Can a Trust Protect Your Assets from a Lawsuit in Florida?

A trust can protect assets from a lawsuit in Florida, but only if the trust is irrevocable, properly structured, and funded before any creditor claim arises. A revocable living trust provides no lawsuit protection whatsoever. The type of trust, the grantor’s relationship to it, and the timing of the transfer determine whether the trust actually shields anything.

Living Trusts Do Not Protect Assets from Lawsuits

A revocable living trust is one of the most common estate planning tools in Florida. Many people who create living trusts assume the trust also protects their assets from lawsuits and creditors. It does not.

Under Florida Statutes § 736.0505(1)(a), all property in a revocable trust is subject to the claims of the settlor’s creditors while the settlor is alive. A judgment creditor can reach every asset inside a living trust as though the trust did not exist. A court can order the grantor to revoke the trust or turn over trust assets to satisfy a judgment.

The reason is straightforward. Because the grantor retains the power to revoke the trust and reclaim all assets at any time, the law treats those assets as the grantor’s personal property. A creditor’s right to reach the grantor’s assets extends to everything the grantor controls, and in a revocable trust, the grantor controls everything.

Living trusts serve legitimate estate planning purposes. They avoid probate, provide for incapacity management, and maintain privacy. Protecting assets from lawsuits is not among those purposes.

Irrevocable Trusts Can Protect Assets

An irrevocable trust can provide strong lawsuit protection because the grantor permanently transfers assets out of personal ownership. The grantor cannot revoke the trust, cannot withdraw assets, and cannot direct the trustee to return property. Because the grantor no longer owns or controls the assets, the grantor’s creditors have no claim to them.

Florida law provides two independent protections for irrevocable trust assets.

Spendthrift protection under § 736.0502 prevents a beneficiary’s creditors from attaching the beneficiary’s interest in the trust. A valid spendthrift clause must restrict both voluntary and involuntary transfers of the beneficiary’s interest.

Discretionary distribution protection under § 736.0504(1) prevents a creditor from compelling the trustee to make distributions to a beneficiary. When the trustee has discretion over distributions, no creditor can force a distribution that would flow to the creditor.

An irrevocable trust that combines both provisions is extremely difficult for a creditor to penetrate. The assets remain protected as long as they stay inside the trust.

The Self-Settled Trust Exception

An irrevocable trust does not protect assets from the grantor’s own creditors if the grantor is also a trust beneficiary. Under § 736.0505(1)(b), a creditor of a person who is both the settlor and a beneficiary can reach the maximum amount distributable to the settlor.

Florida’s prohibition on self-settled trust protection means that creating an irrevocable trust, transferring assets into it, and retaining any beneficial interest provides zero lawsuit protection. The trust’s spendthrift and discretionary distribution provisions are overridden by the self-settled trust statute.

Florida’s prohibition extends to domestic asset protection trusts formed in other states. A Florida resident who creates a DAPT in Nevada or South Dakota remains subject to Florida’s public policy against self-settled trusts. Florida courts apply Florida law to the debtor regardless of the trust’s governing law provision.

For the trust to protect the grantor’s assets from lawsuits, the grantor must not be a beneficiary. A family irrevocable trust created for a spouse, children, or other family members satisfies this requirement. A spousal limited access trust allows the grantor to benefit indirectly through a spouse who serves as beneficiary while keeping the grantor outside the class of beneficiaries.

Fraudulent Transfer Limitations

Transferring assets to an irrevocable trust does not provide instant protection. Under Florida’s Uniform Voidable Transactions Act (Chapter 726), a creditor can challenge any transfer as fraudulent if the grantor made the transfer with intent to hinder, delay, or defraud creditors, or if the grantor was insolvent at the time of the transfer.

The statute of limitations for fraudulent transfer claims is four years from the transfer date, or one year after the transfer was or reasonably could have been discovered. During this window, a court can reverse the transfer and make the assets available to creditors.

A trust funded years before any creditor claim arises faces minimal fraudulent transfer risk. A trust funded after a lawsuit has been filed or a claim has been threatened is highly vulnerable to being unwound. Timing is one of the most important factors in determining whether a trust will actually protect assets from a lawsuit.

What a Trust Cannot Protect Against

Even a properly structured irrevocable trust has limitations. Certain creditors and claims can reach trust assets despite spendthrift and discretionary distribution protections.

Federal tax liens override state trust protections. The IRS can place a lien on a beneficiary’s interest in a trust regardless of spendthrift provisions. Only a pure discretionary trust with no support standard may prevent IRS lien attachment.

Family law courts may consider a beneficiary’s interest in a trust when determining alimony and child support obligations. While Florida courts generally cannot compel distributions from a discretionary trust, they can factor the trust’s existence into the financial analysis.

Once assets are distributed from the trust to a beneficiary, the distributed funds lose trust protection. A creditor who cannot reach assets inside the trust can reach those same assets after they are distributed to the beneficiary’s personal accounts.

Trusts Compared to Other Lawsuit Protection Tools

A trust is one component of a broader asset protection strategy. Florida residents often combine trusts with other tools depending on the type of assets involved and the nature of the creditor exposure.

Tool	What It Protects	Limitations
Irrevocable trust	Assets transferred to the trust for non-settlor beneficiaries	Grantor cannot be a beneficiary; fraudulent transfer risk
Florida exemptions	Homestead, retirement accounts, annuities, life insurance	Applies only to specific asset categories
LLC	Business and investment assets inside the entity	Charging order protection varies by LLC structure
Offshore trust	Assets placed beyond U.S. court jurisdiction	Higher cost; IRS reporting requirements
Tenancy by the entirety	Joint marital assets from individual creditors	Lost upon divorce or death of non-debtor spouse

No single tool protects every asset from every type of claim. Effective asset protection combines multiple structures based on the individual’s specific assets, liabilities, and timing. Trust-based strategies work best when layered with exemptions, entity structures, and proper titling rather than deployed in isolation.