Trusts have many uses throughout the scope of estate planning, both as proactive tools for directing your assets where you want them to go, as well as defensive tools for protecting your assets from unfair taxation or claims by outside parties. Many kinds of trusts can help you protect your assets from creditors or others who believe they have a claim to some or all of your property.
When we think of protecting assets from creditors, we generally think of creditors of the individual who has built the estate they wish to protect. As you fight to carve out your piece of the American Dream, there are often wrong turns or dead ends along the way, and some creditors may be very motivated to reclaim something they think you owe them through any means necessary. In these cases, you may be able to place your assets in an irrevocable trust and permanently remove them from your ownership so that a creditor cannot seek repayment from them.
It is also possible to use a trust to protect an asset against your beneficiaries' potential creditors. After all, you don't want to spend all that time building a legacy and see your beneficiaries have it swiped away from them. In broad terms, the more that you limit your beneficiaries' access to the underlying assets in a trust, the fewer options that creditors have for reaching those assets.
If you are ready to protect your estate from a few creditors or an army of them, it is important to get quality legal counsel. With proper legal counsel, you can ensure that your wishes are made clear and followed, while keeping your rights secure.
Source: 360 Degrees of Financial Literacy, "Asset Protection in Estate Planning," accessed June 09, 2017