Creditors are people or entities that may try to take your money. Examples would be creditors from a car accident, business failure, malpractice claim, divorce, nursing home, or bankruptcy. A common misconception is that living trust assets are protected from the trust maker’s creditors; they are not.
When you put assets into a living trust, you have the power to take them out at any time and you maintain full control over the assets. Therefore, those assets are NOT protected from your creditors.
You need comprehensive insurance to protect your assets. A living trust will not protect your assets from your own creditors.
Assets placed off-shore or into irrevocable trusts do have asset protection for future creditors and may be appropriate. Consult with a qualified estate planning attorney to determine whether this level of planning is appropriate for you.
In addition,talk with your parents and encourage them to create living trusts. There are many benefits for them. In addition, the assets you and your siblings receive in individual lifetime trust shares, with asset protection language, are protected from your creditors.
This means if you get sued, your inheritance (if in trust) is protected from your creditors and can’t be taken from you. It’s important that you don’t serve as the sole trustee of an inherited trust if you want to maintain asset protection.
You can also provide this asset protection for your spouse, children, and grandchildren.
All of this means that because your own living trust assets aren’t protected from your creditors, you need a good insurance plan. Your parents (and spouse) can asset protect assets for you and you can asset protect assets for your loved ones. Consult with a qualified estate planning attorney to learn how.