Wetzel, III, et al. v. Regions Bank, et al.

The trustee of Cheryl Reagan's bankruptcy estate, and Latta Bachelor, the personal representative of Ronald Reagan's probate estate, appealed from an order of the district court affirming the judgment of the bankrutpcy court in this interpleader and declaratory judgment action filed by Regions Bank. The court held that although Cheryl, acting as executrix, retained control over the assets in Ronald's estate, and she may have improperly exercised that control in her capacity as executrix, her conduct in that capacity did not invalidate the spendthrift provisions. Because the spendthrift provision was enforceable under Arkansas law, Cheryl's interest in the net income from Trust C was subject to a "restriction on... transfer" under "applicable nonbankruptcy law," the section 541(c)(2) of the Bankruptcy Code's exception applied, and Cheryl's interest in the distributions of net income from Trust C was not a part of her bankruptcy estate. Appellants have failed to establish the requisite inducement and detrimental reliance to successfully assert that Cheryl should be estopped from claiming the benefit of the spendthrift trust.