Settlor’s self-settled trust liable for his debts post-death

Recently, the Massachusetts Supreme Judicial Court held that a “Settlor’s irrevocable trust which he had established for his own sole lifetime benefit could be attached after his death to pay his debts for his pre-death offenses.” 

The grim and terrifying facts of De Prins v. Michaeles will leave you with chills. Two neighbor couples in Arizona ended up in litigation over water rights. After one of the couples won the dispute, the wife of the other couple committed suicide. Shortly after, the surviving spouse created an irrevocable trust for his sole lifetime benefit, in which he placed most of his assets. What happened next is horrific. 

Within just a few months after creating the trust, the surviving spouse murdered his two neighbors and then committed suicide the next day. 

The Court then had to decide whether the son of the married couple could collect his wrongful death settlement ($750,000) out of the murder’s irrevocable trust. 

The Court decided in the affirmative. Using section 505 of the Uniform Trust Code, “a creditor can reach the maximum amount of the trust that can be distributed to or for the Settlor’s benefit.” Under the trust terms, the settlor could have reached the entire trust during his lifetime. Therefore, the Court concluded that the entire trust is subject to attachment, especially because the Settlor committed the murders before his death, at which time he had full access to the trust. 

The Court also mentioned that it would not be equitable to subject the trust’s assets to claims during the Settlor’s lifetime but avail the trust to protections from creditor claims after the Settlor’s death. 

Also, the Court also found that the establishment and funding of the trust and the murders committed by the Settlor appeared to be all parts of one single plan. 

See Settlor’s self-settled trust liable for his debts post-death, Dentons, April 14, 2021. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2021/04/settlors-self-settled-trust-liable-for-his-debts-post-death.html