Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

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joer1212
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Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by joer1212 »

There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Lee_WSP »

Maybe. But let’s be real here, it’s the same issue with any renter. If they don’t pay, what do you do? If she had a job, but loses it, there’s no job to garnish wages against.

No. But you can ask.

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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by GP813 »

The legal fees you would have to pay to recover a distribution from an irrevocable trust might not be worth it. Simplify your life and find another tenant if it's something you're really worried about.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by toddthebod »

Can you ask the trustees to co-sign the rental agreement?
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Jags4186 »

Lease the unit to the trust. Make the trustee pay you.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by student »

Jags4186 wrote: Thu Sep 15, 2022 4:56 pm Lease the unit to the trust. Make the trustee pay you.
Smart.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by mykesc2022 »

Regardless of the income source, I wouldn't rent to anyone with a credit score in the low 600's. You are just asking for trouble in many ways because if someone cannot take care of their credit, what else in their lives gets neglected? I would suspect a lot.

When I had rental credit score and history was the single most important thing. I didnt even look at the rest of the application if the score and the history wasnt solid.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by lws »

You may need to read the trust document to find out exactly what powers were granted to the trustee.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by cchrissyy »

in my state, you can't discriminate on a rental application based on income source.

so her trust income is same as if it came from a job, or alimony, or social security.

i would not rent to anyone at that credit score.


nobody wants to end up fighting in court for unpaid rent in court and a garnishment order against anything. if you get there, things have gone far off course in a very expensive and stressful way. and you'll look back here and ask why you ignored the credit report.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Katietsu »

cchrissyy wrote: Thu Sep 15, 2022 6:02 pm i would not rent to anyone at that credit score.[/b]
Does it matter that all her payments are on time? Does her age matter? Does it matter that she could probably up her score significantly if she played the game and applied for additional cards with increased limits?

I think her credit history matters. I think the OP should decide how he feels about her credit history and debt to income ratio independent of the “score.”
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by placeholder »

With garnishments you won't be able to do anything without a court order anymore than you could with wages or bank accounts.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by cchrissyy »

Katietsu wrote: Thu Sep 15, 2022 9:36 pm
cchrissyy wrote: Thu Sep 15, 2022 6:02 pm i would not rent to anyone at that credit score.[/b]
Does it matter that all her payments are on time? Does her age matter? Does it matter that she could probably up her score significantly if she played the game and applied for additional cards with increased limits?

I think her credit history matters. I think the OP should decide how he feels about her credit history and debt to income ratio independent of the “score.”
i don't know if you are a landlord but speaking for myself the answer is no. i have clear criteria and don't deviate from them. again, it is important not to discriminate.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Joey Jo Jo Jr »

Maybe ask the trustees to sign a guarantee. If you can garnish wages in your state, then it only seems fair to be able to go after this applicant’s income source as well.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Grt2bOutdoors »

Joey Jo Jo Jr wrote: Fri Sep 16, 2022 1:15 am Maybe ask the trustees to sign a guarantee. If you can garnish wages in your state, then it only seems fair to be able to go after this applicant’s income source as well.
Correct me if I’m wrong, but to garnish you need a court order. A court though can’t break through an irrevocable trust so the corpus is off limits and if you don’t know what the terms of the trust say you can’t force income out of it for unpaid debts. The other interesting thing - if the source of income in the trust dries up, you can’t force blood from a stone.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by smectym »

joer1212 wrote: Thu Sep 15, 2022 2:32 pm There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
620’s is a pretty low score. 98% credit utilization demonstrates that your applicant is already at the limit and probably feeling the pressure. The idea that it’s socially acceptable to not pay rent due to exigent circumstances has gained traction since the pandemic. Perhaps the court you may eventually appeal to for relief in the event of default may agree.

No, I wouldn’t plan on invading applicant’s irrevocable trust.

Applicant sounds like a nice person; but nice people in a tough spot make rational calculations based on self interest like everyone. Not paying the rent, for one month or three or longer, may appear a rational calculation to someone maxed out on all the cards, other bills coming due; and also unexpected expenses: the normal hazards of life we all face, but with varying degrees of financial wherewithal with which to face them.

I’m not currently a landlord, but have been. I’d have declined this app (or rather, my rental manager would have, and I’d never have seen it).
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by ResearchMed »

Grt2bOutdoors wrote: Fri Sep 16, 2022 1:40 am
Joey Jo Jo Jr wrote: Fri Sep 16, 2022 1:15 am Maybe ask the trustees to sign a guarantee. If you can garnish wages in your state, then it only seems fair to be able to go after this applicant’s income source as well.
Correct me if I’m wrong, but to garnish you need a court order. A court though can’t break through an irrevocable trust so the corpus is off limits and if you don’t know what the terms of the trust say you can’t force income out of it for unpaid debts. The other interesting thing - if the source of income in the trust dries up, you can’t force blood from a stone.

This gets at something I've never been quite clear about.

There are certain sources of money that may not be "touchable" in a lawsuit, including 403b plans or TIRAs in some states, etc.

But once any money has been released and transferred to a bank/checking account so that the indivual can actually *use* the money... can it be somehow seized there? Maybe something like garnishing (or some other word at this stage in the money's journey?) from the checking/bank account balance?

If so, that could obviously slow down payment of any large debt, but at least it could be used to recover *something*?

RM
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by michaeljc70 »

98% credit utilization???? No way. She is clearly over extended unless she has very little credit.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by neverpanic »

joer1212 wrote: Thu Sep 15, 2022 2:32 pm There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
Her income is 4.5x the rent and you report she has a 100% on-time payment history. Are former landlords included in that report? If she's paid her rent on time for the past 5 years and all her other bills are up-to-date, as long as there is no negative information from a previous landlord, I don't see a problem. If your property has a minimum credit score that's higher than she currently has, there's no problem with keeping your standards consistent. But if she meets your criteria, you could potentially have a reliable, long-term tenant.

There are people who strongly believe in paying their rent and utilities on time, even if they are being hounded by other creditors. A clean rental history should not be overlooked.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by michaeljc70 »

neverpanic wrote: Fri Sep 16, 2022 7:50 am
joer1212 wrote: Thu Sep 15, 2022 2:32 pm There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
Her income is 4.5x the rent and you report she has a 100% on-time payment history. Are former landlords included in that report? If she's paid her rent on time for the past 5 years and all her other bills are up-to-date, as long as there is no negative information from a previous landlord, I don't see a problem. If your property has a minimum credit score that's higher than she currently has, there's no problem with keeping your standards consistent. But if she meets your criteria, you could potentially have a reliable, long-term tenant.

There are people who strongly believe in paying their rent and utilities on time, even if they are being hounded by other creditors. A clean rental history should not be overlooked.
But how much of that income is to cover her up to the eyeballs credit card debt? When will she be past the tipping point? It would be useful to know the total amount of credit card debt and the monthly minimum payments.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by CoastLawyer2030 »

joer1212 wrote: Thu Sep 15, 2022 2:32 pm There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
Not sure what the law is in MA, but here in Ohio, we have a "first cause" (the eviction itself) and then a separate hearing for a "second cause" (the money damages, e.g., back rent, damage to the property, etc.).

I have done hundreds of evictions and in the rarest of circumstances, I tell clients to not even bother with the second cause. I have literally never collected on one of them. If they cannot pay you the rent you are never going to collect from them.

Point of this is that you should be making your decision about the front end information you have (credit score, history, etc.), not whether you are going to be able to collect if they default.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by JoMoney »

ResearchMed wrote: Fri Sep 16, 2022 4:17 am
Grt2bOutdoors wrote: Fri Sep 16, 2022 1:40 am
Joey Jo Jo Jr wrote: Fri Sep 16, 2022 1:15 am Maybe ask the trustees to sign a guarantee. If you can garnish wages in your state, then it only seems fair to be able to go after this applicant’s income source as well.
Correct me if I’m wrong, but to garnish you need a court order. A court though can’t break through an irrevocable trust so the corpus is off limits and if you don’t know what the terms of the trust say you can’t force income out of it for unpaid debts. The other interesting thing - if the source of income in the trust dries up, you can’t force blood from a stone.

This gets at something I've never been quite clear about.

There are certain sources of money that may not be "touchable" in a lawsuit, including 403b plans or TIRAs in some states, etc.

But once any money has been released and transferred to a bank/checking account so that the indivual can actually *use* the money... can it be somehow seized there? Maybe something like garnishing (or some other word at this stage in the money's journey?) from the checking/bank account balance?

If so, that could obviously slow down payment of any large debt, but at least it could be used to recover *something*?

RM
"it depends" is almost always the answer. Different situations, including which state it's in, will protect distributions differently.
In some situations if the source can be traced back to something like a qualified ERISA workplace retirement, it might retain the judgement exemptions. In other situations once the income is distributed to the owners bank account, it might be subject to be garnished.
In some states there is an amount of cash in a bank account that one can claim a judgement exemption on, so if the owner never allows their account to get over that amount it might not be able to be garnished. They might get their distributions by check, and have them cashed rather than deposited and make it extremely difficult to find.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by 7eight9 »

michaeljc70 wrote: Fri Sep 16, 2022 7:53 am
neverpanic wrote: Fri Sep 16, 2022 7:50 am
joer1212 wrote: Thu Sep 15, 2022 2:32 pm There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
Her income is 4.5x the rent and you report she has a 100% on-time payment history. Are former landlords included in that report? If she's paid her rent on time for the past 5 years and all her other bills are up-to-date, as long as there is no negative information from a previous landlord, I don't see a problem. If your property has a minimum credit score that's higher than she currently has, there's no problem with keeping your standards consistent. But if she meets your criteria, you could potentially have a reliable, long-term tenant.

There are people who strongly believe in paying their rent and utilities on time, even if they are being hounded by other creditors. A clean rental history should not be overlooked.
But how much of that income is to cover her up to the eyeballs credit card debt? When will she be past the tipping point? It would be useful to know the total amount of credit card debt and the monthly minimum payments.
According to the OP she owes over $14k on credit cards (I interpret that to be something between $14-15k). While 98% utilization is high, $14k credit limit is in my opinion extremely low. Especially when it is spread amongst credit cards. I would guess that the minimum payment is somewhere between $280 and $560 a month.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Sandtrap »

joer1212 wrote: Thu Sep 15, 2022 2:32 pm There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
Some random notes that may not apply to everyone:

To OP:
(your topic question)
1. On a practical nuts and bolts, rental business and property management perspective, (not conceptual or "by the book" or imagination) "it won't be worth it at all" (garnish for back rent), even if there were damages and everything else and you went to small claims court and got a "judgement to collect" (or other term), it is a very arduous procedure compared to simply re renting the unit to someone else.

Actionably:
2. You can rent to another rental applicant. That is your concern and option. If you have concerns, why don't you?
3. Do you have a very good landlord lease drafted after the NRA (National Realtor's Association) format and rewritten and edited by your attorney? (you should).
4. In your State, per the local/state "Landlord Tenant Code". . you have "x" days (IE 5 day late rent notice to pay or leave) if non payment of rent happens. Then, you follow the legal steps to give proper notice and deadline to vacate the premises. Tenant leaves, you clean up, then re rent.
Has this happened to you before?
5. You can only do so much to investigate and evaluate a tenant's possibility for success as hopefully a long term tenancy with regular rent payments and zero damage to the unit and all those things. After that, you have to either commit to rent to someone and make a good human and business relationship, or rent to someone else. That is the landlord/owner's option. In Hawaiian, that is your "kuleana"(spel?).
So. . what are you going to decide?

6. Do you have other applicants?

To OP:
Note: "speaks well and so forth. . " is largely unrelated to a purely business point of view, but does matter if you have "good business instincts". (but do not rent to a tenant only because you like them but they don't look good on paper and you have "warning bells going off in your head".)

Note:
The above from a purely "property management company/landlord/owner's Personal Finance and Personal Consumer Issue perspective, etc." only. Not legal advice.

dis laimer: (there are other perspectives and opinionizations, this is only one).

To OP:
PM me as you wish.

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Last edited by Sandtrap on Fri Sep 16, 2022 8:26 am, edited 2 times in total.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Sandtrap »

Lee_WSP wrote: Thu Sep 15, 2022 2:54 pm Maybe. But let’s be real here, it’s the same issue with any renter. If they don’t pay, what do you do? If she had a job, but loses it, there’s no job to garnish wages against.

No. But you can ask.

No opinion.
To OP:

This is very professional (and experienced) advice to pay attention to.

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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by michaeljc70 »

7eight9 wrote: Fri Sep 16, 2022 8:13 am
michaeljc70 wrote: Fri Sep 16, 2022 7:53 am
neverpanic wrote: Fri Sep 16, 2022 7:50 am
joer1212 wrote: Thu Sep 15, 2022 2:32 pm There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
Her income is 4.5x the rent and you report she has a 100% on-time payment history. Are former landlords included in that report? If she's paid her rent on time for the past 5 years and all her other bills are up-to-date, as long as there is no negative information from a previous landlord, I don't see a problem. If your property has a minimum credit score that's higher than she currently has, there's no problem with keeping your standards consistent. But if she meets your criteria, you could potentially have a reliable, long-term tenant.

There are people who strongly believe in paying their rent and utilities on time, even if they are being hounded by other creditors. A clean rental history should not be overlooked.
But how much of that income is to cover her up to the eyeballs credit card debt? When will she be past the tipping point? It would be useful to know the total amount of credit card debt and the monthly minimum payments.
According to the OP she owes over $14k on credit cards (I interpret that to be something between $14-15k). While 98% utilization is high, $14k credit limit is in my opinion extremely low. Especially when it is spread amongst credit cards. I would guess that the minimum payment is somewhere between $280 and $560 a month.
Okay. I missed that. I'm not sure why she would do that. It is what is probably dragging down her credit score. Merely opening a card or two and spreading the balance would really help her credit score. We don't know what her other expenses are either. $5k/mo income and $14k debt isn't bad, but it seems odd to me. Like she isn't good at managing her money. My credit score is in the 800s, not the low 600s. That is sub-par.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by exodusNH »

joer1212 wrote: Thu Sep 15, 2022 2:32 pm There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
You should have a hard cutoff for credit scores and stick with that. If you make an exception here, the next tenant that you do decline due to their credit score could claim discrimination.

You've already had "interesting" tenant experiences. I don't want to see you add "sued for discrimination" (even if it's not true) to the list.

I assume MA's rental market is just as tight as NH's. You probably have dozens of other people interested. My neighbor has a two family next to me. They had a rental come up for August. In the first week, they had 98 applications, for an $1800/mo apartment. People were calling my neighbor, in tears, begging for the place.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Katietsu »

michaeljc70 wrote: Fri Sep 16, 2022 9:24 am
Okay. I missed that. I'm not sure why she would do that. It is what is probably dragging down her credit score. Merely opening a card or two and spreading the balance would really help her credit score. We don't know what her other expenses are either. $5k/mo income and $14k debt isn't bad, but it seems odd to me. Like she isn't good at managing her money. My credit score is in the 800s, not the low 600s. That is sub-par.
Because most people are not on bogleheads and plotting to keep a high credit score. I had basically a 100% utilization when I graduated from college as I knew I would be working full time soon. I could have applied more more credit, and even received a free Tshirt, but, silly me, I assumed that if you did not go over the limit and paid your bill on time that you were being responsible.

My nephew has himself in a similar situation right now. I do not think credit scores or GPAs give a full picture.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by LittleMaggieMae »

Don't know about the Garnish thing...
But my Property Manager checks with previous landlords (if applicable) when vetting potential tenants.

I think there is some something in the lease where the tenant agrees to a monthly auto payment of the rent.
They can still "not pay" if they don't have enough in their checking account when the rent "pull" happens, but I think the selling point is that the tenant doesn't have to remember to make the monthly rent payment - it automatically happens.

Why this might be of significance to the OP - perhaps some arrangement can be made where the rent gets paid directly from the Trust OR can be scheduled for when the Trust money hits the tenants account The first business day of the month?? or something like that. Thus increasing the likely hood that the rent will be paid. It basically removes the "decision" to pay the rent from the tenant.

The low credit score might not be a deal breaker for me as a landlord if there is some way to insure that the rent gets paid automatically from the Trust payment OR if the person has been successfully paying other landlords on time and as agreed by the lease for the last year or two (possibly by some agreement with the Trust payment distribution OR by timing the rent pull with with the Trust money hits the person's account. )
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by newbie001 »

I think a credit score in the low 600's is a red flag, but as pointed out above, there are exceptions. I agree that 14K total cc debt is not bad at all, especially with the debt:income ratio. I would have have the trustee sign a guarantee, as suggested above. While going after an (ex-)tenant's funds is cumbersome, most states allow recovery of attorney's fees and interest, which the trust could probably pay if it came to it. You might want to see the actual trust instrument and the most recent accounting for it.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by averagelonghorn »

neverpanic wrote: Fri Sep 16, 2022 7:50 am [Her income is 4.5x the rent and you report she has a 100% on-time payment history. Are former landlords included in that report? If she's paid her rent on time for the past 5 years and all her other bills are up-to-date, as long as there is no negative information from a previous landlord, I don't see a problem. If your property has a minimum credit score that's higher than she currently has, there's no problem with keeping your standards consistent. But if she meets your criteria, you could potentially have a reliable, long-term tenant.

There are people who strongly believe in paying their rent and utilities on time, even if they are being hounded by other creditors. A clean rental history should not be overlooked.
Agree with this mostly.

First question is, do you have a set of published qualifying criteria? You ought to, and if they state a minimum credit score, go with that.
But I'll assume the answer to that is "no."

In general, I order the inputs to evaluate a potential tenant in this order:
Verifiable Income (3x the rent Gross is pretty typical around my parts for rental criteria, her 4.5x NET is pretty darned good.)
Good rental history. (This takes the most work to get, you have to contact the landlords and they have to actually reply.)
Decent Credit. Decent is of course a fuzzy term. Not sure what part of MA, (and I'm not all that familiar with any part, just know that COL and rent prices must vary a lot by location) but 1100 rental makes me assume its fairly modest. Modestly priced rentals often get tenants with somewhat dinged credit.

Your garnish question is irrelevant... have enough of a security deposit that helps defray that eventually. Charge first and last month's rent up front. (I know in some places that's the norm, but in my area it's more reserved for "borderline" cases, like right on the edge of credit score or income qualifications.

(And any of those suggestions above, make sure you're following local law and Fair Housing laws (local, state, federal.)

I'll just say there are plenty of very good tenants with low 600 credit scores, and plenty of not so great tenants with high credit scores, so credit score is just one piece of the criteria to decide on an application... it is easy to run, and it has the advantage of being "objective," so it's useful as part of your screening.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Jags4186 »

7eight9 wrote: Fri Sep 16, 2022 8:13 am
michaeljc70 wrote: Fri Sep 16, 2022 7:53 am
neverpanic wrote: Fri Sep 16, 2022 7:50 am
joer1212 wrote: Thu Sep 15, 2022 2:32 pm There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
Her income is 4.5x the rent and you report she has a 100% on-time payment history. Are former landlords included in that report? If she's paid her rent on time for the past 5 years and all her other bills are up-to-date, as long as there is no negative information from a previous landlord, I don't see a problem. If your property has a minimum credit score that's higher than she currently has, there's no problem with keeping your standards consistent. But if she meets your criteria, you could potentially have a reliable, long-term tenant.

There are people who strongly believe in paying their rent and utilities on time, even if they are being hounded by other creditors. A clean rental history should not be overlooked.
But how much of that income is to cover her up to the eyeballs credit card debt? When will she be past the tipping point? It would be useful to know the total amount of credit card debt and the monthly minimum payments.
According to the OP she owes over $14k on credit cards (I interpret that to be something between $14-15k). While 98% utilization is high, $14k credit limit is in my opinion extremely low. Especially when it is spread amongst credit cards. I would guess that the minimum payment is somewhere between $280 and $560 a month.
Yea but someone who is maxed out is spending beyond their means. If she can’t charge any more on the cards but needs money for expenses she has to look elsewhere. And where is elsewhere? That rent payment her greedy landlord wouldn’t miss if she paid late this month.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by rick51 »

My cousin is a trustafarian. I’m not sure of his credit rating, but he would be a safe bet for a rental tenant.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by joer1212 »

CoastLawyer2030 wrote: Fri Sep 16, 2022 8:01 am
joer1212 wrote: Thu Sep 15, 2022 2:32 pm There's an applicant who's looking to rent one of my units in Massachusetts for $1,100/mo. The thing is, her only income is $5,000/mo from an irrevocable trust in her name.

Included in her application was a letter from a co-trustee, stating that "there are sufficient funds" in the trust in order for the rental applicant to receive a distribution of $5,000 a month.

Her credit score is only in the low-600s (98% credit utilization), but she's made 100% on-time payments on her various credit cards through the years (she currently owes over 14K).

She also has no job, but is looking for work.

If she becomes delinquent on her rent, can I garnish the income from her irrevocable trust, or is that legally off-limits?

Do I have a legal right to know how much is in her trust?

Should I insist that she gets a co-signer, with better credit and a job?

For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive.

Thanks
Not sure what the law is in MA, but here in Ohio, we have a "first cause" (the eviction itself) and then a separate hearing for a "second cause" (the money damages, e.g., back rent, damage to the property, etc.).

I have done hundreds of evictions and in the rarest of circumstances, I tell clients to not even bother with the second cause. I have literally never collected on one of them. If they cannot pay you the rent you are never going to collect from them.

Point of this is that you should be making your decision about the front end information you have (credit score, history, etc.), not whether you are going to be able to collect if they default.
Good Point.
I might add that the lawyer's fees to evict a tenant may be as much as the sum he owes.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by joer1212 »

Sandtrap wrote: Fri Sep 16, 2022 8:16 am Some random notes that may not apply to everyone:

To OP:
(your topic question)
1. On a practical nuts and bolts, rental business and property management perspective, (not conceptual or "by the book" or imagination) "it won't be worth it at all" (garnish for back rent), even if there were damages and everything else and you went to small claims court and got a "judgement to collect" (or other term), it is a very arduous procedure compared to simply re renting the unit to someone else.

Actionably:
2. You can rent to another rental applicant. That is your concern and option. If you have concerns, why don't you?
3. Do you have a very good landlord lease drafted after the NRA (National Realtor's Association) format and rewritten and edited by your attorney? (you should).
4. In your State, per the local/state "Landlord Tenant Code". . you have "x" days (IE 5 day late rent notice to pay or leave) if non payment of rent happens. Then, you follow the legal steps to give proper notice and deadline to vacate the premises. Tenant leaves, you clean up, then re rent.
Has this happened to you before?
5. You can only do so much to investigate and evaluate a tenant's possibility for success as hopefully a long term tenancy with regular rent payments and zero damage to the unit and all those things. After that, you have to either commit to rent to someone and make a good human and business relationship, or rent to someone else. That is the landlord/owner's option. In Hawaiian, that is your "kuleana"(spel?).
So. . what are you going to decide?

6. Do you have other applicants?

To OP:
Note: "speaks well and so forth. . " is largely unrelated to a purely business point of view, but does matter if you have "good business instincts". (but do not rent to a tenant only because you like them but they don't look good on paper and you have "warning bells going off in your head".)

Note:
The above from a purely "property management company/landlord/owner's Personal Finance and Personal Consumer Issue perspective, etc." only. Not legal advice.

dis laimer: (there are other perspectives and opinionizations, this is only one).

To OP:
PM me as you wish.

j :D
3) No, never heard of the NRA, and the fact they have a standard lease recommendation. Will look into it. Thanks.
Last edited by joer1212 on Sat Sep 17, 2022 1:28 pm, edited 1 time in total.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by joer1212 »

Update: the co-trustee emailed me the applicant's trust fund latest statement, which shows a balance of over 823K.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by joer1212 »

Sandtrap wrote: Fri Sep 16, 2022 8:16 am Some random notes that may not apply to everyone:

To OP:
(your topic question)
1. On a practical nuts and bolts, rental business and property management perspective, (not conceptual or "by the book" or imagination) "it won't be worth it at all" (garnish for back rent), even if there were damages and everything else and you went to small claims court and got a "judgement to collect" (or other term), it is a very arduous procedure compared to simply re renting the unit to someone else.

Actionably:
2. You can rent to another rental applicant. That is your concern and option. If you have concerns, why don't you?
3. Do you have a very good landlord lease drafted after the NRA (National Realtor's Association) format and rewritten and edited by your attorney? (you should).
4. In your State, per the local/state "Landlord Tenant Code". . you have "x" days (IE 5 day late rent notice to pay or leave) if non payment of rent happens. Then, you follow the legal steps to give proper notice and deadline to vacate the premises. Tenant leaves, you clean up, then re rent.
Has this happened to you before?
5. You can only do so much to investigate and evaluate a tenant's possibility for success as hopefully a long term tenancy with regular rent payments and zero damage to the unit and all those things. After that, you have to either commit to rent to someone and make a good human and business relationship, or rent to someone else. That is the landlord/owner's option. In Hawaiian, that is your "kuleana"(spel?).
So. . what are you going to decide?

6. Do you have other applicants?

To OP:
Note: "speaks well and so forth. . " is largely unrelated to a purely business point of view, but does matter if you have "good business instincts". (but do not rent to a tenant only because you like them but they don't look good on paper and you have "warning bells going off in your head".)

Note:
The above from a purely "property management company/landlord/owner's Personal Finance and Personal Consumer Issue perspective, etc." only. Not legal advice.

dis laimer: (there are other perspectives and opinionizations, this is only one).

To OP:
PM me as you wish.

j :D
3) No, never heard of the NRA, and the fact they have a standard lease recommendation. Will look into it. Thanks.

6) Surprisingly, no. Not many applicants, which is in sharp contrast to the high demand I had during the pandemic.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by cchrissyy »

If you have no well qualified applicants, take it as a wakeup call for your pricing, your listing photos, your professionalism, your whole process.
Idk which but consider all of them.
But do not take it as a reason to accept a substandard applicant.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by michaeljc70 »

cchrissyy wrote: Fri Sep 16, 2022 9:38 pm If you have no well qualified applicants, take it as a wakeup call for your pricing, your listing photos, your professionalism, your whole process.
Idk which but consider all of them.
But do not take it as a reason to accept a substandard applicant.
+1

If you only have a few applicants the pricing is probably off or the unit is bad.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by spammagnet »

joer1212 wrote: Thu Sep 15, 2022 2:32 pm... For whatever it's worth, I get good vibes from this woman. She speaks and writes well, and has a pleasant demeanor, but I know that can be deceptive. ...
I'm not a landlord but making rental decisions based on subjective criteria like this sounds like you're setting yourself up for a future discrimination claim by a tenant applicant that you reject.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by toddthebod »

joer1212 wrote: Fri Sep 16, 2022 8:55 pm Update: the co-trustee emailed me the applicant's trust fund latest statement, which shows a balance of over 823K.
Why not ask for the trust pay the full year's rent up front?
Backtests without cash flows are meaningless. Returns without dividends are lies.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by ResearchMed »

joer1212 wrote: Fri Sep 16, 2022 8:55 pm Update: the co-trustee emailed me the applicant's trust fund latest statement, which shows a balance of over 823K.

Does she have unlimited access to that amount?
If so, why is she running balances on charge cards that probably charge interest?
:confused

Just seems a bit odd.

RM
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Marseille07 »

ResearchMed wrote: Fri Sep 16, 2022 11:50 pm
joer1212 wrote: Fri Sep 16, 2022 8:55 pm Update: the co-trustee emailed me the applicant's trust fund latest statement, which shows a balance of over 823K.

Does she have unlimited access to that amount?
If so, why is she running balances on charge cards that probably charge interest?
:confused

Just seems a bit odd.

RM
The OP says: "her only income is $5,000/mo from an irrevocable trust in her name."

So she probably has some kind of arrangements where she can only draw 5K/mo rather than unlimited access to 823K.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Mr. Rumples »

It is state specific. I found this by googling "Virginia garnish income from irrevocable trust." Substitute any state instead of VA. In VA, it is addressed in statute § 6.2-606. Ownership during lifetime; garnishment, attachment, or levy. In VA, if there is a garnishment, then the answer is yes. But the attorney's fees, court costs and court backlogs wouldn't make it worthwhile. § 8.01-511. Institution of garnishment proceedings.

Regarding access to information about the trust itself, again state specific. In VA, it seems it might be possible under § 55.1-1203. Application; deposit, fee, and additional information. But trust laws, consumer protection and privacy laws vary from state to state.

"Looking for work" doesn't mean much. With labor shortages and where I live even stores closing or reducing hours for lack of employees, I would be wary.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by FellsGuy »

As a MA landlord I didn’t even read the other posts grifter alert grifter alert 🚨 run don’t walk. I’ve had tenants like this and thanked god the day I finally got them out of the house. The state of MA [political comment removed by admin LadyGeek] is not the place to take on any tenant with a “story”…but you do you.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by AnnetteLouisan »

newbie001 wrote: Fri Sep 16, 2022 3:58 pm I think a credit score in the low 600's is a red flag, but as pointed out above, there are exceptions. I agree that 14K total cc debt is not bad at all, especially with the debt:income ratio. I would have have the trustee sign a guarantee, as suggested above. While going after an (ex-)tenant's funds is cumbersome, most states allow recovery of attorney's fees and interest, which the trust could probably pay if it came to it. You might want to see the actual trust instrument and the most recent accounting for it.
Yes, low credit score *and* unemployed. At the same time. Looking for work, young, female and well spoken, with a pleasant demeanor, but not able to find work in an exceptionally good job market. Maybe not looking very hard for work, and who would? How did her prior rental arrangement end? Receives $5k a month - tax free possibly? - but wants to rent a place for only $1100?

Irrevocable trusts are pretty uncommon aren’t they? Thought they were often offshore asset protection vehicles, in contrast to say revocable trusts or testamentary or donor trusts. But I am sadly unfamiliar with this area, despite allegedly being a remainderman of a trust.

So my question is, who uses irrevocable trusts and why? Someone seeking to evade a money judgment? Did OP do a criminal record or reference check on this individual?
Last edited by AnnetteLouisan on Sat Sep 17, 2022 7:56 am, edited 1 time in total.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by toddthebod »

AnnetteLouisan wrote: Sat Sep 17, 2022 7:24 am
newbie001 wrote: Fri Sep 16, 2022 3:58 pm I think a credit score in the low 600's is a red flag, but as pointed out above, there are exceptions. I agree that 14K total cc debt is not bad at all, especially with the debt:income ratio. I would have have the trustee sign a guarantee, as suggested above. While going after an (ex-)tenant's funds is cumbersome, most states allow recovery of attorney's fees and interest, which the trust could probably pay if it came to it. You might want to see the actual trust instrument and the most recent accounting for it.
Yes, low credit score *and* unemployed. Looking for work, young, female and well spoken, with a pleasant demeanor, but not able to find work in an exceptionally good job market. How did her prior rental arrangement end?

Irrevocable trusts are pretty uncommon aren’t they? Thought they were often offshore asset protection vehicles, in contrast to say revocable trusts or testamentary or donor trusts. But I am sadly unfamiliar with this area, despite allegedly being a remainderman of a trust.

So my question is, who uses irrevocable trusts and why? Someone seeking to evade a money judgment? Did OP do a criminal record or reference check on this individual?
Revocable trusts become irrevocable when the grantor dies. So it could be as simple as her dad set it up and then died.

The rest of your comment is spot on. Why can't she find a job?
Backtests without cash flows are meaningless. Returns without dividends are lies.
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by Sandtrap »

joer1212 wrote: Fri Sep 16, 2022 8:47 pm
Sandtrap wrote: Fri Sep 16, 2022 8:16 am Some random notes that may not apply to everyone:

To OP:
(your topic question)
1. On a practical nuts and bolts, rental business and property management perspective, (not conceptual or "by the book" or imagination) "it won't be worth it at all" (garnish for back rent), even if there were damages and everything else and you went to small claims court and got a "judgement to collect" (or other term), it is a very arduous procedure compared to simply re renting the unit to someone else.

Actionably:
2. You can rent to another rental applicant. That is your concern and option. If you have concerns, why don't you?
3. Do you have a very good landlord lease drafted after the NRA (National Realtor's Association) format and rewritten and edited by your attorney? (you should).
4. In your State, per the local/state "Landlord Tenant Code". . you have "x" days (IE 5 day late rent notice to pay or leave) if non payment of rent happens. Then, you follow the legal steps to give proper notice and deadline to vacate the premises. Tenant leaves, you clean up, then re rent.
Has this happened to you before?
5. You can only do so much to investigate and evaluate a tenant's possibility for success as hopefully a long term tenancy with regular rent payments and zero damage to the unit and all those things. After that, you have to either commit to rent to someone and make a good human and business relationship, or rent to someone else. That is the landlord/owner's option. In Hawaiian, that is your "kuleana"(spel?).
So. . what are you going to decide?

6. Do you have other applicants?

To OP:
Note: "speaks well and so forth. . " is largely unrelated to a purely business point of view, but does matter if you have "good business instincts". (but do not rent to a tenant only because you like them but they don't look good on paper and you have "warning bells going off in your head".)

Note:
The above from a purely "property management company/landlord/owner's Personal Finance and Personal Consumer Issue perspective, etc." only. Not legal advice.

dis laimer: (there are other perspectives and opinionizations, this is only one).

To OP:
PM me as you wish.

j :D
3) No, never heard of the NRA, and the fact they have a standard lease recommendation. Will looking into it. Thanks.
The NRA (National Association of Realtors) "per State", has tenant/rental leases that they use that is designed specifically for their use "as a rental agent" , or "agent for the owner". It is an excellent lease but, as an owner for personal use, etc, it is best if you have legal counsel edit it to focus on you as the the owner/rental agent VS having the lease focused on "the rental agent" and the relationship between "tenant and rental agent" as far as legal protections, etc, (not legal advice), and many other things.

Assuming you already know the local in your area, "Landlord Tenant Code" like the "back of your hand" and have it memorized, and a copy of it in your home office or office, and it is well read and highlighted and penciled in, be sure you also have a solid rental contract/lease "package" that includes "house rules", as required "bed bug" notices and agreements and liabilities, unit inventory and condition "check in" and "check out" checklist sheet, etc. etc.
Your "legal counsel" can help you put together a packet.

j :D
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by FellsGuy »

I'll just say if you are not a landlord in MA you know not of what you speak. NRA guidebooks etc are very relevant in many parts of the US but in MA it is a quaint document from a time long ago. I've had a number of very good tenants some pretty good and two nightmares. The nightmares were pros and they all had some twist like this one "Clark Rockefeller's" who were fabulously wealthy with offshore accounts and income for life trusts but none of the things normal people have like a landlord you can call a checking account, a job and a fico above 700.
michaeljc70
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Re: Can a Landlord Garnish the Income from a Tenant's Irrevocable Trust for Non-Payment of Rent?

Post by michaeljc70 »

Marseille07 wrote: Sat Sep 17, 2022 12:24 am
ResearchMed wrote: Fri Sep 16, 2022 11:50 pm
joer1212 wrote: Fri Sep 16, 2022 8:55 pm Update: the co-trustee emailed me the applicant's trust fund latest statement, which shows a balance of over 823K.

Does she have unlimited access to that amount?
If so, why is she running balances on charge cards that probably charge interest?
:confused

Just seems a bit odd.

RM
The OP says: "her only income is $5,000/mo from an irrevocable trust in her name."

So she probably has some kind of arrangements where she can only draw 5K/mo rather than unlimited access to 823K.
How sustainable is taking out $60k a year out of $823k for a young woman? That is 7.2%. Obviously not the OP's problem unless she becomes a long term tenant, but still.
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