Are Assets Held in a Living Trust Protected From a Lawsuit?
The idea behind a living trust is to create separate ownership of property and/or life insurance policies to be distributed after the death of the person who created the trust.
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Life Insurance
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Life insurance policies are established to enrich the named beneficiaries and once placed in a living trust can't be used for personal enrichment by the named insured. Since it is not the property of the insured or the beneficiary, it is protected from lawsuits.
Real Estate
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Once real estate is placed in a living trust, it is no longer the property of the trustor, which means that it is unavailable for attachment in lawsuits against the trustor.
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Trustor Lawsuits
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If the trustor is pursued in legal action, any property can be attached before it is transferred to a living trust. A life insurance policy cannot be attached before or after transfer into the trust, because the benefits are the future property of the named beneficiary.
Beneficiary Lawsuits
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If the beneficiary has any lawsuits, they can only attach the property once it has been transferred to the beneficiary following the trustor's death.
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References
- Photo Credit US Supreme Court image by dwight9592 from Fotolia.com
