[§554G-10]  Effect of avoidance of permitted transfers.  (a)  A creditor may avoid a permitted transfer pursuant to section 554G-8 only to the extent necessary to satisfy the transferor's debt to the creditor at whose instance the transfer has been avoided, together with costs, including attorney's fees, as allowed by a court.

     (b)  In an action pursuant to subsection (a) to avoid a permitted transfer:

     (1)  If a court finds that a trustee has not acted with intent to defraud, hinder, or delay the creditor in accepting or administering the property that is the subject of the permitted transfer:

         (A)  The trustee shall have a first and paramount lien against the property that is the subject of the permitted transfer in an amount equal to the entire cost, including attorney's fees, properly incurred by the trustee in the defense of the action or proceedings to avoid the permitted transfer; and

         (B)  The permitted transfer shall be avoided, subject to payment of proper fees, costs, preexisting rights, claims, and interests of the trustee and of any predecessor trustee who has not acted with intent to defraud, hinder, or delay the creditor; and

     (2)  If the court is satisfied that a beneficiary of the trust has not acted with intent to defraud, hinder, or delay the creditor, the permitted transfer shall be avoided subject to the beneficiary's right to retain any distribution made prior to the creditor's commencement of an action to avoid the permitted transfer.  For purposes of this paragraph, it shall be presumed that a beneficiary did not act with intent to defraud, hinder, or delay the creditor merely by creating the trust or by accepting a distribution made in accordance with the terms of the trust.

     (c)  A creditor who brings an action pursuant to section 554G-8 to avoid a permitted trust shall have the burden of proving by clear and convincing evidence that a trustee or beneficiary acted with intent to defraud, hinder, or delay the creditor; provided that in the case of a beneficiary who is also the transferor, the burden on the creditor shall be to prove by a preponderance of the evidence that the transferor-beneficiary acted with intent to defraud, hinder, or delay the creditor.  Mere acceptance of permitted property by a trustee shall not constitute evidence of intent to defraud, hinder, or delay a creditor. 

     (d)  Notwithstanding any other provision of this chapter, a creditor shall have no right against the interest of a beneficiary to a trust based solely on the beneficiary's right to authorize or direct the trustee to use all or part of the trust property to pay:

     (1)  Estate or inheritance taxes imposed upon or due to the beneficiary's estate;

     (2)  Debts of the beneficiary's estate; or

     (3)  Expenses of administering the beneficiary's estate[,]

unless the beneficiary actually directs the payment of taxes, debts, or expenses and then only to the extent of that direction. [L 2010, c 182, pt of §2]