Do Living Trusts Protect From Creditors?

Do Living Trusts Protect From Creditors?

The question came up again this week:  Will a Living Trust protect your home and other property here in Boise, Idaho from creditor claims?

The short answer is no.  A creditor with a persistent lawyer will be able to track down your property even after you have placed it in a trust and have the property sold to satisfy the debt. 

And the truth is that this is appropriate.  If you owe someone money, you should not be able to avoid that debt by placing your home in a trust that allows you to continue to use the property. 

Realistically, there are very few avenues available to you and your attorneys to effectively protect against legitimate creditor claims here in Idaho.  Among them are:

• Keep insurance in place.  Your homeowners, automobile, medical, and an umbrella policy of insurance are your best first lines of defense against creditor claims.
• File bankruptcy.  With the exception of certain assets that you will permitted to retain even in the bankruptcy proceeding, the bankruptcy process will require that you give up most assets to satisfy creditor claims leaving you with minimal possessions for a “fresh start” in life.
• If you live in the home that you own, don’t forget that up to $100,000 in equity in the home will be protected from creditor claims under Idaho’s homestead exemption laws.  If your home here in the Boise, Meridian, and Eagle area is not worth at least $100,000 more than you owe against it, your creditors will not be able to touch it.

While claims are sometimes made that a trust or a corporation may be used to protect your assets, as long as you retain the ownership of the corporation or the right to revise or revoke the trust, your creditor’s attorney will be able to invade the trust or the corporation to satisfy your debts.

Your best approach to avoiding creditors is to live life cautiously and keep your insurance up to date.

Having said that, a  Trust carefully prepared by an experienced attorney does serve two very important purposes:  It will keep your heirs from having to go through the time and expense of a probate proceeding and it will eliminate most or all of the estate taxes that may be payable at the time of your death.  A living or family trust will insure that your heirs will receive your property here in the Boise, Eagle, and Meridian area as quickly and easily as possible after your death.

For additional information on Wills and Trusts, visit http://BarryPeters-Law.com .

blog comments powered by Disqus