DOES A MARYLAND REVOCABLE LIVING

TRUST PROVIDE ASSET PROTECTION?

“A revocable living trust can be a good choice as an asset transfer vehicle for a wide range of people, but it does not satisfy every single objective. We will examine the value of these trusts in this paper, but first, we will look at the matter of asset protection.”

Colleen Sinclair Prosser

Annapolis, Maryland Estate Planning Attorney

Does A Maryland Revocable Living Trust Provide Asset Protection? www.sinclairprosserlaw.com 2

A revocable living trust can be a good choice as an asset transfer vehicle for a

wide range of people, but it does not satisfy every single objective. We will

examine the value of these trusts in this paper, but first, we will look at the

matter of asset protection.

It is said that we live in a litigious society. Indeed, there are people out there

who like to file lawsuits, especially if they feel as though the person they are

targeting has a great deal to take. Plus, there are certain business endeavors and

professions that create vulnerabilities.

Does A Maryland Revocable Living Trust Provide Asset Protection? www.sinclairprosserlaw.com 3

Many people think that you are creating a legal degree of separation when you

convey assets into any type of trust. The idea is that any trust would protect

assets from legal judgments.

In fact, this is not true with a revocable living trust. The first thing that you

should notice is the revocable designation. You can in fact dissolve or revoke this

type of trust if you ever choose to do so.

Plus, you as the grantor of the trust can act as the trustee while you are alive

and well, and most people who create living trusts do assume this role. As the

trustee, you control the

actions of the trust every

step of the way.

Since you can take assets

out of the trust, and you

could even dissolve the

trust entirely if you ever

choose to do so, you are

retaining incidents of

ownership in legal parlance. Because you do not surrender control of the assets

in the trust, they would not be protected if you were to be targeted by a litigant

seeking redress.

There are however other types of trusts that do in fact protect assets. These

Does A Maryland Revocable Living Trust Provide Asset Protection? www.sinclairprosserlaw.com 4

would be irrevocable trusts that you cannot rescind. You surrender incidents of

ownership when you convey assets into this type of trust.

VALUE OF REVOCABLE LIVING TRUSTS

Now that we have explained what a living trust cannot accomplish, we can look

at the value of revocable living trusts. As we have stated, you don't lose control

of assets in this type of trust, and for some people who are not concerned about

asset protection, this can be seen as a positive.

Does A Maryland Revocable Living Trust Provide Asset Protection? www.sinclairprosserlaw.com 5

If you were to retain direct personal possession of your property and arrange for

its transfer through the terms of a last will, you would be leaving lump sum

inheritances to people named in the will. This can be disconcerting if you have

people in the family who may not be very good at managing money.

When you create a living trust, you name a successor trustee to take over the

trust ministration tasks after you pass away, and you name beneficiaries. You do

not have to allow for lump sum distributions all at once. If you have concerns

about a spendthrift, you could instruct the trustee to distribute limited assets on

a monthly basis to stretch the viability of the trust.

Does A Maryland Revocable Living Trust Provide Asset Protection? www.sinclairprosserlaw.com 6

This is one advantage, but another major advantage is the avoidance of probate.

This is a legal process that takes place under the supervision of a court. When

personal property is passed along through the terms of a will, the will must be

admitted to probate, and the court supervises the administration of the estate.

The heirs to the estate cannot receive their inheritances while the process is

underway, and it will take close to a year, even if there are no particular

complications that slow things down. More complicated situations can take

considerably longer.

On top of the time

consumption, probate can

also be expensive, and it is a

public proceeding. Anyone

who wants to find out how

you planned your estate can

access probate records to pry

into your final affairs.

You avoid these pitfalls if you use a living trust, because the administration of the

estate would not be subject to the probate process.

Does A Maryland Revocable Living Trust Provide Asset Protection? www.sinclairprosserlaw.com 7

SUMMARY

A revocable living trust can provide a number of different valuable benefits.

However, this type of trust will not protect assets, because you can in fact revoke

the trust and take back direct personal possession of the property.

The good news is that there are irrevocable trusts that will provide asset

protection. If you would like to obtain more detailed information, schedule a

consultation with a licensed estate planning attorney.

REFERENCES

American Bar Association

http://www.americanbar.org/content/dam/aba/migrated/publiced/practical/books

/wills/chapter_5.authcheckdam.pdf

Forbes

http://www.forbes.com/sites/jayadkisson/2011/07/13/ten-rules-for-asset-

protection-planning/

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About the Author

Colleen Sinclair Prosser Currently the owner and manager of SinclairProsser Law, LLC, Colleen steers her firm with both a guiding hand and direct involvement with the clients, bringing to the table a wealth of Estate Planning experience from many years spent at the helm of a busy law practice. In the past Colleen served on the Board of Trustees for By Their Side, Lifelong Advocates for

Marylanders with Developmental Disabilities and She on the Board of Governors of the American Academy of Estate Planning Attorneys. EXPERIENCE An established member of the American Academy of Estate Planning Attorneys, Colleen offers years of experience in estate preservation and transfer. A strong proponent of the living trust, she also focuses on wills, powers of attorney, living wills, probate, trust administration, prenuptial agreements, nursing home planning, and special needs planning. She strongly endorses long-term care insurance and, in certain cases, life insurance and some annuities as valuable estate preservation vehicles, and strives to assure the compatibility of her clients’ estate plan and financial plan. Sensitive to the challenges presented by lifestyle and circumstance, Colleen addresses each situation with personal attention, wisdom, and skill.

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