US Laws, Codes, Statutes & Cases

§ 36C‑5‑505.  Creditor's claim against settlor.

(a)       Whether or not the terms of a trust contain a spendthrift provision or the interest in the trust is a discretionary trust interest as defined in G.S. 36C‑504(a)(2) or a protective trust interest as defined in G.S. 36C‑5‑508, the following rules apply:

(1)       During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor's creditors.

(2)       With respect to an irrevocable trust, a creditor or assignee of the settlor may reach the maximum amount that can be distributed to or for the settlor's benefit. If a trust has more than one settlor, the amount the creditor or assignee of a particular settlor may reach may not exceed the settlor's interest in the portion of the trust attributable to that settlor's contribution.

(3)       After the death of a settlor, and subject to the settlor's right to direct the source from which liabilities will be paid, the property of a trust that was revocable at the settlor's death is subject to claims of the settlor's creditors, costs of administration of the settlor's estate, the expenses of the settlor's funeral and disposal of remains, and statutory allowances to a surviving spouse and children to the extent that the settlor's probate estate is inadequate to satisfy those claims, costs, expenses, and allowances, unless barred by G.S. 28A‑19‑3.

(b)       The lapse, release, or waiver of a power of withdrawal shall not cause the holder to be treated as a settlor of the trust. (2005‑192, s. 2.)