An irrevocable trust may be an effective way to protect your Colorado home, a vehicle or money inside of a bank account from being seized by creditors. Furthermore, assets that are kept in an irrevocable living trust are shielded from being taken away in a divorce. Let’s take a closer look at why trust assets are generally protected from outside claims.
You no longer control those items
Anything that you place into an irrevocable trust is titled in its name. In addition, you are generally prohibited from acting as the trustee. This means that someone else has complete control over property that may one day be distributed to a child, grandchild or another beneficiary. It’s important to note that the document’s language typically cannot be changed after it goes into effect.
An exception may be made if the trust was made in bad faith
If a creditor can show that the trust was created to hide assets, a judge might declare it invalid. This means that anything held outside of your estate will be transferred back into it. At that point, a credit card company, mortgage lender or government agency might be able to take your property. An estate planning attorney may be able to review an existing trust to ensure that it is structured properly.
An estate planning attorney may be able to talk more about the potential benefits of creating an irrevocable living trust. He or she may also be able to review an existing estate plan document to determine if it complies with state law. Finally, legal counsel might be able to help you make any changes to your existing plan to ensure that it meets your needs.