A revocable trust and an asset protection trust serve different purposes and are used in different circumstances.
A revocable trust is primarily used for estate planning purposes. It allows the settlor to retain control over the trust assets during their lifetime, with the flexibility to amend or revoke the trust at any time. This type of trust helps avoid probate, making the transfer of assets upon death more efficient and private. However, assets in a revocable trust are not protected from the settlor’s creditors during their lifetime.
On the other hand, an asset protection trust is designed to protect assets from creditors. This type of trust is typically irrevocable, meaning the settlor cannot easily amend or revoke it once it is established. The primary purpose of an asset protection trust is to shield assets from potential future creditors, providing a higher level of security for the trust assets. The terms of the trust usually restrict the settlor’s access to the trust assets, which helps in protecting those assets from claims by creditors.
In summary, a revocable trust is suitable for individuals seeking flexibility and ease of estate management, while an asset protection trust is appropriate for those looking to safeguard their assets from creditors.