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Can a Trust Protect Assets?

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  • Can a Trust Protect Assets?

    Can a Trust owned by myself and wife protect the assets that are in it from a malpractice suit?

  • #2
    Asset protection is state dependent.  What is protected or not depends where you live.

    Revocable trusts do not provided asset protection; however based on your state what accounts and assets you title to your trust may be protected whether it is in the trust or not...which is why many people are confused thinking it is the trust providing the protection when actually it is just how the state treats the asset regardless of the trust.

    irrevocable trusts do provide asset protection; but those assets no longer belong to you...which is fine if that is an asset you never intend to use yourself (like a life insurance policy, money for heirs etc).

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    • #3
      As bean1970 notes, revocable "living trusts" provide no asset protection.  Just as you-the grantor-can put assets into and take them out of the trust, so can you be compelled to do so by a judgement.

       

      We see a common planning mistake with our physician families-they are actually advised by estate planning attorneys to take assets out of well protected "as tenants by the entireties accounts" (which provide strong asset protection against individual creditors in some states), and then put them into separate husband and wife revocable trust.

      Trusts you inherit are irrevocable-if your parents leave you assets in their revocable trust-these assets are protected from judgements against you-but the caveat here is that you should not be the only beneficiary and only trustee for the trust.

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