The answer is YES. Yes they can.
A revocable living trust does not provide protection from creditors, lawsuits or divorce.
There are many advantages to a Revocable Living Trust, but protection of assets isn’t one of them.
A creditor or judgment holder or even an ex-spouse can take property owned by your revocable living trust because the trust is revocable. It is not necessarily permanent, you can change the terms of a revocable living trust agreement at any time. You can put assets into trust and take them out. A creditor, judgment holder or divorce court can force you to take property out of trust to pay off judgments or other types of debt and obligations.
There are other options for asset protection. Here are two suggestions:
- Setting up a limited liability company (LLC) or limited partnership and transferring the ownership of assets into these legal entities. It is a good idea to contact an attorney who knows about this, and they can help you set up one of these corporations.
- Creating one or more irrevocable trusts – these do provide asset protection. But you are essentially giving the assets away to this trust. Be very careful when choosing his options, it is always best to consult an estate planning attorney who knows about Irrevocable Trusts before doing this.
Even though a revocable trust does not offer asset protection and cannot protect your property from the claims of creditors or a divorcing spouse, there are still options. Speak with a knowledgeable attorney about the steps you can take to create a comprehensive asset protection plan that goes along with your estate plan.