There are trusts that can protect your assets, but a revocable trust is not one of them.
The following is a transcript of the video above:
Hey folks, Don Rolfe here, owner and founder of Northwest Legal Planning, and you are watching episode 25 of Estate Planning Weekly.
This week we are talking about what a revocable living trust is not. Precisely, it is not an asset protection trust.
By the way, if you have questions about this or any other estate planning topic, probate topic, please do feel free to reach out to me. You can schedule a time to chat by going to myestateplanmeeting.com.
So, why is a revocable trust not an asset protection trust? Well, the reason is because it's a self-settled trust and it's revocable, and it's really just not intended to protect your assets. What it's intended to do is protect you during incapacity, and then after you've passed away to make a more private administration of your estate and make sure that things can go probably a little bit smoother than they go with a probate.
So, why does this come up? I was thinking back to what was my first introduction as a lawyer to the trust and estates world. And during that time, I was a litigation attorney and I was representing a woman, we'll call her Mickey, and she was being sued for some contracts and for some other issues unrelated to her estate planning. But Mickey had gone out and created for herself a revocable living trust. And Mickey was under the impression that by creating that revocable living trust and by putting all of her assets in it, she was judgment proof.
That all of those assets were protected from any kind of a judgment or lawsuit that might come up later after she had created that trust. And me being new to the world of estate planning and trusts at that time, being a litigation attorney, I really didn't understand that. And I really started to dive deep and figure out, was my client correct?
And unfortunately she wasn't. Her revocable trust was just her and her creditors were able to collect from that trust just as they would have been able to collect from her on a judgment.
Since I've left the litigation world and entered the world of trust and estates, this misconception has presented itself a number of times. And I wanna get it out there that if you think that you're going to be protecting your assets by putting together a revocable trust in the future, or if you think you have protected your assets by putting together a revocable trust, most likely that's not the case.
There are trusts that you can create. All of them are irrevocable, that are specifically for asset protection purposes. And they to be formed under generally a certain number of states' laws, Nevada comes to mind, where you can actually put your assets into an irrevocable trust and protect those assets. But it's not something that's done when you're doing your general estate planning and you create a revocable living trust.
If you think that you have a trust that's protecting your assets and you're not sure, I'd be happy to take a look at it for you. So if you want me to do so, you can go to myestateplanmeeting.com and schedule a time for us to talk, either on the phone or in person. If it's a trust that you want me to look at, an in-person meeting would probably be best so I can actually take a look at it and see the document that you're talking about.
But that client that I had when I was a litigator, Mickey, she really thought that she had protected herself and insulated all of her assets and it just wasn't the case. And unfortunately, it was a stark realization and open eyes moment to find out that her home, her car, all of the real estate that she owned, wasn't protected, wasn't insulated from litigation and creditors and so forth, as she thought it was.
Again, if you have any questions about this or any other estate planning topic, do feel free to schedule a meeting with me at myestateplanmeeting.com.
For future questions, you can continue to tune in here every week for Estate Planning Weekly. As always, take care, talk to you later, bye.