McConnell, et al. v. Robert

Debtor filed for Chapter 7 bankruptcy protection, having never made any withdrawals from a trust with a spendthrift provision that was created by his grandmother. Appellee, debtor's bankruptcy trustee, sought to bring funds of the trust into the bankruptcy estate, free of trust. At issue was whether debtor was entitled to acquire any of the trust's assets by virtue of its withdrawal provision. The court held that debtor's grandmother was the sole settlor of the trust; that the grandmother was living on debtor's 30th birthday, so his withdrawal right "at age 30" never accrued; that the grandmother's death after debtor's 30 birthday, but before his 35th birthday, satisfied the condition precedent to the accrual of debtor's withdrawal right "at age 35"; even though debtor never exercised his age-35 withdrawal right before he filed for bankruptcy protection at age 37, he remained entitled to withdraw assets worth one-half of the value of all trust principal on hand, calculated as of his 35th birthday; and debtor's bankruptcy trustee was therefore entitled to withdraw the trust principal that remained in trust on trustor's 35th birthday. Therefore, the court affirmed the judgment of the district court to the extent it reversed the bankruptcy court and authorized appellee to exercise debtor's right to withdraw a portion of the trust's principal and remanded for further proceedings.