7.3 Special Status Creditors
Despite the general respect afforded a spendthrift trust, it is not inviolate against certain claims: alimony arrearages, Safe Deposit & Trust Co. v. Robertson, 192 Md. 653, 65 A.2d 292 (1949); child support, Zouck v. Zouck, 204 Md. 285 (1954), and federal income taxes, Mercantile Trust Co. v. Hofferbert, 58 F. Supp. 701 (D. Md. 1944). In the case of alimony and child support, the Court has made the distinction that such claims are not for debts of a beneficiary but are rather duties of the beneficiary: “We think the view expressed in the Restatement is sound. The reason for the rejection of the common law rule (prohibiting spendthrift provisions), that a condition restraining alienation by the beneficiary is repugnant to the nature of the estate granted, was simply that persons extending credit to the beneficiary on a voluntary basis are chargeable with notice of the conditions set forth in the instrument…. This reasoning is inapplicable to a claim for alimony which in Maryland at least, is ‘an award made by the court for food, clothing, habitation and other necessities for the maintenance of the wife…’. The obligation continues during the joint lives of the parties, and is a duty, not a debt.” Robertson, at 662. See also, Prince George’s County Police Pension Plan v. Burke, 321 Md. 699, 584 A.2d 702 (1991) upholding, as part of a marital property award, a transfer of a partial interest in a county pension plan despite spendthrift protections because the spouse is entitled to her the equitable distribution of her “rightful portion” of the retirement fund. When discussing these cases, the Court of Appeals noted that “none of these cases was premised on there having been a lack of notice given to the claimants as to the trust beneficiary’s limited interest in the trust. Rather, the courts recognize a fundamental difference between these obligations and those of ordinary creditors.” DuVall at 499-500. This distinction in DuVall is important, of course, as DuVall involved a tort creditor who certainly lacked notice of the debtor/tortfeasor’s limited interest in the trust. One could argue that a prospective spouse may have notice when he or she marries a person primarily supported by a trust fund that a subsequent spousal award may be difficult to collect.
Every edition of the Restatement of Trusts has recognized that a spendthrift trust can be reached to satisfy claims “for necessary services rendered to the beneficiary or necessary supplies furnished to him,” Restatement § 157 or based on “services or supplies provided for necessities or for the protection of the beneficiary’s interest in the trust.” Restatement (Third) § 59. The Comment to Restatement (Third) states: “Failure to give enforcement to appropriate claims of this type (based on supplying necessities) would tend to undermine the beneficiary’s ability to obtain necessary goods and assistance; and a refusal to enforce such claims is not essential to a settlor’s purpose of protecting the beneficiary.” These rules suggest that the trust in question is either explicitly or implicitly a “support trust.” To the extent that the trust is wholly or partially discretionary, of course, no creditor will be able to enforce a judgment for providing necessities. See First Nat’l Bank of Maryland v. Dept. Health and Mental Hygiene, 284 Md. 720, 399 A.2d 891 (1979): “A support trust, it is generally recognized, is one that provides that ‘the trustee shall pay or apply only so much of the income and principal or either as necessary for the education or support of the beneficiary,’ thereby barring the beneficiary from transferring his interest and precluding his creditors from reaching it.” Id. at 725. The beneficiary of a support trust has enforceable rights to compel the trustee to make appropriate distributions. Offutt v. Offutt, 204 Md. 101, 102 A.2d 554 (1954). The First Nat’l Bank of Maryland court cited Robertson for the proposition that a creditor of the beneficiary likewise may compel the support distributions. Robertson, 192 Md. 653, 65 A.2d 292 (1949). The creditor in Robertson, of course, was a spouse who is afforded super-creditor status.