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Home » Asset Protection » Why a Living Trust Cannot Protect Assets

Why a Living Trust Cannot Protect Assets

November 12, 2010 by Larry Parman, Attorney at Law

A Revocable Living Trust is a great estate planning option. It offers a plan for disability, a way to avoid probate and allows you to easily pass belongings to your loved ones. A Living Trust does not, however, offer creditor protection for your assets. If you have assets within a Revocable Living Trust they can be taken by a creditor, for a lawsuit or by a divorcing spouse. There are two aspects of a Living Trust that make it unsafe for asset protection: that it is Revocable and that you are the beneficiary.

Revocable

All Living Trusts are Revocable, which means they can be changed by the Trust maker after they are created. This changeability allows you to put assets in and take them out as needed. Because assets can be easily removed, a judgment creditor or bankruptcy trustee can stand in your place and remove assets in order to pay off a debt.

Ownership

Although Living Trust assets are no longer titled in your name, they are still considered your property. This is because, as a beneficiary, you have full benefit of all Trust assets and income from those assets. Since assets titled in the name of your Trust actually belong to you, they can be taken for any legal action against you.

Options

Asset protection is important and goes beyond a basic Will or Living Trust. In order to protect your assets you must determine your financial goals for your life and retirement and decide what inheritance you want to leave for your loved ones. Your attorney can help you find the best asset protection strategies for your lifetime as well as asset protection for the lives of your family members. Common options include irrevocable trusts and family limited liability companies.

Larry Parman
Attorney at Law

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Larry Parman, Attorney at Law
Larry Parman, Attorney at Law
Founder and Owner at Parman & Easterday
After helping his own family deal with a lengthy probate and the IRS following his father’s untimely death in a farm accident, Larry Parman made a decision to help families create effective estate plans designed to reduce taxes, minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors.
Larry Parman, Attorney at Law
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