In re Brown

2001 WL 34095702 (11th Cir.)

For opinion see 67 Fed.Appx. 590, 303 F.3d 1261

United States Court of Appeals,

Eleventh Circuit

In re: Jane McLean BROWN, Debtor.

Deborah C. Menotte, Appellant/Trustee in Bankruptcy,

Jane McLean Brown, Appellee.

Court of Appeals Docket No. 01-16211A.

December 4, 2001.

APPEAL FROM ORDER OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA

Appellant's Initial Brief

Morris G. (Skip) Miller, Esq., Adorno & Zeder, P.A., 1551 Forum Place, Building 200, West Palm Beach FL 33401, (561) 640-8000, Attorneys for Appellant/Trustee Deborah C. Menotte

STATEMENT REGARDING ORAL ARGUMENT

Appellant does not desire oral argument.

TABLE OF CONTENTS

Cover Page ...

Certificate of Interested Parties ...

Statement Regarding Oral Argument ...

Table of Contents ...

Table of Citations ... i

Statement of Jurisdiction ... v

Statement of the Issue on Appeal ... 1

WHETHER THE DISTRICT COURT ERRED IN FINDING THAT THE TRUST QUALIFIES AS A SPENDTHRIFT TRUST AND THEREFORE DOES NOT CONSTITUTE PROPERTY OF THE BANKRUPTCY ESTATE.

Statement of The Case and Facts ... 2

I. Record References ... 2

II. Nature of The Case ... 2

III. Course of the Proceedings and Dispositions in the Case Below ... 3

IV. Statement of the Facts ... 5

V. Standard or Scope of Review For Each Contention ... 7

Summary of the Argument ... 8

Argument and Citations of Authority ... 10

THE DISTRICT COURT AND THE BANKRUPTCY COURT ERRED IN OVERRULING THE TRUSTEE'S OBJECTION TO THE CLAIMED EXEMPTION OF THE SUBJECT TRUST BECAUSE THE TRUST IS A SELF-SETTLED TRUST AND THEREFORE THE DEBTOR'S INTEREST IN THE TRUST CANNOT BE EXCLUDED FROM THE BANKRUPTCY ESTATE.

I. At a Minimum, the Income Received Annually by the Debtor Should be a Part of the Bankruptcy Estate ... 10

II. The Corpus of the Trust Should Also be a Part of the Bankruptcy Estate ... 20

Conclusion ... 22

Certificate of Service ... 23

*i TABLE OF CITATIONS AND AUTHORITIES

CASE LAW

Arizona Bank v. Morris, 435 P. 2d 73 (1967), opinion modified 436 P. 2d 499 (Ariz. Ct. App. 1968) ... 12

Bank of Dallas v. Republic Nat'l, Bank, 540 S.W. 2d 499 (Tex. Ct. App. 1976) ... 20, 21

In re Bottom, 176 B.R. 950 (Bankr. N.D. Fla. 1994) ... 16

In re Brackett, 54 B.R. 57 (Bankr. D. N.M. 1985) ... 13, 19

In re Brooks, 217 B.R. 98 (Bankr. D. Conn. 1998) ... 13

In re Cattafi, 237 B.R. 853 (Bankr. M.D. Fla. 1999) ... 16

Cooke Trust Co. v. Lord, 41 Haw. 198 (1955) ... 12, 13

Croom v. Ocala Plumbing & Elec. Co., 62 Fla. 460, 57 So. 243 (1911) ... 11, 14, 16

Deposit Guar, Nat'l. Bank v. Walter E. Heller & Co., 204 So. 2d 856 (Miss. 1967) ... 13, 19

*Fehlhaber v. Fehlhaber, 850 F.2d 1453 (11th Cir. 1988) ... 8, 13, 14, 16

In re Frangos, 132 B.R. 723 (1991); aff'd. on rehearing 135 B.R. 272 (Bankr., N.D. Ohio 1992) ... 19

First Wisconsin Nat'l. Bank v. Schwab, 141 Fla. 748, 194 So. 307 (1940) ... 20, 21

Matter of Goff, 706 F.2d 574 (5th Cir. 1983) ... 10

In re Green, 115 B.R. 1001 (Bankr. W.D. Mo. 1990) ... 13

Hanson v. Denckla, 100 So. 2d 378 (Fla. 1956); rev'd. on jurisdictional grounds 357 U.S. 235 (1958) ... 15

*ii In re JIJ, Inc., 988 F.2d 1112 (11th Cir. 1993). ... 7

Johnson v. Craig, 158 Fla. 254, 28 So. 2d 696 (1947) ... 15

In re Jordan, 914 F.2d 197 (9th Cir. 1990) ... 18

In re Lawrence, 251 B.R. 630 (S.D. Fla. 2000) ... 14, 16

In re Lichstrahl, 750 F.2d 1488 (11th Cir. 1985) ... 10, 16

In re Marriage of Chapman, 697 N.E. 2d 365 (Ill. App. Ct. 1998) ... 19

Miller v. Ohio Dept. of Human Services, 664 N.E. 2d 619 (Ohio Ct. App. 1995) ... 12, 13, 19

In re Morgan's Estate, 72 A. 498 (Pa. 1909) ... 12

Morton v. Morton, 147 A. 2d 150 (Pa. 1959) ... 12, 20

In re Myers, 200 B.R. 155 (Bankr., N. D. Ohio 1996) ... 19

Nelson v. California Trust Co., 202 P.2d 1021 (Cal. 1949) ... 13

Nolan v. Nolan, 67 A. 52 (Pa. 1907) ... 21

In re Robbins, 211 B.R. 2 (Bankr., D. Conn. 1997) ... 18, 19

Seymour v. Seymour, 85 So. 2d 726 (Fla. 1956) ... 15

*In re Shurley, 115 F.3d 333 (5th Cir. 1997) ... 13, 17, 18, 19, 20, 21

In re Simmonds, 240 B.R. 897 (Bankr., 8th Cir. 1999) ... 19

In re Simon, 170 B.R. 999 (Bankr., N. D. Ill. 1994) ... 19

Speed v. Speed, 430 S.E. 2d 348 (Ga. 1993) ... 12

*iii In re Spenlinhauer, 182 B.R. 361 (Bankr. D. Me. 1995); aff'd., 195 B.R. 543 (D. Me. 1996) ... 13, 14, 19

State v. Nashville Trust Co., 190 S.W. 2d 785 (Tenn. Ct. App. 1944) ... 21

In re Walro, 131 B.R. 697 (S.D. Ind. 1991) ... 18

*Waterbury v. Munn, 159 Fla. 754, 32 So. 2d 603 (1947) ... 8, 11, 14, 16

*In re Wheat, 149 B.R. 1003 (Bankr. S.D. Fla. 1992) ... 14, 17

In re Williams, 118 B.R. 812 (Bankr. N.D. Fla. 1990) ... 14, 17

In Matter of Witlin, 640 F.2d 661 (5th Cir. 1981) ... 14

In re Wilcox, 225 B.R. 51 (Bankr., E.D. Mich. 1998) ... 19

In re Ziegler, 156 B.R. 151 (Bankr., W. D. Pa. 1993) ... 19

STATUTES

Fla. Stat. ch. 222.14 (2000) ... 4

Fla. Stat. ch. 222.201 (2000) ... 3

11 U.S.C. Section 522(b)(2) ... 3

11 U.S.C. Section 541(a)(1) ... 10

11 U.S.C. Section 541(c)(2) ... 10

28 U.S.C. Section 1291 ... iv

OTHER AUTHORITY

Bogert on Trusts, Section 222 (1992) ... 12, 14

Scott, The Law of Trusts, Section 156, 4th Edition 2000 ... 13, 14, 17

*iv Restatement of the law, second, property, Section 328 (1959) ... 20

Restatement of the law, second, trusts, Section 156 (1959) ... 13, 14, 15, 17, 20

*v STATEMENT OF JURISDICTION

This case is an appeal from a final decision of the United States District Court for the Southern District of Florida. Accordingly, this Court has jurisdiction under 28 U.S.C. Section 1291.

*1 ISSUE ON APPEAL

WHETHER THE DISTRICT COURT ERRED IN FINDING THAT THE TRUST QUALIFIES AS A SPENDTHRIFT TRUST AND THEREFORE DOES NOT CONSTITUTE PROPERTY OF THE BANKRUPTCY ESTATE.

Note: Page 2 missing in original document

*3 ?? funds being held within an investment account. Deborah Menotte is the Chapter 7 Trustee. The Debtor is Jane McLean Brown.

This appeal was timely filed on October 25, 2001.

II. Course of the Proceedings and Disposition in the Court Below

This voluntary chapter 7 bankruptcy proceeding was filed on February 4, 1999 (BR# 1, RE# C-1). Deborah Menotte was appointed as the Chapter 7 Trustee (RE # B-1) and upon the conclusion of the first meeting of creditors on March 19, 1999 became the permanent trustee.

Pursuant to 11 U.S.C. Section 522(b)(2) the Debtor was permitted to claim various items of property as exempt from administration by the Trustee by listing such property on her Schedule C (BR# 1, RE# C-8 to 9). In this instance, the Debtor claimed her interest in a self settled trust as exempt pursuant to Fla. Stat. ch. 222.201 (2000). Specifically, the Debtor described the property as:

Debtor is the Trustee of a CRT in favor of the American Cancer Society. Debtor does not own, nor has authority to take or distribute corpus under this estate planning device established in 1994. (RE# C-8)

In furtherance of her duties, the Trustee objected to this claimed exemption by filing her Trustee's Objection to Claimed Exemptions (BR# 10, RE# E-1) on May 12, 1999. The Trustee argued that the Trust was holding in excess of $250,000.00 in a *4 Morgan Stanley Dean Witter Investment account from which the Debtor was receiving $1,607.00 per month, and that the Trust did not qualify as exempt under Florida law. As part of her relief, the Trustee sought for the Court to find that such alleged Trust was not exempt and that the Trustee was entitled to a turnover of all and/or any portion of such Trust which the Court deemed to be non-exempt.

The hearing on the objection to claimed exemptions was held before the Bankruptcy Court on September 21, 1999. The day before this hearing the Debtor amended her Schedule C (BR# 19, RE# D-1) to add an additional legal basis for the claimed exemption by relying upon Fla. Stat ch. 222.14. In support of the Trustee's objection, the transcript of the Debtor's April 20, 1999 deposition was filed with the Court (BR# 18).

After the hearing, at the order of the Bankruptcy Court, the Trustee filed her legal argument by way of a pleading entitled "Trustee's Legal Argument in Support of Trustee's Objection to Claimed Exemption, and, to the Extent Necessary Trustee's Objection to Amended Schedule C of September 20, 1999" (BR # 21, RE# F-1). The Debtor also filed her legal argument by way of a pleading entitled "Debtor's Brief on Trustee's Objection to Claimed Exemption" (BR# 22). The Bankruptcy Court in its "Order Overruling Trustee's Objection to Claimed Exemption and Trustee's Objection to Amended Schedule C" entered July 26, 2000, ruled that as a matter of law the Trust *5 is not the property of the bankruptcy estate (BR# 27, RE# H-1). The Trustee filed a pleading entitled "Trustee's Motion for Reconsideration/Rehearing/Clarification of Order Overruling Trustee's Objection to Claimed Exemptions and Trustee's Objection to Amended Schedule C" on July 31, 2000 (BR# 28). The Bankruptcy Court issued its November 1, 2000 "Order Clarifying July 26, 2000 Order in Response to Trustee's Motion for Reconsideration/Rehearing/Clarification of Order Overruling Trustee's Objection to Claimed Exemptions and Trustee's Objection to Amended Schedule C" (BR# 30, RE# I-1).

An appeal to the District Court was filed on November 8, 2000 (DC# 1). The Trustee filed her Initial Brief on February 27, 2001 (DC# 5). Debtor filed her Initial Reply Brief on April 4, 2001 (DC# 9), and Trustee filed her Reply Brief on April 16, 2001 (DC# 10). The District Court entered its Order on September 28, 2001, upholding the order of the Bankruptcy Court (DC# 13, RE# G-1).

This appeal was filed on October 25, 2001, and the Designation to Reporter has been filed in accordance with the rules of this Court.

IV. Statement of the Facts

The facts in this case are not in dispute. The Debtor created a trust titled "Irrevocable Charitable Remainder Unitrust Agreement" (the "Trust")into which she *6 placed money that she inherited. The Trust assets consist of three Morgan Stanley Dean Witter & Co. investment accounts with approximately $250,000.00 (BR# 18, pages 47 to 48, RE# E-29 to E-45). The Debtor is both the settlor and the trustee of the Trust (RE# E-5).

The Trust provides that the Debtor is to receive in each year 7% of the net worth of the Trust as of December 31 of the previous year, payable monthly (RE # E-8). Based on the foregoing, the Debtor currently receives $1,625.40 per month from the accounts (BR# 18, pg. 50). The Debtor is the only person that has received any money from the Trust since its inception (BR# 18, pg. 58). There are no limitations or restrictions set forth in the Trust relating to the Debtor's right to receive these yearly distributions. Upon the Debtor's death, the 7% yearly Trust income goes to her daughter, and, upon her daughter's death, the corpus goes to charity (BR# 18, pg. 58, RE# E-5). Although the various charities are to be Internal Revenue Service qualified charities, the Debtor was uncertain if one of the charities, Circle of Care, Inc. still exists (BR# 18, pg. 60) and does not even know what the charity known as Space Coast Science Center, Inc. is (BR# 18, pg. 61). Nonetheless, upon the demise of the Debtor's daughter, these various charities receive the corpus of the Trust (RE# E-11)..

The Trust also provides that the Debtor as beneficiary has the ability by will to terminate her daughter's interest in the Trust, in which case the corpus goes to charity ??

Note: Page 7 missing in original document

*8 SUMMARY OF ARGUMENT

The assets of the Trust at issue in this case can only be excluded from the bankruptcy estate of the Debtor if under Florida law the Trust is a valid spendthrift trust not reachable by creditors. However, the Trust is "self-settled" as Debtor created it herself for her own benefit. Under Florida law a self-settled trust does not meet the definition of a spendthrift trust, Waterbury v. Munn, 159 Fla. 754, 32 So. 2d 603 (1947), and therefore the assets of the Trust are not excluded from the bankruptcy estate. It is almost universally held that a self-settled trust does not enjoy the protections otherwise applicable to a spendthrift trust and that the creditors of the settlor can reach his or her interest in the trust. This is because, as this Court recognized in Fehlhaber v. Fehlhaber, 850 F.2d 1453 at 1455 (11th Cir. 1988), "it is against public policy to permit a man to tie up his property in such a way that he can enjoy it but prevent his creditors from reaching it." 850 F. 2d 1453 at 1455.

It can be argued that the Debtor only has an interest in the 7% of the assets of the Trust that she is entitled to receive each year and that therefore only that interest should be part of the bankruptcy estate. However, it is the Trustee's position that the trust corpus should also be part of the bankruptcy estate, because in the Trust the Debtor reserved to herself the power to divest the named beneficiaries and reappoint the remainder interest in her will, the only limitation on that power being that it has to *9 be to charitable organizations. A settlor should not be able to put his or her property in trust with what amounts to the right to designate the ultimate beneficiary of that property, thus giving him or her all of the substantial benefits arising from the ownership thereof, yet putting that property beyond the reach of creditors.

*10 ARGUMENT

I. At a Minimum, the Income Received Annually by the Debtor Should be a Part of the Bankruptcy Estate.

Under 11 U.S.C. Section 541(a)(1), an estate in bankruptcy consists of all the interests in property, both legal and equitable, possessed by the debtor at the time of filing the bankruptcy action. However, there are a few enumerated exceptions. Under 11 U.S.C. Section 541(c)(2), "a restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title." Under this Code section, a debtor's beneficial interest in a trust is excluded from the bankruptcy estate if the trust is subject to a transfer restriction under applicable nonbankruptcy law. Matter of Goff, 706 F. 2d 574 (5th Cir. 1983). In In re Lichstrahl, 750 F. 2d 1488 (11th Cir. 1985), this Court held that "applicable nonbankruptcy law" refers to state spendthrift law. 706 F. 2d at 1490.

Based on the foregoing, the Trustee does not take issue with the District Court's opinion that "if the Trust is an enforceable spendthrift trust, it is excluded from the property of the estate." (DC# 13, pg. 6, RE# G-6). However, the Trustee does not agree *11 that the Trust is a valid spendthrift trust not reachable by creditors. This is because the Debtor created the Trust for her own benefit and therefore under Florida law the Trust does not meet the definition of a spendthrift trust.

The language contained in Article IV of the Trust is language commonly used to create a spendthrift trust. As is the case in most states, spendthrift trusts are recognized in Florida. Waterbury v. Munn, 159 Fla. 754, 32 So. 2d 603 (1947); Croom v. Ocala Plumbing & Elec. Co., 62 Fla. 460, 57 So. 243 (1911). In Waterbury, the Florida Supreme Court defined a spendthrift trust as follows:

A spendthrift trust is one that is created with the view of providing a fund for the maintenance of another, and at the same time securing it against his own improvidence or incapacity for self protection. Croom v. Ocala Plumbing & Elec. Co., 62 Fla. 460, 57 So. 243 (1911). The typical spendthrift trust is one in which the life cestui's right to recover income is inalienable, either by his own act or that of his creditors, during all or a part of the life of the beneficiary. See Bogert, Trusts and Trustees, V. 1. Sec. 222; Griswold, Spendthrift Trusts, Sec. 1, p.3; Scott on Trusts, V. 1, Sec. 152, p.744.

Waterbury, supra, 159 Fla. at 757, 32 So. 2d at 605 (emphasis supplied).

A spendthrift trust will generally prevent a creditor of a beneficiary from reaching that beneficiary's interest in the trust. Interestingly enough, the theory behind recognizing spendthrift trusts is not the protection of the debtor, but of the right of the settlor or donor to do as he or she wishes with the trust property. As described by one court:

*12 The law rests its protection of what is known as a spendthrift trust fundamentally on the principle of cujus est dare, ejus est disponere. It allows the donor to condition his bounty as suits himself, so long as he violates no law in so doing. When a trust of this kind has been created, the law holds that the donor has an individual right of property in the execution of the trust; and to deprive him of it would be a fraud on his generosity. For the law to appropriate a gift to a person not intended would be an invasion of the donor's private dominion. . . . It is always to be remembered that consideration for the beneficiary does not in the remotest way enter into the policy of the law; it has regard solely to the rights of the donor. Spendthrift trusts can have no other justification that is to be found in considerations affecting the donor alone.

In re Morgan's Estate, 72 A. 498 (Pa. 1909); cited with approval in Bogert on Trusts, Section 222 (1992).

However, the spendthrift provisions of a trust will not be enforced where either (1) the trust is self-settled- that is, created by the settlor for his or her own benefit, or (2) the beneficiary retains significant dominion and control over the trust property. It is the first of these factors, the self-settled nature of the Trust, that invalidates the spendthrift provision in this case.

It is almost universally held that a self-settled trust does not enjoy the protections otherwise applicable to a spendthrift trust and that the creditors of the settlor can reach his interest in the trust. See Speed v. Speed, 430 S.E. 2d 348 (Ga. 1993); Arizona Bank v. Morris, 435 P. 2d 73 (1967), opinion modified 436 P. 2d 499 (Ariz. Ct. App. 1968); Morton v. Morton, 147 A. 2d 150 (Pa. 1959); Cooke Trust Co. v. Lord, 41 Haw. 198 (1955); *13Miller v. Ohio Dept. of Human Services, 664 N.E. 2d 619 (Ohio Ct. App. 1995); In re Spelinhauer, 182 B.R. 361 (Bankr. Me. 1995), aff'd. 195 B.R. 543 (D. Me. 1996); In re Green, 115 B.R. 1001 (Bankr. W.D. Mo. 1990); In re Brackett, 54 B.R. 57 (Bankr. N.M. 1985); Restatement of the law, second, trusts, Section 156 (1959). This is because, as this Court has recognized, "it is against public policy to permit a man to tie up his property in such a way that he can enjoy it but prevent his creditors from reaching it." Fehlhaber v. Fehlhaber, 850 F.2d 1453 at 1455 (11th Cir. 1988); see also, Cooke Trust Co., supra; Nelson v. California Trust Co., 202 P. 2d 1021 (Cal. 1949); Scott, The Law of Trusts, Section 156, 4th Edition. Also, it is immaterial whether the settlor-beneficiary intended to defraud his creditors, or whether he was solvent at the time the trust was created. Cooke Trust Co., supra; Deposit Guar. Nat'l. Bank v. Walter E. Heller & Co., 204 So. 2d 856 (Miss. 1967); In re Brooks, 217 B.R. 98 (Bankr. D. Conn. 1998); Scott, supra; Restatement of trusts, supra. As the Fifth Circuit Court of Appeals, in In re Shurley, 115 F.3d 333 (5th Cir. 1997), explained:

Public policy does not countenance devices by which one frees his own property from liability for his debts or restricts his power of alienation of it; and it is accordingly universally recognized that one cannot settle upon himself a spendthrift or other protective trust, or purchase such a trust from another, which will be effective to protect either the income or the corpus against the claims of his creditors, or to free it from his own power of alienation. The rule applies in respect of both present and future creditors and irrespective of any fraudulent intent in the settlement or purchase of a trust.

Id. at 339.

*14 By its description of the law of spendthrift trusts in Croom, supra, and Waterbury, supra, the Florida Supreme Court has made it clear that Florida, like most states, recognizes as a spendthrift trust only a trust that is created for the maintenance of another. Accord, In re Wheat, 149 B.R. 1003 (Bankr. S.D. Fla. 1992), In re Williams, 118 B.R. 812 (Bankr. N.D. Fla. 1990). Therefore, under Florida law such a spendthrift clause is void as to existing and future creditors, and such creditors can reach the settlor's interest under the trust. Fehlhaber, supra; In Matter of Witlin, 640 F. 2d 661 (5th Cir. 1981); In re Lawrence, 251 B.R. 630 (S.D. Fla. 2000).

This position is almost universally supported by the case law in other states, by the RESTATEMENT OF TRUSTS, supra, and by the above referenced treatises of Scott and Bogert. As stated by the court in In re Spelinhauer, supra,

The principles that determine the unenforceability of transfer restrictions on a self settled spendthrift trust are axiomatic. See Emanuel, Spendthrift Trusts: It's Time to Codify the Compromise, 72 Neb.L.Rev. 179, 190 (1993) (observing that invalidity of self-settled spendthrift trusts is "virtually universal") (citing Griswold Spendthrift Trusts Created in Whole or in Part for the Benefit of the Settlor, 44 Harv.L.Rev. 203, 208 (1930)). They are clearly reflected not only in the Restatement, but in well-developed case law from other jurisdictions, leaving no doubt that they apply here.

Id. at 363- 364.

Florida courts have often relied on the RESTATEMENT OF TRUSTS, including reference to the illustrations, and those treatises to support their decisions on trust *15 questions that have not been previously ruled on in Florida. See Hanson v. Denckla, 100 So. 2d 378 (Fla. 1956); rev'd on jurisdictional grounds, 357 U.S. 235 (1958); Seymour v. Seymour, 85 So. 2d 726 (Fla. 1956); Johnson v. Craig, 158 Fla. 254, 28 So. 2d 696 (1947). Restatement of trusts, Section 156, states the general rule of law to be as follows:

Section 156. Where the Settlor Is a Beneficiary

Where a person creates for his own benefit a trust with a provision restraining the voluntary or involuntary transfer of his interest, his transferee or creditors can reach his interest.

The following comment, and one of the illustrations that accompany the Restatement, are especially relevant:

Comment:

a. Intention to defraud creditors not required. The rules stated in this Section are applicable although the transfer is not a fraudulent conveyance. The interest of the settlor-beneficiary can be reached by subsequent creditors as well as by those who were creditors at the time of the creation of the trust, and it is immaterial that the settlor-beneficiary had no intention to defraud his creditors.

Illustrations:

1. A transfers property to B in trust to pay the income to A for life and to pay the principal on A's death to C. By the terms of the trust it is provided that A's interest cannot be transferred or reached by his creditors. A can transfer his interest; his creditors can reach his interest.

*16 The situation in this case is almost identical to that described in the above illustration, and makes it clear that the Debtor's interest in the Trust should be a part of the bankruptcy estate.

As stated at page 12, supra, a trust with spendthrift language will also not be enforced if the beneficiary has a significant amount of control or dominion over the trust assets. This is an independent basis for allowing the creditors of a beneficiary to reach the beneficiary's interest in a spendthrift trust, and applies regardless of whether a trust is self-settled. See In re Bottom, 176 B.R. 950 (Bankr. N.D. Fla. 1994). Most of the federal cases interpreting Florida law in this area focus on this second element of control as opposed to the self-settled nature of a trust. See Fehlhaber, supra; In re Lichstrahl, supra; In re Lawrence, supra; In re Cattafi, 237 B.R. 853 (Bankr. M.D. Fla. 1999). These cases, several of which were cited by Trustee in her briefs before the District Court, cite with approval to the general law in Florida as stated in Croom, supra, and Waterbury, supra, to the effect that for a spendthrift trust to be valid in Florida it must be created for the benefit of another, In re Lichstrahl, supra, In re Cattafi, supra, but base their decisions on the significant control that the beneficiary retained over the trust property.

The District Court and the Bankruptcy Court correctly recognized that in the cited cases the beneficiary had much more control and dominion over the trust assets *17 than does the Debtor in this case. However, that distinction is irrelevant to this case because the Trust is self-settled and is not entitled to spendthrift protection, even if Debtor has no or limited control over the trust assets. The District Court erred when it based its decision on the limited control the Debtor has over the distribution of trust assets. This is recognized by at least two federal cases interpreting Florida law on this subject. In In re Wheat, supra, the court stated:

The Debtor and Creditor argue at great lengths over whether the Debtor's Plan contains a transfer restriction which is enforceable under state spendthrift law and, thus satisfies the requirements of 11 U.S.C. Section 541(c)(2). Their arguments focus primarily on the Debtor's degree of control over his interest in the Plan. However, the debtor's degree of control is irrelevant in this case since one cannot create a spendthrift trust for oneself in Florida. 149 B.R 1003 at 1004.

Similarly, the court in In re Williams, supra, specifically found as an independent basis for rejecting the debtor's claim that an ERISA plan was a spendthrift trust that a settlor cannot create a spendthrift trust for his own benefit, citing Scott, supra, and the RESTATEMENT OF TRUSTS, supra.

There are also cases in many other states that hold that the self-settled nature of a trust is the sole basis for denying spendthrift protection, even where the beneficiary has little or no control over the trust assets. The 5th Circuit case of In re Shurley, supra, is especially relevant. A husband, wife and their two daughters created a trust under Texas law with a spendthrift provision. The parents and the daughters all *18 contributed property to the trust. After the death of the parents, each daughter received half of the income from the trust. There were also remainder provisions that applied after the death of the daughters. One of the daughters and her husband filed for bankruptcy. The trust instrument vested the trustee with control of the trust. The 5th Circuit held that the portion of the trust contributed by the daughter was subject to the claims of creditors solely because that portion of the trust was self-settled. As part of its decision, the court specifically rejected the argument that the spendthrift provision failed because the daughter exercised too much control over the trust. From this case it is clear that the self-settled nature of a trust in and of itself invalidates any spendthrift provision as to the settlor's interest.

There are several cases in which the issue is whether the assets of a trust containing a spendthrift clause created by the injured party/debtor as part of a structured personal injury settlement is part of the debtor's bankruptcy estate. As with the Trust, the typical trust of this type is irrevocable and provides a fixed periodic income to the beneficiary with no or limited discretion to vary the amount to be paid. These cases uniformly hold that the interest of the debtor in the trust is a part of the bankruptcy estate because the trust is self-settled, even though the debtor has no discretion to vary the amount to be paid. See, In re Jordan, 914 F. 2d 197 (9th Cir. 1990) (interpreting Washington law); In re Walro, 131 B.R. 697 (S.D. Ind. 1991); In *19 re Robbins, 211 B.R. 2 (Bankr., D. Conn. 1997); In re Myers, 200 B.R. 155 (Bankr., N.D. Ohio 1996); In re Simon, 170 B.R. 999 (Bankr., N.D. Ill. 1994); In re Ziegler, 156 B.R. 151 (Bank., W.D. Pa. 1993).

There are yet more states where courts have found the spendthrift provisions of a trust to be unenforceable as against the interest of the beneficiary solely because the trust is self-settled, without consideration of the amount of control the debtor has over the trust assets. See, for example, In re Wilcox, 225 B.R. 51 (Bankr., E.D. Mich. 1998) (restriction on transfer in annuity savings plan not enforceable because the plan is self-settled); Miller, supra; In re Simmonds, 240 B.R. 897 (Bankr. 8th Cir. 1999) (interpreting Minnesota law); In re Brackett, supra; In re Spelinhauer, supra; In re Marriage of Chapman, 697 N.E. 2d 365 (Ill. Ct. App. 1998).

Also, the fact that there are multiple beneficiaries and/or settlors will not remove the beneficial interest of a debtor from the reach of creditors. In re Shurley, supra; In re Spelinhauer, supra; In re Frangos, 132 B.R. 723 (1991), aff'd on rehearing 135 B.R. 272 (Bankr. N.D. Ohio 1992). Nor will the fact that there is a remainder interest in a third person. In re Shurley, supra, Heller, supra.

There can therefore be no doubt that the Debtor's interest in the Trust is a part of the bankruptcy estate.

*20 II. The Corpus of the Trust Should Also be a Part of the Bankruptcy Estate.

The trust corpus should also be part of the bankruptcy estate. Where a settlor reserves to himself the power to appoint the remainder by will or deed, his creditors can reach the remainder interest. First Wisconsin Nat'l. Bank v. Schwab, 141 Fla. 748, 194 So. 307 (1940). This is the case even if the trust has a spendthrift provision. Morton, supra; In re Shurley, supra, Bank of Dallas v. Republic Nat'l. Bank, 540 S.W. 2d 499 (Tex. Ct. App. 1976); RESTATEMENT OF TRUSTS, supra; Restatement of the law, second, property, Section 328 (1959). By the terms of the Trust the Debtor has essentially reserved the power to appoint the remainder, the only limitation on that power being that it has to be to charitable organizations. The fact that Debtor initially designated her daughter with a life estate after Debtor's death and designated four charitable organizations with the remainder is not relevant because the terms of the Trust permit the Debtor to change that designation by will, so that those interests are not vested.

This is similar to In re Shurley, supra, where the 5th Circuit found that the corpus of a spendthrift trust was subject to the claims of creditors notwithstanding the remainder interest of the debtor's lineal descendants, because the debtor retained a special power of appointment over the trust corpus which could defeat such interest, even though that power limited the choice of recipients to the descendants of the debtor *21 and her sister. The court referred to the similar decision in Bank of Dallas, supra, which involved a general, as opposed to a special, power of appointment, and stated: "We cannot fathom why the court would have reached a different result if the debtor had a special rather than a general power of appointment." Shurley, 115 F. 3d at 340.

As the Florida Supreme Court stated in Schwab, supra:

It is against public policy, and non consonant with natural justice and fair dealing as between debtor and creditor, that a settlor should be permitted to play fast and loose with his property, in such a manner as to have the use of the income during life, and the right of disposing of the principal by will at any subsequent time he chooses to exercise the power, thus giving him all of the substantial benefits arising from the ownership thereof while he has safely put his property beyond the reach of creditors.

141 Fla. at 757, 194 So. at 309, quoting from Nolan v. Nolan, 67 Atl. 52 (Pa. 1907).

And at least one court has gone so far as to hold that creditors can claim the whole of the trust corpus of a spendthrift trust even where the remainders are identified and cannot be divested of their interest, on the rationale that since the settlor already owned the entirety of the property, the only benefit to be acquired by putting the property in trust "would be to hinder and delay creditors in the collection of their debts." State v. Nashville Trust Co., 190 S.W. 2d 785 (Tenn. Ct. App. 1944).

Based on the above authority, the Trustee believes that the corpus of the Trust should be made part of the bankruptcy estate, not just the Debtor's annual entitlement to 7% of the value of the assets.

*22 CONCLUSION

Because the Trust does not qualify as a spendthrift trust under Florida law, the interest of the Debtor in the Trust should be a part of the bankruptcy estate. In addition, the interest of the Debtor should be defined to include the corpus of the Trust as well as the monthly payments the Debtor is entitled to receive thereunder.

Therefore, the Order should be reversed.