§ 4-10-521 — Avoidance of qualified transfer

(a) A qualified transfer to a qualified spendthrift trust
is avoided only to the extent necessary to satisfy the settlor's
debt to the creditor at whose instance the qualified transfer
had been avoided, together with costs, including attorney's fees
if otherwise authorized, as the court may allow. If any
qualified transfer is avoided as provided in this section, then:
(i) If the court is satisfied that a qualified
trustee has not acted in bad faith in accepting or administering
the property that is the subject of the qualified transfer:
(A) The qualified trustee has a first and
paramount lien against the property that is the subject of the
qualified transfer in an amount equal to the entire cost,
including attorney's fees, court costs, penalties, fines, fees
and other amounts paid or payable, which were properly incurred
by the qualified trustee in the defense of the action or
proceedings to avoid the qualified transfer. It shall be
presumed that the qualified trustee did not act in bad faith
merely by accepting the property; and
(B) The qualified transfer is avoided subject to
the proper fees, costs, preexisting rights, claims and interests
of the qualified trustee, and of any predecessor trustee that
has not acted in bad faith.
(ii) If the court is satisfied that a beneficiary of
a qualified spendthrift trust has not acted in bad faith, the
avoidance of the qualified transfer is subject to the right of
the beneficiary to retain any distribution made upon the
exercise of a trust power or discretion vested in the qualified
trustee of the trust, which power or discretion was properly
exercised prior to the creditor's commencement of an action to
avoid the qualified transfer. It shall be presumed that the
beneficiary, including a beneficiary who is also a settlor of a
qualified spendthrift trust, did not act in bad faith merely by
creating the trust or by accepting a distribution made in
accordance with the terms of the trust.
(b) A creditor shall have the burden of proving by clear
and convincing evidence that a trustee or beneficiary of a
qualified spendthrift trust acted in bad faith under paragraph
(a)(i) or (ii) of this section.