The Revocable Living Trust is very popular in America. A living trust helps
you avoid the cost and delay of
probate. You can also avoid the dangers from jointly owning assets.
But here’s the downside: a revocable living trust won’t protect
you from lawsuits. Though a revocable trust doesn’t offer lawsuit
protection, you have the comfort of knowing that you can change or revoke
your living trust as often as you can revise your will.
September 2018 Estate Planning Webinar: Revocable Trusts
But can a living trust can cause you to lose lawsuit protection? Several
states have ruled that a homesteaded home transferred to a living trust
loses homestead protection. Similarly, assets owned between spouses as
tenants-by-the-entirety may lose creditor protection from this type of co-ownership when those
same assets are instead titled to a living trust.
There are trade-offs between the different ways to title assets. Without
a revocable living trust, the court will distribute your assets under
your will. This can be expensive, time-consuming, and cumbersome. (Probate
costs can consume as much as 4% of an estate and delay estate distributions.)
If you bequeath $1 million through your will, your heirs may pay $40,000
in probate costs, and wait years for their inheritances. A living trust
circumvents the probate process. Your assets immediately transfer to your
Have the best of both worlds
When you die, your ownership in the limited partnership immediately transfers
through the living trust to your heirs and avoids probate. During your
lifetime, your assets would be creditor-protected by the limited partnership.