Generally speaking properly formed spendthrift trusts will not be able to be attached by creditors of the beneficiaries. Historically, the trust could not be "self settled," that is, formed by you with yourself as a beneficiary. But grandpa could form a spendthrift trust with proceeds going to his children and grandchildren. A creditor of the beneficiaries would not be able to reach the trust assets. A creditor of grandpa may or may not be able to seize trust assets, depending on grandpa's degree of control (revocable vs. irrevocable), grandpa's intent in forming the trust (was it to evade creditors?) and how long ago the trust was formed (transfers without reasonable equivalent value can be undone within a certain time period, generally six years).
In the past few years there has been a development in some states of allowing asset protection trusts that you could form with yourself as a beneficiary and under those state's laws, could not be attached by your creditors. These laws are fairly new and I question whether an asset protection trust would protect you from creditor claims in a bankruptcy. The bankruptcy code does not currently address these kinds of trust and when the most recent amendments to the code were passed they did not modify the code to address these types of trusts.
I talked more about these types of trusts here:
http://early-retirement.org/forums/i...41896#msg41896
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