Interviewer: What is a revocable living trust? Does it provide asset protection?
Becky Cholewka: A revocable living trust is a document that you can set up, that houses all of your assets in the trust, so that you can avoid probate upon your death.
We’ve also touched on other issues that we can avoid…it’s called living probate. We can avoid the need to have a guardian or conservator at a later time appointed by a court. We have all these things taken care of in the revocable living trust.
It doesn’t provide asset protection. A lot of people don’t realize that. If you have money in your right hand, and you move your $10 bill into your left hand. That’s still your money. Your creditor doesn’t care which hand it’s in. They know they can still get to that money.
What a revocable living trust can do, is provide asset protection for your beneficiaries. If a beneficiary is left money in your trust, we can protect them from their creditors, from possible bankruptcy, from a spouse, if there is an ugly divorce for one of the beneficiaries. We can protect it from themselves. If they happen to be into drugs, or alcohol, or someone who has a spending habit who spends all of their money.
We can put safeguards in that trust to help protect their beneficiaries, but not themselves from their own creditors.