## Facts

- Wilfred A. Dunnebier created an inter vivos trust on September 30, 1971, transferring stock of five closely held corporations to the trust.
- Dunnebier retained broad powers, including the power to amend or revoke the trust and the lifetime right to direct the disposition of trust principal and income.
- The trust authorized the trustees, in their sole discretion, to pay the settlor’s debts, funeral and administration expenses, and taxes from trust assets.
- Shortly after creating the trust, Dunnebier executed a will leaving his residuary probate estate to the trust.
- In November 1972, Dunnebier obtained an unsecured $75,000 working-capital loan from State Street Bank, evidenced by a personal demand note.
- Dunnebier told the bank he had controlling interests in the corporations listed on his financial statement but did not emphasize that the stock had been placed in trust; the probate judge found no intent to defraud or misrepresent.
- About four months after the loan, Dunnebier died in an accident, and his probate estate was insufficient to pay the bank’s claim.
- The bank sued in the Suffolk County Probate Court to reach trust assets; the probate judge ruled for the trustee, and the bank appealed.

## Issues

1. Whether a creditor may, after the settlor’s death, reach assets of an inter vivos trust when the settlor retained powers to revoke or amend and to direct distributions of principal and income.
2. Whether the creditor’s right to reach such trust assets depends on proof of fraudulent intent or misrepresentation.
3. What limits apply to any creditor recovery from the trust when the probate estate is inadequate.

## Decision

- The Appeals Court reversed the Probate Court’s judgment.
- The court held that a settlor’s creditors may reach trust assets after the settlor’s death to the extent the probate estate is insufficient, when the settlor retained control that would have permitted use of trust assets for the settlor’s own benefit.
- The court treated the absence of fraudulent intent as not determinative of creditor access to the trust.
- Recovery was limited to the portion of trust assets subject to the settlor’s retained, beneficial control at death and only for the amount unpaid after exhausting the probate estate.

## Legal Principles

- Trust assets are reachable by the settlor’s creditors after death when the settlor reserved a power to amend or revoke, or a right to direct the disposition of principal and income, such that the settlor could have used the assets for personal benefit.
- Creditor access in this setting is not contingent on establishing fraudulent conveyance or fraudulent intent; it arises from the settlor’s retained dominion over the trust property.
- The remedy is limited: creditors may reach only (1) the amount not satisfied by the probate estate and (2) no more than the value of assets over which the settlor’s retained powers effectively gave beneficial access.
- A revocable or settlor-controlled inter vivos trust will not be treated as a device to preserve assets for the settlor’s use while insulating those same assets from the settlor’s debts.

## Conclusion

The court held that when a settlor retains revocation and distribution-control powers sufficient to permit personal use of trust property, creditors may reach those trust assets after the settlor’s death to satisfy unpaid debts, but only to the extent the probate estate cannot pay and only within the scope of the settlor’s retained beneficial control.


State St. Bank & Tr. Co. v. Reiser, 7 Mass. App. Ct. 633, 389 N.E.2d 768 (1979)