Opinion ID: 541990
Heading Depth: 2
Heading Rank: 1

Heading: Corpus Distribution

Text: 11 The district court was correct in finding that this case calls for application of 11 U.S.C. Sec. 541(c)(2) to take the corpus of each spendthrift trust out of the definition of property of the estate of the debtor. A contrary decision would drain the spendthrift trusts of any meaning and ignore the relevant Bankruptcy Code provision. The grantor of the trusts clearly and effectively directed that the corpus not become a part of the debtor's estate until he reached age 50 and that the debtor and his creditors be prevented from anticipating the debtor's interest in the corpus until that time. 12 The trustee in bankruptcy places great emphasis on the fact that, according to the terms of the trusts, they shall terminate when the debtor reaches age 50, at which time the trustee shall distribute to [Newman] the assets of the trust estate, absolutely and free from trust. The trustee asserts that this language will act to nullify the spendthrift provisions at the instant the debtor turns 50, so that he is to receive the trust corpus free from trust. As a result, the trustee asserts, the estate in bankruptcy should now include the present value of that amount to be turned over free from trust. 13 This reading of the trusts is imaginative but far too narrow. It ignores the plain import of the trusts taken as a whole. If the debtor were now older than 50, this approach would make sense. The point of a spendthrift trust, however, is to prevent exactly this sort of anticipation by beneficiaries and their creditors. The Bankruptcy Code is designed to further that goal.