MEMORANDUM OPINION
This is a bankruptcy appeal. On July 21, 2009, the Honorable Ben T. Barry, United States Bankruptcy Judge, Western District of Arkansas, entered final judgment in the adversary proceeding styled Regions Bank v. Wetzel, et al., USBC AP No. 6:08-ap-07158 (Bankr.W.D.Ark). We have jurisdiction pursuant to 28 U.S.C. § 158, and for reasons reflected herein, the judgment is AFFIRMED.
A. Background
Ronald E. Reagan died February 1, 2000, leaving an estate valued at $19,936,612.00. Prior thereto, Mr. Reagan executed a valid will that, inter alia, created a spendthrift trust naming Mr. Reagan’s wife, Cheryl, as its beneficiary. The spendthrift provision stated: Except as otherwise provided herein, all payments of principal and income payable, or to become payable, to the beneficiary of any trust created hereunder shall not be subject to anticipation, assignment, pledge, sale or transfer in any manner, nor shall any said beneficiary have the power to anticipate or encumber such interest, nor shall such interest, while in the possession of my Executor or Trustee, be liable for, or subject to, the debts, contracts, obligations, liabilities or torts of any beneficiary.
Under the terms of the trust,
Commencing with the date of my death, my Trustee shall рay to or apply for the benefit of my said wife during her lifetime all the net income from [the spendthrift trust] in convenient installments but no less frequently than quarter-annually.
The will also appointed Mrs. Reagan to serve as executrix, and in that capacity, directed her to fund thе trust by distributing the decedent’s stock in the Chem-Fab Corporation (“Chem-Fab”), less certain deductions, to the trustee, designated as Arkansas Bank & Trust of Hot Springs, Arkansas.
Contrary to the instructions set forth in the will, Mrs. Reagan failed to fund the trust. Rather, she utilized the proceeds from the sale of the Chem-Fab stock tо finance a series of business ventures that ultimately proved unsuccessful. On April 23, 2004, the Circuit Court of Garland County, Arkansas (“probate court”), ruling on an ex parte petition by Rex Reagan, one of Mr. Reagan’s sons and beneficiaries, froze the assets of Mr. Reagan’s estate. This relief wаs made permanent on May 11, 2004.
Mrs. Reagan filed a Chapter 11 bankruptcy petition on November 17, 2004. In June 2006, Latta Bachelor was appointed successor personal representative of Mr. *266 Reagan’s estate. On April 17, 2007, the bankruptcy court granted relief from the bankruptcy stay to Mr. Reagan’s estate, enabling administration of the estate in the probate court. The probate court authorized the funding of the spendthrift trust on January 15, 2008, utilizing the proceeds from certain investments in the amount of $2,400,000.00. Regions Bank was appointеd trustee.
On September 23, 2008, as the trust began to generate income, Regions Bank filed an interpleader action in the bankruptcy court; Mr. Reagan’s estate intervened. Regions Bank requested that the bankruptcy court determine whether the bankruptcy estate or Mrs. Reagan was entitled to the present and future income from the spendthrift trust. The court determined both the present and future income to be payable to Mrs. Reagan.
B. Standard of Review
The United States District Court functions as an appellate court in reviewing decisions of the United States Bankruptcy Court.
See
Fed. R. Bankr.P. 8013. Conclusions of law are reviewed
de novo,
while factual findings will not be set aside unless “clearly erroneous.”
Id.; In re Muncrief,
C. Discussion
Frederick Wetzel, trustee of Cheryl Reagan’s bankruptcy estate, and Latta Bachelor, personal representative of the estate of Ronald Reagan, appeal the order of the bankruptcy court determining that Mrs. Reagan is entitled to the present and future income from the spendthrift trust established by the will of Mr. Reagan. Thus, this Court must address two issues: (1) whether the bankruptcy court’s determination that income from the spendthrift trust was not unreasonably withheld from Mrs. Reagan is clearly erroneous; and (2) whether the bankruptcy court properly determined that prospectively earned income from the spendthrift trust is not property of the bankruptcy estate.
The property that comprises the bankruptcy estate is defined in the bankruptcy code. It provides in relevant pаrt that the estate is comprised of “all legal or equitable interests of the debtor in property as of the commencement” of the bankruptcy case. 11 U.S.C. § 541(a)(1). This definition is subject to exceptions. Of particular relevance, a “restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable non-bankruptcy law is enforceable in a case under this title.” 11 U.S.C. § 541(c)(2). In the present case, it is undisputed that the “restriction on the transfer” language of this exception is a reference to an interest in a spendthrift trust and that the “applicable nonbankruptcy law” is that of Arkansas.
Pursuant to Arkansas law, a trust beneficiary has an equitable interest in trust property.
Adamson v. Sims,
Appellants contend that Regions Bank unreasonably withheld trust distributions from Mrs. Reagan, and therefore, the distributions are not entitled to spendthrift protection under Arkansas law. The Arkansas trust code provides:
Whether or not a trust contains a spendthrift provision, а creditor or assignee of a beneficiary may reach a mandatory distribution of income or principal, including a distribution upon termination of the trust, if the trustee has not made the distribution to the beneficiary within a reasonable time after the designated distribution date.
Ark.Code Ann. § 28-73-506. Under this section, if a trustee fails to make a timely distribution from the spendthrift trust, the distribution, even while under the control of the trustee, can be reached by creditors. Thus, because there is no enforceable “restriction on the transfer” of the trust distribution under Arkansas law, sеction 541(c)(2) would be inapplicable, and the untimely distribution could be included in the bankruptcy estate.
The Arkansas trust code does not define the term “reasonable time.” However, pursuant to the uniform comments, “[t]he question of what period of time is reasonablе turns on the totality of factors affecting the asset and the trust.” Ark.Code Ann. § 28-73-904. The evidence presented to the bankruptcy court reflects that the probate court entered an order directing the funding of the trust on January 15, 2008. Subsequently, Mr. Bachelor, as successor pеrsonal representative, initiated the process of transferring assets from Mr. Reagan’s estate to Regions Bank. At least as late as September 8, 2008, Regions Bank continued the process of finalizing its documentation relating to trust assets. Regions Bank filed its interpleader action September 23, 2008.
It is undisputed that the trust earned income between January and September 2008. According to Mr. Reagan’s will, the trustee was required to make net income distributions “no less frequently than quarter-annually.” It is undisputed that these distributions were not made. Howevеr, as the bankruptcy court noted, the failure of Regions Bank to make said distributions must be evaluated against the backdrop of the multi-year bankruptcy proceeding of Mrs. Reagan, with multiple counsel and more than one thousand filings, and the difficulty faced by Regions Bank in аcquiring and finalizing the assets of the trust. Whether Regions Bank acted in a “reasonable time” is a factual determination to be reviewed by this Court for whether it is “clearly erroneous.”
In re U.S.A. Inns of Eureka Springs,
Appellant Bachelor further contends that the bankruptcy court erred in its determination that prospectively earned income from the spendthrift trust is not property of a bankruptcy estate. His key argument concerns the interpretation to be given to the decision of the United States Supreme Court in
Patterson v. Shumate,
*268
The scope of the bankruptcy estate is defined by 11 U.S.C. § 541. “The relevant moment for determining whether property constitutes the bankruptcy estate is ‘as of the commenсement of the case.’ ”
In re Nelson,
Evaluating these bases, it is undisputed that Mrs. Reagan filed her bankruptcy petition on November 17, 2004, and that the spendthrift trust created by Mr. Reagan’s will did not produce income until sometime in 2008. As this Court has determined, it would be speculative to attempt to retroactively determine what the trust earnings might have been in 2004, immediately following Mrs. Reagan’s bankruptcy filing. As a result, because they cannot be computed, none of the distributions could have been acquired within 180 days of Mrs. Reagan’s Chapter 11 filing, and section 541(a)(5) is therefore inapplicable. Further, having already found that the spendthrift interest is excluded from the bankruptcy estate, the distributions from the trust cannot be considered proceeds or profits of estate property, and as a result, section 541(a)(6) does not apply.
In re Moses,
In the absence of а statutory basis for including the distributions, Appellant Bachelor contends that the decision of the bankruptcy court that future income distributions be made to Mrs. Reagan is contrary to the precedent of the Supreme Court as announced in
Patterson v. Shumate.
In
Patterson,
the Court held that the antialiеnation provision in a qualified ERISA plan was a restriction on transfer enforceable pursuant to section 541(c)(2) and therefore properly excluded from the bankruptcy estate.
Appellant Bachelor’s argument is misplaced for three reasons. First, as a matter of statutory construction and as stated, he has provided no basis under section 541 for including the trust distributions. Sec
*269
tion 541(c)(2) speaks only in terms of interests; a beneficiary of a spendthrift trust hаs a beneficial interest in trust income.
Medical Park Hosp. v. Bancorp South Bank of Hope,
D. Conclusion
For reasons recited hеrein, we find that the bankruptcy court’s determination regarding income distributions was not clearly erroneous and that the bankruptcy court properly determined that prospectively earned income from a spendthrift trust is not property of a bankruptcy estate. Accordingly, the judgment of the bankruptcy court is AFFIRMED.