By: Serena Bader

Senior Paralegal – Estates & Trusts

What Happens When Seniors Put a Home in a Trust — and a Credit Card Company Tries to Claim It?

A Complete Guide for California Homeowners and Families

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Main Types of Trusts for Senior Citizens Who Own Homes

1. Revocable Living Trust (RLT)

Purpose: Avoids probate and keeps control of assets during life.

Key Points:

• Can be changed or revoked anytime.
• Lets the senior stay on title and manage property.
• Passes the home to heirs quickly after death (no court).
• Does not protect from creditors, Medi-Cal recovery, or lawsuits.
• Becomes irrevocable at death, meaning no changes afterward.

Best for: Seniors who want to avoid probate and maintain control while alive.

Create your California Revocable Living Trust online with Sonoma County LDA.

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2. Irrevocable Trust

Purpose: Protects assets from lawsuits, creditors, and Medi-Cal after the lookback period.

Key Points:

• Cannot be easily changed or revoked.
• Removes assets from taxable and legal ownership.
• Protects the home from Medi-Cal estate recovery.
• Must be established early (ideally 5 years before Medi-Cal).

Best for: Seniors planning ahead to shield property from future long-term-care costs or creditors.

Sonoma County LDA can prepare irrevocable trusts across Northern California.

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3. Medicaid Asset Protection Trust (MAPT)

Purpose: Designed specifically for Medi-Cal eligibility and long-term care protection.

Key Points:

• The home is deeded into the trust.
• The senior can still live there but cannot access equity.
• Keeps the home from being counted for Medi-Cal.
• Avoids Medi-Cal estate recovery if set up 5+ years before applying.

Best for: Seniors anticipating nursing-home care who want to preserve the home for heirs.

Learn about Medi-Cal protection trusts at Sonoma County LDA.

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4. Qualified Personal Residence Trust (QPRT)

Purpose: Reduces estate taxes for high-value homes.

Key Points:

• Transfer the home to a trust but live in it for a fixed term.
• After the term, the home passes to beneficiaries at a reduced taxable value.
• If you die before the term ends, the benefit is lost.

Best for: High-net-worth seniors minimizing estate taxes.

QPRT setup help available through Sonoma County LDA.

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5. Life Estate / Lady Bird Deed (Enhanced Life Estate)

Purpose: Simplify transfer of a home while avoiding probate.

Key Points:

• Senior keeps lifetime use and control.
• Automatically transfers to beneficiaries upon death.
• Lady Bird deeds (in FL, TX, MI) avoid probate and allow sale/refinance during life.
• Not recognized in California; similar results require a living trust.

Best for: Seniors in qualifying states who want a simple probate-avoidance method.

California residents can achieve similar results with a living trust through Sonoma County LDA.

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6. Special Needs Trust (SNT)

Purpose: Protect assets for a disabled spouse or child without losing benefits.

Key Points:

• Can hold a home or other property.
• Used for supplemental needs beyond SSI or Medi-Cal.
• Preserves government-benefit eligibility.

Best for: Families with disabled beneficiaries who need long-term protection.

Set up a Special Needs Trust online with Sonoma County LDA.

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7. Testamentary Trust

Purpose: Created through a will and effective only after death.

Key Points:

• Does not avoid probate.
• Manages assets for minors or dependents.
• Can direct sale or rental of a property.

Best for: Seniors wanting post-death control but not concerned with avoiding probate.

Estate-planning packages available from Sonoma County LDA.

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💼 What Happens When a Parent Dies Owing Credit-Card Debt but the Home Is in a Trust?

Imagine your mother or father passes away in California:

• The home is titled in a Revocable Living Trust
• There is $24,000 in credit-card debt
• The only other asset is a 401(k) left to a named beneficiary

Key Principle

A Revocable Living Trust provides no creditor protection. Creditors can pursue trust assets after death—but only if they follow California’s strict procedures.

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⚖️ Ten-Step Process in California

1. Death of the Grantor

The trust becomes irrevocable at death; the successor trustee assumes control.

2. Mandatory Notices

Under Probate Code §16061.7, the trustee must notify beneficiaries and known creditors. Creditors then have at least 120 days to file claims.

3. Collect and Review Records

The trustee gathers bank statements, bills, and debt notices. The 401(k) bypasses the trust—it goes straight to its named beneficiary and is protected.

4. Creditor Claims Filed

Credit-card companies may submit written claims against the trust within the notice window.

5. Trustee Evaluates Claims

The trustee reviews whether each claim is valid. Unsecured debts (like credit cards) are low priority.

6. Denying or Accepting Claims

If denied, the creditor has 90 days to sue. Most do not—especially for small balances.

7. Home Value and Debt Options

If the only asset is the home, the trustee may:
A. Sell the home and settle claims.
B. Negotiate partial payment.
C. Wait until the statute expires and release the property to heirs.

8. Payment Hierarchy

California prioritizes administrative costs, taxes, and secured debts before unsecured credit cards.

9. Transfer to Beneficiaries

After the 120-day window, remaining valid claims are resolved, and the home title passes to heirs.

10. Final Accounting and Closure

The trustee provides a closing statement, distributes property, and records the deed for new ownership.

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🧩 Likely Outcome

In most California trust administrations:

• Credit-card companies cannot force the sale of a home when no cash exists.
• 401(k) funds go directly to the beneficiary.
• Unsecured debts often lapse if no claim is filed.
• The home remains with the family once the claim window closes.

Learn more about California trust debt rules from Sonoma County LDA.

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🧭 Quick Comparison Table

Trust Type	Avoids Probate	Protects from Creditors	Protects from Medi-Cal Recovery	Can Be Changed	Keeps Control During Life
Revocable Living Trust	✅ Yes	❌ No	❌ No	✅ Yes	✅ Yes
Irrevocable Trust	✅ Yes	✅ Yes	✅ Yes	❌ No	⚠️ Limited
Medicaid Asset Protection Trust	✅ Yes	✅ Yes	✅ Yes	❌ No	⚠️ Limited
QPRT	✅ Yes	⚠️ Limited	⚠️ Limited	❌ No	✅ During term
Life Estate / Lady Bird Deed	✅ Yes	⚠️ Limited	✅ Often	❌ No	✅ Yes
Special Needs Trust	✅ Yes	✅ Yes	✅ Yes	⚠️ Depends	⚠️ For beneficiary
Testamentary Trust	❌ No	⚠️ Limited	❌ No	—	—

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🔗 Trusted Help Across Northern California

For affordable, attorney-prepared quality trust and estate-planning documents:

• Sonoma County LDA – Official Site
• Estate Planning & Trust Services in Sonoma, Napa, Marin, Solano, Mendocino, Lake, Sacramento & Yolo Counties
• 100 % Online • Delivered in 1–3 Days • Customized to Your Needs

For more information, visit SonomaCountyLDA.com — your Northern California solution for trusts, probate, and estate-planning done right.