Many believe that the revocable living trusts will protect your assets. You might be surprised that it doesn’t in most instances. In fact, a creditor can, and often will, lay claim to those assets.
Revocable Living Trusts
These are legal documents that allow you to name someone to manage your property while you’re still living. There are three people involved in a trust with these dynamics. You, who fills the role as the creator of the trust, the trustee, who is named by you to manage the assets according to your stipulations, and your beneficiaries, those who receive the assets in the trust as part of their inheritance.
A living trust will provide no significant protection in your estate planning efforts. They have a definitive place in the process, but when it comes to protecting your assets, you’ll need to consider one of the other options. This week, we take a look at living trusts and alternatives for better protection when these dynamics are at play.
Simply stated, a revocable living trust is often included in an estate plan with the primary goal being to keep your family members from the legalities associated with probate following your death. Of course, avoiding probate should be a priority. By using this legal vehicle, and unlike your will, you can place any of your property into it to ensure those who you leave it to aren’t facing a lot of red tape. And, too, the fact that probate can go on for months, a living trust takes on new significance.
Meanwhile, others use living trusts to name a trustee to oversee an estate should they become incapacitated.
Other Estate Planning Options
Now that you know the limitations of a revocable living trust, here are a few reasons why it’s not the route for those looking to protect their assets.
In a revocable trust, you remain the owner of the assets that define it. As we know, anyone can be sued. Creditors can go after any of your assets, including those types of trusts. As long as you’re the owner, you can move those assets around, add to or take away from it as well. There are no restrictions at all, which many creditors might see as avoidance.
So if a revocable trust isn’t going to help in your efforts of protecting your assets, what will? This is where an irrevocable trust comes in. These allow you to separate your name from those assets. If you’re sued, creditors can’t touch those assets. On the flipside, you can’t backtrack and take control of those assets once they’re irrevocable. You have no control, either, as to what happens with it, since you no longer “own” those assets; the trust owns them.
Your best option for considering the best avenue is to meet with an estate planning lawyer. An experienced Ohio estate planning lawyer can help ensure there are no weaknesses in your efforts and can provide peace of mind that your bases are indeed covered.
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