Key Points
- Placing a property in trust does not make it untouchable: asset segregation has a specific weakness, namely a creditor's avoidance action.
- If the trust arrangement is created when debts already exist, the protection is bound to fail; once it has failed, no subsequent move can restore it.
- Changing trustee is an illusion: the incoming trustee is a successor in title to the specific right in dispute under Article 111 c.p.c. and is bound by the effects of what happened previously.
- In a self-declared trust, attachment is carried out directly against the debtor, without the formalities required for enforcement against a third-party owner.
- The successful bidder at auction is protected: challenges to the attachment and the award at auction must be raised during the proceedings, not after the transfer has taken place.
An idea has been circulating for years among those concerned with — or worried about — protecting their assets: placing a home in trust supposedly puts it beyond creditors' reach once and for all. There is some truth in this idea, because an asset settled into a trust does indeed form a separate fund, distinct from the personal assets of whoever administers it. But it also contains a dangerous misconception: that separation is not an impregnable fortress.
It has a specific weakness, known as a creditor's avoidance action, and a moment at which almost everything is determined: when the trust is established. If the trust arrangement is created when debts already exist, the protection is bound to fail; and once it has failed, no subsequent move — not even changing the trustee — can restore it. A recent ruling by the Italian Supreme Court (Corte di Cassazione) (Order No. 16957/2026) illustrates this with a clarity worth more than many textbooks.
The trajectory of a "protected" property
The story begins in 2010, when a married couple establish a self-declared trust: a straightforward — and, as will become apparent, fragile — form of trust, in which the settlors appoint themselves as trustees. The property remains registered in the names of the same people but becomes part of a separate fund, and the couple also reserve the right to continue living in it. On paper, the home is safe.
In reality, it is not. A creditor of the couple responds with an avoidance action, the remedy enabling a creditor to have the transaction by which the debtor divested themselves of assets declared ineffective against that creditor. She registers the claim in the land register in 2012, and in 2014 the Court (Tribunale) finds in her favour: as far as she is concerned, it is as though the settlement into trust had never occurred. The following year brings the decisive step: attachment of the property, carried out directly against the couple, who are simultaneously the trust's settlors, debtors and trustees.
At this point, the family plays the card that gives the whole affair its significance: after the attachment has already been registered, a new person, unconnected with the debts, takes over as trustee, in the hope that the fund, having passed into other hands, will become untouchable again. It does not work. The proceedings continue, and in 2019 the home is sold at auction and transferred to the purchaser. And when the new trustee and one of the settlors bring a final action after the event to recover the property and the right of habitation, the judges' answer — at three levels of jurisdiction, up to the Italian Supreme Court (Corte di Cassazione) — is an unequivocal no, accompanied by costs orders and, at first instance, a penalty for vexatious litigation.
Asset segregation is not a fortress: an avoidance action can defeat the trust if the debts predate the settlement
To understand why the protection failed, it is necessary to examine the mechanism.
A trust produces its characteristic effect — asset segregation — from the moment it is created and throughout its duration. But creditors prejudiced by the settlement have an avoidance action available to them, and if they succeed, the outcome is far-reaching: the transaction remains valid between the parties, whereas, in relation to the successful creditor, it is as though it did not exist. The asset once again becomes available to satisfy the debts and may be attached, without the restriction earmarking it for the trust's purposes being enforceable against that creditor any longer.
In a self-declared trust, moreover, the creditor's route is even simpler. Since there is no transfer to a third party — the settlor and trustee are the same person — attachment is carried out directly against the debtor, without the formalities required for enforcement against a third-party owner. This is why this variant, often chosen precisely by those wishing to retain control of their assets, is also particularly vulnerable when creditors come knocking.
Changing trustee is an illusion
And what of replacing the trustee?
This is a particularly instructive part of the story. The reasoning behind the defence was this: if the fund passes to a new trustee, unconnected with the debts, the attachment carried out against the former trustees, who were also the debtors, should not be enforceable against the incoming trustee. The Italian Supreme Court (Corte di Cassazione) rejected the reasoning at its root: whoever takes over as trustee does not start a new game, but continues the one already under way. The incoming trustee takes over the assets in their existing state — with the registrations, attachments and court proceedings already in place — and is bound by the effects of what happened before their arrival: they may defend themselves in pending proceedings, but cannot reopen matters that have already become settled. In other words, the trust's governance may change any number of times; the fund's position in relation to creditors remains the same.
To reach this conclusion, the Italian Supreme Court (Corte di Cassazione) used a specific category of procedural law: the new trustee is a successor in title to the specific right in dispute, under Article 111 of the Code of Civil Procedure. Anyone who succeeds to a right already at the centre of a dispute does not stand outside that dispute: they are bound by its outcome, exactly as their predecessor would have been. Replacing the officeholder is a matter of free choice, but it does not erase the fund's history.
The successful bidder is protected: late challenges do not reopen the transfer
There is also an aspect of interest to a different audience: those who invest in judicial auctions. The case confirms the stability of purchases made through enforcement proceedings: challenges to the attachment and the award at auction must be raised during the proceedings, through the objections provided for by the Code, and once the asset has been transferred, the purchase can no longer be called into question by late claims, except in the exceptional case of collusion between the creditor and the purchaser. Even the reservation of the right of habitation that the couple had secured for themselves did not survive: created by the transaction subsequently declared ineffective, it shared that transaction's fate. In short, anyone who successfully bids for an asset from a trust that has been successfully "challenged" need not fear that the trust restriction will reappear after the event.
The procedural rule is clear: defects in enforcement must be challenged during the proceedings, through the objections provided for by the Code, not after the event. Once the transfer has taken place, that remedy is no longer available. Not even an objection to the validity of the instrument establishing the trust — raised out of time — can reopen a matter that has already been closed.
A trust works, but not as a last-minute shield
The lesson is not that trusts serve no purpose. They remain an effective estate-planning tool: to organise an intergenerational transfer, protect a vulnerable family member or earmark assets for a particular purpose. But the protection they offer must be built in advance, when creditors are not on the horizon, and holds only if the settlement pursues purposes worthy of protection rather than merely depleting the assets available to satisfy creditors.
There is also a cultural aspect to bear in mind. A trust is often perceived as a tool to be activated when a problem arises, a safe to be locked when the waters become troubled. The reality is exactly the opposite. A settlement made well in advance, for genuine and documented purposes — protecting family members, orderly succession, managing assets over time — is difficult to challenge, precisely because it is created in a context where there is nothing to hide. A settlement made when creditors are already at the door is, at best, a way of buying time.
Used as an emergency remedy when debts have already arisen, a trust buys time, not protection; and, as this case shows, last-minute governance changes merely add the costs of years of unsuccessful litigation to the loss already suffered.
For planning undertaken in good time, see the page dedicated to trusts and wealth management.
Frequently Asked Questions
Is a property settled into a trust protected from creditors?
Not always. The settled asset forms a separate fund, but that separation has a specific weakness: a creditor's avoidance action. If the trust arrangement is created when debts already exist, the protection is bound to fail.
What happens if the creditor succeeds in the avoidance action?
The transaction remains valid between the parties, whereas, in relation to the successful creditor, it is as though it did not exist: the asset once again becomes available to satisfy the debts and may be attached, without the restriction earmarking it for the trust's purposes being enforceable against that creditor any longer.
Does replacing the trustee stop enforcement?
No. Whoever takes over as trustee continues the process already under way: they are a successor in title to the specific right in dispute under Article 111 of the Code of Civil Procedure and are bound by the effects of registrations, attachments and court proceedings already in place.
Why is a self-declared trust more vulnerable?
Because there is no transfer to a third party — the settlor and trustee are the same person — attachment is carried out directly against the debtor, without the formalities required for enforcement against a third-party owner.
Does someone buying an asset from a trust at auction risk challenges?
Challenges to the attachment and the award at auction must be raised during the proceedings, through the objections provided for by the Code: once the asset has been transferred, the purchase can no longer be called into question by late claims, except in the exceptional case of collusion between the creditor and the purchaser.
Giancarlo Marzo — Marzo Associati, Law and Tax Firm. Article published in We-Wealth on 14 August 2026.
