Asset Protection Trusts: 2026 Guide

Short answer: A funded revocable living trust keeps your family out of probate court and lets a successor trustee manage your assets if you become incapacitated. It doesn’t protect your assets from your own creditors, because property in a trust you can revoke stays subject to your creditors’ claims while you’re alive (Prob. Code §18200). Real asset protection comes from different trust terms, mainly spendthrift provisions in trusts for your beneficiaries (Prob. Code §§15300, 15301).

People come to me asking for an “asset protection trust” and mean one of three things: avoiding probate, keeping an inheritance safe from a child’s creditors, or sheltering their own savings from a lawsuit. California law treats those very differently. The first two are routine. The third mostly isn’t available in California, and it’s better to know that before you pay for a document that promises it.

	Goal	What works	California answer
Avoid probate	A funded revocable living trust	Yes Assets titled in the trust skip probate
Keep an inheritance safe from a child’s creditors	Spendthrift clause in the trust for the beneficiary (Prob. Code §§ 15300, 15301)	Yes Generally protected while still held in the trust
Shelter your own savings from a lawsuit	Revocable or self-settled trust	No Mostly unavailable (Prob. Code §§ 18200, 15304)

Law verified against Prob. Code §§890, 1800.3, 8200, 13100, 15200, 15300, 15301, 15304, 15400, 16061.7, 18200 and 19001, Civ. Code §3439.04, Rev. & Tax. Code §13301, and 26 U.S.C. §§676, 2010 and 2038, 2026. This is general information, not legal advice for your situation.

How a living trust works

A trust can be created by a declaration that you hold your own property as trustee, or by transferring property to someone else as trustee (Prob. Code §15200(a), (b)). With a living trust you usually do the first. You’re the trustee of your own trust, you manage everything as before, and you name a successor trustee to take over later.

A California trust is revocable unless the trust instrument expressly makes it irrevocable (Prob. Code §15400). That flexibility is why most families use a revocable living trust. It’s also why a revocable trust offers no creditor protection during your lifetime.

Benefit one: avoiding probate

A will doesn’t move anything on its own. After death, whoever holds the original will must deliver it to the clerk of the superior court within 30 days of learning of the death (Prob. Code §8200(a)(1)). If the estate needs probate, the court supervises the process through final distribution. The probate process in California commonly takes twelve to eighteen months.

Assets titled in the trust’s name don’t go through that process. Your successor trustee administers them privately. The trustee does have to serve a notification on beneficiaries and heirs when a revocable trust becomes irrevocable at the settlor’s death (Prob. Code §16061.7(a)(1)), but nothing is filed with a court just to administer the trust.

The trust only covers what’s in it. An asset left in your individual name may still need probate, unless the estate qualifies for a small estate procedure. That limit is $208,850 for deaths on or after April 1, 2025 (Prob. Code §13100), and it adjusts every three years (Prob. Code §890(a)). This is why I record the deed moving your house into the trust and give you a map for re-registering each account. The trust funding step is where most plans succeed or fail.

Benefit two: planning for incapacity

If you can’t manage your finances and have no plan, your family may have to ask a court to appoint a conservator. The court can’t grant a conservatorship unless it finds that it’s the least restrictive alternative needed to protect the person, and it must consider alternatives such as powers of attorney and advance health care directives (Prob. Code §1800.3(b), (c)). A trust with a named successor trustee, paired with a durable power of attorney and a health care directive, is the alternative the court looks for.

Benefit three: control over how heirs receive money

A will in probate usually ends with outright distribution. A trust can hold assets for years. You can stagger distributions by age, limit them to education or a home purchase, or leave everything in trust for life with an independent trustee. For a child who receives means-tested benefits, the right structure is a special needs trust, which needs specific drafting.

Asset protection trusts: protecting what your heirs inherit

If your trust says a beneficiary’s interest in income can’t be transferred, that interest isn’t subject to enforcement of a money judgment until it’s paid to the beneficiary (Prob. Code §15300). The same rule covers principal (Prob. Code §15301(a)). A creditor of your child, or a spouse in your child’s divorce, generally can’t reach money still held in the trust. There are exceptions. Principal that has already become due and payable can be reached by a judgment creditor through a court petition (Prob. Code §15301(b)). My post on spendthrift trusts and creditor protection covers the rest.

Asset protection trusts: protecting yourself

Here the answer is mostly no. A spendthrift clause protecting the settlor’s own interest “is invalid against transferees or creditors of the settlor” (Prob. Code §15304(a)). If the trustee has discretion to pay you, your creditors can reach the most the trustee could pay you, up to what you put in (Prob. Code §15304(b)). Making the trust irrevocable doesn’t change that if you remain a beneficiary.

Protection for yourself comes from giving the asset up for real, to a trust you don’t benefit from, and doing it before any claim exists. A transfer made to hinder or defraud a creditor can be undone (Civ. Code §3439.04(a)(1)). I cover the tradeoffs in revocable vs. irrevocable trust in California.

Creditors after your death

A revocable trust doesn’t cut off your creditors when you die either. Property that was subject to your power of revocation is subject to your probate estate’s creditors and administration expenses, to the extent the probate estate can’t cover them (Prob. Code §19001(a)).

What a trust does for taxes

A standard revocable trust doesn’t lower your income tax or estate tax. For income tax, you’re treated as the owner of a trust you can revoke (26 U.S.C. §676(a)), and for estate tax, property you could take back is included in your gross estate (26 U.S.C. §2038(a)). California imposes no inheritance tax and no gift tax (Rev. & Tax. Code §13301). The federal basic exclusion amount is $15,000,000 per person for 2026 (26 U.S.C. §2010(c)(3)(A)), so federal estate tax isn’t a concern for most California households. Families above that level use irrevocable trusts as part of tax planning, which is a separate conversation.

What it costs

My flat fee for a trust-based estate plan is $4,900. It includes the revocable living trust, pour-over will, incapacity documents, up to two deeds transferring California real estate into the trust, and a notary who comes to your home to sign, even nights and weekends. Planning happens by phone and Zoom, and a mobile notary comes to you for signing. See fee information for what’s included.