Revocable Living Trusts Do Not Provide Asset Protection
When people think about protecting their assets they often think of trusts.
We always see in the movies how super rich people doing bad things or wanting to avoid taxes create trusts to shield their assets from lawsuits and the government.
There are two truths we need to understand when it comes to revocable living trusts and asset protection.
First, revocable living trusts provide ZERO asset protection for you, the trustor (the person that creates the trust).
Second, most normal, run of the mill people don’t need more than an umbrella insurance policy to protect their assets.
But I’m just going to leave you hanging with that. Let’s dive a little deeper.
First, revocable living trusts by their very nature provide you no asset protection.
The reason for this is they are designed for maximum flexibility and control, to allow you to change them at will and do whatever you want.
Asset protection trusts are designed in exactly the opposite way. You, the creator of the trust have no flexibility and no control, hence the high level of asset protection.
HOWEVER, once you die and the next level of beneficiaries step in under the trust there is a high level of asset protection.
This is because, at that level, the beneficiaries have no ability to change the terms of the trust (no control, no flexibility, high asset protection).
Hopefully this makes sense, if you have more questions set up a time for us to chat.
Estate Planning Attorney