Adams was the lifetime income beneficiary of a testamentary trust created by a third party (his testator). The will directed the trustees to pay the net income to Adams from time to time and included a spendthrift provision stating, in substance, that the income was to be paid to him upon his personal receipt only, that he could not anticipate or assign it, and that it would not be liable for his debts. Broadway National Bank, a judgment creditor of Adams, sought to reach the trust income in the hands of the trustees—proceeding by trustee process and/or equitable reach-and-apply—and, alternatively, to enforce an alleged assignment or order given by Adams against future income. The trustees asserted the spendthrift restraint as a bar. The trial court refused to allow the creditor to intercept or attach the trust income prior to payment to Adams, and the matter was reviewed by the Supreme Judicial Court of Massachusetts.
Whether a testamentary trust provision restraining a beneficiary's alienation of income and protecting that income from the beneficiary's creditors is valid and enforceable, thereby preventing a creditor from reaching unpaid trust income in the trustees' hands or enforcing the beneficiary's purported assignment of it.
A settlor may validly create a spendthrift trust that restrains a beneficiary's voluntary and involuntary alienation of their equitable interest—particularly the right to receive trust income—so that the beneficiary's creditors cannot reach it while held by the trustee, nor can the beneficiary assign it in advance. Such a restraint is not against public policy when the trust is created by a third party (not self-settled). However, once income is actually paid to the beneficiary, it becomes the beneficiary's property and is then subject to creditors' claims.
The spendthrift restraint in the testamentary trust was valid and enforceable. Broadway National Bank could not reach the trust income before payment to Adams, nor could it enforce Adams's purported assignment of future trust income. The trustees' obligation was to pay income only to Adams personally, consistent with the trust's terms.
The court grounded its decision in the principle of donor (settlor) freedom of disposition. A property owner may dispose of property on such terms and conditions as they see fit, provided the conditions are not unlawful, repugnant to the nature of the estate, or contrary to public policy. Here, the testator's will created only a limited equitable interest in income for Adams, expressly insulated from anticipation, assignment, and creditors' claims, and to be paid to Adams upon his personal receipt. The beneficiary therefore never possessed an alienable, attachable property interest in the unpaid income that creditors could seize; the property interest remained circumscribed by the donor's conditions. The court rejected the English line of cases (e.g., Brandon v. Robinson) that treated restraints on an adult beneficiary's alienation of income as ineffective to bar creditors, and instead aligned with the emerging American view, exemplified by the U.S. Supreme Court's decision in Nichols v. Eaton, that such restraints may be valid. There is no public policy requiring a donor to enrich the beneficiary's creditors; the donor may prefer to provide for the beneficiary's support without enabling dissipation or creditor interference. The court distinguished self-settled arrangements—where a debtor attempts to protect their own property from creditors—which are invalid as to creditors. It also clarified the temporal boundary: while the trust income remains in the trustee's hands, the spendthrift clause is effective; once paid to the beneficiary, it becomes subject to ordinary creditor remedies. Finally, because the trust made payment contingent on the beneficiary's personal receipt and forbade anticipation or assignment, the beneficiary's purported assignment or order to a creditor had no legal effect against the trustees.
Broadway National Bank v. Adams is a canonical state-court endorsement of spendthrift trusts and a staple in Trusts & Estates courses. It solidifies several core doctrines: (1) a third-party settlor can restrain alienation of a beneficiary's equitable interest; (2) creditors cannot reach unpaid trust income protected by a valid spendthrift clause; (3) beneficiary assignments of protected interests are ineffective; and (4) once distributions are actually made, creditor remedies attach to the funds. The case also frames the policy debate between creditor rights and settlor intent, a recurring theme on exams and in practice, and it foreshadows the widespread codification of spendthrift protections in modern statutes (e.g., Uniform Trust Code) with well-recognized exceptions and limits.
Broadway National Bank v. Adams definitively establishes that a third-party settlor may insulate a beneficiary's trust income from both voluntary and involuntary alienation through a valid spendthrift clause. By doing so, the settlor creates only the limited equitable interest described in the instrument, and creditors must respect that limitation while the funds remain in the trustee's hands.