Vermont 2025-2026 Regular Session

Vermont Senate Bill S0003 Compare Versions

Version 1 (Old)

Version 2 (New)

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1		-	~~BILLASINTRODUCEDANDPASSEDBYSENATEANDHOUSE~~ S.3
	1	+	BILLASINTRODUCEDANDPASSEDBYSENATE S.3
2	2		2025 Page1of6
3	3		S.3
4	4		IntroducedbySenatorHashim
5	5		ReferredtoCommitteeonJudiciary
6	6		Date:January10,2025
7	7		Subject:Trusts;transferofpropertytotrust;creditor’sclaims
8	8		Statementofpurposeofbillasintroduced:Thisbillproposestoprovidethat
9	9		whenpropertyownedbyspousesastenantsbytheentiretyistransferredintoa
10	10		trust,eachspouseretainsthesameimmunityfromcreditorclaimsagainstthe
11	11		propertythatthespouseshadbeforetheytransferredthepropertyintothe
12	12		trust.
13	13		Anactrelatingtothetransferofpropertytoatrust
14	14		ItisherebyenactedbytheGeneralAssemblyoftheStateofVermont:
15	15		Sec.1.14AV.S.A.§ 505isamendedtoread:
16	16		§505.CREDITOR’SCLAIMAGAINSTSETTLOR
17	17		(a)Whetherornotthetermsofatrustcontainaspendthriftprovision,the
18	18		followingrulesapply:
19	19		(1)Duringthelifetimeofthesettlor,thepropertyofarevocabletrustis
20	20		subjecttoclaimsofthesettlor’screditors.
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	38	+	18 BILLASINTRODUCEDANDPASSEDBYSENATE S.3
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40	40		(2)Withrespecttoanirrevocabletrust,acreditororassigneeofthe
41	41		settlormayreachthemaximumamountthatcanbedistributedtoorforthe
42	42		settlor’sbenefit.Ifatrusthasmorethanonesettlor,theamountthecreditoror
43	43		assigneeofaparticularsettlormayreachshallnotexceedthesettlor’sinterest
44	44		intheportionofthetrustattributabletothatsettlor’scontribution.This
45	45		subdivisionshallnotapplytoanirrevocable“specialneedstrust”established
46	46		foradisabledpersonasdescribedin42U.S.C.§1396p(d)(4)orsimilar
47	47		federallawgoverningthetransfertosuchatrust.
48	48		(3)Afterthedeathofasettlor,andsubjecttothesettlor’srighttodirect
49	49		thesourcefromwhichliabilitieswillbepaid,thepropertyofatrustthatwas
50	50		revocableatthesettlor’sdeathissubjecttoclaimsofthesettlor’screditors,
51	51		costsofadministrationofthesettlor’sestate,theexpensesofthesettlor’s
52	52		funeralanddisposalofremains,andstatutoryallowancestoasurvivingspouse
53	53		andchildrentotheextentthesettlor’sprobateestateisinadequatetosatisfy
54	54		thoseclaims,costs,expenses,andallowances.
55	55		***
56	56		(c)(1)Propertyheldbyspousesastenantsbytheentiretythatisconveyed
57	57		tothespouses’jointlyorseparatelyheldrevocableorirrevocabletrusts,and
58	58		anyproceedsofthesaleordispositionoftheproperty,shallbeimmunefrom
59	59		theclaimsofthespouses’separatecreditorstothesameextentastheproperty
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79		-	20 ~~BILLASINTRODUCEDANDPASSEDBYSENATEANDHOUSE~~ S.3
	79	+	20 BILLASINTRODUCEDANDPASSEDBYSENATE S.3
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81	81		wouldhavebeenifithadremainedheldbythespousesastenantsbythe
82	82		entiretyifthefollowingapply:
83	83		(A)thespousesaremarriedtoeachother;
84	84		(B)thepropertyisheldinthetrustortrusts,orhasbeendeededout
85	85		ofthetrusttothespousesastenantsbytheentirety;
86	86		(C)ifthetrustisajointtrust,thetrustmayberevokedbyeither
87	87		spouseactingalonebutmaybeamendedonlybyactionofbothspouses;and
88	88		(D)thepropertyisthespouses’property,includingif:
89	89		(i)bothspousesarecurrentbeneficiariesofonejointtrustthat
90	90		holdstheentireproperty;or
91	91		(ii)eachspouseisacurrentbeneficiaryofaseparatetrustandthe
92	92		twoseparatetrusts,together,holdtheentireproperty,whetherornotother
93	93		personsarealsocurrentorfuturebeneficiariesofthetrustortrusts.
94	94		(2)(A)Propertyatanytimeheldinatenantsbytheentiretytrustshall
95	95		havethesameimmunityfromtheclaimsofaseparatecreditorofeithersettlor
96	96		asthepropertywouldhaveifitwereheldoutsidethetrustbythesettlorsas
97	97		tenantsbytheentiretyunlessotherwiseprovidedinwritingbythesettloror
98	98		settlorswhotransferredthepropertytothetrust.Thepropertyshallbetreated
99	99		inallrespectsastenantsbytheentiretyproperty,includingforpurposesof
100	100		federalandstatebankruptcylaws.
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120		-	20 ~~BILLASINTRODUCEDANDPASSEDBYSENATEANDHOUSE~~ S.3
	120	+	20 BILLASINTRODUCEDANDPASSEDBYSENATE S.3
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122	122		(B)Propertyheldinatenantsbytheentiretytrustshallceaseto
123	123		receiveimmunityfromtheclaimsofcreditorsuponthedissolutionofthe
124	124		settlors’marriagebyacourt.
125	125		(3)Exceptasotherwiseprovidedinthistitle,ontheeffectivedateof
126	126		thissubsection:
127	127		(A)thissubsection(c)appliestoalltrustscreatedbefore,on,orafter
128	128		theeffectivedateofthissubsection;
129	129		(B)thissubsection(c)appliestoalljudicialproceedingsconcerning
130	130		trustscommencedonoraftertheeffectivedateofthissubsection.
131	131		Sec.2.EFFECTIVEDATE
132	132		Thisactshalltakeeffectonpassage.
133	133		Sec.1.14AV.S.A.§ 505isamendedtoread:
134	134		§505.CREDITOR’SCLAIMAGAINSTSETTLOR
135	135		(a)Whetherornotthetermsofatrustcontainaspendthriftprovision,the
136	136		followingrulesapply:
137	137		(1)Duringthelifetimeofthesettlor,thepropertyofarevocabletrustis
138	138		subjecttoclaimsofthesettlor’screditors.
139	139		(2)Withrespecttoanirrevocabletrust,acreditororassigneeofthe
140	140		settlormayreachthemaximumamountthatcanbedistributedtoorforthe
141	141		settlor’sbenefit.Ifatrusthasmorethanonesettlor,theamountthecreditor
142	142		orassigneeofaparticularsettlormayreachshallnotexceedthesettlor’s
143	143		interestintheportionofthetrustattributabletothatsettlor’scontribution.
144	144		Thissubdivisionshallnotapplytoanirrevocable“specialneedstrust”
145	145		establishedforadisabledpersonasdescribedin42U.S.C.§1396p(d)(4)or
146	146		similarfederallawgoverningthetransfertosuchatrust.
147	147		(3)Afterthedeathofasettlor,andsubjecttothesettlor’srighttodirect
148	148		thesourcefromwhichliabilitieswillbepaid,thepropertyofatrustthatwas
149	149		revocableatthesettlor’sdeathissubjecttoclaimsofthesettlor’screditors,
150	150		costsofadministrationofthesettlor’sestate,theexpensesofthesettlor’s
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161		-	11 ~~BILLASINTRODUCEDANDPASSEDBYSENATEANDHOUSE~~ S.3
	161	+	11 BILLASINTRODUCEDANDPASSEDBYSENATE S.3
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163	163		funeralanddisposalofremains,andstatutoryallowancestoasurviving
164	164		spouseandchildrentotheextentthesettlor’sprobateestateisinadequateto
165	165		satisfythoseclaims,costs,expenses,andallowances.
166	166		***
167	167		(c)(1)Propertyheldbyspousesastenantsbytheentiretythatisconveyed
168	168		tothespouses’jointlyorseparatelyheldrevocableorirrevocabletrusts,and
169	169		anyproceedsofthesaleordispositionoftheproperty,shallbeimmunefrom
170	170		theclaimsofthespouses’separatecreditorstothesameextentastheproperty
171	171		wouldhavebeenifithadremainedheldbythespousesastenantsbythe
172	172		entiretyifthefollowingapply:
173	173		(A)thespousesaremarriedtoeachother;
174	174		(B)thepropertyisheldinthetrustortrustsorhasbeendeededout
175	175		ofthetrusttothespousesastenantsbytheentirety;
176	176		(C)ifthetrustisajointtrust,thetrustmayberevokedbyeither
177		-	spouseactingalonebutmaybeamendedonlybyactionofbothspouses;
	177	+	spouseactingalonebutmaybeamendedonlybyactionofbothspouses;and
178	178		(D)thepropertyisthespouses’property;and
179	179		(E)(i)bothspousesarecurrentbeneficiariesofonejointtrustthat
180	180		holdstheentireproperty;or
181	181		(ii)eachspouseisacurrentbeneficiaryofaseparatetrustandthe
182	182		twoseparatetrusts,together,holdtheentireproperty,whetherornotother
183	183		personsarealsocurrentorfuturebeneficiariesofthetrustortrusts.
184	184		(2)(A)Propertyatanytimeheldinatenantsbytheentiretytrustshall
185	185		havethesameimmunityfromtheclaimsofaseparatecreditorofeithersettlor
186	186		asthepropertywouldhaveifitwereheldoutsidethetrustbythesettlorsas
187	187		tenantsbytheentiretyunlessotherwiseprovidedinwritingbythesettloror
188	188		settlorswhotransferredthepropertytothetrust.Thepropertyshallbetreated
189	189		inallrespectsastenantsbytheentiretyproperty,includingforpurposesof
190	190		federalandstatebankruptcylaws.
191	191		(B)Propertyheldinatenantsbytheentiretytrustshallceaseto
192	192		receiveimmunityfromtheclaimsofcreditorsuponthedissolutionofthe
193	193		settlors’marriagebyacourt.
194	194		(3)Exceptasotherwiseprovidedinthistitle,ontheeffectivedateofthis
195	195		subsection:
196	196		(A)notwithstanding1V.S.A.§ 214,thissubsection(c)appliestoall
197	197		trustscreatedbefore,on,oraftertheeffectivedateofthissubsectionandto
198	198		propertyheldbyspousesastenantsbytheentiretythatisconveyedbefore,on,
199		-	oraftertheeffectivedateofthissubsection; ~~BILLASINTRODUCEDANDPASSEDBYSENATEANDHOUSE~~ S.3
	199	+	oraftertheeffectivedateofthissubsection; BILLASINTRODUCEDANDPASSEDBYSENATE S.3
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201	201		(B)thissubsection(c)appliestoalljudicialproceedingsconcerning
202	202		trustscommencedonoraftertheeffectivedateofthissubsection.
203	203		Sec.2.EFFECTIVEDATE
204	204		Thisactshalltakeeffectonpassage.