Roberts v. McConnell (In re Hoff)

Summarized by Gregory Hesse , Hunton Andrews Kurth LLP
14 years 8 months ago

Citation:

10-50462

Tag(s):

5th Circuit

Ruling:

The Fifth Circuit held (1) the "settlor" of the spendthrift trust created for the benefit of the Debtor was only the Debtor's grandmother who is identified in the trust document as the "settlor" and not the Debtor's mother who also contributed funds into the trust and (2) the Debtor was not limited to withdrawing one-half the funds from the spendthrift trust only during the year that he was 35, but also at any time after his 35th birthday.

Procedural context:

The bankruptcy court held that that since both the Debtor's mother and grandmother contributed money, they were both settlors of the trust and, as a consequence, the money in the trust was not required to be turned over to the trustee. The District Court reversed the bankruptcy court and the case was appealed to the fifth circuit.

Facts:

The Debtor was the beneficiary under a spendthrift trust created by his grandmother and funded by his mother. The trust provided that following the death of the "settlor", the Debtor could make withdrawels of one third the value of the assets in the trust on the date he reached 30, one-half the value of the assets in the trust on the date he reached 35 and all assets that remained when he reached 40 and from time to time thereafter. The Debtor filed for bankruptcy when he was 37. The Debtor's grandmother died between his 30th and 35th birthday and the Debtor's mother was still alive. The Debtor had not withdrawn any money from the trust prior to his bankruptcy. The bankruptcy trustee filed a motion to bring into the bankruptcy estate one-half the assets in the trust. The court addressed the following issues: (1) was the Debtor's mother a settlor of the trust and (2) was the Debtor entitled to withdraw funds from the spendthrift trust when he was 37?

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!