N.Y. Estates, Powers & Trusts Law § 7-3.1: Disposition in trust for creator void as against creditors

§ 7-3.1 Disposition in trust for creator void as against creditors

(a) A disposition in trust for the use of the creator is void as

against the existing or subsequent creditors of the creator.

(b) (1) For purposes of paragraph (a) of this section, all trusts,

custodial accounts, annuities, insurance contracts, monies, assets or

interests established as part of, and all payments from, either an

individual retirement account plan which is qualified under section 408

or section 408A of the United States Internal Revenue Code of 1986, as

amended, or a Keogh (HR-10), retirement or other plan established by a

corporation, which is qualified under section 401 of the United States

Internal Revenue Code of 1986, as amended, shall not be considered a

disposition in trust for the use of the creator, even though the creator

is (i) in the case of an individual retirement account plan, an

individual who is the settlor of and depositor to such account plan, or

(ii) a self-employed individual, or (iii) a partner of the entity

sponsoring the Keogh (HR-10) plan, or (iv) a shareholder of the

corporation sponsoring the retirement or other plan.

(2) All trusts, custodial accounts, annuities, insurance contracts,

monies, assets, or interests described in subparagraph one of this

paragraph shall be conclusively presumed to be spendthrift trusts under

this section and the common law of the state of New York for all

purposes, including, but not limited to, all cases arising under or

related to a case arising under sections one hundred one to thirteen

hundred thirty of title eleven of the United States Bankruptcy Code, as

amended.

(3) This section shall not impair any rights an individual has under a

qualified domestic relations order as that term is defined in section

414(p) of the United States Internal Revenue Code of 1986, as amended.

(4) Additions to an asset described in subparagraph one of this

paragraph shall not be exempt from application to the satisfaction of a

money judgment if (i) made after the date that is ninety days before the

interposition of the claim on which such judgment was entered, or (ii)

deemed to be voidable transactions under article ten of the debtor and

creditor law.

(c) A provision in any trust, other than a testamentary trust or a

trust which meets the requirements of subparagraph two of paragraph (b)

of subdivision two of section three hundred sixty-six of the social

services law and of the regulations implementing such clauses, which

provides directly or indirectly for the suspension, termination or

diversion of the principal, income or beneficial interest of either the

creator or the creator's spouse in the event that the creator or

creator's spouse should apply for medical assistance or require medical,

hospital or nursing care or long term custodial, nursing or medical care

shall be void as against the public policy of the state of New York,

without regard to the irrevocability of the trust or the purpose for

which the trust was created.

(d) A disposition in trust shall not be considered to be for the use

of the creator under paragraph (a) of this section by reason of the

trustee's authority to pay trust principal to the creator pursuant to

section 7-1.11 of this article. Nor shall a disposition in trust be

considered to be for the use of the creator under paragraph (a) of this

section where the trustee is authorized under the trust instrument or

any other provision of law to pay or reimburse the creator for any tax

on trust income or trust principal that is payable by the creator under

the law imposing such tax or to pay any such tax directly to the taxing

authorities. No creditor of a trust creator shall be entitled to reach

any trust property based on the discretionary powers described in this

paragraph.