When we are sitting with clients discussing how to plan their estates, we are often asked about how to protect assets from the high cost of long term care or from other potential creditors. It’s generally in the context of whether a Revocable Living Trust (RLT) will protect their assets from their creditors.
The short answer is “no.” An RLT is usually set up to allow the Trustmakers to serve as Trustees, to maintain control over their assets, and to have unlimited access to their assets. Because the Trustmakers have access to and control over the assets, their creditors can get at those assets as well. So while an RLT can be set up to provide protections for your beneficiaries, it won’t protect your assets from your creditors and potential creditors.
In order to protect your assets from your potential creditors, you have to put them out of your control. That is either done through an outright gift (not recommended), or with an Irrevocable Trust. In an Irrevocable Trust, someone else is named as the Trustee, and the Trustmaker is not allowed to be given assets from the trust (although sometimes they are designed to give the Trustmaker the right to receive the income from the assets in the Irrevocable Trust). Because the assets can’t be given to the Trustmaker, they can’t be used to pay the Trustmaker’s creditors.
If you have questions about using a Revocable Living Trust or an Irrevocable Trust as part of your estate planning, please give our office a call at 419-872-7670 and schedule a free initial consultation with one of our attorneys. We looked forward to speaking with you.