Short Answer

Yes. In North Carolina, a last-minute move of assets into a trust can be voided as a “voidable” (fraudulent) transfer if it is done to hinder, delay, or defraud creditors, or if the transferor does not receive reasonably equivalent value and is insolvent. Also, assets in a revocable trust remain reachable by the settlor’s creditors. Safer immediate tools often include claiming statutory exemptions and evaluating title protections before considering any trust transfers.

Understanding the Problem

In North Carolina, can a parent who is being sued by creditors move the home or other assets into a trust now to keep a judgment from taking the property? The parent is showing signs of mental decline, which raises capacity concerns for signing new documents.

Apply the Law

North Carolina’s voidable transfer law lets creditors challenge asset transfers made to dodge collection. Transfers with “actual intent” to hinder or those for less than reasonably equivalent value when the debtor is insolvent are at risk. Separately, property in a revocable trust remains subject to the settlor’s creditors. If capacity is impaired, any trust transfer risks being invalid or attacked as undue influence. The main forums are Superior Court for creditor challenges and the Clerk of Superior Court for post-judgment exemption claims, which have short deadlines.

Key Requirements

• Actual intent or constructive fraud: A transfer can be voided if done with intent to hinder creditors, or if made for less than fair value when insolvent.
• Revocable trust exposure: Assets in a revocable trust are treated as the settlor’s assets for creditor purposes; moving them offers no shield.
• Self-settled irrevocable trust limits: Creditors can reach the maximum amount that can be distributed to or for the settlor, even with spendthrift terms.
• Capacity and validity: The settlor must have capacity to sign; transfers procured by undue influence, or without authority under a power of attorney, are vulnerable.
• Exemptions and title: North Carolina’s homestead exemption and tenancy by the entirety may protect a primary residence in some situations; claiming exemptions is time-sensitive.

What the Statutes Say

• North Carolina Gen. Stat. § 39-23.4 (Transfers voidable as to present and future creditors) – Allows creditors to set aside transfers made with actual intent to hinder, delay, or defraud creditors.
• North Carolina Gen. Stat. § 39-23.5 (Transfers voidable as to present creditors) – Covers transfers for less than reasonably equivalent value when insolvent or becoming insolvent.
• North Carolina Gen. Stat. § 36C-5-505 (Creditor’s claim against settlor) – Makes revocable trust assets subject to the settlor’s creditors and permits reach into self-settled irrevocable trusts to the extent of possible distributions to the settlor.
• North Carolina Gen. Stat. § 1C-1601 (Exempt property) – Provides homestead and other personal exemptions that can protect some equity in a primary residence and other property.

Analysis

Apply the Rule to the Facts: Because creditors have sued and judgments exist, a new transfer into a trust risks being labeled a voidable transfer if the goal is to keep assets from collection, especially if the parent remains the beneficiary or retains control. If the trust is revocable, creditors can reach the assets anyway. If it is irrevocable but self-settled, creditors can reach what could be distributed to the parent. The parent’s mental decline raises capacity and undue influence concerns, increasing the risk that any transfer will be challenged or set aside.

Process & Timing

1. Who files: A creditor seeking to unwind a transfer. Where: Superior Court (civil action) in the county where the property or debtor is located. What: Complaint under North Carolina’s voidable transfer statutes seeking to avoid the transfer and reach the asset. When: Within statutory windows that can be short; some claims must be brought within four years and certain others sooner.
2. Who files: The judgment debtor (the parent) to protect immediate assets. Where: Clerk of Superior Court where the judgment is docketed. What: File a Motion to Claim Exempt Property after receiving the Notice of Right to Have Exemptions Designated (standard AOC forms available on nccourts.gov). When: Typically within 20 days of service of the notice; deadlines are strict.
3. Who acts: The family, regarding any trust planning. Where: Execute trust documents properly (and deeds if real estate is involved), and consider court options if capacity is borderline (including seeking guardianship or, for a revocable trust, a court validity proceeding). When: Before further cognitive decline; document capacity and authority carefully.

Exceptions & Pitfalls

• Revocable trusts don’t shield the settlor: Moving property to a revocable trust will not stop collection by the settlor’s creditors.
• Self-settled irrevocable trusts are limited: Creditors can reach the maximum amount distributable to or for the settlor, even with spendthrift language.
• Badges of fraud: Transfers to insiders, made when lawsuits are pending, for little or no value, or where the transferor keeps control are red flags that support a creditor challenge.
• Capacity and authority: If the parent lacks capacity, the transfer may be invalid; an agent needs express authority in the power of attorney to create or fund a trust.
• Use existing protections first: Title by the entirety (if only one spouse owes the debt) and the homestead exemption can offer real protection; missing the 20‑day exemption deadline risks losing those rights.

Talk to a Estate Planning Attorney

If you’re dealing with creditor pressure and are considering a trust to protect a home, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at 919-341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.