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Will a revocable living trust provide any protection against credit card debt upon death of the original trustee?

Battle Creek, MI |

My dad recently passed and has an estate valued at $300k. Of this, $140k is from life insurance, the rest from stocks/mutual funds. These assets were all placed in a revocable living trust over 10 years ago where I am the sucessor trustee and executor. The insurance policy listed the trust as the beneficiary. He also died with approximately $75k in credit card debt. The credit cards were listed in his name only, not the trust.

Now that I am settling up his affairs, is there any way to protect these assets from the credit card companies? If they are entitled to payment, is it possible to settle for something less than 100% of the amount owed?

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Attorney answers 4

Best Answer

In years past, a probate *estate* was all that creditors could generally make a claim against. The laws have changed to become more creditor friendly. The first line of attack is still through a probate estate. If there is not an estate, however, such as is likely the case in your situation, the trustee is supposed to file a notice to creditors on behalf of the trust. If a creditor does not make a claim within 4 months of publication of the notice, then their claim is barred. The failure to publish extends the creditor's right to make a claim. Since the trust is not a part of the public record, however, it can be difficult for a creditor to even learn of its existence.

Of course, even though there may be no legal recourse for a creditor, or it may be difficult or expensive for them to proceed, there is still a moral obligation to pay off the decedent's debts, as long as you can verify that they really were his debts. There is nothing wrong with negotiating with the creditors to see if they will accept less than the amount owing. Some of what is owed is certainly penalties and interest. If you were to fail to pay, ultimately, the loss is past on to consumers who are forced to pay for someone else's debt, in the form of higher interest and other charges.

I would suggest you try to negotiate with them. Best of luck to you!

James Frederick


In hind site, I'm sure it seems that it would have been best to have the insurance policy payable to a named beneficiary so that it did not become an estate asset or an asset of the trust. Perhaps there was a reason to do so that is not obvious.

You are allowed to negotiate with the debtors, but typically a revocable trust does not protect against creditors. if it is an irrevocable trust, it would be a different outcome.
You should seek the advice of an attorney who is well-versed in these matters in your home may also wish to consult with the attorney who drafted the revocable trust.
No relationship is intended, agreed upon or accepted by answering this general question
Best wishes,
Robert L. Brenna, Jr.
Brenna Brenna &Boyce PLLC
Rochester New York

No relationship is intended, agreed upon or accepted by answering this general question


The law in Michigan requires a trustee of a trust to pay claims against the grantor of the trust if he has no probate estate or his estate is in sufficient to do so and the trust has funds with which to pay the claims. In fact, if the estate has no funds or insufficient funds, a trustee is obligated to advise known claimants of the opportunity to file a claim and to publish a claims notice providing information as to who the trustee is and where to file claims. If such a notice is published in a paper of general circulation in the community where the decedent resided, claimants must file their claims within 4 months or their claims will be barred. If a claim is filed, a trustee has the right to reject or contest the claim. If the creditor does not respond, the claim is deemed to be disallowed. The Michigan Trust Code provides rules for this process.

It will be useful for you to consult with an attorney on this process.

Donald B. Lawrence, Jr. (P16463)* THE HUBBARD LAW FIRM, P.C.* DID 517-886-7115 Fax: 517-886-7129 Email: The information provided does not constitute legal advice and no attorney client relationship exists based upon this response. Unless specifically noted to the contrary, information refers to Michigan law. Prior to taking action, you should consult directly with an attorney for specific advice based on a full factual disclosure about your own legal situation. This information is provided for your personal use and may be reproduced for non-commercial distribution. All copies must include the following copyright notice: Copyright © 2011 THE HUBBARD LAW FIRM, P.C. THE HUBBARD LAW FIRM, P.C.* 5801 W. Michigan Avenue, Lansing, MI 48917 Phone: 517-886-7176; Fax: 517-886-1080 *AV Peer Rated, Martindale-Hubbell® Please consider the environment before printing this response

Robert L. Brenna Jr.

Robert L. Brenna Jr.


Nice Job, Don. Bob Brenna Jr


As the first commenter stated, credit card companies are usually willing to negotiate once the account holder has passed away. The trustee has the responsiblity to pay any creditors prior to making distirbutions to beneficiaries (if the trust was a revocable trust). You should have your attorney negotiate with the credit card company on your behalf and get that balance cut down.

I am only licensed to practice law in the State of California. As such, answers are based on an application of California law to general factual scenarios and should not be considered for any other purpose. The information presented in this answer should not be construed to be formal legal advice nor as forming a lawyer/client relationship. Individuals reading this answer are encouraged to seek independent legal counsel from an attorney licensed to practice law in their state for advice regarding their individual legal issues.

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