Wednesday, 23 January 2013

Real Estate, Trusts, And Judgments

What if your judgment debtor lives in a property owned by some trust? For example, they put their house into a trust in the past, long before you got your judgment. There are at least two reasons people transfer assets into trusts. One reason is to avoid probate, another reason is to attempt to thwart judgment creditors.

If a trust owning a property can be proven to be an AKA of your judgment debtor, you might be able to then attach a lien on that property. How can you find out if your judgment debtor owns a trust that owns a property?

This article is my opinion, and not legal advice. I am a judgment expert, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.

Whenever there is any chance that your judgment debtor now or will someday, have any real estate ownership, it is a good idea to quickly record and maintain a property lien that identifies them as much as the law allows. Such property liens are sometimes called an abstract of judgment, and they should list the judgment debtor's last-known property address.

The first step in finding out who owns the property your judgment debtor lives in or is involved with, is to visit the local county recorder's office and look at the records for that property. If a property is owned by Joe Smith (Te), the "Te" usually means that person is the trustee of a trust. Often, properties are transferred to a trust with a quit claim deed.

Trusts are contracts among individuals. A trust is a legal entity, however trusts are not separate legal entities like corporations and LLCs are. A trust is sometimes a document that holds the wishes of the judgment debtor in the event of their death or disability.

A simple trust might be an asset, similar to some other asset inside a judgment debtor's safety deposit box. Your judgment debtor may not own a trust, and instead may own or use assets owned by the trust.

A trust can contain another trust, or own other LLCs or corporate entities. It can be so well structured that assets placed inside the trust are judgment proof and unreachable.

Some trusts, especially complicated trusts set up by expert asset-protection attorneys, are used as an asset protection tool for judgment debtors. A well-designed trust, set up by an experienced financial planner working with a competent attorney, can create a trust that may be judgment proof, and might provide the judgment debtor a world-class asset protection solution. Attempting to undo such asset protection trusts is usually very difficult and expensive.

Everything depends on the details of the trust itself, the size of the judgment, and the assets at stake. The only way to determine the potential asset-protection difficulty of a trust, is for you or your attorney to use a subpoena to get and read a copy of it. If the trust is home-made, simple, not properly set up, or has flaws; there may be hope.

Hopefully, you can prove the trust and the assets within it, are simply an asset belonging to your judgment debtor. To prove the ownership of a judgment debtor's trust usually requires a judgment debtor examination, with a document production request. Subpoena the trust document, and look for the proof of authenticity, which may include one or more (often notarized) signatures.

If there is a loan on the real estate in question, the details of the loan situation will show who is who. Usually, loans are made to individuals, and then properties are transferred into trusts.

If you can prove that your debtor has a simple trust, and is using it only to attempt to thwart you from attaching your judgment lien to their property; you might be able to get an affidavit of identity order approved. Such an order could show that the trust is just an AKA of your debtor. Then, you might be able to get a turnover order approved, after a debtor examination. Some judges will not sign such an order, so your mileage will vary.

If you get such a trust turnover order approved, it could be recorded, along with a certified minute order (the documented statement after the court makes their decision). That might cloud title to your debtor's property.

Look for other assets named in the trust, such as bank or brokerage accounts. Then, subpoena any documents of assets owned in the name of that trust. If there are any accounts, you may be able to request a Sheriff levy or get a turnover order of them; after proving the assets are the judgment debtor's property, held in the name of an AKA trust of your judgment debtor.

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