A Look at Revocable Living Trust, Who Needs It, and Why a Simple Last Will May Not Be Your Best Option When It Comes to Asset Protection
DOES A REVOCABLE LIVING TRUST PROTECT ASSETS IN IOWA?
DENNIS D. DUFFY Iowa Estate Planning Attorney
There are numerous different legal devices that are routinely utilized in the field of estate planning. The correct course of action will vary depending on the objectives of the individual in question. There are people who automatically believe that they should use a last will to direct future asset transfers. Some of them will even go online and download generic last will documents. They fill in the blanks and they think that they have an effective estate plan in place. In fact, there are many things to take into consideration, and a simple last will may not be your best option. As a case in point, consider the matter of asset protection.
ASSET PROTECTION: WHAT IS IT & WHO NEEDS IT?
Asset protection involves taking legal steps to insulate financial assets from monetary judgments. People who are prone to lawsuits or other types of liabilities often engage asset protection strategies. Others who simply want to be safe without having any particular expectations of being subject to a
Does a Revocable Living Trust Protect Assets in Iowa?
www.duffylawoffice.com
2
judgment may be interested in asset protection as well. People who are in certain lines of work are naturally more prone to legal actions than others. Imagine the life of a surgeon. This individual is taking on enormous responsibilities each and every day, and any perceived misstep could result in a lawsuit. A person in this line of work would definitely want to take steps to protect assets. There are many other lines of work that can also leave you open to lawsuits, such as real estate investment and development. Tenants could decide to sue claiming that you are negligent if they were injured on your property. Clearly, someone who is in this position would want to take steps to protect assets.
REVOCABLE LIVING TRUSTS The most commonly used alternative to a last will would be the revocable living trust. If you didn't know about all the different options that are available to you when you're planning your estate you may assume that it is a choice between a last will and a revocable living trust. Let's say that you made this assumption and you did in fact want to make sure that your assets were protected. You think that you are divesting yourself of personal ownership of assets when you place them into a trust of any kind. You decide to create a revocable living trust using a template or down load that you purchased online thinking that this is the way to protect your assets.
Does a Revocable Living Trust Protect Assets in Iowa?
www.duffylawoffice.com
3
If you were to take this course of action you would be making a big mistake.
Revocable living trusts do not provide asset protection. Let's look at the anatomy of such a trust. The person who creates the trust is known as the grantor or settlor. The grantor names a trustee to administer the financial assets that have been placed into the trust. He or she also names a beneficiary or beneficiaries. The beneficiary will receive monetary distributions out of the trust. These distributions are made in accordance with the terms of the trust that are created by the grantor. When you create a revocable living trust you can serve as both the trustee and the beneficiary while you are still alive and in full control of your faculties. As such, you retain total control of the resources. Many people find this to be a positive because they don't want to hand the control over to someone else. In addition, remember the name of the device: it's a revocable living trust. This means that you as the grantor have the right to revoke or dissolve the trust at any time. You can simply revoke the trust and go forward using the money and/or property that you placed into the trust in any way that you choose. Because you can act as both the trustee and the beneficiary coupled with the fact that you have the right to revoke the trust you are retaining incidents of ownership. You are not legally prevented from using the trust's resources to satisfy judgments. As a result, the property that has been placed into the trust is indeed fair game for claimants seeking address.
Does a Revocable Living Trust Protect Assets in Iowa?
www.duffylawoffice.com
4
REVOCABLE TRUSTS & PROBATE AVOIDANCE
FREE REPORT
Why would you want a revocable living trust if you are not getting any asset protection from it? The answer is that these trusts facilitate probate avoidance. If you pass away with resources in your personal possession and you state your wishes regarding the distribution of these assets in your will the property that you own becomes probate property. This property is not distributed to the heirs until the probate court has closed the estate. There are a few reasons why people often times take steps to arrange for distributions to their loved ones outside of probate. One of them is the fact that probate takes time. Exactly how much time it will take varies on a case-by-case basis. Simple cases can take months, more complicated cases can take years. Even if the people on your inheritance list don't need the money immediately you may want to engage probate avoidance strategies to make
Living Trusts: Plan Ahead for Your Family's Future Creating Trusts and Living Trusts Put Your Family First A Living Trust is a very versatile estate planning tool - one that can be customized to suit all your needs. Click to Download Your Free Report Today
things more efficient for them. However, in some
Does a Revocable Living Trust Protect Assets in Iowa?
www.duffylawoffice.com
5
cases immediate liquidity is greatly needed, and in these situations probate avoidance is all the more important. When you convey assets into a revocable living trust the beneficiaries receive distributions outside of the probate process.
VIABLE STRATEGIES Although revocable living trusts don't provide asset protection, there are other viable strategies that can be employed. The best way to explore them would be to set up a consultation with a licensed estate planning lawyer.
REFERENCES Nolo http://www.nolo.com/legal-encyclopedia/revocable-living-trusts.html Investopedia http://www.investopedia.com/articles/pf/06/revocablelivingtrust.asp
Does a Revocable Living Trust Protect Assets in Iowa?
www.duffylawoffice.com
6
About the Author Dennis D Duffy Dennis Duffy combines an extensive background in business with a wide range of legal experience to provide his clients with a uniquely practical perspective. An attorney since 1989, he practices primarily in Estate Planning, Wills, Trusts and Probate. Mr. Duffy also offers frequent educational seminars on a variety of estate planning topics to both the general public and private groups in the Quad Cities area. Experience Mr. Duffy has been practicing law since 1989, when he joined the general practice firm of Bozeman, Neighbour, Patton & Noe in Moline Illinois. In 1990, Mr. Duffy and five other attorneys founded the law firm of Anderson & Nelson, with offices in Rock Island, Illinois and Davenport Iowa; the firm eventually grew to 12 attorneys, with Mr. Duffy as managing partner. He founded Duffy Law Office in 1995. Before returning to school for his advanced law and business degrees, Mr. Duffy worked for nearly a decade for Per Mar Security & Research Corp. in Davenport, as Vice President. Mr. Duffy is a member of the American and state bar associations of both Iowa and Illinois as well as the Scott and Rock Island County Bar Associations. He is an executive member of the American Academy of Estate Planning Attorneys. He is coauthor of the book Estate Planning Basics – A Crash Course in Safeguarding Your Legacy. Also, the American Academy of Estate Planning Attorneys announced that Mr. Duffy was honored with the Academy Fellow designation. The Fellow program recognizes Academy Members who demonstrate advanced expertise and significant practical experience in the estate planning, trust, tax planning, guardianship, probate and estate administration fields.
Duffy Law Office Helping Families Preserve their Wealth www.duffylawoffice.com 1840 E. 54th Street Davenport, IA 52807 (563) 445-7400
Does a Revocable Living Trust Protect Assets in Iowa?
www.duffylawoffice.com
7