Does a Living Trust Protect Your Assets from Lawsuit? (2024)

A living trust does not protect your assets from a lawsuit. Living trusts are revocable, meaning you remain in control of the assets and you are the legal owner until your death. Because you legally still own these assets, someone who wins a verdict against you can likely gain access to these assets. There are other options, specifically an irrevocable trust, to protect your assets from civil suits, however.

The team at Bratton Estate & Elder Care Attorneys can ensure you have a plan in place that meets your needs long before you need it. Contact us today to learn more about our New Jersey asset protection services.

Understanding How a Revocable Living Trust Works

Living trusts help your familyavoid probateafter your death. These trusts are a relatively common part of estate planning.

When you have a living trust, you remain the trustee as long as you are alive. This means you have full control of the assets you put in the trust. You can perform any of the following actions:

  • Adding new assets
  • Taking assets out of the trust
  • Selling assets
  • Giving assets away before your death
  • Changing beneficiaries
  • Spending the assets without permission
  • Taking your assets out and undoing the trust entirely

For all legal purposes, the assets in a revocable trust remain yours even after you put them in the trust. This type of trust has few benefits aside from allowing your family quick access to the money after your death and eliminating the need forprobate. Since you still own all the assets, they are fair game for debt collectors, plaintiffs, and others who have legal access to your accounts.

For a legal consultation, call 856 770 2744

The Benefits of Placing Your Assets in an Irrevocable/Asset Protection Trust

An irrevocable trust differs from a revocable trust because it forces you to give up control of your assets. When you create an irrevocable trust, you name another person to act as a trustee, and they oversee what happens to the assets. You have no say over what this person does with your assets. If you decide you do not like the trust, there is no backing out — it is irrevocable. (It is possible to get out of an irrevocable trust with the use of a trust protector..)

You Have Control Over What You Put in the Trust

You have control over what you put into this type of trust, of course, so this is an effective way to protect your family home, inherited treasures, and other important assets from Medicaid, creditors, and legal action.

Other Parties Cannot Gain Access to Your Assets

Since your assets in an irrevocable trust are no longer under your control, it is difficult for creditors or those who file a civil suit against you to gain access. You can take other steps to build in additional protections. If there is already a lawsuit in the works, you may not be able to use this type of trust to protect your assets.

We Help with Asset Protection in New Jersey

At Bratton Estate & Elder Care Attorneys, we have an interdisciplinary team including not only estate planning attorneys but also social workers and a registered nurse who can help ensure we understand your family’s needs and create a plan that meets them. We provide a wide range of services, including helping you create an asset protection trust or other asset protection plans. We can protect your assets from creditors, lawsuits, or evenMedicaid.

We can help you understand your options, including irrevocable trusts, to ensure your family has access to your home and other assets even if there is a verdict against you in the future. We can also explain other types of trusts that may play an essential role in your estate plan.

Meet with Our Team About Your Estate

The team from Bratton Estate & Elder Care Attorneys can help you understand your options forestate planningandasset protection. We treat every client like a member of our family. You will encounter only compassion and understanding, and every member of our team is dedicated to providing services that help give you peace of mind.

When we discuss your needs, our team can explain the applicable laws, and the services we offer that may meet those needs. We can help you build a comprehensive estate plan to protect your assets from lawsuits or creditors and secure your family’s financial future.

Call our New Jersey office today at 856 770 2744to learn more or to get started.

Call 856 770 2744or complete theContact us form

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Does a Living Trust Protect Your Assets from Lawsuit? (2024)

FAQs

Does a Living Trust Protect Your Assets from Lawsuit? ›

A living trust does not protect your assets from a lawsuit. Living trusts are revocable, meaning you remain in control of the assets and you are the legal owner until your death. Because you legally still own these assets, someone who wins a verdict against you can likely gain access to these assets.

Does a trust protect assets from a lawsuit? ›

While trusts can protect assets from lawsuits, not every type of trust offers lawsuit protection. A revocable trust, such as a living trust, will not fill that bill. This is because creditors can step into our shoes and invoke your power of revocation. That is not the case with a properly drafted irrevocable trust.

What is the best trust to protect your assets? ›

An irrevocable trust provides you with more protection. While you can't modify it, creditors can't easily make claims against it, and assets held within it can generally be passed on to beneficiaries without being subject to estate tax.

Can a trust protect assets from debt? ›

Because the assets within the trust are no longer the property of the trustor, a creditor cannot come after them to satisfy debts of the trustor. Still, it is crucial to know your state law regarding irrevocable trusts to understand exactly how well your assets are protected from creditors.

Does a living trust protect assets from bankruptcies? ›

Many Californians use living trusts to bypass the probate process and ensure a more seamless transition, giving loved ones access to the benefits of that property earlier. But, living trusts aren't, and aren't intended to be, asset protection trusts.

How do I protect my money from a lawsuit? ›

Methods for protecting assets from lawsuit in California include shifting ownership into legal entities such as trusts, taking advantage of legal protections for homesteads and retirement accounts, and maintaining appropriate insurance coverage.

Can creditors go after trust? ›

Can Creditors Garnish a Trust? Yes, judgment creditors may be able to garnish assets in some situations. However, the amount they can collect in California is limited to the distributions the debtor/beneficiary is entitled to receive from the trust.

Are trusts judgment proof? ›

A living trust does not protect your assets from a lawsuit. Living trusts are revocable, meaning you remain in control of the assets and you are the legal owner until your death. Because you legally still own these assets, someone who wins a verdict against you can likely gain access to these assets.

Can creditors go after beneficiaries? ›

When a person dies, creditors can hold their estate and/or trust responsible for paying their outstanding debts. Similarly, creditors may be able to collect payment for the outstanding debts of beneficiaries from the distributions they receive from the trustee or executor/administrator.

Does a trust protect from title theft in the US? ›

Having your home title in your trust does add many complications for someone looking to steal your title or defraud you. It takes a higher level of sophistication to commit fraud regarding that property than on a home in an individual's or couple's name.

Can you transfer credit card debt to a trust? ›

The only transfers that are to be made to a Revocable Living Trust are assets, not liabilities. Debt that has been incurred by the family is not transferred to the Trust; however, the provisions are included in your trust to permit the transfer of certain assets with the debt attached.

How to protect assets from creditors after death? ›

Asset protection trusts offer a way to transfer a portion of your assets into a trust run by an independent trustee. The trust's assets will be out of the reach of most creditors, and you can receive occasional distributions. These trusts may even allow you to shield the assets for your children.

How to protect assets from judgements? ›

Seven Ways to Protect Your Assets from Litigation and Creditors
  1. Purchase Insurance. Insurance is crucial as a first line of protection against speculative claims that could endanger your assets. ...
  2. Transfer Assets. ...
  3. Re-Title Assets. ...
  4. Make Retirement Plan Contributions. ...
  5. Create an LLC or FLP. ...
  6. Set Up a DAPT. ...
  7. Create an Offshore Trust.
Aug 18, 2022

What is asset protection in a trust? ›

An asset protection trust (APT) is a trust vehicle that holds an individual's assets with the purpose of shielding them from creditors. Asset protection trusts offer the strongest protection you can find from creditors, lawsuits, or any judgments against your estate.

Can assets in an irrevocable trust be seized? ›

For protection, you must use an irrevocable trust, relinquish control, and beneficial interest, and still your trust assets may be seized as a fraudulent transfer.

Does irrevocable trust protect assets? ›

To protect your assets from legal threats, the best thing you can do is put those assets in an irrevocable trust. If you set up your trust instrument properly, a court, lawsuit plaintiff, or creditor won't be able to get access to the funds, real estate, and property you store within.

How to protect your assets from the government? ›

The two most common ways to protect assets are:
  1. Choosing a protective business structure: It is not easy for the IRS to obtain property from an LLC or other corporation. ...
  2. Establishing legal trusts: Though usually related to estate planning, trusts legally shift ownership of assets whenever you decide.

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