I am a named beneficiary of a revocable trust. Will the assets be attached in a bankruptcy?
When you file for bankruptcy, a trustee will look for assets that you own in order to sell and pay your creditors. Whether the assets in your trust are vulnerable in bankruptcy boils down to who has control of the assets in the trust.
Revocable Trusts in a Bankruptcy
If you have a revocable trust, the person waiting to receive something from the trust (called a trust beneficiary) does not immediately control the assets. Typically, only when the grantor or creator of the trust dies, does the beneficiary take control.
In fact, prior to his or her death, the grantor of a revocable trust has complete control over all trust assets, which means they can do whatever they wish with regard to the assets including removing or adding beneficiaries, adding or removing assets or revising instructions. The beneficiaries can’t say or do anything to control the assets or influence the grantor’s activities. Therefore, the trust assets are not part of the beneficiary’s bankruptcy estate.
When the grantor dies, however, the trust will become assets of the beneficiary, which may then be counted as assets in a bankruptcy despite provisional restrictions.
Peoria Illinois Experienced Bankruptcy Lawyer
If you are the beneficiary or have been named as a successor trustee to a revocable trust and are considering bankruptcy, it is important to seek the help of a experienced bankruptcy lawyer to determine if your trust is protected.
Contact the Peoria, Illinois bankruptcy Law Offices of Charles E. Covey for help if you are considering bankruptcy. Planning for bankruptcy in advance is key when you have assets that you wish to protect when filing. It is important to discuss what you can expect with your attorney to determine if bankruptcy protection is the right strategy for you and your family.