There are sometimes misconceptions about living trusts, including the myth that a living trust provides asset protection for the makers assets. The goal of this article is to set the record straight: A living trust that you create does not offer asset protection of your assets.
Every comprehensive estate plan includes planning for asset protection so that assets cant be taken in a lawsuit or spent down for nursing home care. While a living trust, has tremendous benefits, your own living trust doesnt provide asset protection for your own assets.
A full insurance plan is required to protect assets. Insurances you need to consider include: homeowners/renters, auto, umbrella (personal catastrophic), life, disability, malpractice, business insurance, and long term care.
If you live in a zone where earthquake, flood, or wind and rain insurances are needed, buy them.
Advanced Estate Planning
In addition, if you have significant assets, consider advanced estate planning such as limited liability companies, family limited partnerships, or trusts sited in states that offer asset protection for self-settled trusts.
Asset Protection for Beneficiaries
A valuable benefit of living trust planning is that you can design the trust to create individual trust shares for beneficiaries (i.e., spouse and children.) This means that assets you pass to them cant be taken in a divorce, lawsuit, malpractice case, or bankruptcy.
Asset protection planning is wise; however, remember that your own living trust does not provide asset protection. If you have questions about your individual situation, consult with a qualified estate planning attorney who can guide you through the asset protection process.