Trust rules limit creditor claims and allow some tax reimbursements

A settlor's creditor or assignee may reach the largest amount that can be distributed to or for the settlor's benefit. This rule covers irrevocable trusts and claims by a settlor's creditor or assignee. For a trust with more than one settlor, a creditor's reach is limited to that settlor's interest in the part tied to that settlor's contribution. Chapter 3E trusts are excepted. These rules took effect October 1, 2026, and apply to trusts under Section 19-3B-1204.

An independent trustee may use trust assets to reimburse a settlor or another person treated as the trust owner for certain income taxes. This covers a settlor or another person treated as the trust owner under federal tax law. The trustee must not be related to or subordinate to the person under the cited federal tax rule, and the trustee decides whether to make the payment. The reimbursement must cover income taxes on trust property or income included in that person's personal income under applicable law. These rules took effect October 1, 2026, and apply to trusts under Section 19-3B-1204.

A beneficiary of an irrevocable trust who holds a withdrawal power is not treated as a settlor when that power lapses. This covers a beneficiary of an irrevocable trust who holds a power to withdraw trust property. The rule applies when the beneficiary's power to withdraw trust property lapses. This rule took effect October 1, 2026, and applies to trusts under Section 19-3B-1204.