We’re living in tough financial times. Small businesses are failing at an alarming rate, bankruptcy filings and foreclosures are reaching record levels. People who never thought they’d have to worry about protecting their property from creditors, or from lawsuits, are facing that very reality.
A Revocable Living Trust Won’t Work
So, can you use a Revocable Living Trust to protect your property from creditors? Unfortunately, no – because you retain control over the property in a Revocable Living Trust, it won’t protect your property from creditors.
Once a creditor wins a lawsuit against you, they can find and collect your assets in payment for the money you owe them. And, if they discover property you’ve transferred into a Revocable Living Trust, then they can access that property just as if it were titled in your name.
This doesn’t mean that you shouldn’t have a Revocable Living Trust; they’re useful for avoiding probate, for protecting your family’s privacy, and for assisting with incapacity planning. And, with the addition of AB Trust provisions, your Revocable Living Trust can be used for estate tax planning and protecting your spouse’s assets after you pass away. But, for dealing with creditors during your lifetime, you’ll need to engage in some additional asset protection planning.
There May Be Other Options
So, if you’re concerned about creditors, you should talk to an attorney. There are likely other steps you can take to preserve your property.
The key is to take the appropriate action to protect your assets before there’s a lawsuit on the horizon. An experienced attorney can evaluate your situation and let you know what strategies would work best for you and your family.
Stephen A. Mendel, Estate Planning Attorney
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