From our “Ask a Question” mailbag: I am worried about having someone sue me in the future and would like to shelter my assets from creditors. I have read about Irrevocable Trusts and Revocable Trusts, do they both help avoid creditors and lawsuits?
A Revocable Living Trust is a wonderful tool with many uses, but it does nothing to help you avoid your creditors. Because a Revocable Living Trust is “Revocable.” That means you can take the assets back into your name at any time. Because you can take the assets back, any future creditor you have or any future lawsuit judgement against you can be enforced against the trust.
If you create an Irrevocable Trust and fund it before the creditor has a claim or the cause of action arises that creates the lawsuit, it can be designed so that that creditor has no way to access the funds. This means you must give the asset to the trust and have no right to reclaim the asset or control it. If you are willing to give up these rights, though, the Irrevocable Trust might be just what you are looking for.
To give you a better answer I would need to know more about the assets you wish to place in the trust and your overall estate planning goals. Feel free to contact me to set up a free consultation.
If you have any other questions about Estate Planning, Revocable Living Trusts or Irrevocable Trusts, feel free to contact our office for a free consultation.