Revocable Living Trust Reason #2 – Divorce Protection | Estate Planning TV 052
Revocable Living Trust Reason #2 – Divorce Protection
We’re continuing our discussion of reasons you might want to have a revocable living trust and today we’re going to talk about the big D.
Before you get too uneasy, though, we’re not talking about YOUR divorce.
A revocable living trust that you create gives you essentially no protection in the event you are divorced (remember, the revocable nature of the trust – i.e. you can change it at any time, destroy it at any time, move property in and out at any time – and its flexibility create a situation with zero asset protection for you).
The divorce we are talking about is the one that your heirs or beneficiaries may go through in the future.
And, while that’s not exactly fun to think about, it is a reality we must (or at least should face) and deal with accordingly.
And your revocable living trust can provide excellent divorce protection, IF you want it to.
Here’s how it works:
When you die, your revocable living trust will become irrevocable. Your heirs will be subject to trust distributions at the discretion of the trustee (or even outright in the future).
While any and all assets remain in the trust they are NOT treated as the property of the beneficiary.
Translation: when your beneficiary goes through a divorce the assets in the trust are not seen as being theirs and therefore they are not included in the settlement.
Now, before we wrap up I do want to say one thing…
What I’ve just given you is the BASICS around trust planning and divorce.
The truth is, in reality it can be a little more complicated (for example, if your kid is both the trustee and the beneficiary there can be issues).
I only tell you this because I want to caution you from adopting the do-it-yourself plan.
You don’t have to use me if you don’t want to (but why would you go anywhere else?), but at least go talk to someone!
If you have any more questions or think you might want some help, click the link below to schedule a phone or in person strategy session. Looking forward to it! https://cmslawfirm.com/scheduleasession