5 Myths About Revocable Trusts (Part 1): My Trust Will Provide Creditor Protection For Me

Myth #1: My trust will provide creditor protection for me.

Any assets that you place into your revocable trust will be treated as though you still own them. A revocable trust provides you the power to revoke or get rid of the trust at any time, for any reason. Because you still retain complete control over the trust and everything you place inside, you are legally considered the owner of those assets even though they may be titled in the name of your trust. Because you are still considered the owner, any and all assets within your trust may be subject to any creditors claims, any judgments against you, and taken into consideration for such things as child support obligations, filing for bankruptcy and applying for Medicaid or other financial need-based benefits.

Some good news: as soon as you die, your trust will become irrevocable. No one will have the right to remove assets from the trust except within the trust terms. At that time the beneficiaries of your trust will have protection from creditors, divorce proceedings, judgments etc. as long as the money remains in the trust. In the end, you will not receive creditor protection from your trust, but your beneficiaries might.

For Myth #2 - click here

Kelley Scrocca, LLM
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Business, Expert Estate Planning, and Probate Attorney Dedicated To Helping You Preserve Your Legacy