24 Apr Will a Living Trust Protect Your Assets from Lawsuits?
Protecting your assets is vital to you. And they face many potential risks during your lifetime, such as: lawsuits, divorce, creditors, or bankruptcy. Some people choose to dissolve a living trust to protect their assets in a divorce.
If you’re facing a lawsuit you might be wondering if the assets in your living trust are at risk.
Will a trust protect your assets?
Living Trusts and Lawsuits
One of the best parts about a living trust is that they help your family avoid probate. The beneficiaries of the trust will also be able to access the funds in the account shortly after your passing, which is a huge benefit.
Another upside is that you’re in complete control of the trust’s assets. However, being that a living trust is revocable, a lawsuit could potentially have some affect.
Let’s say Ronald has a living trust. He’s legally responsible for the trust—this means all the assets are technically his. But a civil lawsuit is brought against Ronald and his defense loses the case. The assets in Ronald’s living trust are now in a vulnerable position because the funds are personally owned.
Can you sue an irrevocable trust?
Not generally speaking, no. There are some cases where you can sue an irrevocable trust, but those situations are uncommon.
When you create an irrevocable trust you’re handing over complete control to someone else. Once that’s done, you can’t go back. Assets in irrevocable trusts are considered to belong to another person or entity—those assets are no longer legally considered yours.
Let’s say Ronald had an irrevocable trust instead of his living trust. When Ronald lost the case, his assets in the irrevocable trust aren’t considered to be his, so they would most likely be safe.
Estate Planning Goals
Estate planning is one of the most important steps you can take to ensure your financial wishes are honored during a time of disability, and after your death. It sets in stone that your loved ones will be provided for in your absence.
Let Phelps LaClair help you take the first steps in establishing your plan today! For a free estate planning webinar, sign up on our website and receive a complimentary consultation and a $500 fee discount for attending.
You want the maximum amount of your hard-earned assets to pass to who you want, with the least amount going to pay for court fees, attorneys’ fees, income taxes and death taxes. Creating a well-thought out estate plan is an act of love for your family. Start yours now!