Delmus Jerone Phillips created a trust in 1996 to hold real estate for his benefit and that of his family. Under the trust instrument, Phillips is entitled to receive the net income generated by the trust for the rest of his life. The trust instrument does not, on its face, give Phillips any right to the trust corpus during his lifetime. However, the trust does give Phillips a testamentary power of appointment which allows him to appoint the trust property to anyone he chooses, including his own personal estate or his creditors. The trust instrument names specific beneficiaries to receive the corpus of the trust if Phillips fails to exercise the power of appointment. And it contains a “spendthrift provision,” which protects the income and principal of the trust from the claims of creditors.
Phillips filed for bankruptcy in 2007. The bankruptcy trustee moved for summary judgment to determine whether the spendthrift provision was enforceable. The bankruptcy court granted the bankruptcy trustee’s motion for summary judgment and held that the corpus of the trust was property of the bankruptcy estate. On appeal, the district court found that the case involved a determinative issue of law for which there is no clear controlling Georgia precedent and, therefore, certified the following question to this Court for resolution: Whether a settlor of a trust is a sole beneficiary, such that creditors may reach the corpus of the trust, when the trust instrument gives the settlor no right to the corpus during his lifetime but provides him with a general power to appoint the trust corpus as he sees fit in his will and names specific beneficiaries to receive the corpus of the trust in the event that the settlor does not exercise his power of appointment In Speed v. Speed , 263 Ga. 166 430 SE2d 348 1993, the settlor created an irrevocable spendthrift trust which distributed the principal and interest to him, as necessary in the trustee’s discretion, during his lifetime for his maintenance and support. The settlor retained a general power of appointment pursuant to which the trustee was to pay the remainder of the principal to the settlor’s estate, upon the settlor’s death, according to his will. No contingent beneficiary was named by the trust. The settlor’s wife tried to reach the trust during divorce proceedings. This Court ruled in the wife’s favor, finding that the spendthrift clause did not shield the trust from creditors:
