What's happening
This bill clarifies that the lapse of a power of withdrawal in a trust does not make someone the creator of that trust for creditor and judgment purposes.
Why it matters
Protects trust beneficiaries from being considered "creators" of the trust simply because a right to withdraw funds (a “power of withdrawal”) expired. , which means their own creditors cannot reach trust assets on that basis—important for estate planning and asset protection.
Reinforces and clarifies New York law by making it explicit that the lapse of a withdrawal power does not count as contributing assets to the trust. for creditor or judgment purposes, reducing legal uncertainty and risk for beneficiaries.
Applies retroactively to all trusts governed by New York law, regardless of when they were created. , ensuring both current and past trust arrangements are treated consistently and resolving any ambiguity about prior trust structures.
May influence how trusts are structured and administered in New York. , giving attorneys and families greater confidence in using withdrawal powers (like “Crummey” powers for tax planning) without fear of unintentionally exposing trust assets to creditors.
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Who cares
Headline styles
Clarify Trust Withdrawal Rules
Plain English, a few words. Used as the page title.
Sponsors
2 Multi-sponsors
History
- Referred to judiciary
- Referred to judiciary
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
5432
2017-2018 Regular Sessions
IN ASSEMBLY
February 9, 2017
Introduced by M. of A. WEPRIN -- Multi-Sponsored by -- M. of A. COLTON, ORTIZ -- read once and referred to the Committee on Judiciary
AN ACT to amend the estates, powers and trusts law and the civil practice law and rules, in relation to clarifying and declaring as the existing law of the state of New York the provisions of rules relating to the lapse of a power of withdrawal over the income or principal of a trust
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Paragraph (a) of section 7-3.1 of the estates, powers and trusts law, as amended by chapter 108 of the laws of 1987, is amended to read as follows:
(a) A disposition in trust for the use of the creator is void as against the existing or subsequent creditors of the creator. No individual shall be treated for purposes of this section as having made a disposition in trust for the use of that individual by reason of a lapse of a power of withdrawal over the income or corpus of a trust created by another person.
§ 2. Paragraph 1 of subdivision (c) of section 5205 of the civil practice law and rules, as amended by chapter 93 of the laws of 1995, is amended to read as follows:
1. Except as provided in paragraphs four and five of this subdivision, all property while held in trust for a judgment debtor, where the trust has been created by, or the fund so held in trust has proceeded from, a person other than the judgment debtor, is exempt from application to the satisfaction of a money judgment. For purposes of this section, a judgment debtor shall not be treated as creating or funding a trust by reason of the lapse of a power of withdrawal over the income or principal of a trust created and funded by a person or persons other than the judgment debtor.
§ 3. This act shall take effect immediately and shall be enforceable as to all trusts created under New York law, regardless of when created, as it is declaratory of existing New York law.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD09519-01-7
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.