This Week's Topic: Asset Protection

Asset protection is an issue that many clients ask me about when we discuss establishing a trust to avoid probate and estate taxes. The typical revocable living trust is not an asset protection device. However, when one spouse dies and establishes an irrevocable trust for the benefit of the surviving spouse, that irrevocable trust can protect the assets in the trust if the irrevocable trust is gives only the income to the surviving spouse, even if the surviving spouse is the sole trustee of the irrevocable trust. Additionally, if someone else is the trustee of the irrevocable trust for the benefit of the surviving spouse and that non-spouse trustee has the discretion to invade principal for the surviving spouse, as well as giving the surviving spouse the income from the trust, the irrevocable trust will probably be able to successfully resist the creditors of the surviving spouse from obtaining assets of the first spouse to die