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It can be, depending on whether the trust is an irrevocable trust or a revocable living trust. There are two types of trusts, one in which the trust creator still has control over the assets in the trust (revocable) and one in which the creator relinquishes control over the trust (irrevocable).
With a revocable trust, the creator legally still owns the assets placed in the trust, even if the trust funds are held on behalf of another party. If they’re successfully sued, the assets in the trust may be subject to seizure to pay the plaintiff damages in the suit. The assets in an irrevocable trust, on the other hand, are no longer under the control of the trust grantor and, therefore, technically don’t belong to the original owner.
That being said, courts frown heavily on the creation of a trust specifically to shield assets from potential creditors, including lawsuit plaintiffs. The grantor could be found guilty of fraudulently creating the trust and open to creditor lawsuits. If you are seeking damages from the creator of the trust or the trust itself in a personal injury claim, your recovery can quickly become complicated. Our West Palm Beach personal injury lawyer can advise you of your best legal options.
Understanding how a trust works
A trust is a legal entity that holds and manages money, property, and other assets on behalf of one or more beneficiaries (which can be a person or an entity, like a charitable foundation).
A grantor founds the trust by placing assets in it, working with an estate planning attorney to create trust documents that outline how the trust is to be used and the circumstances under which the recipients financially benefit from the assets in the trust (like paying for college tuition and room and board). A beneficiary is the recipient of financial assistance from the trust, such as monthly income, assets once certain conditions are met, or other fiscal benefits.
The grantor may act as the trustee, responsible for administering the trust, or designate another party to fulfill this responsibility. Trustees have a fiduciary duty to properly manage the trust and act in the best interests of the beneficiaries, which may include hiring a lawyer to protect the trust in the event of litigation.
Options for personal injury plaintiffs if the defendant’s assets are in a trust
What happens when you’re awarded damages, but you can’t get any money because the defendant put their assets in a trust? Florida plaintiffs have a few options:
- Sue the trustee. While the trust cannot be sued directly, you can sue the trustee if the courts determine that they’re personally liable for your harm. Or, recovery for your suit may come from the trust’s funds.
- Challenge the trust’s validity. If there is evidence that the defendant transferred assets into the trust specifically to avoid lawsuits or creditors, you could challenge these transfers as fraudulent conveyances.
- File a temporary restraining order and a preliminary injunction to freeze the trust’s assets while the lawsuit proceeds.
Each of these options requires additional court motions, maybe a hearing, and can prolong the lawsuit process. However, as a valid creditor, you do have rights under Florida law and are entitled to the money awarded to you by a jury or in a settlement. Talk to your personal injury lawyer about the pros and cons of taking these options to get your money.
If you’re seeking damages in a Florida personal injury claim, it is possible to sue a trust or sue the trustee. We can help you. Contact Lytal, Reiter, Smith, lvey & Fronrath at (561) 655-1990 for a free consultation.