When your loved one creates a trust and names you as one of its beneficiaries, they intend for the assets to pass to you to be protected from disputes and other claims asserted against those assets.
However, third-party creditors may still have the right to assert their claims against those assets.
Under California law, a creditor’s claim may include almost any cause of action that a person could assert against the decedent and his or her trust and estate. For example, unpaid bills, contract disputes, and even personal injury claims for damages may all be subject to the creditor’s claim process.
Litigating creditor’s claims may diminish the value of a trust’s assets before the beneficiaries receive what was left behind for them. And in certain cases, the claims can even limit your access to the trust altogether. If you are expecting to receive a distribution from a trust or an estate, and anticipate that a creditor may bring a claim against those assets, a trust and estate litigation lawyer can help manage any such claims that arise.
On the other hand, you may be a beneficiary or creditor with a claim that the surviving trustee or beneficiaries refuse to honor. In that case, you will also need a competent attorney to assist you and protect your rights.
What are third-party creditor claims?
When someone passes away, the estate of the deceased person (the “decedent”) may still be responsible for any debts owed by the person in life.
Third-party creditor claims are requests to be compensated by the estate made by the people or entities that are owed those debts. These claims can be directed at an estate, a trust or the heirs and beneficiaries of the estate or trust. And even though trusts are typically better protected against these claims than wills are, they are not immune to claims by creditors.
Depending on the size of those debts, however, the estate may not have enough funds to pay them off. If the estate lacks sufficient funds, then the creditor may often bring a claim against the decedent’s trust.
How a Trust and Estate Litigation Lawyer Can Help With Third-Party Creditor Claims
The goal of a third-party creditor claim is to acquire the money or other assets that are being claimed. That money will often come out of the decedent’s trust.
Challenging the Legitimacy of the Claim
Many third-party creditor claims are, in fact, not legitimate. A bad actor may try to get money from the estate, even if they are not owed it, just because the deceased is no longer around to dispute the claims.
The first thing the Trust Law Partners team will do is investigate the claim. If the third party cannot prove that they are legitimately owed money by the deceased’s estate, there is no reason to entertain the claim. Any attempt to continue to push a claim that is not supported by evidence will be met with legal action.
Negotiation
While a third-party creditor with a legitimate claim may have the right to engage in litigation and demand a full trial on the issues, it is rarely worth it. Litigation is expensive and time-consuming. And even if a court sides with the creditor, that person could end up spending more money on the litigation than they would receive from a judgment in their favor.
Typically, creditors are willing to negotiate to avoid such costly litigation. Many are even willing to accept a fraction of the debt they are owed to close out the account.
Lawyers at Trust Law Partners have extensive experience negotiating to resolve creditor’s claims, whether you are a third-party claimant or someone defending against a creditor’s claim.
Litigation
The more challenging scenario involves pursuing litigation and going to court to prosecute the claim or defend against it.
The trial of the claim may often be held in the probate court. But the form of the trial may resemble a contract dispute or even a personal injury matter, depending on the nature of the claim.
The attorneys at Trust Law Partners have decades of courtroom and pre-trial experience. We will keep your case on track and do all we can to obtain the best result for you that we can.
Contact Trust Law Partners for Help With Third-Party Creditor Claims
If you are a beneficiary of a trust, or the heir to an estate, and your distribution is being held up due to a third-party claim, we can likely help you resolve the claim.
If, instead, you are a creditor with a claim to assert against a trust or estate, you still need to retain the help of an experienced attorney as soon as possible.
Contact the legal team at Trust Law Partners today to learn how we can help you.