One of the most popular tools that people utilize to protect their assets is putting them into a trust for a beneficiary. People create trusts for their beneficiaries for many different reasons, but one important reason is to provide protection and limit the access that creditors have to their assets.
When creating a trust, many people wonder whether a creditor will be able to access or take over the property listed in the arrangement. If you are wondering whether the creditors of a trust beneficiary can reach trust assets, do not hesitate to meet with one of our skilled estate planning lawyers.
When Could a Creditor Make a Claim Against a Beneficiary?
Generally speaking, the type of trust in question determines whether a creditor or collector could attempt to access the assets inside. In most situations, the less control a beneficiary has over their trust, the less likely it is that a creditor could seize the assets.
For instance, one option that many people use to prevent creditor access is an arrangement known as an irrevocable trust. This document requires the grantor to give up complete control and ownership of the property in question and, usually, prevents them from changing the arrangement in the future. These trusts can only be changed under certain circumstances, which makes them a powerful and secure method of keeping valuable assets safe.
On the other hand, creditors might be able to reach assets that are placed into an arrangement known as a revocable living trust. This type of trust, which centers around the grantor having complete ownership over their assets until they pass away, is generally not protected from creditors. If a lender is looking to sue the grantor, this person who authored the document might need to hand over any funds or assets if they lose the claim.
If you are interested in creating a trust that is safe from creditors, then please meet and speak with one of our dedicated estate planning attorneys.
Does the Process Change if the Grantor is Deceased?
Once the grantor of an irrevocable trust passes away, assets left in a trust for a beneficiary are distributed and free from any creditor claims because the grantor essentially relinquished his or her control over the arrangement when the irrevocable trust was established. Revocable trusts are not free from creditors, but the process does change when the grantor is deceased because a revocable trust then becomes irrevocable.
However, there are exceptions to this norm. For instance, if a revocable trust has two grantors, it may still remain revocable until all these people have passed away. However, the deceased person’s outstanding debts from the revocable trust do not go away, and creditors will still be entitled to the assets listed in the document.
If you recently lost a family member who authored an irrevocable trust with two grantors, our knowledgeable lawyers could inform you whether the assets inside would be protected or subject to creditor seizure.
Contact a Trusts Attorney Today to Learn More
When it comes to planning and finding a trust that fits your needs and protects your assets from the reach of creditors, our knowledge and experience could help you avoid mistakes. Amity Law Group offers attorneys that could answer your questions, assess your situation, and help make the process go as smooth as possible. Contact us today for a free consultation.