“Avoiding probate” has become almost an obsession with many Americans. In some states, this can be a good idea, to the extent reasonably possible. But “probate avoidance” is usually not my biggest concern for a client.

It is very important to remember that a trust designed to avoid probate may provide absolutely no asset protection. A so-called revocable grantor trust (a very common estate planning vehicle) often provides no protection from creditors. Put another way — just because your assets are in some sort of trust, it does not mean they are necessarily protected from creditors. Only certain types of trusts will provide creditor protection.

Many trust arrangements do protect assets from creditors. Some states allow Domestic Asset Protection Trusts. Irrevocable life insurance trusts as well as trusts with an independent trustee will also generally provide protection from creditors.

This does not mean that a trust designed to avoid probate is a bad idea. In may circumstances it could be an excellent idea. I am simply emphasizing that I often run across people who think that the trust arrangement which they have is designed for asset protection, when it frequently is not.  Periodically reviewing your estate planning documents from an asset protection standpoint can provde to be very valuable.