Trusts and Bankruptcy

Many people turn to trust funds of various types to protect their assets from creditors or potential lawsuits. When a person files for bankruptcy, a trust can be useful in protecting some of the assets a person has from liquidation. This is because a trust assigns some ownership of a person’s assets to another person or a group of people. This makes it harder for creditors to collect these assets.

While going through bankruptcy, the trust holder can continue to collect the interest made on the property in the state by reserving a life estate. Many people try to transfer this interest to another party in order to shelter it from creditors. Unfortunately, with the bankruptcy reform that went into effect in 2005, creditors can access these assets more easily.

A self-settled trust is a trust that was put in place for a person’s personal benefit. These trusts can allow a trustee to stop the trustor from collecting the interest on properties protected by trusts if the trust was made within 10 years of the bankruptcy filing. In this way, the interest earned on assets can be protected.

A trustee can also stop a trustor from collecting interest on assets in a trust if the individual is attempting to interfere with or to defraud any creditors deliberately.

Contact an Austin Probate Lawyer

If you are interested in learning more about trust funds or in establishing one for a child, contact the Austin probate lawyers of Slater & Kennon at 512-472-2431 today.

Centrally located in the Arboretum area of north Austin, the Slater & Kennon law firm represents clients in Travis County, Bastrop County, Burnet County, Williamson County, and Hays County, including the cities of Austin, San Marcos, Bastrop, Burnet, and Georgetown.