Living Trusts Typically Do Not Provide Asset Protection

I am often asked whether a living trust will protect assets from nursing home costs, lawsuits, or other risks.  The general answer is “no.”  A living trust is designed to help organize your assets and prepare for a time where you may face a disability or when you pass away.  A living trust is under your control.  You can add or remove property from the living trust, and you can amend or revoke the trust at any time.  Because of this control, there is generally no asset protection for you while you are alive.  (However, the trust can set up wonderful asset protection for your spouse or children after you’re gone.)

Whether we are talking about business risks, possible lawsuits, personal liability on loans, nursing home risks, or other asset protection concerns, any asset where you have control is going to be subject to those risks and creditors.

In order to achieve asset protection during your life, you need to take steps other than using a living trust.  Those could include various steps, like using an irrevocable trust (where you give up some control) or using other legal or financial tools to minimize or avoid risks to your assets.

To read more about trusts, check out our article, “Living Trusts” or “Your Bucket List for Estate Planning: Why a Trust Might be Right for You.”