A trust is a legal document that creates a separate legal entity that has the power to hold and manage property, typically including the right to buy and sell trust assets. The trust commonly includes:
Once a trust document is created and executed, the trust has the legal right and authority to hold property. Most types of assets can be placed in a trust—real property, investments, bank accounts, business assets, and personal property can all be transferred to a trust. As a general rule, retirement assets cannot be placed in a trust.
Access to the assets in the trust is governed by the terms of the trust document. One of the responsibilities of the trustee is to ensure that the use of the assets complies with the terms of the trust.
When you transfer property to a trust, you no longer own it, the trust does. Accordingly, if a creditor has a personal judgment against you, they won’t be able to access the property in the trust to satisfy the judgment.
A caveat, though: a trust can be revocable or irrevocable. If it’s revocable, that means the grantor can revoke the trust at any time and retake ownership of the assets. A court may therefore find that the assets in the trust should be treated like the property of the grantor and allow creditors to access them to satisfy a judgment. Assets in an irrevocable trust are more likely to be protected from creditors.
At MCIS Law, PLLC, in Stafford, we provide comprehensive counsel to businesses and business owners throughout southeast Texas, handling all matters related to business formation. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.