Can a Family Trust be used to avoid creditor claims? Not really.

It used to be rumored that, if a person with unpaid bills placed his assets into a Family Trust, the owner’s creditors could not “penetrate” the trust and force the sale of the assets to satisfy the unpaid debts. Unfortunately for the debtor, that is not the case.

In reality, when a person creates a Family Trust, he almost always retains the right to put additional assets into the trust and to take them back out.

So, if a creditor has a judgment against a debtor whose assets are hidden in the trust, the judge who entered the judgment can simply order the owner of the trust to take the assets back out of the trust in order to have them sold to satisfy the judgment.

So, although a Family Trust can definitely slow a creditor down, it should not be viewed as a reliable tool to protect assets from creditor claims.

Daniel Patchin

Benjamin Monaghan, Attorney

Benjamin Monaghan