Re: What's The Best Way To Hide/Protect Assets
Why is the trust being sued? Did the trust do something bad?
If she is sued solely as trustee of the trust and not in her individual capacity, then only trust assets are at risk.
If she is sued in her individual capacity and loses, then certain of her assets will be exempt from creditors. What assets are exempt depends on a mix of federal and state law. ERISA qualified retirement plans and pensions are not subject to creditor claims, except for claims of the federal government (for example, taxes) and except for claims of a spouse in a divorce action. IRAs, including both Roth IRAs and traditional IRAs are exempt up to $1,000,000, plus any rollover amounts from ERISA plans like 401ks. However, the IRA exemption only applies if she files bankruptcy. If she doesn't file bankruptcy, then what is exempt in her IRA depends on state law, which is all over the board, from fully exempt to not exempt at all.
If she doesn't file bankruptcy, the only way to know what is exempt is to consult the law of her state. For example, Minnesota has a $250,000 homestead exemption. Florida has an unlimited exemption. Wisconsin has a $40,000 exemption. There are even a couple of states that have no homestead exemption.
Putting assets in a trust to protect them from creditors is a strategy that may or may not work. First of all, the trust better be created before there is a creditor claim or the creation of the trust may be considered a fraudulent transfer. If a person is the beneficiary of a spendthrift trust that was created by someone else, then the trust assets are probably safe. If a person forms their own revocable trust, the assets probably are not safe from creditors. If you form an irrevocable "asset protection trust" in a state that offers such a trust, then the answer is maybe yes, maybe no. These trusts are put in place to try to safeguard assets from creditor claims, as well as an estate planning tool. An amendment to the bankruptcy code was proposed to specifically deny protection of these trust assets in bankruptcy. The amendment was defeated. By defeat of the amendment, I suppose you could argue that Congress was indicating its intent not to include in the debtor's bankruptcy estate the beneficial interest in a properly formed domestic asset protection trust.
However, I see nothing to indicate that the trust would be protected from a bankruptcy trustee's claim that the trust was a fraudulent transfer. I also think that a trustee in bankruptcy could easily argue that a trust reserving excessive control to the debtor (or arguably any control) is property of the bankruptcy estate which could be liquidated to pay creditor claims.