Self-Settled Trust in California: Can Creditors Reach It?

By Eric Ridley, attorney, Ridley Law. Updated October 2026.

A self-settled trust is a trust you create and fund for your own benefit. Marketing for Nevada and Alaska trusts promises that you can keep using your money and keep creditors away from it. In California a creditor’s reach follows your access. For the wider list of what works and what doesn’t, see asset protection in California.

Why your access decides what a creditor can reach

Take a hypothetical California physician with an $800,000 brokerage account. A patient’s lawyer has sent a demand letter for $500,000. The physician is thinking about moving the account into a trust. The numbers are invented, and the three versions below show where California law puts the line.

In the first version, the physician puts the account in a revocable living trust. The trust property is open to the physician’s creditors to the extent of the power to revoke (Prob. Code, § 18200). That power covers all $800,000, so the $500,000 claim is collectible.

In the second version, the physician makes the trust irrevocable but names themselves as a beneficiary, with the trustee free to pay income or principal to them. A creditor can reach the most the trustee could pay the physician, up to the physician’s own contribution (Prob. Code, § 15304(b)). The trustee could pay out all $800,000, so the claim is collectible again. The trust still exists. It doesn’t stand between the physician and the creditor.

In the third version, the physician makes the trust irrevocable and can never receive anything from it. Section 15304 no longer reaches the trust, because the physician isn’t a beneficiary. The physician has given the money up for every purpose, and a transfer made after a demand letter invites a challenge. A court deciding whether a transfer was made with intent to hinder a creditor may consider whether the person had been sued or threatened with suit (Civ. Code, § 3439.04(b)(4)).

The label on the trust doesn’t change any of this. What changes the answer is whether you can get the money back, directly or through a trustee’s discretion, and when you moved it.

A revocable living trust protects your family, not you

A revocable trust doesn’t shelter anything from the person who made it. Unless a trust is expressly made irrevocable, California treats it as revocable when the settlor was domiciled here when the trust was created, signed the trust here, or the trust says California law governs (Prob. Code, § 15400), and a trust you can revoke is a trust your creditors can reach to that extent (Prob. Code, § 18200). The statute also gives you the exemptions you’d have had if you owned the property yourself (Prob. Code, § 18201), so a living trust doesn’t lose you the homestead or retirement exemptions either.

Property that was subject to the power of revocation at the settlor’s death answers for the creditors of the probate estate, to the extent the probate estate can’t cover its claims and expenses (Prob. Code, § 19001). Trustees have to deal with creditor claims early in an administration. See creditor claims against a trust for the mechanics.

Married couples have a second layer. Except as another statute provides, the community estate is liable for a debt either spouse incurred before or during marriage, whichever spouse manages the property, but not for debts incurred after the date of separation and before judgment (Fam. Code, § 910). Community property that goes into a revocable trust generally stays community property, subject to the conditions in Fam. Code, § 761(a), so the trust doesn’t take it out of that rule. If you’re deciding between trust types for other reasons, revocable versus irrevocable trusts covers the trade-offs.

The irrevocable version: what Prob. Code, § 15304 says

Under subdivision (a), if you’re a beneficiary of a trust you created and your interest carries a spendthrift restraint, the restraint is invalid against your transferees and creditors. The trust itself stays valid. You don’t get the spendthrift protection that the same clause would give a beneficiary of someone else’s trust.

Under subdivision (b), if the trust says the trustee must pay you income or principal for your education or support, or gives the trustee discretion over how much to pay you, a creditor can reach the maximum the trustee could pay you, but not more than your proportionate contribution to the trust. The cap limits the reach to the settlor’s proportionate contribution. If a parent and a child both funded the trust, the child’s creditor can reach no more than the child’s proportionate contribution.

Subdivision (c) carves out tax reimbursement. You aren’t treated as a beneficiary of your own irrevocable trust solely because the trustee has discretion to pay or reimburse you for income tax on the trust’s income or principal, and a creditor can’t reach anything because of that discretion alone. The carve-out is narrow. A trustee who can pay you for any other reason puts you back under subdivision (b).

The same statute set protects you when someone else is the settlor. If a parent leaves you money in a trust that gives the trustee sole discretion over payments, your creditors can’t compel the trustee to pay (Prob. Code, § 15303(a)), and a spendthrift clause shields your interest in income and principal until it’s paid to you (Prob. Code, §§ 15300, 15301). The difference between that trust and the one you’d create for yourself is who the settlor is. For the full set of exceptions, including support judgments, see spendthrift trusts and creditor protection in California.

What a Nevada or Alaska trust changes for a California resident

Nevada lets a person create a spendthrift trust for their own benefit if the writing is irrevocable, doesn’t require any distribution to the settlor, and wasn’t intended to hinder, delay or defraud known creditors (NRS 166.040(1)(b)). The statute lists permitted features that include discretionary payments to the settlor by another person, and it lets the settlor hold powers such as removing and replacing the trustee (NRS 166.040(2)(g), (3)). A creditor who existed when the transfer was made has two years from the transfer, or six months after discovering it if that’s later, and must prove a fraudulent transfer by clear and convincing evidence (NRS 166.170(1)(a), (3)).

Those are Nevada’s rules. A Californian has to ask whether a California court, or a federal court sitting in California, honors the choice of Nevada law given § 15304. Two decisions show how courts have treated Alaska self-settled trusts: a Washington bankruptcy court applying Washington law, and the Alaska Supreme Court ruling on jurisdiction.

In In re Huber (Bankr. W.D. Wash. 2013) 493 B.R. 798, a Washington developer created an asset protection trust under Alaska law on September 23, 2008. The correspondence in the record said one of his goals was to protect part of his assets from his creditors. The settlor, his creditors, his beneficiaries and his lawyer were in Washington, and nearly everything he transferred came from there. The court tested the trust’s choice of Alaska law under the Restatement (Second) of Conflict of Laws, section 270, which honors the chosen law only if the state has a substantial relation to the trust and applying its law doesn’t violate a strong public policy of the state with the most significant relationship. It found Alaska had only a minimal relation to the trust while Washington had a substantial one and a strong, long-standing public policy against self-settled trusts, so it applied Washington law and held the transfers void. It also granted the bankruptcy trustee partial summary judgment under 11 U.S.C. § 548(e)(1).

In Toni 1 Trust v. Wacker (Alaska 2018) 413 P.3d 1199, family members had moved property into an Alaska trust while Montana judgments were being entered against them. A Montana state court and an Alaska bankruptcy court both found the transfers fraudulent. The trustee argued that an Alaska statute gave Alaska courts exclusive jurisdiction over those claims. The Alaska Supreme Court held that the statute can’t unilaterally deprive other state and federal courts of jurisdiction.

Neither case involves a Californian. For a California settlor, § 15304 makes a spendthrift restraint in a trust the settlor created invalid against the settlor’s creditors, and a Nevada or Alaska choice of law in the trust would have to get past a California court’s own choice-of-law analysis. Applying Huber to California is an inference from the text of § 15304, and a California judge could weigh it differently. A plan that works only if a California court sets aside § 15304 has a gap in it. The longer treatment of these trusts, including the contempt cases involving foreign trustees, is on why offshore and domestic asset protection trusts fail Californians, and the income tax side is on whether a Nevada trust avoids California income tax.

How far back a creditor can reach after you fund the trust

Even where a trust is valid, the transfer into it can be challenged. California’s Uniform Voidable Transactions Act reaches a transfer made with actual intent to hinder, delay or defraud any creditor, whether the creditor’s claim arose before or after the transfer (Civ. Code, § 3439.04(a)(1)). The creditor has four years from the transfer to sue, or one year after the transfer was or could reasonably have been discovered, if that’s later (Civ. Code, § 3439.09(a)). Seven years after the transfer is the outside limit on any claim under the chapter (Civ. Code, § 3439.09(c)). A creditor who wins can have the transfer avoided to the extent needed to satisfy the claim, get an injunction against further transfers, or have a receiver appointed (Civ. Code, § 3439.07(a)).

A bankruptcy trustee may avoid a transfer to a self-settled trust made on or within 10 years before the filing, if the debtor made it with actual intent to hinder, delay or defraud a creditor and the debtor is a beneficiary (11 U.S.C. § 548(e)(1)). A debtor who funds a trust in good health and good standing, with no claim on the horizon, has a different story to tell than one who funds it the week after a demand letter.

Where a trust you fund for yourself still makes sense

Creditor protection is the wrong reason to build one, but the structures have other uses.

A gift to an irrevocable trust in which you keep no benefit is a normal estate tax tool, and it works because you’ve let go of the property. Nobody should treat it as a creditor shield, since the look-back rules above apply to the transfer. The tradeoffs are in the dangers of an irrevocable trust in California.

A trust for a person with a disability can be funded with that person’s own money. Federal law excludes a trust holding the assets of a disabled person under 65, established for that person’s benefit, from the general Medicaid rule, as long as the state receives the remaining amounts at death up to the medical assistance it paid (42 U.S.C. § 1396p(d)(4)(A)). The general rule counts assets of an irrevocable trust you fund as your resources to the extent payment could be made to you, however much discretion the trustee has (42 U.S.C. § 1396p(d)(2)(C), (d)(3)(B)(i)). I don’t handle Medi-Cal applications or planning, and this paragraph is information only. See Medi-Cal, long-term care and estate recovery and special needs trusts for the background.

A revocable living trust does its real job without any help from creditor law. It avoids probate, names who manages your affairs if you can’t, and keeps the plan private. Creditor protection isn’t on the list.

What protects a California resident who is worried about a claim

The protections that hold up are the ones the Legislature wrote or that someone else creates for you.

Your home has a homestead exemption. It is the greater of $300,000 or the countywide median single-family sale price for the prior year, capped at $600,000. Those are the statutory base amounts, and both have adjusted annually for inflation since 2022 (Code Civ. Proc., § 704.730). The current figures are on the California homestead exemption page.

Retirement money is the other large one. Amounts held in a private retirement plan, for the payment of benefits, are exempt (Code Civ. Proc., § 704.115(b)). IRAs and self-employed plans get a narrower rule, exempt only to the extent necessary for your support in retirement and the support of your spouse and dependents (§ 704.115(e)(1)), with a floor for personal debt tied to the bankruptcy exemption amount in 11 U.S.C. § 522(n) (§ 704.115(e)(2)), so the type of plan matters.

Liability insurance, separate entities formed early for real business reasons, and discretionary trusts that your parents or grandparents create for you complete the list. None of them depends on a court honoring a clause that California statute declares invalid. If you already have a claim pending, the options narrow quickly, and what you can still protect after you’ve been sued walks through them. The full comparison is in the asset protection guide.

Questions to ask before you fund a trust for yourself

• Can I get money out of this trust, by right or at the trustee’s discretion? If yes, assume a California creditor can reach what the trustee could pay me.
• Does any claim, demand letter, lawsuit or unpaid debt exist today? If yes, a transfer now will be read against that background.
• Which state’s law governs the trust, and which court would decide? If the answer depends on a California judge ignoring § 15304, the plan has a gap.
• Is the person recommending it paid by the trust company or by a commission on the sale? Ask who benefits if I say yes.
• What do I give up if the trust fails? An irrevocable trust costs you control even when it doesn’t protect you.

My work is the planning side, including trusts that protect what you leave to your children. My contact page has the ways to reach me.

Frequently asked questions

What is a self-settled trust?

A self-settled trust is a trust you create with your own property in which you are also a beneficiary. The settlor and the beneficiary are the same person. A revocable living trust fits this description, and so does an irrevocable trust that can pay you income or principal. California treats the two differently in detail, but in both cases your creditors can reach what you can get back out.

Can creditors reach my revocable living trust in California?

Yes. Property in a revocable trust is subject to the claims of your creditors to the extent of your power to revoke it, during your lifetime (Prob. Code, § 18200). You keep the exemptions you would have had owning the property directly (Prob. Code, § 18201). After your death, property that was subject to the power of revocation answers for probate estate creditors if the probate estate can’t pay them (Prob. Code, § 19001).

Does a spendthrift clause protect a trust I create for myself?

No. If you’re a beneficiary of a trust you created and your interest has a spendthrift restraint, the restraint is invalid against your creditors and transferees (Prob. Code, § 15304(a)). The trust stays valid, but a creditor can reach the most the trustee could pay you, up to your contribution (§ 15304(b)). A spendthrift clause protects a beneficiary of someone else’s trust, not the person who made it.

Is a Nevada self-settled trust valid for a California resident?

Nevada’s statute allows one (NRS 166.040). A California court isn’t bound by that, and California’s own statute makes a settlor’s spendthrift restraint invalid against the settlor’s creditors (Prob. Code, § 15304). Whether a California court would give effect to a Nevada choice of law for a California settlor is a choice-of-law question this page doesn’t predict. A Washington bankruptcy court applied its own state’s law to a Washington resident’s Alaska trust and held the transfers void (In re Huber, 493 B.R. 798). Don’t assume a Nevada trust works for a Californian.

How long can a creditor challenge a transfer to a trust?

In California, a creditor generally has four years from the transfer to challenge it as made with intent to hinder creditors, or one year after discovery if later, and seven years is the outside limit (Civ. Code, § 3439.09). In bankruptcy, a trustee can avoid a transfer to a self-settled trust made within 10 years before filing if it was made with actual intent to hinder, delay or defraud a creditor (11 U.S.C. § 548(e)(1)).

Can I protect an inheritance for my children with a trust?

Yes. A trust you create for your children isn’t self-settled, because you aren’t the beneficiary. If the trustee has sole discretion over payments, a child’s creditor can’t compel one (Prob. Code, § 15303(a)), and a spendthrift clause shields the child’s interest until it’s paid out (Prob. Code, §§ 15300, 15301). Support judgments and some other claims are exceptions.

Does a living trust protect my house from a lawsuit?

No. A revocable living trust is open to your creditors to the extent you can revoke it, so it doesn’t change who can collect from your house (Prob. Code, § 18200). The homestead exemption protects part of your equity from a judgment creditor. It is the greater of $300,000 or the countywide median single-family sale price, capped at $600,000. Those are the statutory base amounts, adjusted annually for inflation since 2022, so the current figures differ (Code Civ. Proc., § 704.730).