Exposing Trust Property to Trustee’s Creditors

According to judicial decisions in Florida a person who served as trustee of a trust which held real property for the benefit of another person could expose the real property to the trustee’s personal creditors. These cases held that real property titled in the name of a trustee belongs to the trustee in his individual capacity, and as a result, the property is vulnerable to the trustee’s individual creditors or part of his bankruptcy estate. A new Florida Statute (HB 529) clarifies whether deeds or mortgages belongs to a trustee in his individual capacity or to the trust and the trust beneficiaries. The bill retroactively states that real property or a mortgage belongs to a trust and its beneficiaries if the instrument conveying the real property interest to the trustee includes any of the following information: 1. the name of a beneficiary of the trust; 2.the nature and purpose of the trust; or 3. the title or date of the trust. If none of this information is including on the instrument of conveyance then the real property or mortgage interest in real property belongs to the trustee where it can be seized by the trustee’s individual creditors to the detriment of trust beneficiaries.

Last updated on May 22, 2020

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