Irwin Union Bank & Trust Co. v. Long

Brief Fact Summary. Laura Long created a trust for her son, the appellate, Phillip W. Long that gave him the right to withdraw from the principal once in any year of up to four percent (4%) upon request to the trustee. The appellant, Victoria Long, sought to attach his interest in the trust to satisfy his obligation under a divorce decree.

Synopsis of Rule of Law. A creditor may acquire a power, compel its exercise, nor reach property covered by a power if the donee of the general power of appointment fails to exercise that power.

Facts. The appellee was the beneficiary of a trust that gave him the right to withdraw principal once in any calendar year upon thirty days written notice to the trustee up to four percent (4%) of the market value of the entire trust principal on the date of such notice. The appellant sought to attach the interest in the trust to satisfy the appellee’s obligations under a divorce decree.

Issue. Whether a creditor can reach the assets subject to a general power of appointment, if that power has not yet been exercised?

Held. No. The bank may not reach the appellee’s interest in the trust because his interest is a power that he has not yet exercised. No title vests in the appellee until he exercises that power. Until then, the power is just an offer that a court of law cannot compel him to accept.

Discussion. The appellee here was the beneficiary under a trust who could only receive from the trust if he made a request for a disbursement. He did not have any other control over the assets of the trust. Until he made a request for a disbursement, he had no title to the assets of the trust.