Does a Living Trust Protect Your Assets from a Lawsuit?

The short answer is no—a living trust does not protect your assets from a lawsuit. Since you maintain control over the assets in a revocable living trust, they remain vulnerable to creditors, legal judgments, or claims made against you. If you are sued, a court can force you to dissolve the trust or hand over assets in the trust to satisfy a judgment.

Why Doesn’t a Living Trust Provide Asset Protection?

A living trust is primarily designed for estate planning purposes, not for shielding assets from lawsuits. The revocable nature of these trusts keeps your assets in your name, so they remain accessible to any creditors or legal claims. If your goal is asset protection, an irrevocable trust or other asset protection strategies, such as forming an LLC, would be more effective options.

What About Irrevocable Trusts?

For those looking to protect assets from lawsuits, an irrevocable trust may be a better solution. Unlike a living trust, an irrevocable trust transfers ownership of your assets to the trust itself. Once assets are transferred, you no longer have control over them, and because you don’t own the assets anymore, they are generally not subject to claims from creditors.

However, irrevocable trusts come with their own limitations, such as losing control over the assets placed into the trust, and they are typically more complex.