Wills vs Trusts and Claims of Creditors
Hi, it’s Guy DiMartino. I’m in Northwest Indiana estate planning and probate lawyer. If you ever have any questions regarding the estate planning or probate matter and would like to have a strategy session, just go to Indianaestatemeeting.com. We can set up a time when we could chat on the phone, you can come into the office and we can discuss your potential issues, or we can even do it by video conference if you’re more comfortable with that. So today, many folks are pushing trusts in the estate planning and financial advisors businesses. Trusts definitely have their place. But you know, trusts also have some detriments that you need to know about. One of the detriments has to do with creditors. So if you’re somebody that has a lot of debt, and you pass away – your trust lives on. The assets in your trust could be subject to potential creditors’ claims.
On the other hand, if you had stuff that is going through your will, there is a limited period of time in which creditors can go ahead and file a claim against the estate once they receive notice. Then we have another protection statute here in the state of Indiana called the non-claim statute. So if you’re really worried about debt, the non-claim statute, says no claim will be valid if it’s not filed within one year from the decedent’s date of death. The non-claim statute is clear and doesn’t change if the creditor didn’t receive notice that the debtor passed way. So, if you’re really concerned about debtors being out there, you can just sit on the matter for a year, file the probate, and then the creditor’s claims will be extinguished by the non-claim statute. Many folks choose not to wait for the year because they want to take care of the estate.
Many times heirs do not want to wait and they want to sell the Decedent’s property as quickly as possible because folks want to go ahead and get on with the rest of their lives after a family member dies. You don’t have that non claim period and you don’t have those strict time limits when a trust is involved. So if it’s a trust that for some reason does not have asset protection benefits beforehand, the creditor might potentially keep on bothering the trust for years to come until trust[s purpose is finally met and the trust is dissolved.