Can a Living Trust Protect my assets from creditors?

This is a question that I hear often. The quick answer is “NO”.

In California, a living trust is a fiduciary relationship. A Settlor, or Trustor which is the initial owner of an asset, transfers the asset to another person, called Trustee, where the Trustee has one job: to hold the asset and at the designated time to transfer it to a third person - the Beneficiary.

Trusts are used for various purposes in different areas of law. One of the reasons we use trusts in Estate Planning in California is to avoid probate at the death of a person. The way we draft a revocable living trust, during the lifetime of the Settlor, this person is both the Trustee and the Beneficiary of the asset. It is only at their death that another Successor Trustee takes over the asset and distributes it to certain named Beneficiary or Beneficiaries.

Therefore, during the lifetime of the Settlor, the asset in question is viewed as belonging to the Settlor.

Now, if you own a rental property, or a business and you are concerned about personal liability against any risks arising out of these types of assets, attorney Bela I. Ispas should be able to help finding alternative ways to protect you. Contact our office to schedule a consultation!