A trust is a common way for debtors to hide and protect assets in order to avoid collection on a judgment. What do you need to know about Trusts? How does a trust affect your ability to collect? What protections does a trust offer? Here’s what you need to know about trusts and enforcing your judgment.

What is a Trust?

A trust is a three-party agreement between the trustor, the trustee, and the beneficiary. This type of formal agreement is normally used as a means for managing assets during a person’s life and transferring assets after a person’s death. There are two main types of trusts that you may encounter while conducting private investigation: a living non-revocable trust and a living revocable trust. The descriptor “living” allows the trustor to benefit from the trust while alive. An irrevocable living trust allows the trustor access to the assets of the trust but the specifications of the trust cannot be changed or altered. On the contrary, a revocable living trust can be altered by the trustor. This allows the trustor to transfer assets in and out of the trust’s name by changing the terms of the trust.

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What Protections does a Trust Offer?

An irrevocable trust can offer a debtor protection against their creditors. When a debtor has assets under an irrevocable trust, he or she cannot change the terms of the trusts and the assets are not legally under their name. However, a state court can determine that a debtor attempt to transfer assets into an irrevocable trust is an attempt to defraud a creditor. In this case, further legal action can be taken against the debtor.

A revocable living trust does not feature the same level of protection as an irrevocable trust. This is because a revocable trust can be changed or altered by the trustor. A revocable trust does not protect a debtor’s assets from your judgment.

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