One of the most common questions that I receive from families regarding trusts is whether placing their assets into a trust will protect them from creditors and provide them with protection of their personal assets from loss due to a lawsuit. Although there are hundreds of different types of trusts (revocable and irrevocable) that can be customized for the particular family situation, the short answer is no. A simple revocable living trust will not protect your assets from loss due to a lawsuit.
The purpose of the basic estate plan which includes a revocable living trust, will, power of attorney for health care and financial decisions, and living will, is to keep your estate settlement simple for your surviving family. In addition to the benefit of avoiding probate for your surviving family, preventing a government intrusive probate court process, avoiding unnecessary delays of your surviving family members reaching your financial assets in a timely manner, and avoiding tens of thousands of dollars in financial cost in the settlement of the estate after death.
However, a simple revocable trust does not protect your assets from loss due to a lawsuit. However, a revocable living trust can be designed to protect your children’s inheritance from loss due to a lawsuit, due to creditors, or even from a spousal claim in a divorce. So long as the trust is structured the correct way and with the correct language, the inheritance that you leave your adult son or daughter in a revocable living trust can be protect.
In addition, your assets can be protected from potential creditors through a Domestic Asset Protection Trust. These trusts can provide a significant level of asset protection from creditors, lawsuits, and even divorce claims. However, these trusts are very complex with a complex set of rules. If you are thinking about establishing a Domestic Asset Protection Trust it is recommended that you seek the advice of a knowledgeable estate planning attorney to determine if it is the right choice for your estate planning and asset protection needs.
If you have questions or concerns regarding the proper comprehensive estate plan to put in place for your family to ensure a smooth transition of your wealth to the next generation, then please contact our office for a complimentary visit and conversation so that we can discuss your estate planning needs in further detail.
We look forward to hearing from you!