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Don’t Touch My Assets! How Do You Freeze Trust Assets During a Lawsuit?

One of the most common questions we receive from clients is: “how do we freeze the Trust assets?” After all, when you file a Trust contest, aren’t all the Trust assets frozen until the case is resolved? The answer is no. That rarely occurs. It sounds surprising, we know, but let us explain a bit further. For starters, it’s not that easy.

 

Real property (things like homes, apartment buildings, commercial buildings, shopping centers) tends to be the easiest assets to freeze because you can file a litigation lien (referred to as a Lis Pendens) against those assets. A Lis Pendens is a lien recorded against real estate that informs the world that the title to that real estate is being disputed in court. Typically, real estate cannot be sold, encumbered, or refinanced while a Lis Pendens is recorded against it.

But it is important to remember that, to file a Lis Pendens, you first must have a pending lawsuit filed in court. Also, that lawsuit must involve contesting the title to the real estate. If you file a Lis Pendens against real estate whose title you are not contesting, then you could subject yourself to being penalized by the court. A Lis Pendens is only supposed to secure title to real estate where direct ownership of that real estate is in dispute.

When it comes to every other type of asset besides real estate, then you will have to file a temporary restraining order and preliminary injunction if you want to try to freeze those assets. With this approach, you are asking the court to lock down assets before the court has received any evidence in the case. Most courts are reluctant to do this. They do not want to “shoot from the hip” as they say. Anytime you are asking the court to freeze assets before trial, it can be a hard sell.

A trial is the first point in time when the court receives, and reviews, the evidence in your case. Prior to that point in time, the facts are merely allegations. And allegations may be true or false in the eyes of the court. For that reason, courts tend to shy away from freezing assets prior to trial.

That’s not to say you should not try to freeze Trust assets in your lawsuit. In some cases, it is possible to lock down the Trust assets pending trial. But you should know that freezing assets is not easy or automatic. It takes the right set of facts, the right judge, and the right evidence to obtain the orders you want from the court.