Can a defaulted student loan attach to a legacy trust?
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Can a defaulted student loan attach to a legacy trust?
My father just passed away and the life insurance money was put into a legacy trust in my mothers name. My nephew has defaulted on his student loan and my mother is co-signer can that student loan be attached to the legacy trust?
Asked on September 14, 2012 under Estate Planning, Kansas
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 11 years ago | Contributor
If there is a judgment resulting from a defaulted student loan where your nephew defaukted on it and your mother is the co-signer as to the loan, then presumably there is a judgment against the nephew and your mother.
Under the laws of all states in this country, if your mother is not a trustee under the legacy trust where she is a beneficiary, then the presumed judgment creditor cannot levy on this legacy trust and pull money from it. However, if there is a levy, then a claim of exemption needs to be timely filed with the court.
If your mother is a trustee under the legacy trust that you have written about, then the legacy trust is subject to levy by the judgment creditor.
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