If I were to be sued in a personal injury lawsuit and a judgement is recorded against me, could the court force the sale of trust property to pay the judgement?

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If I were to be sued in a personal injury lawsuit and a judgement is recorded against me, could the court force the sale of trust property to pay the judgement?

About 2 years ago, I purchased a condo 50/50 with family members. When the escrow closed the deed was solely in my name. I then used a quitclaim deed to transfer title to the property to a trust that my grandmother setup before her death for me. I reside in the condo and it is my only residence. As far as I understand it the legal name of the trust is “X’s trust” with X being my first name. So my full legal name is not on the trust but the property taxes for the condo in question read the owner as “X’s Tr, Attn. X Y” with X Y being my full name.

Asked on March 16, 2013 under Estate Planning, California

Answers:

Catherine Blackburn / Blackburn Law Firm

Answered 8 years ago | Contributor

An internet lawyer cannot answer this question.  It depends on a number of factors, the first being the terms of the trust itself.  Most trusts are written with strong spendthrift provisions that prevent creditors from invading the trust.  The next depends on the effectiveness of your transfer to the trust.  If your transfer is effective, the trust is irrevocable, and you do not have a general power of appointment (the right to demand a distribution or change the terms of the trust etc.), the creditor cannot reach the property of the trust.  There are other considerations.

It sounds like you are asking a hypothetical question.  You should understand that a personal injury plaintiff must sue you, go to trial, get a judgment, and then execute on the judgment.  This is a long process.  You should buy sufficient insurance to avoid that.  If it happens, the creditor can take your deposition and ask you to disclose your assets.  You would want legal advice as to whether you must disclose trust assets. 

And let me add one more thing - a judgment creditor would have to sue to invade your trust. That would be expensive and potentially difficult.  The good news is that personal injury lawyers know nothing about it.  They want to get paid - which means they want to settle the personal injury case and be done with it.  Buy a reasonable amount of insurance and the personal injury lawyer will almost always recommend that the plaintiff accept it in settlment.  By the way, given the time, cost, and risk of chasing assets  like your trust, that is the best advice and best choice.

I hope this helps.


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