LIVING TRUSTS AND CREDITORS/BANKRUPTCY

Recently, I went to a financial planner.  The planner, who had a referral network with several estate planning attorneys, informed me that a living trust would give me added protection from my creditors.  Being a friendly listener, I did not correct the planner assisting me.  While it may be true that in a few states a living trust will protect your assets from your creditors, this is usually not the case.  When you settle your own trust and have powers over the trust to revoke it at any time or change the beneficiaries, etc., it is known as a settlor trust.  In Virginia, such a trust will not protect your assets from your creditors, and property in such a trust becomes part of the bankrupcty estate upon settlor's filing for bankruptcy.  Again, you should consult with an estate planning attorney familiar with creditors' rights before embarking on an asset protection strategy that does not provide the expected protection.

Martin Conway


This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.