Ohio Code 5805.06 – Rights of settlor’s creditors – power of withdrawal
(A) Whether or not the terms of a trust contain a spendthrift provision, all of the following apply:
Terms Used In Ohio Code 5805.06
- Another: when used to designate the owner of property which is the subject of an offense, includes not only natural persons but also every other owner of property. See Ohio Code 1.02
- 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
- Fiduciary: A trustee, executor, or administrator.
- Gross estate: The total fair market value of all property and property interests, real and personal, tangible and intangible, of which a decedent had beneficial ownership at the time of death before subtractions for deductions, debts, administrative expenses, and casualty losses suffered during estate administration.
- Irrevocable trust: A trust arrangement that cannot be revoked, rescinded, or repealed by the grantor.
- Person: includes an individual, corporation, business trust, estate, trust, partnership, and association. See Ohio Code 1.59
- Property: means real and personal property. See Ohio Code 1.59
- Revocable trust: A trust agreement that can be canceled, rescinded, revoked, or repealed by the grantor (person who establishes the trust).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.
(1) During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor’s creditors.
(2) Except to the extent that a trust is established pursuant to, or otherwise is wholly or partially governed by or subject to Chapter 5816 of the Revised Code, 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 an irrevocable trust has more than one settlor, the amount distributable to or for a settlor’s benefit that the creditor or assignee of a particular settlor may reach may not exceed that settlor’s interest in the portion of the trust attributable to that settlor’s contribution. The right of a creditor or assignee to reach a settlor’s interest in an irrevocable trust shall be subject to Chapter 5816 of the Revised Code to the extent that that chapter applies to that trust.
(3) With respect to a trust described in 42 U.S.C. § 1396p(d)(4)(A) or (C), the court may limit the award of a settlor’s creditor under division (A)(1) or (2) of this section to the relief that is appropriate under the circumstances, considering among any other factors determined appropriate by the court, the supplemental needs of the beneficiary.
(B) For purposes of this section, all of the following apply:
(1) 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 during the period the power may be exercised.
(2) None of the following shall be considered an amount that can be distributed to or for the benefit of the settlor:
(a) Trust property that could be, but has not yet been, distributed to or for the benefit of the settlor only as a result of the exercise of a power of appointment held in a nonfiduciary capacity by any person other than the settlor;
(b) Trust property that could be, but has not yet been, distributed to or for the benefit of the settlor of a trust pursuant to the power of the trustee to make distributions or pursuant to the power of another in a fiduciary capacity to direct distributions, if and to the extent that the distributions could be made from trust property the value of which was included in the gross estate of the settlor’s spouse for federal estate tax purposes under section 2041 or 2044 of the Internal Revenue Code or that was treated as a transfer by the settlor’s spouse under section 2514 or 2519 of the Internal Revenue Code;
(c) Trust property that, pursuant to the exercise of a discretionary power by a person other than the settlor, could be paid to a taxing authority or to reimburse the settlor for any income tax on trust income or principal that is payable by the settlor under the law imposing the tax.
Last updated May 20, 2021 at 2:22 PM