A revocable living trust does not protect your assets from creditor claims
Attorney Tom Olsen: We've been talking about insurance today, one thing, we often have people call us and say, "Tom, I want to make sure I'm protected if somebody sues me," so a lot of people that's on their mind. It's top-of-mind awareness for a lot of people out there. Often they'll say, "Yes, I want to have a trust," and we got to tell them the idea that the trust that you hear about out there, the revocable living trust, they're all about avoiding probate. They are not for the purpose of protecting your assets from creditor claims, doctors, hospitals, credit card, automobile accidents. Your revocable living trust is not going to protect you from those creditors.
Attorney Chris Merrill: Correct. Thank you, Tom, because it's really important for us. Of course, we want to educate generally, but a very important topic that we want to educate our listeners on is what you just said, which is, a trust, whether it is a land trust or any type of trust that somebody is thinking of that they would do for their family, generally, again, a revocable living trust, it is not a protection from creditors.
Being well insured is one of the best ways to of course have protection from creditors, but we want to, again, educate people and let them know that, yes, having a trust is about avoiding probate. It is not protecting you from-- Often it's people think that I may be sued. Whether it's, again, a car accident or any other type of liability, a trust is not the tool to protect from any of those creditors.
Tom: If you have accumulated some wealth, a home, a condo at the beach, savings account, IRAs, personal possessions, your best defense is to be well insured, including having an umbrella policy.
Chris: Correct.
Tom: There's just no way around it. There's no simple way around it but the best way to be well insured.
Chris: Exactly.
Tom: Now, with that said, I want to say that here in the state of Florida, our laws are written to protect people who owe money. Stated another way, it is very hard to collect money from people here in the state of Florida. Let me give you a prime example of that. If you're a married couple and you own everything jointly, if somebody sues just the husband, they cannot touch anything owned by both the husband and wife. If somebody sues just the wife, they can't touch anything that's owned jointly by them. That in itself is a huge protection. Also here in the state of Florida, your home, the home you live in is automatically protected from creditor claims.
Chris: Exactly. You're correct, Tom. Again, each state varies with this. However, again, we know that because of the area of law that we do with the state planning, and we do create trust, and by the way, we do trust for clients every day, there are many really great reasons to do trust. Avoiding creditors is not one of those that's going to help you.
Tom: Exactly.
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