I regularly receive calls from prospective clients interested in creating a revocable living trust both because they want to protect their assets from some ill-defined potential liability.
Many people mistakenly believe that putting their assets into a revocable trust will shelter those assets from creditors. This is not the case. Because if a third party creditor has a claim against you, then transferring assets in order to “hinder, delay, or defraud” that creditor’s claim may likely violate some type of law by against the fraudulent transfer of assets. Revocable Living Trusts Do Not Protect Assets From Creditors.
A revocable living trust is a trust that you create during your lifetime. You fund the trust by transferring legal ownership of your property to the revocable trust. However, when you transfer ownership of your assets to the revocable trust, you don’t relinquish any control over them. You still have the power to add assets to the trust, remove assets from the trust, and even revoke or amend the trust at any time and for any reason.
Because you retain so much control, you are treated as their legal owner trust assets. Consequently, a creditor can force you to use the trust assets to satisfy a legal debt.