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Can creditors lay claim to property or assets if those assets are in a trust?

San Francisco, CA |

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?

Thanks :)

Attorney Answers 3

Posted

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."

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

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Posted

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.

Disclaimer - This response does not constitute legal, accounting or other professional advice. Only through a personal, confidential consultation with qualified legal counsel can anyone properly evaluate their own unique legal challenges and determine what, if any, appropriate legal strategies and tactics should be implemented to meet those challenges.

Circular 230 Disclaimer - “Nothing in this response is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same.”

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Posted

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)

DISCLAIMER: The information in and this communication are not intended to create an attorney-client relationship between you and me or my law firm. The information in this communication is intended for general informational purposes only and should be used only as a starting point for addressing your legal issues. It is not a substitute for an in-person or telephone consultation with an attorney licensed to practice in your jurisdiction about your specific legal issue, and you should not rely upon the information in this communication. You understand that this communication is not confidential and is not subject to attorney-client privilege.

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