Creditor Access to Beneficiaries’ Interest in Trusts

Abstract This chapter compares creditors’ rights to a beneficiary’s interest in a trust across jurisdictions. This topic makes the political implications of the trust form clear. Its structure, allowing as it does for asset partitioning and thus asset protection from creditors, shifts financial obligations from those who incur them to other individuals or to society at large. In other words, the trust’s capacity for asset protection allows for the creation of negative externalities. In the common law, this capacity of the trust has been present from the trust’s beginnings in Equity, where it often served to protect younger children and spouses from the rules of primogeniture and coverture. Civil law regimes, mostly arising from the historically driven concept of unitary ownership, offer much less asset partitioning in their trusts and trust-like devices. Citizens of trust-hostile States, however, can always find offshore—or onshore—jurisdictions nearby to serve their purposes.