A trust can be a powerful estate planning tool, but not all trusts offer the same level of protection. Whether your trust is protected from lawsuits, creditors, or legal claims depends on the type of trust you have and how it was structured. Understanding these distinctions is important for safeguarding your assets.
Revocable vs. Irrevocable Trusts
Revocable Trusts: No Protection from Lawsuits
A revocable living trust is commonly used for estate planning, allowing assets to pass outside of probate. However, because the trust creator (grantor) retains control over the assets, they remain vulnerable to lawsuits and creditor claims. If you are sued, assets in a revocable trust can be accessed just as if they were in your personal name.
Irrevocable Trusts: Stronger Protection
An irrevocable trust, on the other hand, can provide a higher level of protection. Once assets are placed in an irrevocable trust, the grantor relinquishes control, meaning creditors and lawsuits typically cannot reach them. However, this protection is only effective if the trust was not created to defraud creditors.
Types of Asset Protection Trusts
Domestic Asset Protection Trusts (DAPT)
Some states allow Domestic Asset Protection Trusts, which provide strong legal safeguards against creditors. Unfortunately, Georgia does not recognize DAPTs, meaning Georgia residents would need to establish one in another state that allows them if they have property in other states.
Medicaid Asset Protection Trusts (MAPT)
Designed to protect assets from Medicaid recovery while allowing eligibility for long-term care benefits, these trusts must be set up properly and well in advance of applying for Medicaid.
Spendthrift Trusts
A spendthrift trust prevents beneficiaries from transferring their interest in the trust and shields assets from their creditors. This can be particularly useful for protecting an inheritance from lawsuits, divorce, or poor financial decisions.
Our attorneys at Grissom Law, LLC can help you create an estate plans that protect your assets. Whether you need a trust for asset protection, Medicaid planning, or inheritance management, our experienced estate planning attorneys are here to guide you. Contact our attorneys today to discuss your estate planning needs and ensure your assets are protected!
Disclaimer
This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney client relationship between you and Grissom Law, LLC.