Revocable Trusts and Asset Protection
I was meeting with a new client the other day and the client said that from an asset protection perspective, his assets were safe from creditors' claims because he had a revocable living trust and all his assets were tiltled in the name of his revocable living trust. This is simply not true, although it is a common misconception about revocable trusts.
A revocable living trust is simply a mirror image of you - after all, you are the grantor or creator of the trust, the beneficiary of the trust during your life, and usually the trustee of the trust as well. Since a revocable living trust is, in effect, your alter-ego, your creditors can get at assets in the trust just like you can.
If asset protection is needed, something other then a revocable living trust will have to be implemented as part of your estate plan - an asset protection plan.
So what does a revocable living trust do? Among other things, a revocable living trust:
- Can be used as part of a comprehensive disability plan in case you become mentally incapacitated;
- Can be used to avoid probate and the cost and expense of probate; and
- Can keep all of the details about your estate private.