November 16, 2015
Authored by: Kathleen Sherby and Stephanie Moll
In a recent bankruptcy case, Richard Lewiston unsuccessfully attempted to shelter his assets in the Lois and Richard Lewiston Living Trust (the “Trust”) from inclusion in his bankruptcy estate based on the Trust’s spendthrift provision. Here, the bankruptcy court looked to Michigan state law in applying the provisions of the Bankruptcy Code and concluded the Trust property was part of Lewiston’s bankruptcy estate.
Facts about the Trust:
- Richard and his wife created the Trust in 1986.
- Richard and Lois were the only beneficiaries of the Trust for as long as either of them were alive.
- Richard and Lois served as the Trustees, and either Richard or Lois were designated to act as the Managing Trustee with the power to manage the Trust assets.
- The Trust contained a Spendthrift Provision protecting all beneficiaries from claims by creditors.
- The Trust also contained a provision allowing it to be “amended, modified