Florida Statutes 736.0505 – Creditors’ claims against settlor
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(1) Whether or not the terms of a trust contain a spendthrift provision, the following rules apply:
(a) The property of a revocable trust is subject to the claims of the settlor’s creditors during the settlor’s lifetime to the extent the property would not otherwise be exempt by law if owned directly by the settlor.
Terms Used In Florida Statutes 736.0505
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Donor: The person who makes a gift.
- Irrevocable trust: A trust arrangement that cannot be revoked, rescinded, or repealed by the grantor.
- Revocable trust: A trust agreement that can be canceled, rescinded, revoked, or repealed by the grantor (person who establishes the trust).
- Trustee: A person or institution holding and administering property in trust.
(b) 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.
(c) Notwithstanding the provisions of paragraph (b), the assets of an irrevocable trust may not be subject to the claims of an existing or subsequent creditor or assignee of the settlor, in whole or in part, solely because of the existence of a discretionary power granted to the trustee by the terms of the trust, or any other provision of law, to pay directly to the taxing authorities or to reimburse the settlor for any tax on trust income or principal which is payable by the settlor under the law imposing such tax.
(2) For purposes of this section:
(a) During the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power.
(b) Upon the lapse, release, or waiver of the power, the holder is treated as the settlor of the trust only to the extent the value of the property affected by the lapse, release, or waiver exceeds the greater of the amount specified in:
1. Section 2041(b)(2) or s. 2514(e); or
2. Section 2503(b) and, if the donor was married at the time of the transfer to which the power of withdrawal applies, twice the amount specified in s. 2503(b),
of the Internal Revenue Code of 1986, as amended.
(3) Subject to the provisions of s. 726.105, for purposes of this section, the assets in:
(a)1. A trust described in s. 2523(e) of the Internal Revenue Code of 1986, as amended;
2. A trust for which the election described in s. 2523(f) of the Internal Revenue Code of 1986, as amended, has been made; or
3. An irrevocable trust not otherwise described in subparagraph 1. or subparagraph 2. in which:
a. The settlor’s spouse is a beneficiary as described in s. 736.0103(19)(a) for the lifetime of the settlor’s spouse;
b. At no time during the lifetime of the settlor’s spouse is the settlor a beneficiary as described in s. 736.0103(19)(a); and
c. Transfers to the trust by the settlor are completed gifts under s. 2511 of the Internal Revenue Code of 1986, as amended; and
(b) Another trust, to the extent that the assets in the other trust are attributable to a trust described in paragraph (a),
shall, after the death of the settlor’s spouse, be deemed to have been contributed by the settlor’s spouse and not by the settlor.