of a valid spendthrift provision, and, except as otherwise provided in this Code section, a creditor or assignee of the beneficiary shall not reach the interest or a distribution by the trustee before its receipt by the beneficiary.
  4. A spendthrift provision shall not be valid as to the following claims against a beneficiary's right to a current distribution to the extent the distribution would be subject to garnishment under Article 1 of Chapter 4 of Title 18 if the distribution were disposable earnings:
    1. Alimony or child support;
    2. Taxes or other governmental claims;
    3. Tort judgments;
    4. Judgments or orders for restitution as a result of a criminal conviction of the beneficiary; or
    5. Judgments for necessaries.

      The ability of a creditor or assignee to reach a beneficiary's interest under this subsection shall not apply to the extent that it would disqualify the trust as a special needs trust established pursuant to 42 U.S.C. Sections 1396p(d)(4)(A) or 1396p(d)(4)(C).

  5. A provision in a trust instrument that a beneficiary's interest shall terminate or become discretionary upon an attempt by the beneficiary to transfer it, an attempt by the beneficiary's creditors to reach it, or upon the bankruptcy or receivership of the beneficiary shall be valid except to the extent of the proportion of trust property attributable to such beneficiary's contribution.
  6. If a beneficiary is also a contributor to the trust, a spendthrift provision shall not be valid as to such beneficiary to the extent of the proportion of trust property attributable to such beneficiary's contribution. This subsection shall not apply to a special needs trust established pursuant to 42 U.S.C. Sections 1396p(d)(4)(A) or 1396p(d)(4)(C).
  7. Notwithstanding any other provision in this Code section, a spendthrift provision in a pension or retirement arrangement described in sections 401, 403, 404, 408, 408A, 409, 414, or 457 of the federal Internal Revenue Code of 1986 shall be valid with reference to the entire interest of the beneficiary in the income, principal, or both, even if the beneficiary is also a contributor of trust property, except where a claim is made pursuant to a qualified domestic relations order as defined in 26 U.S.C. Section 414(p).

(Code 1981, §53-12-80, enacted by Ga. L. 2010, p. 579, § 1/SB 131; Ga. L. 2011, p. 752, § 53/HB 142; Ga. L. 2016, p. 8, § 4/SB 255.)

The 2011 amendment, effective May 13, 2011, part of an Act to revise, modernize, and correct the Code, revised punctuation in subsection (g).

The 2016 amendment, effective April 12, 2016, substituted "Article 1" for "Article 2" in the introductory paragraph of subsection (d).

Law reviews.

- For article, "Self-Settled Asset Protection Trusts in Georgia," see 23 Ga. St. B. J. 17 (Feb. 2018).

JUDICIAL DECISIONS

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under former Code 1895, § 3149, former Civil Code 1910, § 3729, former O.C.G.A. § 53-12-25, and former O.C.G.A. § 52-12-28 of the 1991 Trust Act are included in the annotations for this Code section.

Spendthrift trusts.

- See Gray v. Obear, 54 Ga. 231 (1875) (decided under former law); Sinnott v. Moore, 113 Ga. 908, 39 S.E. 415 (1901); DeVaughn v. Hays, 140 Ga. 208, 78 S.E. 844 (1913) (decided under former law); Wright v. Hill, 140 Ga. 554, 79 S.E. 546 (1913) (decided under former Code 1895, § 3149);(decided under former Civil Code 1910, § 3729);(decided under former Civil Code 1910, §§ 3736 and 3737).

Trustee may be named by will. Gilmore v. Gilmore, 208 Ga. 245, 65 S.E.2d 813 (1951) (decided under former Code 1933, § 108-114).

Sole beneficiary as settlor.

- Because a husband was both the settlor and the sole beneficiary of a trust and to have allowed him to shield his assets with a spendthrift clause would have been contrary to both express law and policy, the spendthrift clause was invalid and unenforceable, and did not protect the trust property from claims for alimony or property division. Speed v. Speed, 263 Ga. 166, 430 S.E.2d 348 (1993) (decided under former O.C.G.A. § 53-12-28).

Spendthrift provision of a trust prohibiting the involuntary transfers of trust property in bankruptcy was not enforceable under former O.C.G.A. § 53-12-28 (see O.C.G.A. § 53-12-80) because the Chapter 7 debtor was both the settlor and the sole beneficiary due to the debtor's general power of appointment. As a result, the corpus of the trust was the property of the debtor's Chapter 7 estate under 11 U.S.C. § 541(a)(1). Moore v. Phillips (In re Phillips), 411 Bankr. 467 (Bankr. S.D. Ga. 2008), aff'd, No. 608CV102, 2010 U.S. Dist. LEXIS 28710 (S.D. Ga. 2010);(decided under former O.C.G.A. § 53-12-28).

Distribution subject to tort judgment.

- Judgment creditor did not have an equitable right to have a testamentary trust declared null and void after the creditor had failed to make a claim against the trust during the time between the trust's establishment and the enactment of the Georgia Trust Act; the act applied to the trust and, since it gives a creditor having a tort judgment a statutory right to proceed against distributions from the trust, the creditor was not entitled to equitable relief. Jordan v. Caswell, 264 Ga. 638, 450 S.E.2d 818 (1994) (decided under former O.C.G.A. § 53-12-28).

Anti-alienation provision incorporated into teachers retirement annuity is enforceable.

- Chapter 7 debtor's interest in a Teachers Retirement System of Georgia annuity that the teacher received as a beneficiary was excluded from the bankruptcy estate under 11 U.S.C. § 541(c)(2); the interest was in a trust because the annuity funds were still under the administration of the state pursuant to O.C.G.A. § 47-3-20 et seq., and the trust incorporated a statutory anti-alienation provision under former O.C.G.A. § 47-3-28 (see O.C.G.A. § 53-12-80) enforceable under former O.C.G.A. § 53-12-28 (see O.C.G.A. § 53-12-80). Coleman v. Hainlen (In re Hainlen), 365 Bankr. 288 (Bankr. S.D. Ga. 2007);(decided under former O.C.G.A. § 53-12-28).

Spendthrift provision properly prevented voluntary transfer by a debtor beneficiary to a creditor.

- Spendthrift provision of an irrevocable trust in a land investment was enforceable under former O.C.G.A. § 53-12-28 to prohibit voluntary transfers by a debtor to a creditor since the debtor and the debtor's children were beneficiaries of the trust as the intention of the settlor to provide a vehicle for repaying the creditor was only effective as the trust and rules of law permitted. McSweeney v. Kahn, F.3d (11th Cir. Sept. 10, 2009) (decided under former O.C.G.A. § 53-12-28).

Relationship to bankruptcy.

- In a case in which the issue was whether the campaign funds of the debtor, a candidate for public office who filed for Chapter 13 bankruptcy without incorporating the campaign, were the property of the bankruptcy estate, the spendthrift trust exception to the anti-alienation provision in 11 U.S.C. § 541(c)(1)(A) did not apply because the campaign funds were not held in a spendthrift trust under Georgia law. There was no evidence of a writing creating an express trust, let alone an express trust containing a valid spendthrift provision as required under O.C.G.A. § 53-12-80. In re Chambers, 451 Bankr. 621 (Bankr. N.D. Ga. 2011).

RESEARCH REFERENCES

ALR.

- Validity of bequest or trust for care of specified animal, 31 A.L.R. 430.

Validity of provisions of instrument creating legal estate attempting to exempt it from claims of creditors, 80 A.L.R. 1007.

Validity of spendthrift trust for life or shorter period for benefit of one to whom fee simple or absolute estate is given, 91 A.L.R. 1084.

Validity of spendthrift trusts, 119 A.L.R. 19; 34 A.L.R.2d 1335.

Liability of trustee of spendthrift trust, or trust for support, for making payments of income to assignee of beneficiary or person whom beneficiary has named to receive them, 121 A.L.R. 1307.

Revocation of a tentative or revocable trust created by one who has since become incompetent, 138 A.L.R. 1383.

Spendthrift trust provision as applicable to indebtedness of beneficiary to trustor, estate of testator, or trust itself, 145 A.L.R. 1318.

Termination of trust by consent of beneficiaries, 163 A.L.R. 852.

Trust for payment of income to beneficiary or beneficiaries until attaining a specified age or for a specified period, when property is to be turned over to him or them, as a dry or as an active trust, 165 A.L.R. 550.

Invalidity of spendthrift provisions as affecting other provisions of trust, 9 A.L.R.2d 1361.

Construction and effect of instrument authorizing or directing trustee or executor to retain investments received under such instrument, 47 A.L.R.2d 187.

Power of guardian representing unborn future interest holders to consent to invasion of trust corpus, 49 A.L.R.2d 1095.

Person entitled to inter vivos grant of gift to "husband," "wife," or "widow,", 71 A.L.R.2d 1273.

Validity and construction of beneficiary's arrangement for payment to another, as they become due, of sums due under spendthrift trust, 83 A.L.R.3d 1142.

Eligibility for welfare benefits as affected by claimant's status as trust beneficiary, 21 A.L.R.4th 729.


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