When people start estate planning, the most common type of trust that comes to mind is a revocable living trust. But, while a Revocable Trust has many uses, asset protection is not one of them. A Revocable Living Trust is entirely available to your creditors.
If you have a large number of assets and are worrying about a future, potential lawsuit, it would be recommended for you to contact a trust lawyer Cherry Hill, NJ has confidence in to help create an irrevocable trust. There are many types of irrevocable trusts, but these are the types of trusts that protect from your future creditors.
So, if you put your assets in a trust, do they work in bankruptcy to change the rights of the creditors after the money and the debtors who owe the money? If you are concerned about losing your hard-earned assets to creditors, it is recommended to speak with NJ trust lawyer from Klenk Law.
A revocable trust is known also as a living trust. The person who is putting their assets in the trust creates the revocable trust during his lifetime. The grantor, who creates the trust, can make changes to the trust at any time and even has the right to revoke the entire trust. A Cherry Hill, NJ trust lawyer can explain that the main appeal of a revocable trust is that the assets owned by the trust do not need to go through probate at the time of the grantor’s death. Instead, the terms outlined in the revocable trust determine who receives the assets in the trust. The title for any assets in a revocable trust will now read “John Smith, Trustee.” The asset would appear to be no longer in John’s possession but is now the Trust’s asset.
Revocable Trusts and Creditors
The same quality that makes a revocable trust so appealing, that it can be amended or revoked at any time, is the same quality that does not make it useful as a tool to protect your assets. The law states that if the grantor can revoke the trust, the grantor is still viewed, and treated by the law, as the owner of the assets. A revocable trust does not change anything in terms of the grantor’s exposure to their creditors. If bankruptcy schedules ask for a list of your assets, you are required to list the property in your revocable trust.
An irrevocable trust is a living trust in which the trust cannot be modified or revoked at a time. The trust terms can state that assets are now unavailable to the grantor. With an irrevocable trust, you do receive protection for your assets, but you lose all flexibility. To determine if creating an irrevocable trust makes the most sense for your situation, it would be advisable to speak with an NJ trust lawyer to explore all your options.
There is a law against fraudulent transfers. This law protects creditors who have a claim against you at the same time you funded the irrevocable trust. The reasoning of this law is that you cannot get out of paying your debt by giving your property to a trust. State laws and the trust’s terms will decide the rights of creditors to money that is paid from an irrevocable trust.
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You have worked hard to earn your assets. If you are worried that you could face creditors and want to protect your assets to pass them down to your future generations, you should contact Klenk Law to discuss all of your options. Read more about irrevocable trusts in my article New Jersey Irrevocable Trusts. We can work to help you find a suitable option to help keep your family taken care of for years to come.