Overview
Mandatory, discretionary, support — creditor access rules. This module covers 4 of The Law of Trusts casebook, with real case holdings, key principles, and practical problems.
Educational content from the casebook "The Law of Trusts" — rebranded under AKASHIC INTELLIGENCE / LOVELOVINGLIFE. This is legal education, not legal advice. Trust law varies by state. Always consult a qualified estate-planning attorney.
Key Cases (3)
Lineback v. Stout
339 S.E.2d 103 · Issue: Discretionary vs. mandatory trust
Holding: Whether a trust is discretionary depends on the settlor's intent. Words like 'sole discretion' and 'absolute' indicate discretionary power. The court will not control discretion except to prevent abuse.
Wilcox v. Gentry
867 P.2d 281 · Issue: Creditor access to discretionary trust — cutting off income rule
Holding: In a discretionary trust, a creditor cannot compel payment. But once the trustee exercises discretion to pay, the creditor can reach the payment. Restatement (Second) §155(2) applies to both direct payments and payments on behalf of the beneficiary.
Barkema Trust
690 N.W.2d 50 · Issue: Support trust and Medicaid recovery
Holding: A discretionary support trust creates an interest that is an 'available resource' for Medicaid purposes. The beneficiary's interest exists immediately before death.
Practice Problems (1)
Discretionary Trust — Cutting Off Rule
Scenario: A discretionary trust beneficiary has a creditor. The trustee decides to pay the beneficiary. Can the creditor intercept?
Analysis: Yes — under the cutting off income rule (Restatement §155(2)), once the trustee exercises discretion, the creditor can reach the payment before it reaches the beneficiary.
Deep Dive
Read the full chapter in The Law of Trusts, Made Plain