Sec. 9. (a) If a creditor's claim is allowed under section 8 of this chapter, the transferor's qualified disposition to a legacy trust is subject to the claim only to the extent necessary to satisfy the transferor's debt to the creditor making the allowed claim.
(b) In the event the trustee participates in litigation brought by a lender to enforce its rights under section 1(b) of this chapter, the trustee may recover the fees and costs incurred in such litigation from the trust only after the lender has been paid in full.
(c) If a creditor's claim is allowed under section 8 of this chapter and the creditor has not sought to enforce its rights under section 1(b) of this chapter, the claim is limited as follows:
(1) 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 disposition:
(A) the qualified trustee has a first and paramount lien against the property that is the subject of the qualified disposition in an amount equal to the entire cost, including attorney's fees, properly incurred by the qualified trustee in the defense of the action or proceedings filed by the creditor;
(B) the creditor's claim shall be allowed subject to the proper fees, costs, preexisting rights, claims, and interests of the qualified trustee and of any predecessor qualified trustee that has not acted in bad faith; and
(C) it is presumed that the qualified trustee did not act in bad faith merely by accepting the property that is the subject of the qualified disposition.
(2) If the court is satisfied that a beneficiary of a legacy trust has not acted in bad faith, and the distribution was made to the beneficiary before the creditor made the trustee aware of its claim or commenced an action to enforce its claim, the creditor's claim is subject to the right of the beneficiary to retain any distribution made upon the exercise of a trust power or the discretion vested in the qualified trustee that was properly exercised before the trustee was made aware of the claim or an action was commenced to enforce the claim.
As added by P.L.221-2019, SEC.9. Amended by P.L.231-2019, SEC.31.
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