Living Trust FAQ
An introduction to living trusts -- a popular way to avoid probate.
What is a living trust?
Why should I make a living trust?
How does a living trust avoid probate?
Is it expensive to create a living trust?
Is it a hassle to hold property in a living trust?
Is a living trust document ever made public, like a will?
» Does a living trust protect property from creditors?
If I make a living trust, do I still need a will?
Can a living trust reduce estate taxes?
Does a living trust protect property from creditors?
No. A creditor who wins a lawsuit against you can go after the trust property just as if you still owned it in your own name.
Generally, after your death, all property you owned -- including assets held in a living trust -- is subject to your lawful debts. For example, if your house is held in trust and passes to your children at your death, a creditor could demand that they pay the debt, up to the value of the house. Ownership of real estate is always a matter of public record, so creditors can always find out who inherited real estate. It can be more difficult for creditors to know who inherits other property, however (because a trust document, unlike a will, is not a matter of public record), and they may not bother tracking it down.
On the other hand, probate can also offer a kind of protection from creditors. During probate, known creditors must be notified of the death and given a chance to file claims. If they miss the deadline to file, they're out of luck forever.
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