KRS 386B.5-020: Spendthrift trusts.

(1) As used in this section, unless the context otherwise requires, "spendthrift trust"

means a trust in which by the terms of the instrument creating it a valid restraint on

the voluntary and involuntary alienation of the interest of a beneficiary is imposed.

(2) Estates of every kind held or possessed in trust shall be subject to the debts and

charges of the beneficiaries thereof the same as if the beneficiaries also owned the

similar legal interest in the property, unless the trust is a spendthrift trust.

(3) Specific language shall not be necessary to create a spendthrift trust, and it shall be

sufficient if the instrument creating the trust manifests an intention to create a

spendthrift trust.

(4) If an instrument creating a trust provides that a beneficiar y is entitled to receive

income of the trust and that his interest shall not be alienable by him and shall not

be subject to alienation by operation of law or legal process, the restraint on the

voluntary and involuntary alienation of his right to income d ue and to accrue shall

be valid.

(5) If an instrument creating a trust provides that a beneficiary is entitled to receive

principal of the trust at a future time and that his interest shall not be alienable by

him and shall not be subject to alienation by operation of law or legal process, the

restraint on the voluntary and involuntary alienation of his right to principal shall be

valid.

(6) Although a trust is a spendthrift trust, the interest of the beneficiary shall be subject

to the satisfaction of an enforceable claim against the beneficiary:

(a) By the spouse or child of the beneficiary for support, or by the spouse for

maintenance;

(b) If the trust is not a trust described in subsection (7)(b) of this section, by

providers of necessary services render ed to the beneficiary or necessary

supplies furnished to him; and

(c) By the United States or this Commonwealth for taxes due from him or her on

account of his or her interest in the trust or the income therefrom.

(7) (a) If a person creates for his or her own benefit a trust with a provision

restraining the voluntary or involuntary alienation of his or her interest, his or

her interest nevertheless shall be subject to alienation by operation of law or

legal process.

(b) This subsection shall not be constru ed to subject to alienation any interest in

an individual retirement account or annuity, tax -sheltered annuity, simplified

employee pension, pension, profit -sharing, stock bonus, or other retirement

plan described in the Internal Revenue Code of 1986, as a mended, which

qualifies for the deferral of current income tax until the date benefits are

distributed.

(c) For purposes of this subsection, a person has not created a trust for such

person's own benefit solely because a trustee who is not such person is

authorized under the trust instrument to pay or reimburse such person for, or

pay directly to the taxing authorities, any tax on trust income or principal that

is payable by such person under the law imposing the tax.

(8) (a) For the purposes of this section, amounts and property contributed to the

following trusts are not deemed to have been contributed by the settlor of the

trust, and a person who would otherwise be treated as a settlor or a deemed

settlor of the following trusts shall not be treated as a settlor:

1. An irrevocable inter vivos marital trust that is treated as qualified

terminable interest property under 26 U.S.C. sec. 2523(f), as amended, if

the settlor is a beneficiary of the trust after the death of the sett lor's

spouse;

2. An irrevocable inter vivos marital trust that is treated as a general power

of appointment trust under 26 U.S.C. sec. 2523(e), as amended, if the

settlor is a beneficiary of the trust after the death of the settlor's spouse;

3. An irrevocable inter vivos trust for the spouse of the settlor that does not

qualify for the gift tax marital deduction if the settlor is a beneficiary of

the trust only after the death of the settlor's spouse;

4. A special needs trust as defined in KRS 387.860, inc luding a trust

established pursuant to judicial action under KRS 387.855;

5. A trust created under 42 U.S.C. sec. 1396p(d)(4)(A) or (C); and

6. A trust created under 42 U.S.C. sec. 1396p(c)(2)(B).

(b) For the purposes of this subsection, a person is a bene ficiary whether so

named under the initial trust instrument or through the exercise by that

person's spouse or by another person of a limited or general power of

appointment.

(c) For the purposes of this section, the settlor shall be any person who:

1. Created the trust;

2. Contributed property to the trust; or

3 Is deemed to have contributed property to the trust.