- April 17, 2013
- Posted by: Richard Feinberg
- Category: Bankruptcy
If you are considering bankruptcy you have probably had the question of your assets pass through your mind. Bankruptcy exemption laws offer a range of protection over an array of your personal property, but the specifics of these laws can vary greatly between cases. If you are concerned about your trust fund benefits, here is what you need to know:
Type Of Trust
There are several different types of trust fund accounts, each created for one of many purposes. There are charitable trusts that pay out benefits to one or more charities upon the passing of the creator. A life insurance trust is designed to hold life insurance on the life of the grantor or another person; which pays out income upon the passing of the trust creator. An asset protection trust is created for the purposes of protecting inherited income or assets from creditors. Regardless of the purpose of the trust, the way the bankruptcy laws determine if the fund is eligible for liquidation is based on who is in control of the trust at the time of your filing.
Who Is In Control
Who controls the trust is categorized in one of two ways: revocable or irrevocable. A revocable trust is one in which the creator of the trust retains the right to change the terms or provisions of the trust prior to their passing; giving them control over how the assets are used at any particular time.
An irrevocable trust is one in which the creator gives up his or her rights to make changes to the trust prior to their passing; essentially meaning they have no control over the assets contained in the trust after it is established. In bankruptcy your trust could be vulnerable to seizure if it is a revocable trust. This is because you are considered to be in control of the trust and its contents; whereas the beneficiary doesn’t retain control until after your passing. It is important to note that even if you have a trustee or successor of your revocable trust, they are not considered to be in control during your filing; leaving the trust eligible for liquidation if the court grants permission.
Trusts are complicated matters that require professional guidance when seeking debt relief and settlement with creditors. Consult a Tampa bankruptcy attorney about your trust accounts prior to filing your case to be sure you can protect your accounts and assets to the best extent possible.