Q: Can a lawsuit assume a trust if a co-trustee is sued?
My sister has defaulted on a contract. I fear she is to be sued. She is co-trustee along with my Mother and myself of an account that pays for Mothers residential care. If sued will the party have access to the trust? Should we remove my sister's name from the trust to be able to assure continued care for Mom?
A:
A Trustee overseeing someone else's Trust is a fiduciary or someone who manages someone else's money/assets. In some situations a Trustee actually manages their own assets for their own benefit in which case their creditors could usually get at such assets. However, when a fiduciary (trustee) manages someone else's Trust, the fiduciary's personal liabilities should not impact the Trust.
That said, it is very important to make sure that the Trustee is identified as a Trustee (and not a co-owner) of any Trust assets. It is also probably helpful to make sure the trust instrument has spendthrift provisions for beneficiaries, particularly if anyone besides your mom is a beneficiary.
While not legal advice I hope that this general information helps.
A:
No, the assets of the trust cannot be attached or reached based upon a judgment entered against a trustee, who is not also the grantor of the trust, and who otherwise has no discretionary right to make distributions from the trust to herself for any reason. In your description, I assume your mother is the granor of the trust, having transferred her assets into her revocable living trust, and simply named herself and you two daughters as co-trustees. A co-trustee does not own the assets in the trust. A trustee is simply a fiducuary agent acting on behalf of the trust for the purposes set forth in the trust -- in this case, the care of your mother. Your mother as grantor is the one with the authority to revoke the trust of take assets out of it for her own use at any time.
Upon your mother's death, however, the trust likely has a distribution provision that distributes what's left in the trust to named beneficiaries, which I assume are you and your sister. At that point, a judgment entered against your sister may subject her individual share to potential attachment by her creditors, but not any other distributive share, unless she was not entitled to immediate access to the funds. It is possible to draft the trust to limit your sister's right to receive distributions from the trust, which would preclude the creditor from attaching her funds, at least those funds that are not paid over to her personal name. For instance, the trust could be writeen to allow the trustee to pay your sister's rent, car payments, insurance premiums, etc., directly and not to her, so the funds never get placed into her
name, thereby keeping them from the reach of her creditors.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.