The Bacardis got a divorce.
As part of the divorce agreement, Luis was to pay Adriana $2k a month
until one of them died or she got remarried.
Luis failed to make the
alimony payments.
Adriana went to court and got
a judgment for the unpaid alimony. Then she went to White, who was the
trustee of a spendthrift trust that
Luis was the beneficiary of and tried to get the money from him.
A spendthrift trust is a trust that is created for the benefit of
a person (often because he or she is unable to control spending) that
gives an independent trustee full authority to make decisions as to how
the trust funds may be spent for the benefit of the beneficiary.
The spendthrift trust contained a provision that said the trust was
not subject to any debts that Luis might incur, or be used to pay any
judgment against Luis.
The Trial Court issued an
order garnishing the $2k per month out of Luis' trust. Luis and White
appealed.
The Appellate Court reversed.
Adriana appealed.
The Appellate Court found
that Florida common law had long recognized the validity of spendthrift
provisions.
The Florida Supreme Court
reversed the Appellate Court and agreed that the Adriana could get money
out of the spendthrift trust.
The Florida Supreme Court
recognized that there were two long-standing public policy issues, the
policy of recognizing spendthrift trust, and the policy of holding ex-husbands responsible for paying
alimony.
The money in the trust is
still legally the settlor's, and
not Luis' (at least until the trustee makes a disbursement (aka a
payment). Therefore, is it right to take the settlor's money to pay Luis' debts? That goes against
the settlor's intent.
The Florida Supreme Court
found that the provisions of a spendthrift trust do not create an absolute bar against recovery
by creditors.
It would be unjust an not
equitable to allow a debtor to enjoy the benefits of wealth without
being subject to the responsibility to support those whom he has a legal
obligation to support.
However, the Court notes
that garnishing spendthrift trusts
should only be done as a last resort.
However, the Florida Supreme
Court found that the money can't be touched until the trustee makes a
disbursement. If the trust is completely discretionary, the trustee can
always withhold all payments out of the trust and then nobody gets any
money.
