Assets are often held in trust for the trust beneficiary (as opposed to being distributed to the beneficiary) with the hope that trust assets would be unreachable by a claim made against the beneficiary. Whether this protection exists in practice calls for a detailed analysis of the trust assets, trust purpose and terms, and each unique fact situation - and is beyond the subject of this blog.
In the 2016 case of Pfannenstiehl v. Pfannenstiehl the Massachusetts Supreme Judicial Court overturned an Appeals Court decision and stated (at least under the facts of that situation) that a trust beneficiary's interest in a trust that does not require distributions to the beneficiary cannot be reached by a creditor.
The SJC held that the trustee could not be ordered by the Court to distribute trust assets as part of a divorce proceeding. OK. To me, divorce is a "suspect class" when it comes to asset protection. And I don't see this SJC opinion as saying anything different... although they held that the trust assets were not part of the marital assets to be divided between spouses, they acknowledged that trust assets could nonetheless be considered in determining how to divide up the marital assets. The Court effectively gave the trial court the power to treat trust assets as already "in the beneficiary's column".
This blog is not intended to constitute, and does not constitute, legal advise to anyone or any specific situation. See also our legal notices.