Asset Protection in Kentucky: Exemptions, LLCs and Trusts
Kentucky protects less of what you own than most clients assume, and until July 15, 2026 it would not let you shelter your own assets in a trust that also benefits you. What a creditor can take, whether an LLC protects a rental, and how Kentucky's qualified trust works all have narrow answers.
William J. Brown, our Managing Partner, is admitted in Kentucky and handles asset protection matters for the firm.
What Kentucky exempts, and where structures stop working
The general exemptions are modest. The homestead exemption is $5,000 in value, and it does not apply against a mortgage, the purchase price, or a debt that existed before you bought or improved the property (KRS 427.060). Household goods are exempt up to $3,000, one vehicle up to $2,500, and wage garnishment is capped at no more than 25% of weekly disposable earnings (KRS 427.010). The larger protections are statutory carve-outs: qualified retirement accounts, except contributions made within 120 days before a judgment or levy (KRS 427.150), and life insurance proceeds payable to someone other than the insured (KRS 304.14-300). Annuity payments are exempt only up to $350 a month (KRS 304.14-330).
Since July 15, 2026, Kentucky allows a qualified trust for your own benefit: irrevocable, governed by Kentucky law, with a spendthrift clause and a Kentucky qualified trustee who is not you, funded after your sworn solvency affidavit (KRS 386.601, 386.603). Creditors can attack the transfer only as a voidable transaction, generally within 2 years, and past-due support, maintenance, property-division orders and pre-existing debt instruments are not cut off (KRS 386.605). Any other such trust stays exposed despite a spendthrift clause (KRS 386B.5-020(7)(a)). A spendthrift trust for a spouse, child or heir is valid, subject to exceptions for support, necessary services and taxes (KRS 386B.5-020).
For rental and business assets the working tool is the LLC. Members are not personally liable for company debts, even in a single-member LLC (KRS 275.150). A member's creditor is limited to a charging order on distributions, but a court may order foreclosure on the charged interest (KRS 275.260). Timing matters most: a transfer made to hinder a creditor can be unwound, and a pending or threatened suit counts toward that intent (KRS 378A.040), generally within 4 years of the transfer (KRS 378A.090).
Exemption Mapping
Which assets fall under KRS chapter 427 and the retirement and insurance exemptions, and which sit exposed.
LLC Holding Structures
Separate LLCs for rentals and operating businesses under KRS chapter 275, with agreements drafted around the charging order statute.
Trusts for Other Beneficiaries
Spendthrift trusts under KRS 386B.5-020 so an inheritance is not exposed to a beneficiary's creditors.
Titling and Transfer Review
Deed language for spouses, who hold as tenants in common unless survivorship is expressly stated (KRS 381.050), and review of transfers made after a claim.
Does Kentucky have an asset protection trust?
Yes, since July 15, 2026: the qualified trust under KRS 386.601 to 386.619, which requires, among other things, a Kentucky qualified trustee other than you and a qualified affidavit signed before funding. Any other trust for your own benefit stays reachable to the most it could distribute to you (KRS 386B.5-040(1)(b)).
How much of my home is protected from creditors in Kentucky?
The homestead exemption is $5,000 in value (KRS 427.060), and it does not defeat a mortgage, a purchase-money claim or an earlier debt.
Does an LLC protect my rental property in Kentucky?
It protects you from the LLC's debts, including a single-member LLC (KRS 275.150), but not from your own negligence. A creditor of yours is limited to a charging order, which a court can follow with foreclosure of the interest (KRS 275.260).
Can I move assets now if I am being sued?
Not safely. A transfer made with intent to hinder, delay or defraud a creditor is voidable, and a pending suit is a listed factor (KRS 378A.040). We do not take on planning meant to defeat an existing creditor.
Facing an asset protection question in Kentucky?
The first consultation is confidential, and we respond within one business day.