If Mr. Smith has a judgment entered against him, and he decides you create an irrevocable trust, the greater will be your chances of success. In California, Probate Code §15304 (the “self-settled trust rule”) provides that an irrevocable trust in which the settlor is also a beneficiary is invalid against the settlor’s creditors, at least to the extent that the settlor might have received a distribution. If the trustee could have distributed all of the trust’s income and/or principal to Mr. or Mrs. Smith — even if the trustee had made no distributions to them — the creditors could nonetheless reach all of the assets of the trust.
the following week to create an irrevocable trust and then transfers his assets into the trust, the trust might avoid the probate of his estate upon his death, but it will likely not shield the assets from his creditors. As- set protection is contingent upon creating and funding the trust early enough so that a creditor cannot argue that the transfer to the trust was a fraudulent conveyance, i.e. a transfer designed to “delay, defeat or defraud” creditor. The earlier you create an irrevocable trust, the greater will be your chances of success. In California, Probate Code §15304 (the “self-settled trust rule”) provides that an irrevocable trust in which the settlor is also a beneficiary is invalid
against the settlor’s creditors, at least to the extent that the settlor might have received a distribution. If the trustee could have distributed all of the trust’s income and/or principal to Mr. or Mrs. Smith — even if the trustee had made no distributions to them — the creditors could nonetheless reach all of the assets of the trust.