A. Whether or not the terms of a trust contain a spendthrift provision, the following rules apply:

1. (1) during the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor's creditors;
2. (2) with respect to an irrevocable trust, a creditor or assignee of the settlor may reach the maximum amount that can be distributed to or for the settlor's benefit. If a trust has more than one settlor, the amount the creditor or assignee of a particular settlor may reach may not exceed the settlor's interest in the portion of the trust attributable to that settlor's contribution; and

3. (3) after the death of a settlor, and subject to the settlor's right to direct the source from which liabilities will be paid, the property of a trust that was revocable at the settlor's death is subject to claims of the settlor's creditors, costs of administration of the settlor's estate, the expenses of the settlor's funeral and disposal of remains and statutory allowances to a surviving spouse and children to the extent the settlor's probate estate is inadequate to satisfy those claims, costs, expenses and allowances.

   B. For purposes of this section:

4. (1) during the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power; and
5. (2) upon the lapse, release or waiver of the power, the holder is treated as the settlor of the trust only to the extent the value of the property affected by the lapse, release or waiver exceeds the greater of the amount specified in Section 2041(b)(2), 2514(e) or 2503(b) of the Internal Revenue Code of 1986, as amended.

History: Laws 2003, ch. 122, § 5-505.

ANNOTATIONS

Cross references. — For the Internal Revenue Code of 1986, see Title 26 U.S.C.S.

Effective dates. — Laws 2003, ch. 122, § 11-1106 made the act effective July 1, 2003.

Invasion of trust. — Section 46A-5-505A(3) NMSA 1978 allows a revocable trust to be invaded in two relevant instances: to satisfy the claims of creditors and to provide the surviving family with the statutory allowances. There is no legislative intent in the plain language of the statute that would allow an omitted spouse to invade a trust corpus to determine or satisfy an intestate share. Bell v. Estate of Ralph M. Bell, 2008-NMCA-045, 143 N.M. 716, 181 P.3d 708, cert. quashed, 145 N.M. 532, 202 P.3d 125.

Omitted spouse. — The intestate share of an omitted spouse is not a statutory allowance as contemplated by Section 46A-5-505A(3) NMSA 1878. Bell v. Estate of Ralph M. Bell, 2008-NMCA-045, 143 N.M. 716, 181 P.3d 708, cert. quashed, 145 N.M. 532, 202 P.3d 125.

Law reviews. — For article, "The New Mexico Uniform Trust Code," see 34 N.M.L. Rev. 1 (2004).