Tuesday, August 17, 2010
Legal Tip (Not Advice) of the Day
For the longest time I was under the general belief that a living trust protected your assets, like a house, from creditors and lawsuits. I don't know where I got this belief from, but it's not really true. A creditor can make you pull an asset out of your trust for purposes of satisfying an outstanding debt you might owe.
Creditors of named beneficiaries to a trust, however, cannot touch the trust assets. This is possibly where I might have gotten things confused.
In any event, if you want to protect your assets from creditors beyond what the law may already provide, e.g., state homesteading laws, you should get insurance.
Clarification: The above is written in the context of a revocable living trust, wherein the trust creator or settlor is still living and the named beneficiaries possess only a future interest in trust assets.