Senate Bill 21-162 Summary

• Adds Part 5 to the Colorado Uniform Trust Code governing creditor's claims against spendthrift and discretionary trusts, effective July 1, 2022.

• A spendthrift provision is valid only if it restrains both voluntary and involuntary transfer of a beneficiary's interest, and creditors cannot reach trust distributions before receipt by the beneficiary except as otherwise provided.

• Spendthrift provisions are unenforceable against child support obligees and judgment creditors who provided essential services, but these exceptions do not apply to special needs trusts or supplemental needs trusts that would lose Medicaid or SSI eligibility.

• Creditors cannot compel discretionary distributions from a trust, even if the trustee has abused discretion or failed to comply with a distribution standard, except to satisfy child support orders.

• Creditors may reach mandatory distributions that are overdue, and the bill allows trustees to apply distributions for a beneficiary's benefit to protect trust property from creditor claims.