🛡️ Using Trusts to Protect Assets from Creditors and Lawsuits

As a business owner or high-income professional, you’ve worked hard to build what you have. But one lawsuit, creditor claim, or personal liability event could put everything at risk—unless you plan ahead.

Asset protection trusts are one of the most powerful legal tools for shielding your wealth. When structured correctly, they can help keep your home, savings, and legacy safe from litigation, judgments, and creditor claims.

Here’s what you need to know about how trusts can protect your assets—and when they make sense.

💰 What Is an Asset Protection Trust?

An asset protection trust is a type of trust designed specifically to shield assets from creditors, lawsuits, or legal judgments.

When you transfer assets into this kind of trust:

• You no longer legally own the assets (the trust does)

• They are managed by a trustee, under specific rules you define

• You may still benefit from the trust—depending on the structure

-Not all trusts offer asset protection. You must use the right kind of trust, drafted with precision and compliance in mind.

🔍 What Trusts Can—and Can’t—Protect You From

Properly structured trusts can help protect against:

• Medical malpractice lawsuits

• Business liability claims

• Personal injury judgments

• Divorce-related asset grabs (in some cases)

• Predatory creditors and collection agencies

Trusts typically won’t protect you from:

• Fraudulent transfers (e.g., moving assets to hide them after being sued)

• Criminal restitution

• Federal tax debt

• Child support or alimony obligations (in many jurisdictions)

🔐 Types of Trusts Used for Asset Protection

1. Domestic Asset Protection Trusts (DAPTs)

• Available in select states (e.g., Nevada, Delaware, Alaska)

• You can be a beneficiary of your own trust

• Offers strong protection if properly funded and timed

• Requires assets to be transferred before creditors come knocking

-Not all states recognize DAPTs—choose your jurisdiction carefully.

2. Irrevocable Trusts

• You give up ownership and control of the assets

• Assets are no longer part of your personal estate

• Strong protection from future creditors

• Cannot be changed or revoked once created

-Best for clients with significant wealth who are comfortable giving up full access to specific assets.

3. Spousal Lifetime Access Trusts (SLATs)

• Created by one spouse, with the other spouse as beneficiary

• Offers tax planning and asset protection benefits

• Popular among high-net-worth married couples

• Assets stay “in the family” but outside your personal estate

-Often used to remove assets from your taxable estate while maintaining indirect access.

4. Offshore Asset Protection Trusts

• Created in foreign jurisdictions with favorable laws

• Extremely powerful legal protections

• Complex, expensive, and often subject to intense scrutiny

-Best for clients with $5M+ in at-risk assets or high international exposure.

❌ Trusts That Don’t Protect Your Assets

• Revocable Living Trusts
  These avoid probate but offer no creditor protection—assets remain under your control.

• Testamentary Trusts
  Created after death via a will—too late for asset protection during life.

⚠️ Common Mistakes to Avoid

• Transferring assets after a lawsuit is filed (this could be seen as a fraudulent transfer)

• Naming yourself as both trustee and beneficiary (weakens protection)

• Failing to fund the trust properly

• Assuming one-size-fits-all: Asset protection must be tailored to your risk profile and state laws

-Get legal advice early—before you need it.

✅ Who Should Consider an Asset Protection Trust?

• Physicians, dentists, or other professionals at high risk of malpractice suits

• Business owners with personal liability exposure

• Real estate investors with rental or commercial properties

• Individuals with high net worth or significant inherited assets

• Anyone who wants to protect wealth for children or future generations

🧠 Final Thoughts

Trusts are powerful—but only when used properly.

The best time to protect your assets is before there’s a threat. Whether you're concerned about lawsuits, business risk, or protecting wealth for your children, the right kind of trust can make all the difference.

Need help creating a trust that actually protects your assets? Let’s talk about a plan that keeps your wealth secure—today and tomorrow.

Hurley Law Group
Asset Protection & Estate Planning for Professionals and Business Owners
📞 308-383-1867
🌐 hurleylawgroup.com
✉️ eric@hurleylawgroup.com