Posted by & filed under Estate Planning, Finances, Financial, Legal.

A trust does NOT protect you from creditors. One of the wonderful things about a trust is that it is so very, very easy to deal with after you set it up. There are no formalities to follow, no forms to file, no permission to ask. You DO have to title you assets into your trust. Once this is done, however, you continue to control your assets in trust completely, and you may use them as you wish.

The flip side of this good news is that since trust assets are YOURS, they are subject to your creditors. If you are sued, and the plaintiff gets a judgment against you, he or she can attach your assets even if they are in the trust.

The only way to really protect your assets from creditors is to make them not your assets anymore. This has its own downside. Let’s say you have a creditor, and let’s say you own a rental property. Your creditor can take your property even if it is held in trust. You can avoid that by giving your property to your brother, but then you don’t own it anymore. Maybe your brother will give it back later, or maybe HIS creditors will go after it. Don’t rely on a trust to protect your property from creditors.