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Brent Blanchard
Brent Blanchard, Estate and Probate Attorney
Category: Estate Law
Satisfied Customers: 1975
Experience:  Thirteen years of experience in probate, trusts, wills, and medicaid planning
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I inherited my mom's condo, in california, when she died.

Customer Question

i inherited my mom's condo, in california, when she died. the condo is in a trust in her name and i am the sole trustee. it will be two years since her death february 20, 2016. i don't want to put it in my name because i have old creditors i am worried could put lien on condo. i live in the condo. the hoa and management company are mercenary. can i lose the condo if i don't put the deed in my name? i am paid up on hoa fees.
Submitted: 11 months ago.
Category: Estate Law
Expert:  Brent Blanchard replied 11 months ago.

Thank you for your question.

The terms of the trust are supposed to govern what happens after the original beneficiary passes. MOST of them call for distribution of everything to the beneficiary's survivors.

IF a trust is the usual estate planning "revocable" trust, created by the same person who is also the lifetime beneficiary, it becomes irrevocable on the death of that person. The trust creator ("settlor" or "trustor") is almost always the only person who has the power to revoke or amend the trust. Successor trustees usually do not have that power.

Even though these trusts almost always have "spendthrift" clauses that look like they keep the trust assets safe from creditors, that almost always applies only to the "contingent" beneficiaries BEFORE they have a right to receive trust property. Revocable trusts are NOT "asset protection" devices for the people who create them and put their own assets into them.

Beneficiary status on a trust is much more important when dealing with creditors, than is a person's status as a trustee or co-trustee.

A creditor who is savvy can look up the property address where a debtor is living and see that it is owned by a trust. Will they give up then, thinking the house is locked up forever and cannot be taken? NO, not unless they are lazy or uninformed. The next step is for the creditor to start asking around about the relationship between that trust and the debtor who is living in the house. If the creditor has filed a lawsuit regarding the debt, that creditor can subpoena documents from anyone in the state (and from out of state by taking a few legal paperwork steps over 4-12 weeks, typical timeframe) and one way or another find out what's up with the trust.

A creditor can then add the trust, as the owner of an asset which the debtor has a right to at least possess and maybe even own, as a defendant in the lawsuit and eventually force the trust to deed the land over to the debtor, so a judgment lien can be imposed directly on it.

AND a remainder beneficiary of a trust cannot successfully transfer (or have the trustee do it) assets into a new irrevocable *asset protection* trust because CA law (and in every other state, with some variations in the details) to shield them from creditors because that action can be reversed under its "fraudulent transfer" statute. To try to hide property that way (and a lot of other ways) can be ruled by a court to be an effort to "hinder, delay or defraud" creditors.

Bot***** *****ne is that if a person has *known* creditors, there is almost nothing that can be done to hide or protect assets from them. Homestead exemptions and money already in retirement funds like an IRA are about the only reliable ways to keep property out of the hands of creditors.

The only notable exceptions carry some very large risk that the known creditor will object to the asset protection plan and extract assets from the irrevocable asset protection trust. These newer versions are commonly known as "Domestic Asset Protection Trusts" or "DAPT"s--Alaska, Nevada, and Utah are among the states which have them. BUT most require sending notice of the creation of the trust to be mailed to known creditors, AND publishing a notice of the creation of the trust with legal notices (three times in three weeks for example)...and if the creditor fails to object within 120 days, the assets then become unreachable to all creditors who don't object.

I haven't met anyone who was willing to take the risk of notifying a KNOWN creditor that they were trying to remove assets from creditors' reach. The DAPT is almost always used to plan and prepare *before* problems with creditors arise.

"Inheritance" of anything from a trust really is not complete until the trustee transfers that property to the remainder beneficiary.

Now, LOSING a home a person is living in due to debts is rare if the debt is not the money borrowed to buy the place. Foreclosures are done all the time. Any other debt can become a lien on real estate ONLY after there is a judgment from a lawsuit and the creditor takes some paperwork steps. Even then, the ,000creditor can take only the equity above the homestead exemption--in CA that now is $75,000 for a single person under age 65, $100,000 for a person under age 65 who lives there with a family member, $175,000 for a person 65 or over, or who is unable to work because of disability--or 55 or older with a gross annual income of $25,000 or less--or married with a combined gross annual income of $35,000 or less.

The homestead exemption can be declared and used even with regard to known creditors.

It's a good idea to check on the statute of limitation for old debts if the creditor has not yet filed suit. The clock starts to run either the date of the last payment, or the first skipped payment, or the date of the last scheduled payment sometimes (think XX years of contracted payments), depending on the situation. Even when there is a judgment, in CA it can be enforced for 10 years...and renewed for another 10 years.

People are often surprised at how long an attention span some creditors can have.

Thank you.