Does a Revocable Living Trust provide asset protection?
[back to top] In most cases, no. A revocable trust does not provide any protection of assets from creditors or judgments. For tax and creditor purposes a living trust is ignored. In most states, all of the assets of a trust are treated as owned by the grantor if the grantor has a right to revoke the trust. The assets in the trust are essentially the assets of the grantor since he can revoke the trust at will, thus, if there is a judgment against the grantor the creditor is entitled to seize any assets held in the trust. Courts do not respect revocable trusts when it comes to the collection of a court judgment. An alternative for asset protection can be a LLC. You can put the assets in a LLC and have the LLC owned by the trust. This may not be feasible if there is a mortgage or lien that accelerates upon transfer of the property. Transfer to a LLC would be considered a sale and the full amount of the mortgage / lien may have to be paid in full upon the sale. Living trusts are acceptable
