Are Assets in a Trust Protected From Lawsuits?

In the field of estate planning, there are different types of trusts utilized. The optimal choice will depend upon the circumstances and the underlying objectives.

There are trusts that you can revoke or rescind, and there are also irrevocable trusts. When you establish a revocable living trust, you can act as the trustee and the beneficiary while you are living.

As the name would imply, you can also revoke the trust at any time, and it would no longer exist. The assets that were contained within the trust would once again become your direct personal property.

You are retaining incidents of ownership because of this level of control. As a result, when you create and fund a revocable living trust, the assets in the trust would not be protected if you were to become the target of a lawsuit.

Though there is no asset protection, there are a number of different benefits that you would gain if you were to establish a revocable living trust. Probate avoidance is a major benefit, because assets in a living trust can be distributed outside of probate. This is a time-consuming and often expensive process that would enter the picture if you use a will as your asset transfer vehicle.

When you have a living trust, you can also include spendthrift protections. You can instruct the successor trustee to distribute assets to the successor beneficiaries on a long-term, incremental basis.

Asset Protection Trusts

If you are concerned about asset protection, you could convey assets into an irrevocable asset protection trust. Since you are surrendering incidents of ownership when you establish this type of trust, assets contained within the trust would be out of play if you were ever sued.

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Mark S. Eghrari, Estate Planning Attorney

Mark S. Eghrari is an attorney in private practice in Smithtown, New York. He has been in practice since 1988. Mark S. Eghrari provides extensive estate and tax planning services to individuals and businesses. Mr. Eghrari’s primary focus is helping clients avoid probate, minimize or eliminate Federal and State Estate taxes and protect their assets from the high cost of nursing care, if they become ill.

Latest posts by Mark S. Eghrari, Estate Planning Attorney (see all)

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