## Facts

- Victoria B. Long obtained a $15,000 divorce judgment (1957) against Philip W. Long.
- Philip was the beneficiary of a trust created by his mother, Laura Long, with Irwin Union Bank & Trust Company serving as trustee.
- The trust granted Philip a limited annual withdrawal right: once per calendar year, upon 30 days’ written notice, and only when not a full-time student, he could withdraw up to 4% of the market value of the trust principal (non-cumulative and subject to liquidity limits excluding real estate interests).
- Victoria initiated proceedings supplemental to execution, asserting the trustee was indebted to Philip and seeking to apply trust benefits toward her judgment.
- The trial court ordered that nonexempt amounts owed to Philip be applied to the judgment and later ruled that 4% of the trust corpus was not exempt from execution, authorizing a writ of execution against that portion.
- The trustee moved to set aside the writ and filed a motion to correct errors; both were denied.
- The trustee and Philip appealed, arguing the withdrawal right was a general power of appointment that had not been exercised and therefore could not be reached by creditors.

## Issues

1. Whether a beneficiary’s unexercised right to withdraw up to 4% of trust principal annually constitutes a general power of appointment rather than a presently vested property interest.
2. Whether a judgment creditor may levy execution on trust corpus subject only to the beneficiary’s unexercised withdrawal power, or compel exercise of that power.

## Decision

- The Court of Appeals of Indiana reversed the trial court’s execution order and remanded.
- The court characterized Philip’s annual 4% withdrawal right as a general power of appointment.
- Because Philip had not exercised the power (by giving the required notice and demanding distribution), no title or present property interest in the corpus had vested in him.
- A creditor could not acquire, attach, or compel exercise of the power to reach the underlying trust property.
- In the absence of statutory authorization permitting creditor reach of property subject to an unexercised power of appointment, the 4% portion of the corpus was not subject to execution.

## Legal Principles

- A general power of appointment does not vest the donee with title or a present property interest in the appointive property until the power is exercised.
- Creditors cannot compel the donee of a general power of appointment to exercise the power and cannot reach property subject to the power while it remains unexercised.
- A beneficiary’s conditional, non-cumulative right to demand distributions from trust principal may be treated as a power of appointment rather than ownership of the principal.
- Without a present obligation to pay the beneficiary (triggered by the beneficiary’s exercise of the power), there is no attachable interest in the trust corpus for execution.

## Conclusion

The court held that Philip Long’s unexercised annual right to withdraw up to 4% of trust principal was a general power of appointment, leaving the trust corpus beyond the reach of his judgment creditor unless and until he exercised the power and thereby obtained a distributable property interest.


Irwin Union Bank & Tr. Co. v. Long, 160 Ind. App. 509, 312 N.E.2d 908 (Ind. Ct. App. 1974)