Does a living trust protect property from creditors?
No. A creditor who wins a lawsuit against you can go after the trust property just as if you still owned it in your own name. After your death, however, property in a living trust can be quickly and quietly distributed to the beneficiaries (unlike property that must go through probate). By the time creditors find out about your death, your property may already have been dispersed, and the creditors may not know exactly what you owned (except for real estate, which is always a matter of public record). It may not be worth the creditor’s time and effort to try to track down the property and demand that the new owners use it to pay your debts. On the other hand, probate can also offer a kind of protection from creditors. During probate, known creditors must be notified of the death and given a chance to file claims. If they miss the deadline to file, they’re out of luck forever.
Yes and no. Since property in a living trust can be quickly and quietly given to the beneficiaries, your creditors may not know what you owned or find out about it until it’s already given out. Holding assets in a revocable trust doesn’t shelter them from a creditor who wins a lawsuit against you, since he can go after the trust property just as if you still owned it in your own name. It may not be worth the creditor’s time and effort to try to track down the property and demand that the new owners use it to pay your debts. On the other hand, probate can offer a kind of protection from creditors. During probate, known creditors must be notified of the death and given a chance to file claims. If they miss the deadline to file, they’re out of luck forever.
No. A creditor who wins a lawsuit against you can go after the trust property just as if you still owned it in your own name. Generally, after your death, all property you owned — including assets held in a living trust — is subject to your lawful debts. For example, if your house is held in trust and passes to your children at your death, a creditor could demand that they pay the debt, up to the value of the house. Ownership of real estate is always a matter of public record, so creditors can always find out who inherited real estate. It can be more difficult for creditors to know who inherits other property, however (because a trust document, unlike a will, is not a matter of public record), and they may not bother tracking it down. On the other hand, probate can also offer a kind of protection from creditors. During probate, known creditors must be notified of the death and given a chance to file claims. If they miss the deadline to file, they’re out of luck forever.
No. A creditor who wins a lawsuit against you can go after the trust property just as if you still owned it in your own name. Generally, after your death, all property you owned—including assets held in a living trust—is subject to your lawful debts. For example, if your house is held in trust and passes to your children at your death, a creditor could demand that they pay the debt, up to the value of the house. Ownership of real estate is always a matter of public record, so creditors can always find out who inherited real estate. It can be more difficult for creditors to know who inherits other property, however (because a trust document, unlike a will, is not a matter of public record), and they may not bother tracking it down. On the other hand, probate can also offer a kind of protection from creditors. During probate, known creditors must be notified of the death and given a chance to file claims. If they miss the deadline to file, they’re out of luck forever.
Holding assets in a revocable trust doesn’t shelter them from creditors. A creditor who wins a lawsuit against you can go after the trust property just as if you still owned it in your own name. After your death, however, property in a living trust can be quickly and quietly distributed to the beneficiaries (unlike property that must go through probate). By the time creditors find out about your death, your property may already be dispersed, and the creditors may not know exactly what you owned (except for real estate, which is always a matter of public record). It may not be worth the creditor’s time and effort to try to track down the property and demand that the new owners use it to pay your debts. On the other hand, probate can offer a kind of protection from creditors. During probate, known creditors must be notified of the death and given a chance to file claims. If they miss the deadline to file, they’re out of luck forever.
