TITLE 18
Fiduciaries

CHAPTER 18-9.2
Qualified Dispositions in Trust

SECTION 18-9.2-6


§ 18-9.2-6 Effect of avoidance of qualified dispositions.

(a) A qualified disposition shall be avoided only to the extent necessary to satisfy the transferor's debt to the creditor at whose instance the disposition had been avoided, together with any costs, including attorney's fees, that the court may allow.

(b) In the event any qualified disposition is avoided as provided in subsection (a) of this section, then:

(1) If the court is satisfied that the trustee has not acted in bad faith in accepting or administering the property that is the subject of the qualified disposition:

(i) Such trustee shall have a first and paramount lien against the property that is the subject of the qualified disposition in an amount equal to the entire cost, including attorney's fees, properly incurred by the trustee in the defense of the action or proceedings to avoid the qualified disposition;

(ii) The qualified disposition shall be avoided subject to the proper fees, costs, preexisting rights, claims and interest of the trustee (and of any predecessor trustee that has not acted in bad faith); and

(iii) For purposes of subdivision (1) of this subsection, it shall be presumed that the trustee did not act in bad faith merely by accepting the property;

(2) If the court is satisfied that a beneficiary of a trust has not acted in bad faith, the avoidance of the qualified disposition shall be subject to the right of the beneficiary to retain any distribution made upon the exercise of a trust power or discretion vested in the trustee of the trust, which power or discretion was properly exercised prior to the creditor's commencement of an action to avoid the qualified disposition. For purposes of this subdivision, it shall be presumed that the beneficiary, including a beneficiary who is also a transferor of the trust, did not act in bad faith merely by creating the trust or by accepting a distribution made in accordance with the terms of the trust.

(c) A creditor shall have the burden of proving that a trustee or beneficiary acted in bad faith as required under subsection (b) of this section by clear and convincing evidence except that, in the case of a beneficiary who is also the transferor, the burden on the creditor shall be to prove that the transferor-beneficiary acted in bad faith by a preponderance of the evidence. The preceding sentence provides substantive nonprocedural rights under Rhode Island law.

(d) For purposes of this chapter, attachment, garnishment, sequestration, or other legal or equitable process shall be permitted only in those circumstances permitted by the express terms of this chapter.

History of Section.
(P.L. 1999, ch. 402, § 1; P.L. 2007, ch. 302, § 1; P.L. 2007, ch. 478, § 1.)