There are websites on the Internet that sell do-it-yourself estate planning documents. You may purchase one of these documents and fill in the blanks thinking that you have successfully planned your estate.
However, as a layperson you may be assuming that the document is satisfying certain objectives. Your assumptions may be mistaken, and as a result you and/or your family may ultimately wind up paying a heavy price.
One of the simpler types of trusts to create is a revocable living trust. Many people use these trusts to arrange for future transfers of assets to loved ones.
The main reason why you would want to create a revocable living trust is to avoid probate. Probate is a legal process that must run its course after someone dies using a last will to direct asset transfers.
The property in your personal possession at the time of your death would be considered probate property. It cannot be distributed to the heirs that you name in your will until the probate court has closed the estate.
The process of probate is a public proceeding, so anyone who is interested could look at the probate records to see what took place. Many people would prefer that their final affairs remain private, and this is one reason why probate is often avoided.
The costs involved are another consideration. When you create a last will you name an executor to administer the estate. This person is entitled to payment, and the court itself charges a fee. Various different professionals will be engaged by the executor in most cases, and they too must be paid.
All of this takes a lot of time, so the three reasons why probate is often avoided through the creation of a revocable living trust would be to save time, to save money, and to ensure privacy.
No Asset Protection With Revocable Living Trusts
Because you are taking personal property and placing it into a trust you may assume that creditors and claimants can’t seek to attach funds that you have conveyed into a revocable living trust. This is a mistaken assumption.
The key word here is “revocable.” Because the trust is revocable you can dissolve it at any time and go forward with the money as you wish. You could take it to Las Vegas, purchase a yacht, give it to charity, or use it to start a business.
You would also be perfectly capable of using it to pay debts or judgments against you.
As the grantor of a revocable living trust you have total access to the funds, so they are not protected from attachment.
That does not mean that you have no recourse. There are other steps that could be taken to position assets safely. If you would like to become apprised of your options simply contact our office to set up a free consultation.