As Trustee, you are, actually, obligated to pay the debts of the Grantors (the people who created that trust) that you know about before you can distribute assets to the trust's beneficiaries. That includes taxes and, in this case, credit card debt.
With an irrevocable trust, the assets that fund the trust become the property of the trust, and the terms of the trust direct that the trustor no longer controls the assets. ... Because the assets within the trust are no longer the property of the trustor, a creditor cannot come after them to satisfy debts of the trustor.
With a revocable trust, your assets will not be protected from creditors looking to sue. That's because you maintain ownership of the trust while you're alive. Therefore if you lose a lawsuit and a judgment is awarded to the creditor, the trust may have to be closed and the money handed over.
No, when someone dies owing a debt, the debt does not go away. Generally, the deceased person's estate is responsible for paying any unpaid debts. The estate's finances are handled by the personal representative, executor, or administrator.
In California, the statute of limitations is four years for debts (except oral debts have a two year SOL). This means that for unsecured common debts like credit card debt, lenders cannot file suit to collect debts that are more than four years past due.
Can Creditors Garnish a Trust? Yes, judgment creditors may be able to garnish assets in some situations. However, the amount they can collect in California is limited to the distributions the debtor/beneficiary is entitled to receive from the trust.
Under California law, the trustee must send a notice of trust administration to the beneficiaries of the trust. ... There is generally no legal requirement that a trustee provide notice of a trust administration to the creditors of the settlor.
Who Is Responsible for Credit Card Debt When You Die? When you die, any debt you leave behind must be paid before any assets are distributed to your heirs or surviving spouse. Debt is paid from your estate, which simply means the sum of all the assets you had at the time of your death.
If the estate does not have enough money to pay back all the debt, creditors are out of luck. ... If an executor pays out beneficiaries from an estate before all the debts are settled, creditors could make a claim against that person personally.
Once your debts have been established, your surviving family members or the executor of your estate will need to notify your creditors of your death. They can do this by sending a copy of your death certificate to each creditor.
It helps to remember that a Trust is a separate legal entity. The Trustees and beneficiaries are not personally liable for debts owed by the Trust. The Trustee is acting in a fiduciary capacity. The Trustee is required to gather the assets and pay the Trust debts.
That type of trust in California is permitted and can function fairly effectively to shield assets from the children's creditors as long as those assets remain in the trust. But someone cannot gain the same protection if they are the creator of the trust and the beneficiary of the trust.
Family or discretionary trust assets are generally protected from claims by creditors of a bankrupt beneficiary as the trustee of a discretionary trust is the legal owner of those assets. ... Any properties held in trust can only be attacked by creditors of that trust.
Beneficiaries are only liable for debts of a Trust to the extent the beneficiary received assets from the Trust. If the beneficiary received $10,000 from the Trust, and the Trust owes $1,000 in debt, then the beneficiary may have to pay back $1,000 to cover the debt.
If your assets are in a trust, the courts and creditors can't seize those assets. ... It only applies to this type of trust, because it creates a separate legal entity with control and ownership over those assets. The court and creditors could still seize your property, but only the assets that aren't in the trust.
After your death, the irrevocable trust assets would be distributed in accordance with the instructions you put in the trust, free from any claims of your creditors. Although your trust or estate assets are available to pay your and your estate's creditors, you can protect them for your loved ones.
After someone has passed, their estate is responsible for paying off any debts owed, including those from credit cards. Relatives typically aren't responsible for using their own money to pay off credit card debt after death.
Insolvent Estates
The Executor or Administrator is not personally liable for debts of the estate when administered properly, nor are any beneficiaries under a Will. It is, however, important that Executors and Administrators follow the legal scheme for distribution to avoid becoming personally liable for some debts.
Family members, including spouses, are generally not responsible for paying off the debts of their deceased relatives. That includes credit card debts, student loans, car loans, mortgages and business loans. Instead, any outstanding debts would be paid out from the deceased person's estate.
Contact the Credit Card Issuer
Inform the manager that the cardholder is deceased. State that you are the executor or administrator of the deceased's estate and that you want to negotiate a settlement of the account.
You typically can't inherit debt from your parents unless you co-signed for the debt or applied for credit together with the person who died.
The trustee cannot fail to carry out the wishes and intent of the settlor and cannot act in bad faith, fail to represent the best interests of the beneficiaries at all times during the existence of the trust and fail to follow the terms of the trust. ... And most importantly, the trustee cannot steal from the trust.
In order for a trust to end, all debts must be paid and all trust property must be distributed. After the trustee has completed all actions required to administer a trust and there are no remaining assets in the trust except sufficient funds to pay any final expenses, the trustee may close the trust.
A beneficiary cannot outright sell assets held in a trust, even if the beneficiary is the only beneficiary, because although the beneficiary has a legal interest in the trust assets, those assets are legally owned by the trust until such time as they are distributed to the beneficiary.