The Law School Authority

Ware v. Gulda Case Brief

Summary of Ware v. Gulda, 331 Mass. 68, 117 N.E.2d 137 (1954)

Facts: Creditor, Bank, sought to recover trust funds to pay the indebtedness of settlor.  Louise Gulda, Pl, transferred to her son certain $ and property to be held by him in trust.  Twenty years later he executed a trust instrument, and threes years following Louise ratified that document, which made the bank the trustee upon the son’s death.  The trust provided that during her lifetime she would receive income and support from the trust, but at death the property would go to her daughters and son.  The trust terminated on the death of the survivor of Louise and her children.  Payments were at the sole discretion of the trustee who had the power to determine who the distributee are and their proportions. The interest “shall not be alienated, anticipated, nor assigned, nor subject to the claims of creditors.”

Issue: Whether a creditor could obtain payments out of a trust where the settlor was the named beneficiary and the trustee had the discretion to make or withhold payments?

Holding: A trust created by settlor naming the settlor as beneficiary, giving the trustee the sole discretion as to making or w/holding payments did not preclude creditor from obtaining payments out of the trust property.

Procedure: Creditor brought bill against settlor and creditor filed a motion for final decree.  Superior Ct entered a final decree and ordered settlor to pay creditor w/i 60 days, if she failed, the trustee was ordered to pay out of the trust.  Supreme Ct affirmed decree.

Rule: Where a person creates a trust for his own benefit his transferee or creditors can reach the maximum amount which the trustee under the terms of the trust could pay to him or apply for his benefit.

Rationale: Just b/c the trustee has discretionary power is insufficient ground to overrule principle that a settlor cannot place property in trust for his own benefit to keep it beyond the reach of his creditors. The Pl here prevails b/c the policy of the law does not protect the creator of a discretionary trust against the payment of a creditor absent a showing of fraud.

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