Can a Living Trust Protect Your Assets From Creditors?
There are a number of advantages inherent to revocable living trusts. In addition to giving clear instruction for distributing assets after you have died, they also afford your family the convenience of avoiding probate, which can be costly and time consuming. However, some people establish a revocable living trust believing that this type of documents shields their assets from creditors. The truth is that revocable living trusts do not protect your assets from creditors’ claims.
A revocable living trust should be viewed as an estate-planning tool. It is a great way to leave your family money without losing control of your estate during your lifetime. These types of trusts function by technically shifting ownership to someone else prior to your death, but leaving you in control of the assets. Then, upon your death, the assets are automatically passed to your beneficiaries without having to go through probate.
However, the way that these documents allow you to maintain control of your estate is the same reason your assets are not protected from creditors. While you are still alive, you can still withdraw, sell or give away property from the trust. For legal purposes, you are still the owner of these assets. Any creditor that makes a claim against your property can legally target these assets.
Another important aspect of these trusts is that they are revocable. This only reinforces the fact that the assets are still technically yours. If they did serve to shield assets, there is nothing stopping a person from executing a living trust, avoiding all debts while maintaining control and use of the assets, and then revoking it once any creditors had given up on their claims.
There are plenty of other good reasons to establish a revocable living trust, however, and it remains one of the most popular estate planning tools. If you are interested in learning more about these trusts from a legal professional, speak with a Florida trust attorney from The Charles Law Offices.