Can a Living Trust Protect My Assets From Catastrophic Medical Expenses

Can a Living Trust Protect My Assets From Catastrophic Medical Expenses

What Is a Living Trust?

A living trust is a legal document that allows you, while you are still alive, to designate a trustee who will manage assets for the benefit of a person who will eventually inherit them. The person who will inherit is called a beneficiary. The person creating the trust is the grantor, settlor, or trustor while still alive. Once a living trust is established, the grantor can easily move assets into it without going through the expensive, slow, and complicated probate process. Different types of trusts perform different functions as part of your estate plan. Revocable and irrevocable trusts differ in their ability to help you protect assets from creditors in the event of catastrophic medical expenses.

Can a Living Trust Protect My Assets From Catastrophic Medical Expenses?

The answer depends on whether you have a revocable or an irrevocable trust. With a revocable trust, you are both the grantor and the trustee. You are still the owner of the assets, and you still have the power to remove assets from the trust, sell them, donate them to charity, etc. Since they are still within your control, creditors still have access to them. If you have medical bills, the hospital or facility you owe money can file a claim against them. Upon your death, the person you have named to become the successor trustee takes care of distributing the assets according to the plan you specified, without going through probate.

With an irrevocable trust, also called an asset protection trust, you no longer control the assets once they go into the trust. Only a court order can change the terms of the trust unless the grantor and beneficiaries agree to the modifications. Since you no longer have access to them, those assets are not available to creditors to take. Even if the medical provider sues you for the unpaid bills, the trust assets are not subject to seizure.

Where Can I Learn More?

If you would like more information on how to establish a trust to protect assets from catastrophic medical expenses, visit a knowledgeable and experienced living trust lawyer in your area who understands estate law where you live. Ensuring your trusts are correctly established according to your state’s laws is critical, as laws vary somewhat by state. It’s worth the time and money it takes to protect the assets you’ve worked a lifetime to accumulate.