How a Living Trust may be utilized in Asset Protection
A living trust, also known as a revocable trust is a trust that is set up by the Grantor so that access to the assets of the trust can be achieved at some time during the grantors lifetime. The Grantor, the Trustee and the Benificiary are usually the same person.
The most common Revocable trust in the last few years has been the Domestic Asset Protection Trust (DAPT)
The law views this trust simply as an attempt to remove assets out of the view of potential creditors. The Grantor still remains in control of the asset and has too much power over the disposition of the asset. This control disqualifies the Grantors defence from a frivolous lawsuit, because the retained control of the asset is viewed by the court as nothing but a mask for the real owner, the Grantor.
Features of the Living Trust
- Absolutely no Asset Protection due to the fact that the Grantor, Trustee and Beneficiary are generally the same person
- No Deferral of Income Taxes
- Probate - It does eliminate Probate
- Estate Tax is still levied
- Capital Gains Tax is still levied
- Taxation is still levied on the asset as if it was still owned by the Grantor
Conclusion
Has probate benefits but is a very poor asset protection strategy.
