IRWIN UNION BANK & TRUST CO. V. LONG
160 Ind. App. 509, 312 N.E.2d 908(1974)


PROCEDURAL POSTURE: Appellant bank sought review of the order from the Bartholomew Circuit Court ( Indiana), which levied a writ of execution upon a trust in satisfaction of a judgment obtained by appellee ex-wife emanated from a divorce decree. The court denied the bank's motion to set aside the writ.

FACTS: Long (D) obtained a judgment against her ex-husband in a divorce decree To satisfy the judgment, she sought to execute on funds in a trust set up for her ex-husband by his mother The trust instrument gave the husband the right to withdraw up to 4% of the principal of the trust in any given year The lower court held that this amount of the trust principal was not exempt from execution, and ordered a writ of execution The trustee (P) appeals On appeal, the court found that the right to elect to withdraw principal was a general power of appointment

ISSUE: Can a person's creditors reach property held under a general power of appointment if that person has not exercised the power?

RULE: If the donee of a power of appointment exercises the power, the property appointed can be reached by his creditors if his other assets are insufficient to satisfy a debt But where the donee of a general power fails to exercise the power, his creditors cannot compel him to do so, nor can they reach the property covered by the power

HOLDING: Former wife of beneficiary of trust filed petition in proceeding supplemental to execution on the prior judgment of divorce and levied execution upon trust corpus to satisfy the prior judgment. The trustee's motion to set aside the writ of execution was overruled by the Circuit Court, Bartholomew County, William M. Lienberger, J., and the trustee appealed. The Court of Appeals, Lowdermilk, J., held that where beneficiary was given power under testamentary trust to distribute property not his own by electing to withdraw not more than 4% of the trust corpus under certain circumstances, the power given to the beneficiary was a ‘power of appointment’ and beneficiary's former wife was not entitled as a creditor under divorce decree to reach property covered by the power of appointment which was unexercised. Reversed and remanded