Brief Fact Summary. Appellants sought to garnish payments made for the benefit of a beneficiary of a trust. The trial court held that although they could garnish payments made to the beneficiary they could not reach payments made for the benefit of the beneficiary. They now appeal this decision.
Synopsis of Rule of Law. If a creditor has a right to reach payments made to a beneficiary they also have a right to reach payments made in a trustee’s discretion for the benefit of the beneficiary.
The Court of Appeals affirmed the district court in State ex rel, Secretary of SRS v. Jackson.View Full Point of Law
Issue. If a trustee exercises discretion and makes payments on behalf of the beneficiary are such payments subject to the creditor’s garnishment?
Held. Yes. Reversed. Payments to a beneficiary should be treated the same as payments made on behalf of the beneficiary as far as creditors are concerned. Therefore payments on behalf of the beneficiary are subject to creditor’s garnishment.
Discussion. The Court adopts the Restatement (Second) of Trust Section:155(2) in finding that if the creditor has the right to reach payments made to the beneficiary they also have the right to reach payments made for the benefit of the beneficiary. They reason that drawing a distinction between such payments is arbitrary and without any basis in public policy.