Kay Brooks

Ask the Experts: Creditor worries? Take son off bank account

Published: Wednesday, Feb. 6, 2013 - 12:00 am | Page 7B

Does a travel trailer belong in a trust? Should my son, who's on my living trust, be on my checking account?

This week, those questions get answered by Sacramento estate planning attorney Kay Brooks of Weintraub Tobin law firm.

I have a revocable trust with my wife and adult son as trustees. My son is on one of my checking accounts, which is not in the trust. If my son is sued, can my money be attached in a lawsuit? If so, how can I prevent it?

Whether your son is a current trustee or will be a successor trustee after your death, your trust assets cannot be attached in a lawsuit against him as an individual.

As a trustee, your son has a fiduciary obligation to manage the trust assets for your benefit, and his creditors cannot access those funds. It's a different matter with the bank account. If both of you are named as co-owners and the account is not held in your trust, his creditors can reach those funds.

Since you are concerned about this possibility, I recommend that you take him off your bank account right away and change the account so that he has power of attorney for it instead. This way, he can assist you with bill paying, for instance, but the funds are not considered his and thus are not available to his creditors.

I created a living trust and put my house and investments into it. Should I put my fifth-wheel trailer in the trust? I did not add my cars.

Under California law, you may currently have up to $150,000 in assets held outside of a trust without triggering a probate. That amount does not count assets held as joint tenants or that pass to an heir by beneficiary designation, such as an IRA or a "TOD" ("Transfer On Death") bank or brokerage account.

Additionally, vehicles registered with the DMV do not count toward the $150,000 limitation. Assuming that your trailer is registered with the DMV, it is not necessary to title it in the name of your trust to avoid probate.

If you want ownership of the trailer to pass to someone specifically, you can include it on the trust's list of assets or other transfer document. That way, your intent is clear and the trustee knows how to distribute it at your death.

It is important to properly "fund" a revocable trust by retitling your assets, in order to avoid probate. You have done this with your current assets by transferring your house and investments into the name of the trust.

Be sure to take title in the trust's name with any new assets you acquire. Otherwise, if your assets outside the trust exceed $150,000, court proceedings – and often a full probate – may be required to transfer those assets upon your death. Going to court is costly and generally to be avoided.

– Compiled by Claudia Buck

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