[WSBAPT] Can Creditors Access Assets Placed into a Revocable Living Trust after the settlor's Death

[Diane J. Kiepe]

Hello Michael,

Your client is right to be concerned and  this issue can become problematic.  First of all, if it is placed in the trust after death by say beneficiary designation, certain creditor protection is, in fact loss.  I see this issue is particularly worthy of review with life insurance proceeds and qualified plans.  I always advise that the general master trust should not be named for these assets.

Remember Revocable Living trust are simply probate avoidance devices and the general rule of thumb is, if an asset were subject to the decedent’s claims at the moment before death, death does not change that, with the exception of very few assets.  See RCW 11.18.200€.

I have taken position that if made payable to a subtrust in a living trust, it is only payable for a decedent’s estate if there are other insufficient trust assets and not otherwise excepted.  So, for example, I have made qualified plans and life insurance payable to a decedent’s by-pass type trust under a living trust.

Just my 2 cents.

Diane J. Kiepe

Diane J. Kiepe
Douglas Eden
717 W. Sprague Ave.
Suite 1500
Spokane, WA  99201
djkiepe at depdslaw.com<mailto:djkiepe at depdslaw.com>
509-455-5300

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of msafren at jennylinglaw.com
Sent: Monday, July 20, 2020 4:03 PM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Can Creditors Access Assets Placed into a Revocable Living Trust after the settlor's Death

Hello Learned Listservers,

I had a question for you all regarding creditor’s ability to access assets that were placed into a revocable living trust after the settlor’s death.  I’m unclear if the creditor has such an ability and if so the extent of the creditor’s ability to force the sale of assets transferred into the trust to satisfy the creditor’s claims.

To be clear, these are not secured creditors, but rather potential unsecured creditors and assume that creditors file their claims timely.

I could find nothing clearly answering this question one way or the other.  RCW 19.36.020 states “That all deeds of gift, all conveyances, and all transfers or assignments, verbal or written, of goods, chattels or things in action, made in trust for the use of the person making the same, shall be void as against the existing or subsequent creditors of such person.”  However, once a settlor dies and successor beneficiary and successor trustee appears, I imagine that RCW 19.36.020 would not longer apply.

I’ve got a client and this question is of great concern to my client. Please let me know your thoughts and the reasons for your opinions.

Warmest regards,

Michael S. Safren, Esq.
Attorney at Law

14900 Interurban Ave. S., Ste. 280 | Seattle, WA 98168
11900 NE 1st St., Bldg. G - Ste. 300 |  Bellevue, WA 98005
P: (206) 859-5098 | E: msafren at jennylinglaw.com<mailto:msafren at jennylinglaw.com>
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