I was wondering if creditors can lay claim to property or assets, for example if someone files for bankruptcy, if those assets are within a trust rather than owned by an individual?
Estate Planning Attorney
If the trust is a "revocable" trust (a/k/a a "living" trust), then California law specifically makes them subject to claims of creditors. The same is true if the assets are owned by an "irrevocable" trust that you created for yourself as the beneficiary.
California Probate Code section 18200 states: "if the settlor retains the power to revoke the trust in whole or in part, the trust property is subject to the claims of creditors of the settlor to the extent of the power of revocation during the lifetime of the settlor."
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I agree with Ms. Brewer. It depends on the type of trust and the method of transfer into the trust. Ms. Brewer did an excellent job of describing the type of trust issue. Regardless of the type of trust, if property was not transferred to the trust properly, and it is deemed a fraudulent transfer, the creditors can reach the property in the trust. A fraudulent transfer occurs when you knew about the creditor and transferred property to the trust to hinder their collection efforts.
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Yes. (assuming it is a living trust)
No. (assuming it is an irrevocable trust)
Maybe. (assuming it is an irrevocable trust created to avoid creditor claims after such claims existed)
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