Plan on using a Trust to avoid current or future creditors? Just know that plan will probably not work out for you.
The idea that gets tossed my way in conversations is that if the Trust owns property, then you don’t own it as an individual. If you don’t own it as an individual, then a creditor can’t get to those assets because you don’t own them. Seems simple. Asset Protection.
Here is the flaw with this thought: the most widely used trust is a revocable trust. This means you have the power to add and subtract assets from the trust’s ownership, amend the trust, terminate the trust, etc. So, really, from a judge’s perspective, you still own these assets.
The truth is there are States that recognize the types of Trusts that allow for creditor evasion. Idaho does not. Also, these types of irrevocable trusts are often priced out of most people’s ability to purchase.
Even if you created one of the trusts that allows you to avoid creditor’s claims, you still might fall subject to a judgment filed by a creditor if a judge determines that the purpose behind this transfer was fraudulent, see Idaho’s and the Federal Fraudulent Transfers Act.
This doesn’t mean that you have no hope and that if a creditor comes calling you will lose everything. Idaho does have a law called Homestead Exemption, which allows for up to $100,000 in equity in the home you own to be free from attachment by a creditor.
In the end, there are a plethora of great reasons to create a Trust, but protecting assets from creditors is not one of them.
If you have questions, concerns, or would like to find out how to create your estate plan, call Jeppesen Law at 208-477-1785 or email email@example.com