How Do I Create a Litigation Trust?

Q: Is a trust protected from a judgment?

In general, assets held in a trust may be protected from creditors and legal judgments, particularly if the trust is irrevocable. However, if the trust is revocable, creditors may be able to reach those assets. The level of protection can vary by state law and the specific circumstances of the case.

Q: Does a trust protect you from litigation?

A trust can provide some protection from litigation by keeping assets separate from personal ownership. However, this protection is not absolute. Creditors may still pursue claims against the trust in certain situations, especially if the trust is revocable or if the assets were transferred to avoid debts.

Q: Can someone sue me for my trust fund?

Yes, someone can potentially sue you for your trust fund, depending on the circumstances. If the trust is revocable, the assets may be reachable by creditors. However, if the trust is irrevocable, it may offer greater protection against lawsuits. The specific protections can vary based on state laws and the trust's terms.

Full question:

We have been advised we need a 'litigation trust' for a group of investors. Can you advise as to which forms we need? THanks

Category: Trusts
Date: 04/07/2025
State: Texas

Answer:

A litigation trust is typically created in order to settle legal claims arising out of certain acts or operations. The trustee may bring lawsuits on behalf of the trust. The trust is essentially an account where any money collected from lawsuit awards or settlements would be held for distribution to creditors.

Due to the complexity involved in creating such trusts, we suggest you contact a lcoal attorney who can review all the facts and documents involved.

For further discussion, please see:

http://caselaw.lp.findlaw.com/data2/circs/3rd/031857p.pdf
http://www.kccllc.net/documents/0555927/0555927081028000000000003.pdf

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What does a trust protect against?

A trust can protect assets from creditors, lawsuits, and estate taxes. It separates ownership from control, meaning that the assets held in a trust are not directly owned by the beneficiary. This can provide a layer of protection against legal claims and financial liabilities. However, the effectiveness of this protection can depend on the type of trust and specific state laws.

Is a trust protected from a judgment?

What are the three types of trust?

The three main types of trusts are revocable trusts, irrevocable trusts, and testamentary trusts. A revocable trust can be altered or revoked by the grantor, while an irrevocable trust cannot be changed once established. Testamentary trusts are created through a will and take effect upon the grantor's death, often used for estate planning.