Sued for Everything? Why Your Living Trust Won't Save You

🛡️ The "Revocable Trust" Lie

You have a Revocable Living Trust. You put your house and brokerage account in it. You sleep well at night, thinking, "If I get sued for malpractice or a car accident, my assets are safe."

Wake up. A Revocable Trust offers 0% asset protection. Zero.

Because you have the power to "revoke" the trust and take the money back, a judge can order you to do exactly that—and hand it over to your creditor. To truly protect your wealth while you are still alive, you need the nuclear option: The Domestic Asset Protection Trust (DAPT).

Historically, if you wanted to protect your assets from creditors, you had to send your money to an offshore island like the Cook Islands or Nevis.

But starting in the late 90s, certain US states realized they could attract capital by rewriting their laws. They created the Self-Settled Spendthrift Trust.

The Magic: In a DAPT, you can be the Creator (Settlor) AND the Beneficiary. You can enjoy the money, but creditors cannot touch it. 

Sued for Everything?

Why Location Matters (Nevada vs. California)

You cannot just open a DAPT anywhere. Most states (like California, New York, Texas) do not allow them.

You must set up the trust in a DAPT-Friendly State, even if you don't live there. The "Big 4" states are.
1. Nevada (The Gold Standard)
2. South Dakota
3. Delaware
4. Alaska

⚠️ Warning for CA/NY/WA Residents: If you live in a hostile state like California, a local judge may apply "California Law" over "Nevada Law" to penetrate your trust (Conflict of Laws). You need specialized legal structuring (like an LLC inside the trust) to reinforce the shield.

🏆 Why Nevada Wins

Nevada has the shortest "Statute of Limitations" (2 years).

This means if you put assets into a Nevada DAPT, and a creditor tries to sue you 2 years and 1 day later, they are barred from touching the assets. Delaware gives creditors 4 years. Nevada gives them only 2. That 2-year difference is everything.

The "Irrevocable" Trade-Off

There is a catch. To get this protection, the trust must be Irrevocable.

You cannot just call the bank and say, "Transfer $1 million to my personal checking." You must ask the Independent Trustee.

• The Structure (Bifurcated Trustees)
  • Investment Trustee (You): You decide how the money is invested (stocks, real estate, crypto). You keep control of the growth.
  • Distribution Trustee (Trust Company): They decide when to give you distributions. Because you don't have the power to demand money, the judge cannot force you to demand money.

The "Fraudulent Transfer" Trap

You cannot wait until you are sued to set this up.

If you crash your car on Monday, and transfer your assets to a DAPT on Tuesday, that is called a Fraudulent Transfer. The court will unwind it and potentially charge you with a crime.

DAPTs are for "Sunny Day Planning." You must build the fortress before the storm comes.

🛡️ Chief Editor's Verdict

This is not cheap. In 2026, a Nevada DAPT costs $6,000 - $12,000 to set up and $3,000 - $5,000/year to maintain.

1. The $2 Million Rule: Generally, this strategy makes sense if you have a net worth of $2 million or more, or if you work in a high-risk profession (Surgeon, Developer).
2. Don't DIY: You need a Nevada-based Trust Company to serve as the trustee. If you appoint your brother in California as trustee, the California courts will pierce the veil immediately.

Own nothing, control everything. That is the billionaire mindset.

Disclaimer: This article is for educational purposes only and does not constitute legal or financial advice. Asset protection laws are subject to state interpretation and can change (e.g., Uniform Voidable Transactions Act). Establishing a DAPT to evade existing creditors is illegal. Residents of states like California and Washington face specific jurisdictional risks. Always consult with a qualified asset protection attorney.