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Can the California Bankruptcy Court go after irrevocable trust assets that were set up for my father, myself and my son?

San Francisco, CA |

My grandfather set up an irrevocable trust right before he passed away years ago. My father is named beni of 60% and myself 40%, then 100% upon my father's passing. Upon my passing the trust is to be dissolved and all assets are to go to my son. The trust was set up for medical, education and emergency issues. It has been paying for my son's education. I unfortunately am in a position where Bankruptcy might be a necessity, but I am concerned that the courts would go after the trust. I don't receive any interest payments from the trust. I could, but choose not to because I want it available for my sons schooling. Are the courts allowed to touch the trust?

Attorney Answers 3

Posted

Yes, if you have assets in a trust, you'll have to disclose those in any bankruptcy filing. You'll need to consult a bankruptcy lawyer about whether and how to file, based on your financial situation.

Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.

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Posted

Your last sentence seems to indicate that you may have some ability to amend or revise the provisions of the trust. If so, then to the extent of your ability to direct payments of principal or interest, a bankrukptcy trustee might claim an interest. However, if the trust is truly irrevocable and non-amendable, you are only a beneficiary - you have no ownership interest in the trust assets and they are not part of your bankruptcy estate. If the trust contains a spendthrift clause the trustee has the power to cut off any payments to you. In such a case, the bankruptcy trustee cannot claim any interest in any potential distributons to you under the trust provisions. I agree that you should consult with bankruptcy counsel.

Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship

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Posted

If you have never received any interest from the trust you should be in the clear but a bankruptcy attorney would have to make the final call on this one.

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