How can we protect assets and insurance benefits left in a Trust?
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How can we protect assets and insurance benefits left in a Trust?
Deceased left the Trust as the beneficiary to his life insurance policy. Trust has breakdown of benefits and assets left to heirs. Deceased had a large amount of debt. We know the wife is only responsible for any debt which she guaranteed or co-signed, but does that mean that she is now responsible for the entire amount of the debt? Also, if the wife and a minor son are the only ones named in the trust and and she is the trustee for the minor, does the mother’s debt affect what is left to the son?
Asked on December 8, 2010 under Estate Planning, Nevada
Answers:
M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
I am so sorry for your loss. The basic rule is that the estate of the decedent is responsible for the debts of the decedent. What kind or trust was created? A revocable or non-revocable trust? Is it a spendthrift trust? This could possibly have some bearing on the matter. But the general rule is that the trust property is subject to lawsuits brought by the creditors. You can not transfer property in to a trust in the hopes of defrauding creditors. It would be against public policy. Creditors do, though, have a problem with knowing what is in the trust because the trust is not a public record. It honestly may have been foolish to have the trust be funded by the life insurance policy as life insurance passes outside the estate and directly to the beneficiary upon death. I think you need to speak with an attorney in your area. Good luck.
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