If you have worked hard and invested wisely during your lifetime you likely have assets that you want to protect. Whether you are protecting those assets from current or future creditors, the method you use for asset protection will determine how safe your assets really are. A trust can be used to provide asset protection; however, the right type of trust must be used. A revocable living trust, for example, does not provide the asset protection you are looking for to shelter your assets.
A trust is a common addition to any estate plan. The type of trust you create will depend on the purpose of the trust. A testamentary trust is a trust that becomes effective at the time of your death. An inter vivos, or living, trust is one that becomes effective when all the elements of the trust are in place and sufficient assets are transferred into the trust. Trusts may also be either revocable or irrevocable. If you create a revocable trust you may modify the trust or completely revoke the trust at any time and for any reason. If, however, you create an irrevocable trust you cannot change anything or revoke the trust after it becomes effective. Therefore, a revocable living trust is a trust that becomes effective during your lifetime and that can be modified or revoked by you at any time.
Although all trusts are separate legal entities, with a revocable living trust you can still have complete control over the assets transferred into the trust. You have the ability to name yourself as the trustee of the trust, meaning you will continue to control the day to day management of the trust assets even though they are now owned by the trust. Moreover, you can revoke the trust at any time and simply transfer the assets back to you. Because of this, assets held by a revocable living trust are not outside the reach of creditors.
You can create an irrevocable trust that provides asset protection; however, you need to be sure the trust you create accomplishes your objective. With an irrevocable trust, once you transfer assets into the trust you know longer control the assets. Therefore, the transfer is not one in name only – you actually give up control of the assets as well. THIS IS A COMPLEX ESTATE AND FINANCIAL TRANSACTION THAT REQUIRES CAREFUL ANALYSIS BY EXPERIENCED ESTATE AND ASSET PROTECTION LEGAL COUNSEL.
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