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
- What Happens to Assets When Creating a Trust? - February 27, 2017
- Are Living Wills Different from Regular Wills? - February 28, 2017
- Why Wills are Such a Common Estate Planning Tool? - March 1, 2017
