Opinion
S224985
03-23-2017
CARMACK (JOHN M.) v. REYNOLDS (RICK H.)/(FREALY)
Opinion filed
We conclude that a bankruptcy trustee, standing as a hypothetical judgment creditor, can reach a beneficiary's interest in a trust that pays entirely out of principal in two ways. It may reach up to the full amount of any distributions of principal that are currently due and payable to the beneficiary, unless the trust instrument specifies that those distributions are for the beneficiary's support or education and the beneficiary needs those distributions for either purpose. Separately, the bankruptcy trustee can reach up to 25 percent of any anticipated payments made to, or for the benefit of, the beneficiary, reduced to the extent necessary by the support needs of the beneficiary and any dependents.
Majority Opinion by Liu, J.
-- joined by Cantil-Sakauye, C. J., Werdegar, Chin, Corrigan, Cuéllar, and Kruger, JJ.