Senate Judiciary reviews bill to preserve spouses’ creditor protection when property is transferred into trusts

The Senate Judiciary Committee on March 18 reviewed Senate Bill 3, which would allow spouses who transfer property they hold as tenants by the entirety into a trust to retain the property’s existing protection from separate creditors, legislative counsel Eric Fitzpatrick said.

"Senate Bill number 3 is an act relating to the transfer of property to a trust," Fitzpatrick told the committee as he walked members through the proposal and the statutory language it would add to Vermont’s trust code. He framed the issue as an intersection of property law and trust law: tenants by the entirety gives married owners a form of creditor protection, while placing property into a trust typically makes the trustee the legal owner.

The bill would add language to the Uniform Trust Code section of 14A V.S.A. so that, when specific conditions are met, property conveyed to a revocable or irrevocable trust by spouses who hold it as tenants by the entirety "shall be immune from the claims of the spouse's separate creditors to the same extent as the property would have been if it had remained held by the spouses as tenants by the entirety," Fitzpatrick said, reading from the draft.

Mark Langan,…