The Supreme Court of Delaware, on appeal from the Court of Chancery has emphatically upheld spendthrift protection in trusts in the case of Mennen v. Fiduciary Trust International of Delaware. The Chancery Court opinion can be found here. The Supreme Court affirmed here . A judgment of $88 million was placed against a trust beneficiary, George Jeff Mennen (“Jeff”). The judgment arose from Jeff’s alleged bad faith and willful misconduct as individual trustee of a trust established by his father for the benefit of his brother John. Section 3536 of Title 12 of the Delaware Code gives protection to beneficiaries of third-party spendthrift trusts. The holders of the judgment in this case tried to get the court to recognize a public policy exception for tort claimants who are “persistent wrongdoers” that would allow them to recover from Jeff ‘s Trust. The answer was “no.” The report of the Masterr, which was adopted by the Chancery Court , spells out the reasoning.
