Are assets held in a living trust protected from creditors’ claims? – By Kurt V Beasley
Generally speaking, when assets are held in a revocable trust, they are not protected from the legitimate claims of the trust maker’s creditors.
This is because the maker can revoke the trust and take back the trust property at any time. The law finds that it is inequitable to allow the trust maker to have this control and full use and benefit from the trust property while denying creditors the power to compel revocation in order to satisfy their just claims.
An irrevocable trust may provide some creditor protection because the maker is not able to revoke the trust and get the property back. The maker may have a beneficial interest in the trust, such as a right to income or to principal, and that interest may be reached by the maker’s creditors.
However, if the beneficial interest is subject to the discretion of the trustee and the maker is not the sole trustee, creditors can be thwarted. Since the contribution of property to an irrevocable trust is a completed gift, the property generally is outside the reach of the maker as well as his or her creditors.
About Kurt V Beasley
Kurt V Beasley is the founding Partner of Waterford Law Group, PLLC and has been practicing business law and providing management consulting for over 20 years. Kurt Beasley unique approach to the art of law is based deeply in his relationships and commitment to his clients. Kurt Beasley brings previous years of banking and private accounting experience into his caring approach to his profession, which is matched by a commitment to excellence in research, preparation, and issue resolution.
Kurt V Beasley has enjoyed a challenging and diverse experience history that has enabled him to obtain deep industry knowledge in the areas of corporate structure, merger & acquisition counsel, corporate and individual litigation, and capital planning. “I feel very fortunate to have started my career as a practicing CPA and banker, because from that early experience I learned the realities of what it takes to run a business…and an understanding of the challenges that business owners face in their everyday efforts.”
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