It is unfortunate, but perhaps not terribly surprising, that the first two reported cases to consider the application of conflict of laws principles to self-settled spendthrift trusts both involved "bad facts" from an asset protection planning standpoint. In this regard, the adage "bad facts produce bad law" is not a slight on the courts, but rather an acknowledgment of a court's primary duty to do substantial justice to the parties immediately before it. However, in an effort to do substantial justice to the parties immediately before them, the Portnoy and Brooks courts have forged what may well become the first two links in an overly stiff and unyielding chain of precedent upon which future courts will rely without due analysis of the conflict of laws issue. We do not suggest that debtors are bereft of any moral obligation to creditors, nor that the courts should countenance fraudulent conveyances simply because they may be valid under the law of another jurisdiction. We suggest instead that there must be a balancing of interests recognizing that our society continues to evolve, and that our common law must do so as well. In summary, a self-settled spendthrift trust, if valid under the law of a sister state, or even the law of a foreign state, should be respected if created for legitimate estate or asset protection planning purposes but should provide no spendthrift protection if not.
Gideon Rothschild, Daniel S. Rubin, and Jonathan G. Blattmachr,
Self-Settled Spendthrift Trusts: Should a Few Bad Apples Spoil the Bunch?,
32 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vjtl/vol32/iss3/9