Florida estate planning attorneys are often asked whether assets held in a Living Trust, also known as a Revocable Trust, are protected from the creditors of the Settlor of the Trust (i.e. the person who set it up). As with so many questions under the law, the answer is “It depends.”

Florida law provides that in determining whether assets held in a Living or Revocable Trust are protected from creditors depends on whether they would be protected if not titled in the Trust. Section 736.0505 Fla. Stat. provides that:

(1) Whether or not the terms of a trust contain a spendthrift provision, the following rules apply:

(a) The property of a revocable trust is subject to the claims of the settlor’s creditors during the settlor’s lifetime to the extent the property would not otherwise be exempt by law if owned directly by the settlor.

Perhaps the best example of this is shown with respect to a Settlor’s homestead. Florida law protects a Settlor’s homestead from creditor claims. This is true when the homestead is titled in the person’s individual name. It is also true if the homestead is transferred into the Living Trust.

In contrast, if a Settlor owns a bank account which would otherwise be subject to the claims of creditors, then transferring the account into a Living Trust does not protect the account. In other words, the creditor could still seek to levy against the account even though it is in the Trust.

The relationship between estate planning and asset protection is challenging. A person seeking protection of either or both should discuss the same with an experienced attorney.