Irrevocable trusts: limitations.

Existing law provides for the creation and administration of trusts, including irrevocable trusts. Existing law makes invalid provisions of a trust that restrict the transfer of the settlor's interest if the settlor of the trust is a beneficiary. Existing law also authorizes the creditors of a settlor who is also a beneficiary of the trust to reach the amount of income or principal of the trust that the trustee could, at their discretion, pay to or for the benefit of the settlor under the trust instrument, as specified. This bill would prohibit a settlor from being considered a beneficiary of an irrevocable trust created by the settlor solely by reason of a discretionary authority vested in the trustee to pay directly or reimburse the settlor for any federal or state income tax on trust income or principal that is payable by the settlor, and would prohibit a transferee or creditor of the settlor from being entitled to reach any amount solely by a reason of that discretionary authority.