I am not a lawyer, I am a Judgment and Collection Agency Broker. This article is my opinion, based on my experience in California, and laws vary in each state. If you ever need legal advice or a strategy to use, please contact a lawyer.
A Trust is a document that (at least temporarily) separates the ownership of assets from people. Instead of a person owning an asset, the trust owns it.
There are many kinds of trusts. Trusts are not usually separate legal entities from the people that created them, or are named in them.
Trusts are often an alternate way to own assets. Trusts can be thought of as containers for potential or conditional assets.
Trusts can be used to solve many problems, including avoiding probate, or to try to solve the problem of leaving assets available to satisfy judgment debts.
Trusts usually have four categories of people or entities:
1) The grantor (sometimes called a settlor), that creates and usually funds the trust.
2) Assets, which are transferred in and out of the trust.
3) Beneficiaries (sometimes called settlees), that receive assets or benefits from the trust.
4) The trustee, who manages the trust's assets, and distributes them according to the terms of the trust, or if legal action unravels the trust.
The grantor can also be the beneficiary, and the trustee too, at least while they are still alive.
When the same person is the grantor, trustee, and also the beneficiary, it is called a self-settled trust. Self-settled trusts are not legal in most states, and are a foolish way to try to hide assets from creditors.
Putting assets into a properly formed trust can make those assets less available to creditors. Even when the trust itself is the defendant and judgment debtor in a lawsuit, it can be difficult to recover the judgment. There are many ways a trust may be hidden or depleted, in private ways to stymie judgment creditors.
There are two kinds of trusts: revocable, and irrevocable. Revocable trusts can be changed, undone, or dissolved. Assets in revocable trusts are reachable by judgment creditors. When a trust is irrevocable, it is off-limits to changes by the judgment debtor, and usually not available to judgment creditors either.
To avoid the expenses and disclosures required in the probate process, many people with assets, set up a revocable living trust. Then, they transfer ownership of everything they own into that trust.
A revocable living trust can be changed at any time, prior to the death of one or both of the grantors/settlors - the person(s) who set up the trust.
A judgment creditor, looking at the recorder's office for deeds on a judgment debtor's home, might expect to see "Barney and Pam Jones". In the past, the couple owned their house as husband and wife. However, later they transferred title to "Barney and Pam Jones, Trustees of the Jones Family Trust dated April 1, 2011". This means the house was transferred to a trust, most often a living revocable trust.
A revocable living trust is not a separate legal entity, separate from the trustee. Like a DBA, this means the debtor, who has moved their assets to a revocable living trust still owns the assets in the trust.
Note that whether a trust is a separate entity or not, you cannot have legal papers served on a trust, you must serve an actual person who is a party to, or a representative of the trust.
If one or more of the settlors of a revocable trust is your judgment debtor, that can be important, especially when the settlors are married to each another.
When you are trying to recover a judgment against a debtor with a trust, you can subpoena the debtor, and with a document request, get a copy of the trust.
If you suspect the trust was set up only to prevent your judgment from being recovered, you might be able to persuade a judge to undo the transfer of assets into the trust, especially if the transfer was done without consideration.
Some sneaky judgment debtors create two trusts simultaneously, a revocable and an irrevocable trust. This can be done by simply changing the cover pages on the trusts.
These kinds of shenanigans, and most anything else done that is fraudulent (forming an irrevocable trust simply to keep assets out of reach from a creditor) has a very good chance of being unraveled, so the judgment creditor gets paid.
Should You Give Up Ownership Of Your Judgment? Responding to a Collection Agency's Interrogatories Correctly Receiving a Summons: How to Answer a Summons for Debt Properly Which Judgments Should You Take? Legal Support Services: What Can a Business Gain From an Experienced Provider? 4 Civil Summons Mistakes to Avoid
0 comments:
Post a Comment