Can a Living Trust Be Sued?

by Edriaan Koening ; Updated July 27, 2017
A living trust may provide some protection against lawsuits.

A living trust contains your assets so that they don't have to go through probate before they go to your heirs at your death. This may save your heirs the expenses, time and effort of going to court. A living trust may also protect your assets in case creditors or heirs sue you.

Types

There are two general types of living trusts: revocable and irrevocable. With a revocable trust, you retain control over your assets, so you can change or even terminate the living trust at any time after you set it up. On the other hand, an irrevocable trust does not allow you to make any changes to it once established. Whether your trust is revocable or irrevocable determines whether creditors can sue the trust to obtain your assets.

Revocable Trust

With a revocable living trust, you can get back your assets at any time. As such, your creditors can sue you or the trustee to access the assets in a revocable living trust. As long as you or a trustee you appoint still retain control to these assets, the trust does not provide any asset protection. If you go to court and a judge awards your assets to a creditor, you may have to get your assets out of the revocable living trust and give them to your creditor.

Irrevocable Trust

With an irrevocable trust, you no longer have control over the assets inside. Even if you want to get your assets back, you can't do so because you no longer legally own them. As such, a judge can't order you to get your assets out of an irrevocable living trust, according to Phillips Estate Planning. However, you can't appoint yourself as the beneficiary of the living trust to get this protection.

Challenge a Living Trust

After your death, your heirs retain the right to challenge the way your living trust distributes assets to them. While a living trust helps minimize conflicts arising from inheritance issues, it does not prevent a lawsuit. Challenging a living trust is more difficult than challenging a will, but an heir can still start a lawsuit against the living trust. Some claims an heir may make to challenge your living trust include your lack of mental health or you being under duress at the time the trust was set up.

About the Author

Edriaan Koening began writing professionally in 2005, while studying toward her Bachelor of Arts in media and communications at the University of Melbourne. She has since written for several magazines and websites. Koening also holds a Master of Commerce in funds management and accounting from the University of New South Wales.

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