Beneficiary of irrevocable trust unexpectedly filed for bankruptcy. Trustee engaged DeAngelis Legal to review the trust and Arizona law to determine if the trust’s assets were subject to the bankruptcy trustee’s control. In Arizona, the general rule is that a court may reach the assets of the trust for the benefit of the beneficiary. However, the general rule does not apply to any beneficial interest that is protected by a spendthrift provision or is discretionary, making the trust assets unavailable to the beneficiary’s creditors. This protection is another great reason to pass your assets to a properly drafted trust, rather than outright to your beneficiaries.
