A family trust can be an excellent tool for organizing and protecting wealth. At its core, a family trust is a legal document where a party/parties transfer assets to a trustee for their benefit, who, in turn, holds and manages these assets (and other assets to be transferred thereafter) for the benefit of named beneficiaries. Many set up family trusts to keep their estates out of probate, protect their assets from the reach of third-party creditors and other claimants, simplify the transfer of property, and maintain privacy.

Asset Protection — Not Always Guaranteed. One common misconception is that a family trust automatically shields assets from lawsuits or creditors. Whether that protection exists depends on many factors:

• Revocable vs. Irrevocable: Assets in a revocable trust remain legally yours during your lifetime, which means creditors can usually still reach them. Irrevocable trusts, by contrast, can offer stronger protection since you relinquish ownership — but they are harder to change or undo.
• When were the transfers to the trust made? If the assets were transferred to a trust while facing a lawsuit, judgment, or insolvency, courts may classify the transfer as a “fraudulent transfer” and allow creditors to recover those assets.
• Restrictions and Trust Terms: Provisions such as restrictions on use and further transfer by beneficiaries and “spendthrift” clauses can limit beneficiaries’ ability to assign or pledge trust assets, making it more difficult for creditors to reach them.
• What State Law Applies? Each state has different rules on how much protection a trust provides. Some states offer stronger statutory protections than others.
• Special Exceptions: Certain obligations — like child support, alimony, or tax claims — can still reach trust assets even with protective language in place.

In short, a family trust may shield assets, but the outcome depends on careful planning, proper drafting, and the jurisdiction where the trust is governed.

Other Benefits of a Family Trust. In addition to possible creditor protection, family trusts can:

• Avoid probate, saving time and legal costs for heirs
• Provide privacy by keeping estate details out of public court records
• Control how and when beneficiaries receive their inheritance
• Assist with tax planning and the orderly transfer of wealth

The Bottom Line. Family trusts can be highly effective planning tools — but they are not one-size-fits-all solutions. Whether they will protect your assets from claims depends on multiple legal and factual considerations. For tailored guidance, call Weiss LLP. Our attorneys can review your goals, assess your risk exposure, and help you design a trust that provides the right mix of flexibility, protection, and long-term benefit for your family.