Opinion
No. 12-60068 BAP No. 11-1433
08-15-2017
COUNSEL Jesse S. Finlayson (argued), Finlayson Williams Toffer Roosevelt & Lilly LLP, Irvine, California, for Appellant. David W. Meadows (argued), Law Offices of David W. Meadows, Los Angeles, California, for Appellees.
FOR PUBLICATION
OPINION Appeal from the Ninth Circuit Bankruptcy Appellate Panel
Hollowell, Pappas, and Dunn, Bankruptcy Judges, Presiding Argued and Submitted March 7, 2014 Pasadena, California Before: Alex Kozinski and Susan P. Graber, Circuit Judges, and Charles R. Breyer, District Judge. Per Curiam Opinion SUMMARY
The Honorable Charles R. Breyer, United States District Judge for the Northern District of California, sitting by designation.
This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. --------
Bankruptcy
The panel reversed a decision of the Bankruptcy Appellate Panel following the California Supreme Court's opinion answering a certified question regarding whether the creditors of the beneficiary of a spendthrift trust may reach the trust distributions.
The panel held that a bankruptcy estate is entitled to the full amount of spendthrift trust distributions due to be paid as of the date of the bankruptcy petition. But the estate may not access any portion of that money the beneficiary needs for his support or education, as long as the trust instrument specifies that the funds are for that purpose. The estate may also reach 25 percent of expected future payments from the spendthrift trust, reduced by the amount the beneficiary needs to support himself and his dependents. COUNSEL Jesse S. Finlayson (argued), Finlayson Williams Toffer Roosevelt & Lilly LLP, Irvine, California, for Appellant. David W. Meadows (argued), Law Offices of David W. Meadows, Los Angeles, California, for Appellees.
OPINION
PER CURIAM:
Debtor is the beneficiary of a spendthrift trust. The trust payments he receives come entirely from trust principal. The California Probate Code is unclear as to whether and to what extent his creditors may reach the trust distributions, so we certified the question to the California Supreme Court. Frealy v. Reynolds, 779 F.3d 1028, 1030 (9th Cir. 2015). That court answers us in the attached opinion.
In our order certifying the question, we recounted the facts of this case. Id. at 1031-32. Based on the California Supreme Court opinion, we now hold that a bankruptcy estate is entitled to the full amount of spendthrift trust distributions due to be paid as of the petition date. See Carmack v. Reynolds, 391 P.3d 625, 628 (Cal. 2017); Cal. Prob. Code § 15301(b). But the estate may not access any portion of that money the beneficiary needs for his support or education, as long as the trust instrument specifies that the funds are for that purpose. See Carmack, 391 P.3d at 629; Cal. Prob. Code § 15302. The estate may also reach 25 percent of expected future payments from the spendthrift trust, reduced by the amount the beneficiary needs to support himself and his dependents. See Carmack, 391 P.3d at 632; Cal. Prob. Code § 15306.5.
We remand so that the bankruptcy court can apply the teachings of Carmack.
REVERSED and REMANDED.
APPENDIX
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