In a very instructive recent decision by the Fourth District Court of Appeal, the court concluded that California’s public policy in favor of the fulfillment of child support obligations could trump the contractual provisions of a trust agreement. In this specific case, that meant a trustee of a trust could be ordered to pay a woman’s back owed child support to the father of her children, even though the trust agreement had clear language forbidding the trustee from making payments to creditors of the mother, a named beneficiary in the trust. The decision offers a useful tool for parents seeking to analyze all avenues for collecting unpaid child support.
Non-payment of child support is a problem for the children whenever it happens. In popular media, the phrase “deadbeat dad” is sometimes tossed about. In reality, there are both fathers and mothers who fail to comply with paying court-ordered support obligations. In this recent case, the non-compliant parent was a mother, Cynthia Vedder, who owed more than $93,000 in unpaid support.
By the beginning of 2015, the father, David Pratt, took a new legal approach to recover this money his ex-wife owed their children. He went to court and asked a judge to order the trustee of a trust (of which Vedder was the beneficiary) to pay the $93,000 out of trust funds. The man also asked the judge to impose a lien on Vedder’s portion of the trust assets to cover the amount Vedder owed Pratt under the community property judgment.
The trustee opposed the entry of such a court order, arguing that he could not do what Pratt requested. The trust, which had been set up decades earlier by Vedder’s grandparents, had what’s called a “shutdown clause” in it. That provision stated that, if a distribution of trust funds would make the distributed funds potentially vulnerable to claims made by the beneficiary’s creditors, the trustee was prohibited from making that distribution. Paying this money to Pratt would violate that clause, according to the trustee.
The trial court accepted this argument and denied Pratt’s request. On appeal, though, that decision was overturned. Whether or not a trust has a valid spendthrift clause or shutdown clause designed to protect trust assets from claims made by a trust beneficiary’s creditors was not the key to deciding this case. Regardless of the existence of spendthrift or shutdown clauses in a trust, Section 15305 of the California Probate Code says that a child support creditor can “reach a beneficiary’s interest in the trust, despite the existence of” protective clauses. The California courts already decided that spendthrift clauses did not stop child support creditors from pursuing trust assets in order to collect unpaid support. With this ruling, the court also clarified that shutdown clauses similarly were ineffective to stop a demand for payment of a child support obligation.
The ruling was consistent with existing California public policy. The state’s public policy strongly favors the payment of child support. As a general rule, parents should not be permitted to benefit from their interest in a trust while at the same time failing to pay their child support obligations, the appeals court stated in its opinion.
If you are having difficulty receiving payment of child support owed by your children’s other parent, experienced legal counsel can help. The hardworking San Diego child support attorneys at Doppelt and Forney San Diego Divorce Lawyers have helped clients throughout Southern California, including in San Diego, Encinitas, La Jolla, and Chula Vista, with claims for recovery of child support, spousal support, and community property judgments. For a free consultation about your divorce, reach out to Doppelt and Forney San Diego Divorce Lawyers through our website or call toll-free at (800) ROY IS IT (769-4748).
More blog posts:
California Court Denies Father’s Request to Modify Child Support Award, San Diego Divorce Lawyer Blog, July 5, 2016
California Court Holds Social Security Benefits May Apply to Child Support Arrears, San Diego Divorce Lawyer Blog, May 10, 2016