You may get the impression that a trust of any kind will provide asset protection. The idea is that you are divesting yourself of personal ownership of property that you convey into a trust.
This is not entirely true. Let’s look at some of the details.
Revocable Living Trusts
Revocable living trusts are very popular, and part of the appeal lies in the fact that you can retain control of assets that you convey into this type of trust.
A trust involves the grantor, who is the person who creates the trust; the trustee, the individual or entity that administers the trust; and the beneficiary, who is the person that receives distributions out of the trust.
When you create a revocable living trust you are the grantor. Even though you are the grantor, you may also act as both the trustee and the beneficiary while you are alive and of sound mind. Because of this, you have full control of the assets that you have conveyed into the trust.
Beyond this, remember, this is a revocable living trust. Aside from the control that you retain while the trust is active, you can actually revoke it at any time. It would no longer exist, and the assets that you have conveyed into it would become your personal property once again.
Because you are retaining incidents of ownership, the assets that have been conveyed into the trust are not going to be protected from tax collectors, creditors or litigants seeking redress.
You may be wondering why anyone would want to create a revocable living trust given the fact that they do not provide asset protection. Even though you retain a great deal of control, revocable living trusts facilitate the transfer of assets outside of the process of probate. They are useful as a probate avoidance tool.
Other Types of Trusts
There are other types of trusts that could be useful for those who are seeking asset protection. When you create an irrevocable trust you are surrendering incidents of ownership. Therefore, certain types of irrevocable trusts are used by people who want to protect assets.
Asset Protection Planning: Explore Your Options
When you have been successful throughout your life you should certainly do everything possible to protect the assets that you have been able to accumulate. On the one hand you should protect them for your own purposes, and on the other you should make sure that assets that you are passing along to your loved ones are protected.
You have various different options available to you. If you would like to discuss asset protection planning with a licensed estate planning attorney, we invite you to contact our firm to request a free consultation.