Transferring a property’s title to a family member is a common method of protecting that property from creditors. Such transfers do not always guarantee, however, that creditors will be prevented from reaching it. A May 2013 Massachusetts Appeals Court case, Citizens Bank v. Coleman, specifies the criteria that a court will consider in determining whether transferred property should be held in a “resulting trust,” which creditors can reach. See Citizens Bank v. Coleman, Mass. App. Ct. No. 12-P-365. May 15, 2013.
In Citizens Bank, a husband owned two rental properties when he married his wife. After experiencing financial difficulties and defaulting on the rental properties’ mortgages, the husband transferred the rental properties’ titles to nominee trusts, with his wife as sole beneficiary. The husband’s creditor bank obtained judgments against the husband, and sought to recover from the rental properties. The trial court ruled that the creditor bank could recover from the rental properties, since the husband’s intent was to retain some interest in the property. The Appeals Court affirmed the ruling.
A gratuitous transfer to a family member is presumed to be a gift. However, this presumption may be overcome, and a resulting trust imposed, if a court makes two findings:
(1) the intent of the transferor at the time of the transfer was not to convey the beneficial interest to the transferee, and
(2) there was acquiescence on the part of the transferee.
In this case, a resulting trust was implied because the court found that the husband’s sole intent was to shield the properties from his creditors, and the wife agreed that the husband should retain the benefit of the rental properties.
Would your assets be put in a resulting trust? This case emphasizes that it is best to do estate planning in advance of a crisis. Contact the attorneys at Hutchins Law, P.C. today, to discuss how you can protect your family from creditors.