Are My Assets Safe From Creditors Inside a Living Trust?

Claims Against Non Probate Assets: Are My Assets Safe From Creditors Inside a Living Trust?

Article written by Illinois & Iowa Attorney Kevin O'Flaherty
Updated on
February 17, 2020

In this article, we’ll discuss whether or not a creditor can file a claim against a living trust and what level of reach a creditor has against assets in a living trust.

Can a creditor file a claim against a living trust?

For the sake of this article, we are discussing a common, garden variety revocable trust. Setting up a living trust, also known as a revocable trust, is a common part of estate planning and acts as a way for certain assets to avoid probate.  Most would think that after going through all the trouble to set up a living trust that your assets are now safe within that trust. However, in Illinois if the trust grantor, also known as the settlor (the person who holds the trust, or who the trust refers to), is still alive then a creditor can most certainly file a claim against them to settle a debt and the assets aren’t any safer than if they were not in a trust. For more information on trusts, why they are important and what they do check out: What is a Trust? 

Why form a living trust in the first place?

The main reason most people form a trust as part of getting their assets in order in case of death and so that the assets listed in the trust can avoid probate. Upon death the revocable trust becomes irrevocable and the ability for creditors to access certain assets within the trust changes.

Why are my assets not safe from creditors with a living trust?

The bottom line is because you, the settlor, are still alive and have total control over the assets in your living trust. You can sell property move money around, give money to others, etc, etc. The name itself, revocable trust, highlights the fact that the trust can be revoked by you at any time.

When can a creditor not get access to the decedent’s assets?

Once the settlor of the living trust has died and the trust becomes an irrevocable trust the likelihood of a creditor being able to acquire those funds to pay off the settlor’s debt diminishes. However, in some instances, a living trust may include an order to pay off debt before distribution to the beneficiaries. This may be the case if the settlor knew they would have debt upon death and wished to avoid any unnecessary legal issues for the involved family members following his or her death. In any case, a creditor can still file a claim to recover debt after the trust holder’s death, but with the irrevocable trust now in effect and the appropriate decedent’s assets becoming nonprobate the creditors are less likely to be awarded any money.

Could a creditor still go after the non-probate assets awarded to the heirs?

Yes, as discussed in the article “Can Creditors Go After Non-Probate Assets” a claim can still be filed, which would go against the heirs and/or the estate. This usually occurs if it is believed the estate was large, and/or as fraudulent activity and assets were moved around specifically to avoid paying the debt. 

Bottom line, do not assume your assets are safe from creditors just because they are in a living trust. If you have concerns about the safety of your assets while alive or after death seek guidance from a qualified professional.

Additional Financial Considerations
from Financial Experts

From Financial Experts

For many years, financial institutions have been creating a disservice to clients and the industry as a whole for years.
View More Professional Considerations

Presented By O'Flaherty Law

Could a creditor still go after the non-probate assets awarded to the heirs?

Need Legal Help? 

Schedule a
Consultation

What to Expect From a Consultation

The purpose of a free consultation is to determine whether our firm is a good fit for your legal needs. Although we often discuss expected results and costs, our attorneys do not give legal advice unless and until you choose to retain us. Although most consultations are complimentary, some may carry a charge depending on the type of matter and meeting location.

Leave a Comment With Your Questions

Read more about

Probate & Estate Administration

Disclaimer: Our articles and comment responses do not constitute legal advice and are not intended to create an attorney-client relationship.

Please contact us to schedule a free consultation for legal advice specific to your situation.

Here are some articles that may interest you

Contact us for a Free Consultation

Schedule a free consultation

O'Flaherty Law is happy to meet with you by phone or at our office locations in:

Who We Are
We are your community law firm. Our Illinois & Iowa Attorneys are committed to providing exceptional client service in a cost-effective manner in the areas of Family Law, Probate, Estate Planning, Civil Litigation, Guardianship, Criminal Defense, Corporate & Contract Law, Bankruptcy and Real Estate.

Some of Our Accomplishments

Best Child Support Lawyers in Chicago
DuPage County Probate Attorney
Kevin P. O'Flaherty
Rated by Super Lawyers


loading ...
Naperville attorney
DuPage County Probate Attorney

Subscribe to our mailing list

* indicates required