I get calls from clients all the time who think that a living trust's purposes is to hide assets from creditors, the IRS, the government etc. I tell those clients that if that were true, there would be a line out my door with clients looking to establish living trusts. I tell my clients that if hiding assets and avoiding the IRS are their main concerns, a living trust is not going to help them. So if your friend Johnny told you a living trust will protect your from creditors, bankruptcy, or lawsuits, think again.
You see, a revocable living trust is still managed and controlled by you. As long as an asset is within your reach and within your control, you arguably have access to it and cannot "hide it" from others. Now we can indeed design a living trust that protects the inheritance for your heirs (i.e., your children, spouse, etc.), but living trusts are not really designed to be asset protection devices for the person setting up the trust. They do have money-saving and protective features, but not in the "hide my assets" sense.
There are some trusts that are irrevocable and managed by others that you can set up, but irrevocable trusts managed by other people aren't always the best solution if you are looking to protect yourself. Why would you want to lose control over your assets?
I advise clients who are interested in "protection" to explore business structures like corporations, LLCs, and other entities that can protect their families and their assets. Those entities, if run properly, can really provide a great deal of protection. Also, I encourage clients to get adequate liability insurance, both premises liability and professional liability, in case there are any claims against them. Most people making a claim against you would rather take a monetary settlement than spend years in court trying to acquire your assets.
A living trust is designed so that your wishes regarding your estate can be honored. A living trust also helps avoid the probate court system. You can protect your assets for your heirs and even for yourself. However, it should not be viewed as an asset protection device when it comes to creditors, bankruptcy, lawsuits, divorce, etc. Protect yourself in other ways if that is your main concern.
If you want to discuss setting up your own estate plan and discussing how one can help you and your family, please call my office for a consultation.