2023 New York Laws › EPT - Estates, Powers and Trusts › Article 7 - Trusts › Part 3 - Rights of Purchasers, Creditors and Other Persons › 7-3.1 - Disposition in Trust for Creator Void as Against Creditors

§ 7-3.1 Disposition in trust for creator void as against creditors
(a)  A  disposition  in  trust  for  the use of the creator is void as
against the existing or subsequent creditors of the creator.
(b) (1) For purposes of paragraph (a) of  this  section,  all  trusts,
custodial  accounts,  annuities,  insurance contracts, monies, assets or
interests established as part of,  and  all  payments  from,  either  an
individual  retirement account plan which is qualified under section 408
or section 408A of the United States Internal Revenue Code of  1986,  as
amended,  or  a Keogh (HR-10), retirement or other plan established by a
corporation, which is qualified under section 401 of the  United  States
Internal  Revenue  Code  of  1986, as amended, shall not be considered a
disposition in trust for the use of the creator, even though the creator
is (i) in  the  case  of  an  individual  retirement  account  plan,  an
individual  who is the settlor of and depositor to such account plan, or
(ii) a self-employed individual,  or  (iii)  a  partner  of  the  entity
sponsoring  the  Keogh  (HR-10)  plan,  or  (iv)  a  shareholder  of the
corporation sponsoring the retirement or other plan.
(2) All trusts, custodial accounts,  annuities,  insurance  contracts,
monies,  assets,  or  interests  described  in  subparagraph one of this
paragraph shall be conclusively presumed to be spendthrift trusts  under
this  section  and  the  common  law  of  the  state of New York for all
purposes, including, but not limited to,  all  cases  arising  under  or
related  to  a  case  arising under sections one hundred one to thirteen
hundred thirty of title eleven of the United States Bankruptcy Code,  as
amended.
(3) This section shall not impair any rights an individual has under a
qualified  domestic  relations  order as that term is defined in section
414(p) of the United States Internal Revenue Code of 1986, as amended.
(4) Additions to an  asset  described  in  subparagraph  one  of  this
paragraph  shall not be exempt from application to the satisfaction of a
money judgment if (i) made after the date that is ninety days before the
interposition of the claim on which such judgment was entered,  or  (ii)
deemed  to  be voidable transactions under article ten of the debtor and
creditor law.
(c) A provision in any trust, other than a  testamentary  trust  or  a
trust  which meets the requirements of subparagraph two of paragraph (b)
of subdivision two of section three  hundred  sixty-six  of  the  social
services  law  and  of  the regulations implementing such clauses, which
provides directly or  indirectly  for  the  suspension,  termination  or
diversion  of the principal, income or beneficial interest of either the
creator or the creator's  spouse  in  the  event  that  the  creator  or
creator's spouse should apply for medical assistance or require medical,
hospital or nursing care or long term custodial, nursing or medical care
shall  be  void  as  against the public policy of the state of New York,
without regard to the irrevocability of the trust  or  the  purpose  for
which the trust was created.
(d)  A  disposition in trust shall not be considered to be for the use
of the creator under paragraph (a) of this  section  by  reason  of  the
trustee's  authority  to  pay trust principal to the creator pursuant to
section 7-1.11 of this article. Nor shall  a  disposition  in  trust  be
considered  to be for the use of the creator under paragraph (a) of this
section where the trustee is authorized under the  trust  instrument  or
any  other  provision of law to pay or reimburse the creator for any tax
on trust income or trust principal that is payable by the creator  under
the  law imposing such tax or to pay any such tax directly to the taxing
authorities. No creditor of a trust creator shall be entitled  to  reach
any  trust  property based on the discretionary powers described in this
paragraph.