Why a Trust Isn't Always Enough

[meganh]

When it comes to asset protection, simply having a Trust isn't always enough.

Most trusts are created as "revocable" or "living" trusts. You, as the person creating the trust are the Grantor and often the Beneficiary (person who receives benefits of the trust). as well. As far as the courts are concerned, there are two problems with this arrangement when it comes to asset protection. First, it's revocable. You can change what assets are in the trust and who gets them. Second, you can name yourself both the Grantor and the Beneficiary.

Because of this, most courts don't consider revocable trusts as providing any asset protection. If you have all of your assets in a revocable trust where you're both Grantor and Beneficiary, and you wind up being sued personally, that trust won't save your assets from potentially being seized by a creditor.

That's not to say you have to remain completely unprotected. Through the use of other entities, like our Trust Sandwich, or Asset Protection Trusts (in the states where they are permitted), you have more options and can get significantly more asset protection, without losing control over your assets or the income stream from those assets.

If you aren't sure what will work best for your situation, start with a local estate planning service or attorney. Know your choices before you sign on the dotted line!

[john_b]

Hi Megan,

Can you please share a bit more about the Asset Protection Trust, comparison/differences with Trust Sandwich, and whether these are allowed in Texas?

Thanks. John