Dealing with Creditors of Trust

By Matthew P. Stucki

There are numerous reasons that an individual, known as a Grantor, may decide to use a living trust as the vehicle to transfer his or her property upon death. In most living trusts, the Grantor directs the Trustee to settle with the Grantor’s creditors before distributing the property in the living trust to the beneficiaries. In several states, dealing with creditors of a trust upon the death of a Grantor, is a streamlined process wherein the Trustee provides notice to the creditors through publication or by written statement. Once notice has been provide, the creditor has a limited amount of time to file a claim against the living trust or forever be barred from making a claim. Once barred, the Trustee is free to distribute the trust property to the beneficiaries without the fear of creditors making a claim. In the end, this process protects the Trustee.

Unfortunately, Idaho does not have similar statutes. In an effort to bring about certainty, some practitioners will file a probate when the Grantor of a living trust dies in hopes of taking advantage of the creditor notice statutes under probate law. Once notice is properly provided, creditors are barred from making a claim against the estate. Some would argue that this also bars creditors from coming after trust property as well. Other practitioners will seek an order from a Judge attempting to bar creditors from collecting against a trust after notice is properly given under the probate laws. Still others will advise that it is the best course of action for the Trustee to perform his or her due diligence and discovery all the creditors so that they can properly be dealt with one at a time.

Each of these strategies is an attempt to determine and deal with creditors of a living trust so that the Trustee may then distribute trust property to the beneficiaries. Depending on the unique circumstances of each living trust, one or more of the above approaches may be advisable in an effort to protect the Trustee against creditor claims after distributing trust property.

For questions regarding creditors of living trusts feel free to call at 877-232-6101 or 208-232-6101 for a consultation with Matthew P. Stucki and the Racine Olson team of Estate Planning attorneys in Pocatello, Idaho Falls, or Boise. You can also email Matthew P. Stucki directly at mps@racinelaw.net. We will answer your Idaho Estate Planning questions.

This website includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer for advice on specific legal issues.

 

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