Vermont 2025-2026 Regular Session

Vermont House Bill H0023 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	BILL AS INTRODUCED H.23
2	2	2025 Page 1 of 4
3	3
4	4
5	5	VT LEG #379162 v.1
6	6	H.23 1
7	7	Introduced by Representative LaLonde of South Burlington 2
8	8	Referred to Committee on 3
9	9	Date: 4
10	10	Subject: Trusts; transfer of property to trust; creditor’s claims 5
11	11	Statement of purpose of bill as introduced: This bill proposes to provide that 6
12	12	when property owned by spouses as tenants by the entirety is transferred into a 7
13	13	trust, each spouse retains the same immunity from creditor claims against the 8
14	14	property that the spouses had before they transferred the property into the trust. 9
15	15	An act relating to the transfer of property to a trust 10
16	16	It is hereby enacted by the General Assembly of the State of Vermont: 11
17	17	Sec. 1. 14A V.S.A. § 505 is amended to read: 12
18	18	§ 505. CREDITOR’S CLAIM AGAINST SETTLOR 13
19	19	(a) Whether or not the terms of a trust contain a spendthrift provision, the 14
20	20	following rules apply: 15
21	21	(1) During the lifetime of the settlor, the property of a revocable trust is 16
22	22	subject to claims of the settlor’s creditors. 17
23	23	(2) With respect to an irrevocable trust, a creditor or assignee of the 18
24	24	settlor may reach the maximum amount that can be distributed to or for the 19
25	25	settlor’s benefit. If a trust has more than one settlor, the amount the creditor or 20 BILL AS INTRODUCED H.23
26	26	2025 Page 2 of 4
27	27
28	28
29	29	VT LEG #379162 v.1
30	30	assignee of a particular settlor may reach shall not exceed the settlor’s interest 1
31	31	in the portion of the trust attributable to that settlor’s contribution. This 2
32	32	subdivision shall not apply to an irrevocable “special needs trust” established 3
33	33	for a disabled person as described in 42 U.S.C. § 1396p(d)(4) or similar federal 4
34	34	law governing the transfer to such a trust. 5
35	35	(3) After the death of a settlor, and subject to the settlor’s right to direct 6
36	36	the source from which liabilities will be paid, the property of a trust that was 7
37	37	revocable at the settlor’s death is subject to claims of the settlor’s creditors, 8
38	38	costs of administration of the settlor’s estate, the expenses of the settlor’s 9
39	39	funeral and disposal of remains, and statutory allowances to a surviving spouse 10
40	40	and children to the extent the settlor’s probate estate is inadequate to satisfy 11
41	41	those claims, costs, expenses, and allowances. 12
42	42	* * * 13
43	43	(c)(1) Property held by spouses as tenants by the entirety that is conveyed 14
44	44	to the spouses’ jointly or separately held revocable or irrevocable trusts, and 15
45	45	any proceeds of the sale or disposition of the property, shall be immune from 16
46	46	the claims of the spouses’ separate creditors to the same extent as the property 17
47	47	would have been if it had remained held by the spouses as tenants by the 18
48	48	entirety if the following apply: 19
49	49	(A) the spouses are married to each other; 20 BILL AS INTRODUCED H.23
50	50	2025 Page 3 of 4
51	51
52	52
53	53	VT LEG #379162 v.1
54	54	(B) the property is held in the trust or trusts, or has been deeded out 1
55	55	of the trust to the spouses as tenants by the entirety; 2
56	56	(C) if the trust is a joint trust, the trust may be revoked by either 3
57	57	spouse acting alone but may be amended only by action of both spouses; and 4
58	58	(D) the property is the spouses’ property, including if: 5
59	59	(i) both spouses are current beneficiaries of one joint trust that 6
60	60	holds the entire property; or 7
61	61	(ii) each spouse is a current beneficiary of a separate trust and the 8
62	62	two separate trusts, together, hold the entire property, whether or not other 9
63	63	persons are also current or future beneficiaries of the trust or trusts. 10
64	64	(2)(A) Property at any time held in a tenants by the entirety trust shall 11
65	65	have the same immunity from the claims of a separate creditor of either settlor 12
66	66	as the property would have if it were held outside the trust by the settlors as 13
67	67	tenants by the entirety unless otherwise provided in writing by the settlor or 14
68	68	settlors who transferred the property to the trust. The property shall be treated 15
69	69	in all respects as tenants by the entirety property, including for purposes of 16
70	70	federal and state bankruptcy laws. 17
71	71	(B) Property held in a tenants by the entirety trust shall cease to 18
72	72	receive immunity from the claims of creditors upon the dissolution of the 19
73	73	settlors’ marriage by a court. 20 BILL AS INTRODUCED H.23
74	74	2025 Page 4 of 4
75	75
76	76
77	77	VT LEG #379162 v.1
78	78	(3) Except as otherwise provided in this title, on the effective date of this 1
79	79	subsection: 2
80	80	(A) this subsection (c) applies to all trusts created before, on, or after 3
81	81	the effective date of this subsection; 4
82	82	(B) this subsection (c) applies to all judicial proceedings concerning 5
83	83	trusts commenced on or after the effective date of this subsection. 6
84	84	Sec. 2. EFFECTIVE DATE 7
85	85	This act shall take effect on passage. 8