California Legal Implications: Spendthrift Trusts Are Not Always Divorce-Proof
Many California residents utilize Spendthrift Trusts as a strategy to protect their beneficiaries’ inheritance from future creditors. However, a significant ruling from the California Court of Appeal, *In re Marriage of Wendt and Pullen*, serves as a crucial reminder that these protections have limits, particularly regarding family law matters. The court established that assets within a spendthrift trust may be reached for child support and to pay attorney’s fees in divorce proceedings under specific circumstances. as a strategy to protect their beneficiaries’ inheritance from future creditors. However, a significant ruling from the California Court of Appeal, *In re Marriage of Wendt and Pullen*, serves as a crucial reminder that these protections have limits, particularly regarding family law matters. The court established that assets within a spendthrift trust may be reached for child support and to pay attorney’s fees in divorce proceedings under specific circumstances.
For families engaged in estate planning, this case highlights the importance of understanding the boundaries of asset protection. While a Spendthrift Clause typically prevents a beneficiary from transferring their interest in the trust and stops creditors from attaching to the trust assets before they are distributed, California law carves out specific public policy exceptions. typically prevents a beneficiary from transferring their interest in the trust and stops creditors from attaching to the trust assets before they are distributed, California law carves out specific public policy exceptions.
The Reach of Family Code Section 2030
The court’s decision relied heavily on Family Code Section 2030. This statute is designed to ensure a “level playing field” in divorce litigation. It allows the court to order one party to pay the legal fees of the other if there is a disparity in access to funds.. This statute is designed to ensure a “level playing field” in divorce litigation. It allows the court to order one party to pay the legal fees of the other if there is a disparity in access to funds.
In the context of trusts, if a Trustee is joined as a party to the dissolution case, the court may order the trust to pay the legal fees of the beneficiary’s spouse. This is true even if the trustee has not acted in bad faith. For California trustees and beneficiaries, this means that trust assets are not immune to the costs associated with a high-conflict divorce. is joined as a party to the dissolution case, the court may order the trust to pay the legal fees of the beneficiary’s spouse. This is true even if the trustee has not acted in bad faith. For California trustees and beneficiaries, this means that trust assets are not immune to the costs associated with a high-conflict divorce.
Child Support Obligations and Trust Assets
Beyond attorney’s fees, the ruling reinforced that spendthrift provisions generally cannot be used to avoid child support obligations. California has a strong public policy preference for the support of minor children. Consequently, a parent who is a beneficiary of a trust often cannot hide behind a spendthrift clause to claim an inability to pay support. Statutes specifically preclude beneficiaries from using these trust structures to evade their duties to their children.
Strategic Estate Planning Considerations
This case illustrates why “off-the-shelf” trust documents may be insufficient for complex family dynamics. When creating a Third-Party Trust for a child, the Grantor must understand the difference between Discretionary Distributions and mandatory rights to payment. While the trust in this case was discretionary, the joinder of the trustee and specific statutory provisions allowed the court to reach the assets. and mandatory rights to payment. While the trust in this case was discretionary, the joinder of the trustee and specific statutory provisions allowed the court to reach the assets.
Families concerned about the marital stability of a beneficiary should consult with a qualified attorney to draft provisions that maximize protection while remaining compliant with California’s strict public policy requirements regarding support and litigation costs.
About This Case
In the case of *In re Marriage of Elizabeth Anne Wendt and William Nicholas Pullen*, a father established an irrevocable spendthrift trust for his daughter. During her divorce, her husband successfully joined the trustee to the lawsuit and sought to compel distributions for support and attorney’s fees. The trial court initially denied the fees, citing a lack of bad faith by the trustee.
The Appellate Court reversed this decision. It held that under California’s modern interpretation of trust liability and Family Code Section 2030, a spendthrift trust can be liable for attorney’s fees to ensure fair litigation, regardless of the trustee’s good or bad faith. Furthermore, the court affirmed that spendthrift provisions do not shield assets from child support claims.
Source: In re the Marriage of Elizabeth Anne Wendt and William Nicholas Pullen
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Legal Disclaimer
This article is for informational purposes only. Consult with a qualified California estate planning attorney for advice specific to your situation.
About the Author: Dustin MacFarlane, Esq.
California Licensed Attorney | Estate Planning Specialist
Dustin MacFarlane is the founder of California Probate and Trust, PC, with over 15 years of experience in estate planning, probate administration, and trust law. Licensed by the California State Bar, Dustin has helped thousands of California families protect their assets and plan for the future.
CA Bar License: Active | Practice Areas: Estate Planning, Probate, Trust Administration | Location: Granite Bay, CA