                                 CODE OF VIRGINIA

CREDITOR&#8217;S CLAIM AGAINST SETTLOR (§ 64.2-747)

A. Whether or not the terms of a trust contain a spendthrift provision, the
following rules apply:

   1. During the lifetime of the settlor, the property of a revocable trust is
   subject to claims of the settlor&#8217;s creditors.

   2. With respect to an irrevocable trust, except to the extent otherwise
   provided in &#xA7;&#xA7; 64.2-745.1 and 64.2-745.2, a creditor or assignee of
   the settlor may reach the maximum amount that can be distributed to or for the
   settlor&#8217;s benefit. If a trust has more than one settlor, the amount the
   creditor or assignee of a particular settlor may reach may not exceed the
   settlor&#8217;s interest in the portion of the trust attributable to that
   settlor&#8217;s contribution. A trustee&#8217;s discretionary authority to pay
   directly or to reimburse the settlor for any tax on trust income or principal
   that is payable by the settlor shall not be considered to be an amount that
   can be distributed to or for the settlor&#8217;s benefit, and a creditor or
   assignee of the settlor shall not be entitled to reach any amount solely by
   reason of this discretionary authority.

   3. After the death of a settlor, and subject to the settlor&#8217;s right to
   direct the source from which liabilities will be paid, the property of a trust
   that was revocable at the settlor&#8217;s death is subject to claims of the
   settlor&#8217;s creditors, costs of administration of the settlor&#8217;s
   estate, the expenses of the settlor&#8217;s funeral and disposal of remains,
   and statutory allowances to a surviving spouse and children including the
   family allowance, the right to exempt property, and the homestead allowance to
   the extent the settlor&#8217;s probate estate is inadequate to satisfy those
   claims, costs, expenses, and allowances. This section shall not apply to life
   insurance proceeds under &#xA7; 38.2-3122. No proceeding to subject a trustee,
   trust assets, or distributees of such assets to such claims, costs, and
   expenses shall be commenced unless the personal representative of the settlor
   has received a written demand by a surviving spouse, a creditor, or one acting
   for a minor or dependent child of the settlor, and no proceeding shall be
   commenced later than two years following the death of the settlor. This
   section shall not affect the right of a trustee to make distributions required
   or permitted by the terms of the trust prior to being served with process in a
   proceeding brought by the personal representative.

B. For purposes of this section:

   1. During the period the power may be exercised, the holder of a power of
   withdrawal is treated in the same manner as the settlor of a revocable trust
   to the extent of the property subject to the power; and

   2. Upon the lapse, release, or waiver of the power, the holder is treated as
   the settlor of the trust only to the extent the value of the property affected
   by the lapse, release, or waiver exceeds the greatest of (i) the amount
   specified in &#xA7; 2041(b)(2) or 2514(e) of the Internal Revenue Code of
   1986, (ii) the amount specified in &#xA7; 2503(b) of the Internal Revenue Code
   of 1986, or (iii) two times the amount specified in &#xA7; 2503(b) of the
   Internal Revenue Code of 1986 if the donor was married at the time of the
   transfer to which the power of withdrawal applies.

   3. The assets in a trust that are attributable to a contribution to an inter
   vivos marital deduction trust described in either &#xA7; 2523(e) or (f) of the
   Internal Revenue Code of 1986, after the death of the spouse of the settlor of
   the inter vivos marital deduction trust shall be deemed to have been
   contributed by the settlor&#8217;s spouse and not by the settlor.

HISTORY: 2005, c. 935, § 55-545.05; 2011, c. 354; 2012, cc. 555, 614, 718;
2013, c. 784.