Trusts and Debts 

When a loved one passes away, there are many things to consider besides the grieving process.  Although it may seem overwhelming to mourn and to take care of business, these things can happen simultaneously.  Keep in mind, a loved one who wants to ensure that their assets and beneficiaries are handled with care may leave behind a trust or assets to family or charities they believed in. This is their way of leaving behind a memory, as well as a financial contribution to help secure futures for those they loved. 

Many people place their assets in a trust for their beneficiaries to inherit after their death. If your loved one did this, there are some details that are important to know.

There are several benefits to having a trust. A trust is a good option in estate planning because it transfers the ownership of personal assets quickly, it can keep the assets out of probate, and it ensures the assets get distributed according to the person’s desires. It can also protect the assets in the trust from liabilities and debts.  

Trusts are created with an attorney.  There are different kinds of trusts. There are some trusts that can be liable for debts of the estate, as well as trusts that cannot be liable for debts of the estate. Two of the more common trusts are revocable and irrevocable trusts.  


A revocable trust is created while the person is alive, and it can be modified or revoked at any point while they are alive. This kind of trust allows the creator or grantor to transfer the title of the property placed in the trust itself and retain control of the trust itself, as they can make changes to the terms or end it.  

Generally, any asset that is owned by the trust when your loved one passes away will not be subject to probate because the assets are protected by the trust. However, the trust is not protected from creditors. Sometimes creditors petition the court and gain access to funds in the trust in order to cover the debts of the estate. 


An irrevocable, living trust cannot be changed or ended once it is created. In general, no one can take assets from the trust, and that includes the grantor (the creator of the trust) and creditors. After your loved one dies, the property in the trust will be maintained or distributed as detailed in the trust, and will be free from any creditor claims, as well as the probate process. Your loved one may have done this by creating separate lifetime trusts for each of the beneficiaries (recipients) and the trust may allow them to access the assets at any time. Each trust is unique in its guidelines for the distribution of assets.  


Other types of trust include:


Trusts created by the will itself are known as testamentary trusts and are subject to probate. Their assets are connected to the estate and can be used to pay the debts of the estate. 


Charitable trusts are trusts that leave the property to charity. It is possible for these trusts to lower the estate tax for any other assets going through probate. These trusts can be set up in different ways and some are vulnerable to collectors of debt and others are not. 



The executor of your loved one’s estate publishes a notice of death in the local paper and sends notifications to any known creditors. After this is done, creditors have a window to make claims for unpaid debts. This window varies from state to state, so it is important to know your state’s time frame as it relates to this window. It is important to work with a trusted attorney so they can help you navigate the details of a trust. Your attorney will direct you as to the best time and manner to distribute anything from the trusts. 

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