Asset protection planning is the process of reorganizing the way your property is owned so that it will be protected from lawsuits and creditors claims. If youre sued, and the Plaintiff bringing the lawsuit wins a money judgment against you, then property you own in your individual name is fair game when it comes to collecting on that judgment.
Many people are under the mistaken belief that simply transferring property into a Revocable Living Trust will serve to shield that property from being collected in payment of a debt or judgment. This is not true. A Revocable Living Trust has a number of benefits, but it is not a tool for protecting your assets from judgment creditors.
Why not? Although property transferred into a Revocable Living Trust is no longer titled in your name, you retain control over the trust itself. So, you could change the terms of the trust, transfer property back to yourself, or even revoke the trust at any time. Since you are the one who ultimately controls your Revocable Living Trust, the assets held by the trust are considered yours for purposes of collecting money owed to someone who has sued you.
In order to truly protect your assets, you and your attorney need to review your entire financial picture and come up with a strategy for appropriately repositioning your assets so that they are out of reach of your creditors. If you are concerned about shielding your property from the possibility of a lawsuit, youll want to meet with your estate planning attorney as soon as possible. Once a lawsuit has been filed, its too late to protect yourself in this way.