Trusts: Come On, Commit!

If one is beneficiary of a revocable trust, a creditor can have a lien against the property held in trust.

“§ 36C-5-505.  Creditor’s claim against settlor.

(a)        Subject to the other applicable law, whether or not the terms of a trust contain a spendthrift provision or the interest in the trust is a discretionary trust interest as defined in G.S. 36C-504(a)(2) or a protective trust interest as defined in G.S. 36C-5-508, the following rules apply:

(1)        During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor’s creditors.”

Creating an irrevocable trust makes another level of separation between the property and the beneficiary; less control in a sense, because the ability to take back the property is gone (it will go to the named beneficiaries upon death of settlor/trustor/grantor),  but this trust protects the property more completely, and can be made unreachable by any creditor.


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