Will a trust protect my assets?

You may have heard a lot about how a trust can be used to protect assets. It is true that certain trusts can protect the assets held by that trust; however, it must be the right type of trust and the trust agreement must be properly drafted. One type of characterization of trusts is testamentary trusts and inter vivos (living) trusts. Testamentary trusts do not activate until the death of the Settlor whereas a living trust activates when all elements of formation are complete. Living trusts can be further sub-divided into revocable and irrevocable trusts. A revocable trust can be modified or revoked by the Settlor without the need to provide a reason whereas an irrevocable living trust generally cannot be modified or revoked by the Settlor. Because both a testamentary and a revocable living trust can be modified or terminated by the Settlor, the assets held in those trust are typically not protected from creditors and other threats. Assets transferred into an irrevocable living trust, however, irrevocably become property of the trust and are generally out of reach of the Settlor and do extend certain creditor protection.