Tax Facts

9081 / If the Delaware law requirements limiting the ability of creditors to reach trust assets have been satisfied and a creditor makes a claim against those assets, what are the results if the beneficiary has already received a trust distribution?

Updated: December 30, 2024 at 08:17 AM
If a beneficiary of a Delaware trust has not acted in bad faith, the beneficiary may retain any distributions from the trust that are made before a creditor brings a claim against the trust assets.1 Under Delaware law, it is presumed that the beneficiary (including a beneficiary who is also the transferor) did not act in bad faith, and the creditor has the burden of proving the existence of bad faith.2





1.  Del. Code. Ann. Tit. 12, § 3574(b)(2).

2.  Del. Code. Ann. Tit. 12, § 3574(c).

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