Are Trust Assets Immune from IRS Tax Liens?

In a perfect world, putting your assets on trust spares your beneficiaries from the inconveniences that come with probate proceedings. What if a federal tax lien enters the picture, though? Placing your assets into a living trust doesn’t keep it from your creditors’ reach—not especially if you owe the IRS. 

Technically, all property transferred in a living trust is still your property unless such transfer constitutes a sale. If the trust is revocable, it can be changed as you will any time. Nevertheless, the government can still seize your property by filing a federal tax lien on it. As for irrevocable trust, your properties are better protected because it makes it more difficult to withdraw the property from the beneficiary. If you fail to pay your tax debt, the IRS can’t go after the trust assets unless it shows you’re committing some sort of tax fraud. 

Nonetheless, anything your trust assets earn will proceed to the income taxes, otherwise, the IRS may file a lien against them. Regardless of whether you control the trust or not, your tax debt has to be paid or else, the IRS may foreclose your properties if it’s left with no other means to collect money from you. In this case, it would be best to file an appeal if you deem the tax claim inappropriate or negotiate a settlement with a tax lawyer on your side.