Revocable Trusts and Asset Protection

A revocable trust does not provide any protection of assets from judgment creditors. It is ignored for creditor purposes just as it is ignored for income tax purposes. In most states, the law provides that if a settlor has the right to revoke the trust, all of the assets are treated as owned by the settlor. Perhaps because of the promotion associated with these trusts, many people mistakenly believe that a revocable trust somehow shields assets from creditors. This is not correct. If there is a judgment against you, the creditor is entitled to seize any assets that you have in the trust. Asset protection can be accomplished when property is held in the FLP or LLC and those interests are owned by the trust.