What an RLT Can Do And NOT Do

Posted by Keith on June 17, 2007 at 5:01 am  


What type of trust should I set up to (a) let the children avoid probate, and (b) protect the house, bank accounts, personal property from legal actions now and after my death?

My husband listened to you every Sunday. I have a new appreciation for that! Thank you so much



A revocable living trust will avoid probate, but it will not protect you from the claims of creditors during your lifetime.

However, upon your death, your revocable living trust will become irrevocable. You may include spendthrift and creditor protection provisions in the trust for the benefit of your beneficiaries upon your death; but not for yourself. Moreover, putting assets into a revocable living trust — even though it becomes irrevocable upon your death — does not erase legitimate debts or liabilities you had at the time of your death.

You may chose to create an irrevocable trust while living. Assets you put in that trust will be immune from the claims of your creditors, provided you did not transfer assets there merely to avoid pending claims. However, to qualify as an irrevocable trust, the settlor — that’s you — may only manage the trust, if they manage it at all, for the benefit of beneficiaries other than the settlor. You may derive absolutely no benefit from the trust yourself. This simple fact usually puts the Kibosh on this approach during your lifetime.



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