Can You Use a Revocable Living Trust for Asset Protection?

Oct 20, 2010  /  By: Roger Levine, Estate Planning Attorney  /  Category: Asset Protection

A Revocable Living Trust is a popular alternative to a basic Last Will and Testament. A Living Trust offers a few more benefits than a Will, including circumvention of probate and privacy for you and your heirs. There is one benefit, however, that Wills and Living Trusts do not provide: asset protection. Assets in your Living Trust have absolutely no protection from potential creditors.

Why

When you create a Revocable Living Trust, you become the trustor, trustee and beneficiary. You will remain as the Trustee while you are in good mental health. You will remain as the beneficiary for the duration of your life.

At any time you can fund items into your Trust and remove them. Unlike an Irrevocable Trust, items within your Trust remain completely in your control and are considered part of your legal estate. For this reason, your assets can be taken out at any time to settle a judgement against you.

Potential Threats
There are various possible threats to the assets in your Living Trust. For example, if at anytime during your life a creditor receives a judgment against you, you and a spouse divorce or you are the defendant in a negligence lawsuit, assets within your Living Trust may be taken to settle your debt.

Without additional planning, once you pass away, your heirs will also have the potential to lose the Trust funds that they inherit to their own debts, divorcing spouses or lawsuits.

Alternatives
If you want to protect some of your assets from creditors, a possible divorce and lawsuits, you should speak with your attorney about the best asset protection methods for you. Your attorney will help you determine what you will need to protect for your retirement years and what you should protect for your heirs. Some protection methods include Irrevocable Trusts and Family Limited Liability Companies.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

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How to Protect What You Have

Sep 20, 2010  /  By: Roger Levine, Estate Planning Attorney  /  Category: Advanced Planning, Asset Protection

Because you don’t know what the future holds, asset protection is a great way to make sure you will have money for your retirement and still be able to leave an inheritance to your children. Asset protection can protect you from creditor judgments and lawsuits.

Evaluate

First, you must evaluate what your estate is worth and which of your assets need to be protected. Every item you own and every bank account that you hold is either exempt or non-exempt. When an asset is exempt it cannot be taken to settle a creditor debt or other lawsuit. The asset protection process focuses on converting non-exempt items to exemption items.

Protect Your Retirement

If you do not preserve your retirement funds and your home, your later years may be affected. A creditor can place a lien upon your home that will be collected when you sell. Many retirees choose to sell their homes and move to smaller homes or even assisted living facilities and sometimes have no choice, but to move to a nursing home. The lien on your property could affect your retirement nest egg.

Some of your retirement accounts may offer a degree of protection from creditors. For those accounts that do not offer full protection, speak with your attorney about the best way to protect those funds.

Protect Inheritances

Once you have protected what you need for your lifetime, you can focus on inheritance asset protection for your family. Irrevocable Trusts and Family Limited Liability Companies are two ways to protect the assets your members will inherit from your debts and from their own debts. You can even offer family members permanent protection against ex-spouses through Lifetime Trusts.

Don’t Wait

Asset protection should be a major part of your estate planning process. Don’t wait to protect what you have, or it may be too late. You cannot protect an item after you already have a creditor judgment or lawsuit pending. To do so is illegal, and the item may be taken anyway.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

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