KRS 386B.5-040: Creditor's claim against settlor.

(1) Subject to the statutory provisions of KRS Chapter 396 regarding claims against

decedents' estates, whether or not the terms of a trust contain a spendthrift

provision, the following rules apply:

(a) During the lifetime of the settlor, the property of a revocable trust is subject to

claims of the settlor's creditors;

(b) With respect to an irrevocable trust, a creditor or assignee of the settlor may

reach the maximum amount that can be distributed to or for the settlor's

benefit. If a trust has more than on e (1) settlor, the amount the creditor or

assignee of a particular settlor may reach may not exceed the settlor's interest

in the portion of the trust attributable to that settlor's contribution; and

(c) After the death of a settlor, and subject to the settlor's right to direct the source

from which liabilities shall paid, the property of a trust that was revocable at

the settlor's death is subject to claims of the settlor's creditors, costs of

administration of the settlor's estate, the expenses of the set tlor's funeral and

disposal of remains, and statutory allowances to a surviving spouse and

children to the extent the settlor's probate estate is inadequate to satisfy those

claims, costs, expenses, and allowances, but no property added to a revocable

trust on account of the settlor's death from a source other than the settlor's

estate or another revocable trust created by the settlor shall be subject to

claims of the settlor's creditors, costs of administration of the settlor's estate,

the expenses of the settlor's funeral and disposal of remains, and statutory

allowances to a surviving spouse and children.

(2) For purposes of this section:

(a) 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

(b) Upon the lapse, release, or waiver of the power, the holder is not treated as the

settlor of the trust.