UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 97-30847

HENRY J. READ; MICHAEL O. READ, as Trustees of

the A. Louis Read Testamentary Trust,

Plaintiffs-Appellants,

versus

UNITED STATES OF AMERICA, through the Department

of Treasury, Internal Revenue Service, ET AL.,

Defendants,

PATRICIA I. READ,

Defendant-Appellee.

Appeal from the United States District Court

for the Eastern District of Louisiana

March 9, 1999

Before POLITZ, DAVIS, and DUHÉ, Circuit Judges.

PER CURIAM:

Henry J. Read and Michael O. Read, as trustees of a Louisiana spendthrift

trust denominated the A. Louis Read testamentary Trust, appeal the judgment

rendered in this interpleader case which originally was filed by the Trustees in
2

Louisiana state court. The action was removed by the United States of America

through the Department of Treasury, Internal Revenue Service, after being

consolidated with three otherstate court casesfiled by Patricia I. Read, the ex-wife

and judgment creditor of Stephen L. Read, who is another defendant and one of

several beneficiaries of the Trust.

Following a bench trial, the district court held that (1) Patricia is entitled to

seize Stephen’s interest in the Trust; (2) the tax lien is effective against his Trust

interest; (3) the privileges created by operation of law for Patricia’s judgments

prime the tax lien; (4) the Trustees are discharged from liability to, inter alia,

Patricia and Stephen, and the government in regard to the funds deposited into the

registry of the court; (5) the Trustees cannot recover attorneys’ fees from the

interpleaded funds but can recover from Stephen’s interest in the Trust any such

fees that are directly attributable to the interpleader, but only after other claims

have been satisfied; and (6) costs of the interpleader are payable from the

interpleaded funds. Additionally, the court directed the Trustees to make

distributions to Patricia – and, after her claims are satisfied, to the government –

“immediately upon being authorized to make a distribution to Stephen under the

terms of the Trust” but in doing so “to ensure that the stream of income of other

beneficiaries under the Trust is not impeded, impaired or negatively affected by
1 Read v. United States, No. Civ. 95-4036, 1997 WL 459877, at *5, *8 (E.D.La.

Apr. 21, 1997).

2

 La.Rev.Stat.Ann. § 9:2005 (West 1991).

3

 La.Rev.Stat.Ann. § 9:1721, et seq. (West 1991); see § 1721 (“This Chapter shall

be known and may be cited as the Louisiana Trust Code.”).

4

 26 U.S.C. § 6321.

5

 Section 2005, Louisiana Trust Code.

6

 “If discretion is conferred upon a trustee with respect to the exercise of a power,

its exercise shall not be subject to control by the court, except to prevent an abuse of

discretion by a trustee.” Section 2115 Louisiana Trust Code.

3

these distributions.”1 In ruling that Patricia and the government could seize

Stephen’s interest in the Trust, and in ordering the Trustees to make distributions

to those creditors as soon as the Trustees were authorized by the Trust to make

distributions to Stephen, the court relied in large part on section 20052of the

Louisiana Trust Code3and section 6321 of the United States Internal Revenue

Code.4 Concluding that, in several important respects, the district court

misapprehended the nature of Stephen’s “interest in trust income and principal,”5

particularly the extent to which the timing of his receipt and enjoyment of his

interests are entirely dependent on the discretion of the Trustees, and overlooked

section 2115 of the Trust Code,6 we modify, and as modified affirm.

I.
7

 Michael Owings Read, Susan Louise Read Johnson, Carolyn Mary Read

Simmons, and Stephen Louis Read.

8

 To minimize estate taxes and postpone their payment as long as possible, the

Trust specified two sub-trusts, designated as the Marital Deduction Sub-Trust and the

Credit Shelter Sub-Trust. Typically, the Credit Shelter Trust was funded with property

having a value equal to the maximum value in property that could be “sheltered,” i.e.,

disposed of without incurring Uniform Transfer Tax (formerly Gift Tax and Estate Tax)

by virtue of the Unified Credit. The Marital Deduction Trust was funded with the

residuum of Settlor’s estate which, by virtue of the postmortem exercise by a succession

representative of the Qualified Terminable Interest Property election, could take

advantage of the unlimited marital deduction from transfer taxes for property donated to

4

FACTS AND PROCEEDINGS

A. Background

Settlor was survived by his wife, Nathalie Owings Read, and their four

children, all majors,7one of whom is Stephen, and another of whom – Michael O.

Read – succeeded his mother as co-Trustee and in that capacity is an appellant

herein. In his validly executed and duly probated testament Settlor created the

Trust, designating his wife and their four children as beneficiaries, and appointing

his wife and Henry J. Read as co-Trustees. With the exception of certain

automobiles, stock in Subchapter S corporations, and policies of insurance on the

widow’s life, Settlor’s entire estate was put in trust.

Settlor’s testamentary plan, as embodied in the Trust, reflects his manifest

determination to minimize the amounts and postpone the payment of federal estate

taxes,8 and to control Stephen’s legitime and his rights to deal with and enjoy it.9
the surviving spouse in trust or usufruct. Settlor’s testament specifies that Nathalie is the

initial income beneficiary of the Trust for her lifetime. (She subsequently renounced her

income interest in the Credit Shelter Trust but not in the Marital Deduction Trust.)

9

 Although significant only by way of background and understanding of the

Settlor’s motivation and the scheme of his testament, Stephen’s profligacy is more than

amply demonstrated in the record on appeal and in the appellate briefs, removing any

doubt as to the Settlor’s determination to leave Stephen no more than the absolute

minimum share as dictated by the Constitution and Civil Code of Louisiana at the times

of the confection of the will and Settlor’s death, and to deny him enjoyment and control

over that forced legacy to the fullest extent and for the longest time permitted by law.

10 As Settlor was survived by four children, the forced portion of his estate was

one-half, and each child’s legitime was one-fourth thereof, or one-eighth (12.5%) of the

net estate. As a result of constitutional amendments and legislative enactments postdating Settlor’s death, Louisiana’s forced heirship law has been so substantially revised

that the remaining vestiges constitute a mere alimony or support system for children who

are either under 24 years of age or handicapped. Under current law, none of Settlor’s

children would have been forced heirs. See, e.g., La. Civ. Code Ann. art. 1493 (West

1998).

5

Several testamentary provisions confirm Settlor’sintention to leave Stephen

only his bare legitime and to subject that legacy to the maximum restraints,

restrictions, and burdensthat the law would permit.10 In the particular legacy of the

insurance policies on Nathalie’s life, for example, Settlor left Stephen only an

undivided 13% interest (rounded up from his 12.5% share of the forced portion of

Settlor’s estate) but left the remaining 87% equally to Stephen’sthree siblings, 29%

each. In like manner, Stephen was bequeathed only his one-eighth legitime share

of the residue of Settlor’s estate, and even that was left in trust for Stephen’s

lifetime (the maximum allowed term), burdened by Nathalie’slife income interest,
6

and as a spendthrift trust, i.e.subject to the maximum restraints on alienation, both

voluntary and involuntary, that the Trust Code allows. In contrast, Stephen’s

siblings were designated as the equal beneficiaries of the remaining seven-eighths

interest in the Trust, likewise subject to their mother’s income interest for life; but

– unlike Stephen’s – their interests are to be delivered to them, free of trust, at their

mother’s death.

In addition to specifying that “[t]his Trust shall continue as to the interest of

Stephen . . . for his lifetime,” the Settlor continued with this directive on the

distribution of trust assets to Stephen:

Distributions to Stephen. . . . After the termination of my wife’s

income interest, the remaining Trustee shall pay, or apply the net

income of the trust attributable to Stephen’s legitime to or for his

benefit at least annually or at such more frequent intervals as the

Trustee deems fit. Income not attributable to his legitime may be

distributed or accumulated in such amounts and at such times as the

Trustee determines in the Trustee’s sole discretion. After the

termination of my wife’sincome interest, the Trustee may invade and

distribute to or apply for the benefit of Stephen such portion or

portions of his share of the accumulated income, if any, principal or

both, at such time and in such amounts as the Trustee deems

necessary, advisable or proper. After the termination of my wife’s

income interest, the Trustee may terminate the trust or may distribute

any part of the property held in trust if the Trustee considers such

action to be in the best interest of Stephen, considering his

demonstrated ability to handle money wisely, his judgment, prudence

and discretion, and any other factors the Trustee may consider

relevant. A partial termination of Stephen’s interest in the trust shall

not affect his right to receive distributions of income from the trust
11 At all times relevant to this case, Louisiana gave each child the right to claim a

share – his legitime – of the forced portion of each parent’s estate but allowed the parent

to leave a child’s legitime (1) in trust, (2) for his lifetime, (3) burdened with a lifetime

usufruct or income interest in trust in favor of the surviving parent, and (4) subject to

restraints that would deprive the forced heir of the right voluntarily to dispose of or

encumber such interests or to have it seized involuntarily by his creditors; as long as

(a) the net income of the Trust that is not otherwise payable to the surviving parent is paid

at least annually to the forced heir, and (b) the principal of the Trust is distributed to the

forced heirs’ own heirs, legatees, or assignees at the death of the forced heir. See § 1841,

Louisiana Trust Code. The Settlor did this with Stephen’s one-eighth forced share.

7

attributable to his share of the principal remaining in trust. [Emphasis

added.]

Consistent with Settlor’s approach to the minimization of Stephen’s legacy, the

Trustspecifiesthat if Settloris predeceased by Nathalie,seven-eighths of his estate

would passto Stephen’sthree siblingsfree of trust, but Stephen would receive only

“his legitime, to be held in trust for his lifetime.”

In sum, the clearly demonstrated intent of Settlor as to Stephen was to

comply with Louisiana’s law of forced heirship but, in essence, to restrict Stephen’s

access to that mandatory legacy for the rest of his life.11 The only exceptions

permitted by the trust instrument – distributions of income more frequently than

once a year and invasion and distribution of principal prior to Stephen’s death –

were conditioned on the exercise of discretion by the Trustees.

B. Proceedings

After her divorce from Stephen, Patricia obtained two Florida judgments
8

against him which subsequently were made executory by the Louisiana court. She

then filed a third Louisiana suit, a garnishment proceeding, and had a notice of

seizure and interrogatories served on the Trustees. Shortly after responding to

these, the Trustees instituted yet another proceeding in state court, a concursus

action, depositing funds which they identified as income that had accrued to

Stephen in the Credit Shelter Trust, and naming as defendants Stephen, Patricia,

and – because of a notice received by the Trustees of the filing of a federal tax lien

– the government. Patricia’s three state court actions were then consolidated with

the Trustees’ concursus proceeding, after which the government removed same to

federal court. Nathalie intervened to protect her interest in the Marital Deduction

Trust. The trial court entered the judgment as above noted, denied a motion for

new trial, and the Trustees timely appealed.

II.

ANALYSIS

A. Standard of Review

In an appeal from a judgment rendered after a bench trial, we review the

court’s findings of fact for clear error and its determinations of questions of law de

novo. As the discrete facts of this case are essentially uncontested, our review of

the judgment is plenary. This is especially true today as our review almost
12 See Farm Credit Bank of Texas v. Guidry, 110 F.3d 1147 (5th Cir. 1997).

13 “Trusts may be authorized by law and the forced portion may be placed in

trust.” La. Const. of 1974, art. XII, § 5(B).

14 As originally redacted and submitted in 1962 to the Legislature by the Louisiana

State Law Institute, and adopted by the Legislature in 1964, the Trust Code represented

not just a major, cohesive piece of legislation in Louisiana’s Civil Law and code tradition;

it represented the giant step of fitting the round peg that is the Anglo-American trust into

the square hole that is Civil Law tradition, which historically did not know the private

9

exclusively implicates the application of state law.12

B. Framework of Applicable Law

1. Constitution of the State of Louisiana of 1974

The last sentence of section 5(B) of Article XII of Louisiana’s current

constitution continues the pre-existing authorization for enactment of laws

establishing trusts in Louisiana and, particularly pertinent to the instant appeal,

placing the legitime of a forced heir in trust.13

2. Louisiana Trust Code

a. General dispositions: interpretation; definitions

Given the nature of the case at bar, implicating as it does the efforts of

Patricia, as an alimony judgment creditor, and the government, as the holder of a

tax lien, to force the involuntary alienation of, indeed seize, Stephen’s interests in

the Trust, a thorough review of the structure of the Trust Code and the framework

that it provides for analyzing the issues presented by this appeal is imperative.14
trust, and Louisiana tradition, which knew only the most rudimentary of private trusts. 

Adoption of the Trust Code and the enabling amendments to Louisiana’s Constitution

was anything but an incorporation by reference of the Anglo-American system of private

trusts; rather, it was the culmination of a lengthy legal catharsis that produced a civilianlike code (albeit integrated into the Louisiana Revised Statutes) which is truly sui generis

in the field of trust law. Consequently, except to the extent some specific provisions of

the Trust Code restate particular maxims or canons of Anglo-American trust law,

common law jurisprudence and learned treatises on the subject are at best instructive by

analogy.

15 Section 1731, Louisiana Trust Code (emphasis added).

10

Judicial review of issues of Louisiana trust law, like such review of all issues of

Civil Law, begins not with an examination of jurisprudence but with the plain

wording of the Trust Code, read as a whole and interpreted according to its own

rules of construction. Section 1724 provides:

Construction of Code

The provisions of this Code shall be accorded a liberal construction in

favor of freedom of disposition. Whenever this Code is silent, resort

shall be had to the Civil Code or other laws, but neither the Civil Code

nor any other law shall be invoked to defeat a disposition sanctioned

expressly or impliedly by this Code.

In Part II, Creation of the Trust, the initial section contains a definition of a

trust unique to Louisiana: “A trust . . . isthe relationship resulting from the transfer

of title to property to a person [the trustee] to be administered by him as a fiduciary

for the benefit of another.”15 In thus defining a trust, Louisiana stands apart from

common law jurisdictions. With title to trust property vested in the trustee alone,
16 Even though a beneficiary’s interest in the trust, as distinct from property of the

trust (the “trust estate”), is sometimes referred to as “an interest in property,” see, e.g.,

Reynolds v. Reynolds, 388 So.2d 1135, 1142 (La. 1980), such interest is nevertheless not

a “real right” in the Civil Law sense.

17 Sections 1841-47, Louisiana Trust Code.

18 Section 2005, Louisiana Trust Code.

11

only the trustee has a civilian “real right” in trust property. Conversely, the

beneficiary has no title to or ownership interest in trust property, but only a civilian

“personal right,” vis-a-vis the trustee, to claim whatever interest in the trust

relationship the Settlor has chosen to bestow.16 This personal right, as confected

by the Settlor, is further tempered by mandatory provisions of law. Among those

provisions most central to the instant appeal are the rules governing the legitime in

trust17 and those governing the beneficiary’s right to alienate his interest in the

trusts. Of particular note is the section listing the only three exceptions to the

power of a settlor to restrict involuntary alienation of the beneficiary’s interest.18

Section 1736 of the Trust Code states that “[a] trust or a disposition in trust

may be made subject to any condition not forbidden in this Code and not against

public order or good morals.” Emphasizing and supplementing this authorization

for a settlor to make conditional dispositions, section 1737 notes that “[a] settlor

may dispose of property in trust to the same extent that he may dispose of that

property free of trust and to any other extent authorized by thisCode.” Continuing,
12

section 1753 augments the liberal construction mandate of section 1724 by

acknowledging that no particular magic words are necessary to create a trust and

that “[a] trust instrument shall be given an interpretation that will sustain the

effectiveness of its provisions if the trust instrument is susceptible of such an

interpretation.”

Section 1781's definition of the trustee as the “person to whom title to the

trust property istransferred to be administered by him as a fiduciary” confirmsthat

title to all trust property is vested in the trustee alone. Juxtaposed to this definition

of the trustee is section 1801's definition of the beneficiary as “a person for whose

benefit the trust is created.” Notably, no mention of title or ownership of trust

assets, either legal or beneficial, appears in the definition of the beneficiary.

Section 1805 provides that “[t]here may be one beneficiary or two or more

beneficiaries asto income or principal or both. There may be separate beneficiaries

of income and principal, or the same person may be a beneficiary of both income

and principal, or the same person may be a beneficiary of both income and

principal, in whole or in part.” The two succeeding sections – 1806 and 1807 –

amplify those possibilities by specifying that there may be several concurrent

beneficiaries of income or principal or both, and that several beneficiaries may be

designated to enjoy income successively. Part II, Subpart I contains the rules
19 See supra n.10.

13

governing the legitime in trust and specifies those provisions that such a trust may

contain to qualify.19

b. Interest of the beneficiary

Central to the disposition of this appeal is an understanding of the nature and

extent of Stephen’sinterest in the trust, for that is what Patricia and the government

seek to alienate involuntarily, and obviously that is the most that either can cause

to be alienated. Part III of the Trust Code addresses the interest of the beneficiary.

As Stephen is both an income and principal beneficiary, we must perforce examine

the Trust Code’s treatment of each of these interests.

In Subpart A of Part III, section 1961 speaks to the nature of the interest of

an income beneficiary. The first paragraph acknowledges that an income interest

in trust may be absolute or conditional and may be for the life of a beneficiary or

for a lesser term, certain or uncertain. The second paragraph acknowledges the

authority of the settlor to allocate a portion of trust income to an income

beneficiary. Section 1964 specifies that an interest in trust income terminates at the

death of the income beneficiary unless the trust instrument calls for an earlier

termination. In Subpart B of Part III, addressing the interest of the principal

beneficiary, section 1972 provides that such a beneficiary’s interest vests in his
20 Section 2001, Louisiana Trust Code (emphasis added).

14

heirs or legatees at his death.

c. Alienation of the interest of the beneficiary

Subpart D of Part III is composed of seven sections and addresses another

matter central to the instant appeal: alienation of the beneficiary’s interest. In

keeping with the structural recognition that a Louisiana trust is a relationship, and

that the trustee, and not the beneficiary, is the sole owner of trust property, section

2001 speaks to alienation of the beneficiary’s interest in the trust, not alienation of

trust property. It states the general rule of voluntary alienation: the beneficiary may

“transfer or encumber” all or part of his interest in the trust “unless the trust

instrument provides to the contrary.”

20 Section 2002 follows with the express

identification of that which is implicit in the “unless” clause of section 2001, i.e.,

a stipulation “to the contrary.” Section 2002 authorizes a settlor to prohibit both

voluntary and involuntary alienation ofthe beneficiary’s interest in the trust. Under

this section, the settlor is free to impose restraints on voluntary alienation, but his

ability to restrict involuntary alienation is subject to limitations as specified in the

remaining sections of Subpart D. Section 2004 limits the settlor’s authority to

prohibit involuntary alienation, that is, seizure of the beneficiary’s interest by his

creditors, to those instancesin which the settlor also prohibits voluntary alienation.
15

Subpart D clearly reflects the overall public policy of the Trust Code

favoring freedom of disposition by the settlor. Together, the seven sections of

Subpart D give the settlor the option either to remain silent and thereby allow

unfettered alienation by the beneficiary, thus exposing the interest of the

beneficiary to transfer, encumbrance, or seizure; or specify that the beneficiary’s

interest shall not be transferred or encumbered or seized by creditors, that is,

neither voluntarily nor involuntarily alienated. To proscribe all alienation the

settlor may either spell out such restraints in the trust instrument or employ the

shorthand method authorized in section 2007 and simply declare that the interest

of the beneficiary shall be held subject to a “spendthrift trust.” For purposes of the

TrustCode, either method issufficient to restrain alienation to the maximum extent

permitted by Subpart D.

As made manifestly clear by section 2005, however, maximum extent is not

synonymous with unlimited. This section provides, in pertinent part:

Notwithstanding any stipulation in the trust instrument to the contrary,

the proper court, in summary proceedings to which the trustee, the

beneficiary, and the beneficiary’s creditorshall be parties, may permit

seizure of a portion of the beneficiary’s interest in trust income and

principal in its discretion and as may be just under the circumstances

if the claim is based upon a judgment for:

(1) alimony, or maintenance of a person whom the
21 Section 2005, Louisiana Trust Code. Subsections (2) and (3) of section 2005,

neither of which is implicated in this case, allow seizure of a beneficiary’s interest,

notwithstanding stipulations in the trust instrument that restrain involuntary alienation,

when a creditor holds a judgment for necessary services rendered or otherwise furnished

to the beneficiary or a person whom the beneficiary is obligated to support, or for torts

committed by the beneficiary or by one for whom the beneficiary is responsible.

16

beneficiary is obligated to support; . . . .21

Within the structure of the Trust Code, section 2005 specifies three exceptions to

the settlor’s broad freedom to innoculate the interest of the beneficiary against both

voluntary and involuntary alienation. Section 2005 must be narrowly construed.

Thus, in parsing its language to determine what appropriately may be seized by,

inter alia, an alimony judgment creditor – notwithstanding any “contrary”

“stipulation in the trust instrument” – two determinations are key: (1) just what is

it that may be seized and (2) just what is it that the stipulation in the trust

instrument is contrary to?

The answer to the first inquiry is clear from the plain and unambiguous

wording of section 2005: that which may be seized is “the beneficiary’s interest in

trust income and principal.” The court may not permit direct seizure of trust

property, of which, as noted, the trustee isthe sole owner. The only thing the court

may authorize one of the specially favored creditors to seize is the beneficiary’s

personal right – hisinterest in the trust relationship. When that is done, the creditor
22 Section 2005, Louisiana Trust Code.

23 Section 2002, Louisiana Trust Code.

24 Section 2005, Louisiana Trust Code.

17

steps into the shoes of the beneficiary – whatever size and shape they may be, as

dictated by the trust instrument.

The answer to the second question (what isit that the “stipulation in the trust

instrument”22 is contrary to?) can be nothing other than “a restraint upon

involuntary alienation by a beneficiary,”23 i.e., a section 2002 stipulation

prohibiting involuntary alienation – seizure – of “the beneficiary’s interest in trust

income and principal.”24 Clearly then, the court is not authorized by section 2005

to disregard any other provision or stipulation, whether in the trust instrument or

in law, to permit seizure of the interest of the beneficiary.

d. Duties and powers of the trustee

With this construction of Subpart D on antialienation firmly inmind, we now

address PART V. DUTIES AND POWERS OF THE TRUSTEE. In keeping with

section 1724's fundamental policy favoring freedom of disposition, section 2061

prescribes:

The nature and extent of the duties and powers of a trustee are

determined from the provisions of the trust instrument, except as

otherwise expressly provided in this Code [mandatory provisions],

and, in the absence of any provisions of the trust instrument, by the
25 Section 2062, Louisiana Trust Code.

26 Section 2063, Louisiana Trust Code.

27 Sections 2064 and 2066, Louisiana Trust Code.

28 Section 2066, Louisiana Trust Code.

18

provisions of this Part and by law [suppletive provisions].

As with the interest of the beneficiary, and the rights and limitations on the

beneficiary’s use and enjoyment of his interest in the trust, the powers and duties

of the trustee are determined by the settlor. With the sole exception of a provision

that would dispense with the duty of loyalty to the beneficiary,25 the latitude of the

settlor in vesting the trustee with powers and dutiesis virtually boundless. Indeed,

to deviate from duties imposed by the settlor, the trustee must obtain consent from

the beneficiary, which cannot be prospective and cannot limit the duty of loyalty.26

To deviate from administrative and investment provisions of the trust instrument27

or from the administrative provisions of the Trust Code,28 the trustee must obtain

judicial authority.

In contrast to the Trust Code’s admittedly scant provision controlling

deviation from the duties of the trustee, it contains no parallel provisionsregarding

powers. Lawful powers given to the trustee by the settlor are immutable; indeed,

not even a court can control the trustee’s exercise of discretionary powers or force
29 See § 2115, Louisiana Trust Code.

30 See §§ 2067 and 2069, Louisiana Trust Code. “Invasion of principal,” a term of

art in trust law, refers to the act of a trustee in removing assets from the trust and

expending them for purposes of the trust or distributing them to a beneficiary or for his

benefit, in advance of the time that property of the trust would ordinarily be removed and

distributed according to the general provisions of the trust instrument or suppletive

provisions of law.

31 Section 2067, Louisiana Trust Code.

19

their exercise.29

e. Invasion of principal

Pertinent to this appeal are the two sections of Subpart A of Part V of the

Trust Code that address invasion of principal.30 The first of these, section 2067,

contains the limited list of occasions when the court may direct or permit a trustee

to pay income or principal from the trust property.31 This list allows for court

directed invasion of principal for the necessary support, maintenance, education,

medical expenses, or the welfare of a beneficiary before the time he is entitled to

such distributions. We must note two important observations. First, the finite list

warranting invasion of principal is limited to those instances involving the

objective needs of the beneficiary only, not the needs of any creditors, even a

former spouse or other dependent, and then only if such invasion will not impair

the interest of any other beneficiary. A comparison of section 2067 and section

2005 reveals that, whereas the court may authorize seizure of the beneficiary’s
32 See § 2115, Louisiana Trust Code.

20

interest by an alimony judgment creditor, the court is not authorized to direct the

trustee to invade principal and distribute trust property to such a judgment creditor

unless the beneficiary himself would be entitled to enjoy such trust property. It

appears indisputable that the authority of the court to disregard restrictions on

alienation, and to permit seizure of the interest of the beneficiary by an alimony

judgment creditor, does not include the authority to order a trustee to invade and

distribute principal to a judgment creditor when, as here, the trust instrument leaves

invasion of principal to the unfettered discretion of the trustee.32 Second, invasion

cannot be ordered by the court for any reason, even those on section 2067's

permitted list, before such time as the beneficiary would be entitled to demand

distribution of trust property – and never if invasion would impair the interest of

another beneficiary.

f. Attorneys’ fees and costs

A number of Trust Code provisions bear on the issue of recovery of

attorneys’ fees and costs incurred by the Trustees in this litigation. Within

Subpart B of Part V, outlining the duties of the trustee, are found (1) section 2090,

which contains the well-known “prudent man” rule of trustee administration;
21

(2) section 2091, which expresses the duty of the trustee to take, keep control of,

and preserve trust property; and (3) section 2093, which commands the trustee to

defend actionsthat may result in a lossto the trust estate, unlessso doing would not

be reasonable. Subpart C addresses the powers of the trustee and includes, inter

alia, the aforementioned section 2115 which exempts the exercise of discretionary

powers of the trustee from court control except to prevent an abuse of discretion by

a trustee, and section 2117 which, as a complement to section 2093's command to

defend actions, authorizes the trustee to incur expenses necessary to carry out the

purposes of the trust. Then, in Subpart D of Part VI, section 2191 gives the trustee

the right to be indemnified from trust property for all properly incurred expenses;

and, in Part X, section 2241 authorizesthe trustee to select an attorney to represent

the trust if the trust instrument fails to do so or if the lawyer named fails or ceases

to serve. When read in pari materia, these provisions form the matrix for judicial

determination of the trustees’ right of reimbursement for attorneys’ fees.

3. Internal Revenue Code

Section 6321 is the principal section of the I.R.C. implicated in this appeal.

It provides that the amount of unpaid taxes constitutes a lien in favor of the

government on all property and rights to property belonging to the tax debtor. To

affect movable (personal) property, such as the interest of a beneficiary of a
33 26 U.S.C. § 6323(f)(A)(ii) & (f)(2)(B).

34 United States v. City of New Britain, 347 U.S. 81, 74 S.Ct. 367, 98 L.Ed. 520

(1954).

35 See United States v. National Bank of Commerce, 472 U.S. 713, 105 S.Ct.

2919, 86 L.Ed.2d 565 (1985).

22

Louisiana trust, a notice must be filed in the political subdivision in which the

residence of the taxpayer is located.33 As a general rule, competition for priority

between tax liens and other encumbrances is determined on the basis of first in

time, first in right.34 The district court made the conclusional statement that the

federal tax liens attached to Stephen’s right to receive income and principal from

the Trust, presently and in the future. The court recognized Patricia’s ability to

avoid the spendthrift provisions of the Trust by qualifying under section 2005 of

the Trust Code because she is a member of one of the favored classes of creditors

that the court may permit to seize the interests of the beneficiary, notwithstanding

stipulations in the trust instrument prohibiting involuntary alienation. The federal

government, however, is not a member of any of the favored classes of creditors

identified in section 2005. The district court did not enforce the spendthrift

provisions of the Trust against the federal tax lien. Rather, the court finessed the

determination of a legal basis for doing so by citing the truism which allows that

such a lien can reach every interest in property that a taxpayer may have.35 This
36 See §§ 1841-47, Louisiana Trust Code.

37 See § 1841(3), Louisiana Trust Code.

38 See § 1841(4), Louisiana Trust Code.

39 See § 1844, Louisiana Trust Code.

23

observation begs the question whether Stephen’s beneficial interest in the Trust,

subject as it is to antialienation provisions, can be seized under a federal tax lien

in disregard of such stipulations. As we note below, however, this aspect of the

district court’s judgment is not challenged on appeal and we opt not to address it

sua sponte.

C. The Trust Instrument

Within the framework of relevant provisions of the Louisiana Constitution,

Louisiana Trust Code, and applicable I.R.C. provisions, we examine the overall

structure and the applicable provisions of the trust instrument itself, here, the

Settlor’s testament. In broad overview, to the extent relevant to Stephen and this

appeal, the Trust expressly includes all mandated requirements to qualify as a

legitime trust,36 for the longest permissible term,37 with principal retained in trust

for the longest permissible time,38 burdened with an initial income interest for the

lifetime of his mother, Nathalie,39 and – after her death or any earlier termination
40 See § 1841(1), Louisiana Trust Code.

41 See § 1843, Louisiana Trust Code; see also §§ 2001-07. The Trustees have

stipulated that the entirety of Stephen’s interest in the Trust is legitime.

42 Cf. § 2068(B), Louisiana Trust Code.

43 See id.

24

of her income interest – with income distributed at least annually,40 and subject to

the maximum permitted restraints on alienation of his legitime interest in trust.41

Also pertinent here isthe provision in the trust instrument that, afterthe termination

of Nathalie’s income interest (which already has occurred in the Credit Shelter

Trust by virtue of Nathalie’s renunciation of her income interest therein), the

Trustees may invade principal on Stephen’s behalf to the extent the Trustees deem

same necessary, advisable, or proper.42 By electing not to specify any objective

standards to guide or restrict the exercise of the Trustees’ discretion to invade

principal, and instead conditioning invasion on nothing more than the

determination of necessity, advisability, and propriety, Settlor fully vested the

Trustees with complete discretion to determine when and whether to remove trust

property from the Trust and distribute it to the beneficiary or for his well-being.43

In the trust instrument the Settlor restricted the rights of all beneficiaries by

restraining their legal right to alienate their respective interests, either voluntarily
44 See § 2002, Louisiana Trust Code.

45 See § 2007, Louisiana Trust Code; see also § 1725(7) (“‘Spendthrift trust,’ when

used without other qualifying words, means a trust under which alienation by a

beneficiary of an interest in income or principal is restricted to the full extent permitted

by this Code.”).

46 See § 1807, Louisiana Trust Code (“Several beneficiaries may be designated to

enjoy income successively.”); see also § 1725(2) (“‘Income beneficiary’ means a

beneficiary to whom income is payable . . . conditionally, or in the future. . . .”).

25

or involuntarily, to the fullest extent possible.44 The Settlor did so by taking

advantage of the Trust Code’sshorthand provision,simply stating that the “interest

of the beneficiary shall be subject to the spendthrift provisions of Louisiana law.”45

Stephen’sinterest in income and in principal of the Trust are: (1) entitlement

of his heirs, legatees, and assignees to receive his interest in trust principal at his

death (unless his mother is still living at that time, in which case such principal

distribution is postponed until her death or the termination of her income interest

in the Trust, or when some or all of hisshare of trust principal isinvaded during his

lifetime but after his mother’s death); (2) present enjoyment of his interest in

income of the Credit Shelter Trust but only to the extent of the mandatory single

distribution per year (unlessthe Trusteesin their discretion elect to distribute more

frequently); and (3) a successor income beneficiary’s interest in the Marital

Deduction Trust, devoid of any enjoyment until the death of his mother as initial

income beneficiary (or her earlier renunciation of such interest).46
26

D. Interplay of Operable Facts, Provisions of the Trust Instrument,

and Applicable Law

With this framework for our appellate review, we may now appropriately

address the rulings of the trial court.

1. Patricia I. Read is recognized as an alimony judgment creditor under

La. Rev. Stat. 9:2005, and as such entitled to seizure of Stephen L.

Read’s beneficiary interest in the A. Louis Read Testamentary Trust.

This ruling is not contested on appeal.

2. Seizure of the entire amount of the alimony judgments is found to be

just under the circumstances.

This ruling is not contested on appeal.

3. The seizure of the beneficial interest of Stephen L. Read by Patricia I.

Read is effective as of August 4, 1995.

This ruling is not contested on appeal.

4. The tax lien of the United States of America . . . is effective as to

Stephen L. Read’s entire interest in the A. Louis Read Testamentary

Trust, effective January 21, 1997.

This ruling is not contested on appeal.

5. Patricia I. Read’s claim is entitled to priority over the Internal

Revenue Service’s claim.

This ruling is not contested on appeal.

6. The Trustees are hereby discharged from any liability to the named
27

defendants as to the funds on deposit in the Court’s registry.

This ruling is not contested on appeal.

7. The Trustees are to make distributions directly to Patricia and the

government, immediately upon being authorized to make a

distribution under the terms of the Trust, from income and principal,

until the respective claims are satisfied.

This is the key contested issue we consider today. The word authorized in

the phrase “immediately upon being authorized to make a distribution under the

terms of the Trust,” is at the heart of this preeminent issue.

As noted above, even though the claims of Stephen’stwo creditors herein are

unaffected by the spendthrift provision of the Trust, their seizures affect only

Stephen’s interest in the Trust and do not attach directly to the trust estate. For

emphasis we repeat, Stephen has both income and principal interests in the Trust:

(1) an undivided one-eighth current income interest in the Credit Shelter Trust;

(2) an undivided one-eighth successive income interest in the Marital Deduction

Trust, under which Nathalie is the initial income beneficiary for life; (3) an

undivided one-eighth lifetime principal interest in the Credit Shelter Trust, i.e., an

interest that subsists but is not distributable until his death, unless the Trustees in

theirsole discretion elect to invade and distribute such principal in whole or in part,

prior to his death; and (4) an undivided one-eighth lifetime principal interest in the
28

Marital Deduction Trust, identical to his principal interest in the Credit Shelter

Trust, except that the Trustees do not have even discretionary authority to invade

his principal interest in that subtrust prior to Nathalie’s death. Therefore, even

disregarding the spendthrift provisions, Stephen’s only interest in the Trust –

income or principal – that, prior to his death, is not subject to Trustee discretion is

one-eighth of the net income from the Credit Shelter Trust, and even that is subject

to Trustee discretion as to distributions more frequently than once annually, and

one-eighth of the income of the Marital Deduction Trust, but only after Nathalie’s

death. On the other hand, the Trustees are authorized under the terms of the Trust

to make discretionary distributions to Stephen of his entire one-eighth principal

interest in the Credit Shelter Trust and, after Nathalie’s death, of his entire oneeighth principal interest in the Marital Deduction Trust as well. That authorization

is solidly grounded in the unfettered discretion that Settlor vested in the Trustees

through express provisions of the Trust.

In the careful words of the trust instrument, the power of the Trustees to

invade and distribute principal is to be exercised “at such times and in such

amounts as the Trustee deems necessary, advisable or proper” and, after the

termination of Nathalie’s income interest, only “if the Trustee considers such action

to be in the best interest of Stephen, considering his demonstrated ability to handle
47 Section 2067, Louisiana Trust Code.

29

money wisely, his judgment, prudence and discretion, and any other factors the

Trustee may consider relevant.”

At the heart of this issue, then, is the critical inquiry whether any court can

substitute its discretion for that which a settlor has vested exclusively in the trustee,

and thereby force the premature distribution of trust property by distributing same

not to the beneficiary but to his seizing creditors. We are persuaded that question

must be answered in the negative.

We conclude that the district court abused its discretion when it ordered the

Trusteesto make distributions, whether of income or principal, “immediately upon

being authorized” under the terms of the Trust to do so. This aspect of the

judgment must therefore be modified to command the making of distributions

directly to Patricia – and subsequently to the government – only at times when,

under the terms of the Trust, Stephen becomes “entitled to the enjoyment of that

income or principal, if the interest of no other beneficiary of the trust is impaired

thereby.”47

8. The Trustees are to ensure that the stream of income of other

beneficiaries under the Trust is not impeded, impaired or negatively

affected by these distributions.

This ruling is not contested on appeal.
48 George Gleason Bogert et al, Trust & Trustees § 975 (2d ed. rev. 1983).

49 § 2191, Louisiana Trust Code.

30

9. The Trustees’ request for attorneys’ fees is denied as to the

interpleaded funds.

This ruling is not contested on appeal.

10. Those attorneys’ fees directly attributable to thisinterpleader are to be

paid out of Stephen L. Read’sinterest in the Trust after the satisfaction

of the creditors herein.

Given our reversal of the district court’s ruling that the Trustees distribute

Trust principal “upon being authorized” to do so, it is likely to be an extended

period, if ever, before the claims of Patricia and the government are satisfied from

Stephen’s interest in the Trust. Further, the court’s relegation of the claim for

attorneys’ fees to a rank junior to the claims of Patricia and the government, and

its limitation of the source of funds to Stephen’s interest, are without legal

foundation and must be reversed.

Generally, “[a] trustee is entitled to reimbursement for his necessary and

reasonable expenses incurred in the administration of his trust.”48 “A trustee is

entitled to indemnity from the trust estate for expenses properly incurred by him

in the administration of the trust, unlessthe trust instrument provides otherwise.”49

There is no contrary provision in the trust instrument at bar. We previously have
50 Section 2156, Louisiana Trust Code.

31

noted those provisions of section 2093 of the Trust Code that command the trustee

to defend actions that may result in a loss of the trust estate. The judicial assertion

of claims by Patricia and the government clearly qualify assuch. In addition to the

provisions of section 2117 of the Trust Code, which authorize the trustee to incur

expenses necessary to carry out the purposes of the Trust, several provisions of

section 2156 of the Trust Code are applicable. For example, subsection A,

addressing charges that shall be made against income, includes “(4) Court costs,

attorney’s fees, and other fees on other accountings or judicial proceedings if the

matter primarily concerns the income interest, unless the court directs otherwise.”

Similarly, subsection C, addressing charges that shall be made against principal,

includes “(5) Court costs, attorney’s fees, and other fees on other accountings or

judicial proceedings if the matter primarily concerns the principal interest, unless

the court directs otherwise,” and (6) Expensesincurred in maintaining or defending

an action to construe the trust or to protect the trust or the trust property.”50 Patricia

maintains that the phrase “unless the court directs otherwise” gives the court

discretion to order payment of creditors ahead of payment of the Trustees’

attorneys’ fees. Assuming without deciding that this provision gives the district

court discretion, in extraordinary or exceptional circumstances, to refuse to order
32

recovery by the Trustees of their attorneys’ fees until the seizing creditors have

been paid in full, the court à quo made no findings or conclusions to justify this

exercise ofsuch discretion in contravention ofthe well-established general rule that

the Trustees are entitled to reimbursement. We must conclude as a matter of law

that the Trustees are entitled to recover their reasonable attorneys’ fees, including

those associated with this appeal, from the trust estate, ahead of Stephen’s

judgment creditors.

Also problematic is the court’s limitation of the source of recovery of

attorneys’ fees to Stephen’s interest in the Trust. Even though Stephen’s creditors

may seize no greater interest in the Trust than his, the Trustees’ entitlement to

reimbursement of attorneys’ feesis not necessarily so limited. Although the Settlor

could have created separate trusts for each beneficiary, he did not. Indeed, as

noted, he did not create separate creditshelter and marital deduction trusts. Rather,

Settlor created a single trust. Moreover, even though he decreed that the Trust be

separated into two subtrusts, within each subtrust he merely assigned separate

undivided interests in the single corpus.

We modify the judgment of the district court to the extent that it limits

satisfaction of the Trustees’ attorneys’ fees to Stephen’s interest in the Trust, and

then only after satisfaction of the claims of Patricia and the government; and hold
33

that (1) such attorneys’ fees may be recovered without regard to satisfaction of the

claims of Patricia and the government, and (2) although recovery should be made

first from Stephen’s interest in the Credit Shelter Trust, if that should prove

insufficient, the Trustees may complete such recovery next from the remaining

assets of the Credit Shelter Trust, and finally from any remaining Trust assets;

provided that, to the extent the Trustees shall have recovered any portion of their

attorneys’ fees from Stephen’s siblings’ interests in the Credit Shelter Trust, his

interests in the Marital Deduction Trust shall be available for reimbursing the

interests of his siblings. We leave to the fiduciary discretion of the Trustees the

timing of any recovery of attorneys’ fees from the assets of the Marital Deduction

Trust.

11. Costs of these proceedings are to be paid out of the interpleaded funds.

We agree with this ruling of the district court. In doing so, however, we

emphasize that this ruling should not be interpreted as a limitation; if the

interpleaded funds should prove insufficient to cover all costs incurred at both the

trial and appeals levels, the remainder may be recovered from future accruals of

income to Stephen and, if that be insufficient, from his principal interest in the

Trust, beginning with the Credit Shelter Trust.

III.
34

CONCLUSION

For the foregoing reasons, we affirm the judgment of the district court to the

extent it recognizes that (1) Patricia I. Read is an alimony judgment creditor

entitled to seizure of Stephen L. Read’s income and principal interest in the

A. Louis Read Trust, free of restraints on involuntary alienation; (2) seizure of the

entire amount of her alimony judgments is just under the circumstances; (3) her

seizure became effective as of August 4, 1995; (4) the government’s tax lien is

effective asto Stephen’sincome and principal interestsin the A. Louis Read Trust,

free of restraints on involuntary alienation, as of January 21, 1997; (5) Patricia’s

rights as a seizing creditor of Stephen’s interest in the Trust primes the

government’slien thereon; (6) the Trustees are discharged from any liability to the

named defendants as to the funds on deposit in the registry of the district court;

(7) the Trustees are not entitled to recover attorneys’ fees from the interpleaded

funds; and (8) the costs of these proceedings are to be paid out of the interpleaded

funds.

We modify the judgment of the district court regarding (a) distributionsfrom

the Trustees to Patricia and the government and (b) recovery by the Trustees of

their attorneys’ fees, as follows:

1. After deductions for costs of those proceedings, all remaining funds held
35

in the registry of the district court representing distributions of income from

Stephen’s one-eighth income interest in the Credit Shelter Trust are to be delivered

to Patricia and credited to satisfaction of her alimony judgments against Stephen.

2. Until Patricia’s alimony judgments are satisfied, the Trustees shall pay

directly to Patricia, her successors and assigns, all distributable net trust income

allocable to Stephen’s income interest in the Credit Shelter Trust, at least once per

calendar year.

3. After Stephen becomes entitled to receive income distributions from the

Marital Deduction Trust, the Trustees shall pay directly to Patricia, her successors

and assigns, all distributable net trust income allocable to Stephen’s income interest

in said Trust, at least once per calendar year, until her alimony judgments are paid

in full.

4. If, during the continuation of the Credit Shelter Trust, Patricia’s alimony

judgments should be satisfied, the Trustees shall pay to the government such

distributable net trust income as would have been paid to Patricia, at least once per

calendar year, until its tax lien is paid in full.

5. During the continuation of the Marital Deduction Trust following the

demise of Nathalie, all distributable net trust income allocable to Stephen and not

payable to Patricia under the foregoing provisions shall be paid to the government
36

until its tax lien is paid in full.

6. If, at Stephen’s death, Patricia’s alimony judgments shall not have been

paid in full, the Trustees shall pay directly to Patricia, her successors and assigns,

any remaining interest of Stephen in the principal of the Credit Shelter Trust;

provided, however, that if Patricia’s alimony judgment shall have been satisfied,

then the Trusteesshall pay directly to the government Stephen’sremaining interest

in the principal of that subtrust, until the government’s tax lien is paid in full.

7. After the death of the second to die of Nathalie and Stephen, any interest

of Stephen in the Marital Deduction Trust shall be paid first to Patricia, her

successors and assigns, until her alimony judgments are paid in full; and then to the

government until its tax lien is satisfied.

8. Anything in the foregoing to the contrary notwithstanding, the Trustees

are authorized to recover the attorney’s fees they have incurred in connection with

the instant litigation, including this appeal, first from Stephen’s principal interest

in the Credit Shelter Trust, then, if necessary, from remaining principal of the

Credit Shelter Trust, and finally, if still necessary, from the Marital Deduction

Trust; in such amounts and at such time or times as the Trustees in their sole

discretion deem appropriate.

MODIFIED IN PART and, as modified, AFFIRMED.