Are Assets in a Revocable Trust Protected from Creditors?

Assets in a revocable trust are not protected from creditors. A revocable trust allows the grantor to have complete control over the assets of the trust, thereby entitling him or her to amend or revoke it at any time. In that respect, the law treats the assets held by the trust as still being personally held by the grantor, since the grantor remains in control of those assets. That would mean that if the grantor has any legal problems, relating to debts or lawsuits, for example, then creditors may be able to claim the revocable trust assets to satisfy those obligations.

Unlike an irrevocable trust where the grantor is no longer considered to own any of the trust assets, a revocable trust offers minimum protection against creditors. The primary function of a revocable trust is to serve purposes of estate planning, probate avoidance, and continuity in the administration of the assets without protection from liability or legal claims.

If asset protection is a concern, one will have to consider other estate planning tools that offer superior creditor protection. For this, retaining lawyers in estate planning is greatly needed so that one can consider what method will be most appropriate for the protection of assets.

At One Pacific Trust, we provide comprehensive trust services, helping individuals create tailored estate plans that align with their financial goals while ensuring that their assets are properly managed and protected according to their needs.