Most clients understand that revocable living trusts are valuable components of an estate plan. But when asset protection is a primary goal of your estate plan, then revocable living trusts are not necessarily the way to go. The fact is, revocable trusts do not provide asset protection from legal claims or creditors. But, there are other options available that you should discuss with your Reno asset protection attorney.
When you create a revocable family trust, and in particular a living trust, you usually name yourself as the trustee so that you can retain control over your assets during your lifetime. That is the main reason revocable family trusts are so popular. The trust is revocable so you can make changes or revoke the trust at any point during your lifetime. Because you maintain the ability to use the trust property as you wish, to sell it or give it away without restriction, and to revoke the trust and transfer assets back into your individual name these assets essentially still belong to you. Therefore, those assets remain within reach of creditors. This is why you need the assistance of a Reno asset protection attorney if you wish to protect your estate from the reach of creditors.
One of the primary goals of revocable trusts is to avoid probate and the time and expense it requires. Unlike assets that are passed on through a last will and testament, assets in a trust are inherited without the need for probate. This can be a great benefit when you consider the cost of the probate process and the time it takes to complete the process. Probate can cost anywhere from approximately four to ten percent of the estate's full value and can take anywhere from 6 months to a year. The actual cost will vary depending on your family situation and the complexity of your estate.
Living trusts are a type of revocable trust that become effective during your lifetime, allowing you to retain control of your trust assets while you are alive. Upon your death, your successor trustee takes over control of the trust. The good thing about a revocable living trust is that your successor trustee can also take over if you become incapacitated. This type of provision can be extremely beneficial in case of illness or an emergency situation making it difficult for you to continue to manage your own affairs.
A trust is still the most common estate planning tool for asset protection, but it must be an irrevocable trust. “Irrevocable” means the terms of the trust cannot be changed later on. Because of this, the assets transferred to an irrevocable trust are considered to be removed from your estate, thereby putting them beyond the reach of creditors. Simply put, asset protection means analyzing your assets and arranging them in a way that provides the most protection possible. Done properly, you can protect all of your assets from the unexpected risk of loss, without fraud or tax evasion.
Although revocable trusts are not effective for accomplishing asset protection, there are other ways to protect your wealth through an appropriate asset protection plan. This plan must be created before claims and legal liabilities arise, though. If not, asset transactions may be seen as violations of the “fraudulent transfer” law, which could have serious consequences. Because most people cannot easily determine when a legal claim may arise, it is best to start your asset protection planning now. Once you have been served with a demand for payment or a lawsuit, it is likely too late to plan. Let a Reno asset protection attorney help you be prepared.
A common misconception most people have is that asset protection requires surreptitious transactions for the purpose of evading and deceiving. However, that is not true at all. Everyone has the right to structure their assets in a way that is financially beneficial. This can easily be done within the limits of the law. Actually, the only time fraud becomes an issue is when it is clear the intent was to hinder, delay or defraud creditors from collecting legal debts. With the help of an experienced Reno asset protection attorney, you can do it the right way.
One of the most challenging components of asset protection is determining who may be a potential creditor. The better you are at determining where potential claims may arise, the easier it will be to create an effective asset protection plan. The key is to be able to create a strategy for protection against particular claims that will limit your exposure to liability.
If you have questions regarding a revocable family trust, or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455.