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Senate amends bill to preserve spouses' creditor protection when transferring property to a trust
Summary
The Vermont Senate amended S.3 to allow married couples to transfer property into certain trusts without losing tenancy-by-the-entirety creditor protection during their lifetimes; the measure was ordered to third reading after committee amendment.
The Vermont Senate on the floor amended S.3, an act relating to transfer of property to a trust, to preserve tenancy-by-the-entirety creditor protection for married couples who transfer property into qualifying trusts, and ordered the bill to third reading.
The change matters because under current law, property that spouses hold as tenants by the entirety can lose creditor protection if transferred to a trust, which can force estates into probate. The amended S.3 would let spouses retain that protection while both remain alive, while explicitly excluding secondary beneficiaries from the protection.
Senator from Wyndham, speaking at second reading, characterized tenancy by the entirety as a longstanding tool for married couples and explained the bill’s purpose: “And that is tenancy by the entirety in a nutshell.” He told senators the bill would allow a married couple to transfer property to a trust without losing creditor protection and stressed the protection “would not apply to any secondary beneficiaries, it only applies to the married couple while they are alive.”
The bill, as described on the Senate floor, sets out criteria the trust must satisfy for protection to continue: the spouses must be married to each other; the property must be held in the trust; in the case of a joint trust, it must comply with specified revocability rules; and both spouses must be current beneficiaries of the trust. The measure also allows spouses to opt out in writing and provides that protection ends on dissolution of the marriage. The text on the floor said the provision applies regardless of whether a transfer to a trust occurred before, on, or after the act’s effective date. Section 2, as read, provides the act takes effect on passage.
Senator from Wyndham said legislative counsel, the Vermont Bar Association and the Vermont Bankers Association had reviewed the bill; the presenter said that after clarifying language to ensure protection does not pass to secondary beneficiaries, the Vermont Bankers Association supported the bill. A committee report on the floor gave the committee vote as 4-0-1 in favor of the committee recommendation.
On the floor the Senate voted to amend S.3 as recommended by the Committee on Judiciary and then ordered the bill read a third time. The transcript records voice votes: “The ayes have it” for both the committee amendment and the order for third reading.
Votes at a glance: the committee vote on the recommendation was recorded on the floor as 4-0-1; the floor votes to amend and to order third reading were taken by voice vote and recorded as passing. The transcript does not list named aye/no votes for the floor voice tallies.
The bill remains before the Senate for third reading and final passage.
