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By: Scott Grossman on October 13th, 2016

California Irrevocable Trusts Attacked Under the Alter-Ego Theory

Irrevocable trusts protect assets from the reach of creditors. These trusts, however, may come under attack in a California trust lawsuit. One claim that a creditor might use in order to reach the trust assets is referred to as veil piercing, alter-ego theory, constructive trust, or sham transaction theory. Essentially, this claim implies that the irrevocable trust is not a separate entity from the trust creator. If you are the trustee of an irrevocable trust that has come under attack, it is vital that you contact an experienced San Diego probate court lawyer.

When considering whether an irrevocable trust is truly a separate entity from the creator of the trust, the court will consider the following:

  • What was the purpose for establishing the trust?
  • Who are the trustees of the trust?
  • Who had true control over the trust assets?
  • Did the trustee abide by the terms of the trust instrument?
  • Is there an independent trustee?
  • How much control did the grantor or the beneficiaries exert over the trust assets?
  • Did the grantor receive any benefits from the trust?
  • Were transactions with the trust done with the same terms as would be used between two strangers?

Before reaching out to an attorney who may potentially represent you, view our article, How to Prepare for Your Initial Phone Consultation, for more information. For further guidance, consult with an experienced San Diego probate court attorney today.