## Facts

- Freda B. Council and Henry C. McGregor divorced by decree filed April 14, 1982, incorporating a settlement requiring McGregor to pay monthly support equal to one-half of his net income from all sources (including trusts) or $700, whichever was greater.
- Council obtained a July 18, 1986 judgment for alimony arrearage of $26,800.
- The McGregor Family Trust was created December 21, 1976 by Mary Odell McGregor for a 40-year term.
- The trust included an express spendthrift clause restraining beneficiaries from anticipating or assigning their interests and providing that beneficiaries’ interests were not subject to claims of creditors or other persons or to beneficiaries’ liabilities or obligations.
- The trustee (Edward M. Owens) was required to disburse each beneficiary’s share of trust income and lacked discretion to withhold distributions.
- Owens filed a declaratory-judgment action seeking a determination that the trust was a spendthrift trust and that McGregor’s interest could not be reached for Council’s alimony claim.
- Council counterclaimed, seeking satisfaction of her alimony judgment by attachment or garnishment of McGregor’s trust interest or by an equitable decree compelling trustee performance on McGregor’s behalf.

## Issues

1. Whether the McGregor Family Trust’s spendthrift provision created a valid spendthrift trust under Arkansas law that insulated the beneficiary’s interest from an ex-spouse’s claim for unpaid alimony.
2. Whether public policy favoring enforcement of support obligations requires an exception allowing an ex-spouse to reach a beneficiary’s interest in a third-party spendthrift trust.
3. Whether mandatory (non-discretionary) income distributions render a beneficiary’s trust interest reachable despite an otherwise valid spendthrift clause.

## Decision

- The Arkansas Court of Appeals affirmed the chancery court’s judgment for the trustee.
- The court held the trust was a valid spendthrift trust and that McGregor’s interest was not subject to Council’s alimony arrearage judgment.
- The court rejected the argument that mandatory income distributions negated spendthrift protection.
- The court declined to create an alimony-based exception absent controlling Arkansas statutory or precedential authority.
- The court held the divorce decree and settlement agreement bound McGregor personally but did not alter the trust’s restrictions or permit enforcement directly against the trust through the trustee.

## Legal Principles

- Arkansas enforces spendthrift provisions that unambiguously restrain both voluntary and involuntary alienation of a beneficiary’s interest in a third-party trust.
- When a trust instrument clearly states that beneficiaries’ interests are not subject to claims of creditors or other persons and are shielded from beneficiaries’ liabilities, courts will give effect to that intent.
- A beneficiary’s fixed right to mandatory distributions does not, by itself, defeat an otherwise valid spendthrift restraint.
- Absent controlling authority establishing an exception, courts will not disregard or rewrite a spendthrift clause to accommodate an ex-spouse’s alimony claim.
- A divorce settlement’s reference to trust income as a source for support obligations does not create rights against the trust or trustee that override the trust’s spendthrift restrictions.

## Conclusion

The court enforced the settlor’s spendthrift restrictions in a third-party trust and held that an ex-spouse could not garnish, attach, or otherwise compel payment from the trustee to satisfy alimony arrears, even where the beneficiary received mandatory trust income distributions.


Council v. Owens, 770 S.W.2d 193 (Ark. Ct. App. 1989)