Revocable versus Irrevocable Trusts
Following up on my posts of January 26, 2011 and July 21, 2010 -- I want to emphasize again that not all trusts provide asset protection.
A so-called revocable "living trust" (often designed for probate avoidance) can protect beneficiaries of that trust from claims of creditors. For example, you can protect assets that you place in trust for the benefit of your children from claims of their creditors.
But in order to protect your own assets from your own creditors -- the trust you set up has to be irrevocable. You have to give up a certain amount of control over the assets you place in such a trust or they will simply be deemed the equivalent of your own personal assets. As common sense would indicate -- if a trust you set up is completely revocable, a court could simply order you to revoke it. And your judgment creditors could then take steps to seize those assets.
So the bottom line is what common sense would indicate: if you retain complete control over assets in a trust, then the assets are not going to be insulated from claims of your creditors.
