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Trusts may not be enough to protect assets from creditors

Even Nevada residents who follow prudent financial plans may be unprepared for unexpected developments like lawsuits or medical problems. A small error in judgement behind the wheel could lead to a six figure civil judgement, and doctor and hospital bills can quickly add up. Those who wish to protect assets that were acquired after years of hard work from litigants or creditors sometimes feel that estate planning tools like revocable living trusts are all that they need, but financial experts recommend a more comprehensive approach.

While revocable living trusts allow estates to be administered without going through probate, they provide little in the way of asset protection. Assets can be moved in and out of these trusts freely while the settlors are alive, but they offer few tax advantages and do not shield assets from creditors or litigants.

A simple way to protect assets is to purchase liability insurance. These policies are available from most home or auto insurers, and they generally require an annual premium of about $300 for every million dollars of asset protection coverage. Some states allow property to be owned 100 percent by more than one party, which places assets beyond the reach of creditors. However, tenancy by the entirety arrangements are not recognized in Nevada,a community property state.

Experienced estate planning attorneys may recommend strategies that are designed to provide control while reducing the probability of conflict, and they may encourage their clients to view asset protection insurance as a component of a broader legal strategy that includes trusts and powers of attorney. Trusts allow assets to be distributed away from the public scrutiny of probate, and powers of attorney can provide individuals with the assurance that important financial and medical decisions will be made by a trusted individual should they become incapacitated.

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