I keep hearing references to “Irrevocable Living Trusts" and I think its time to define the differences. The more common form of Living Trust...called an intervivos revocable trust...is an entity that can be terminated or changed at anytime by its creator (The Trustor). This type of trust is what I refer to as being transparent...that is, it has no unique tax identity of its own (until the creators death) and exists primarily as a legal entity for holding assets and defining its creators wishes regarding healthcare and distribution of assets and property at death. It provides no lawsuit or liability protection for assets funded into it because it is completely under the creators control and the creator is not separated from the ownership of the assets funded into it. If someone wins a lawsuit against you they can take the assets in the trust because the assets are presumed to be yours. This type of trust is the wise and preferred replacement for a Will because it eliminates the Probate process at death. There are rare and extraordinary circumstances where a Will and Probate would be advisable but as I said, they are rare and it should be done with the advise and consent of a special attorney or advisor who knows what he is doing when it comes to Trusts vs Wills.
The Irrevocable Trust is similar but is used when the Trustor (Creator) wants to hold assets under separate ownership and outside of his control. Such circumstances might include holding a money gift for a child or a grandchild for the future with no possibility of ever taking it back or allowing a parent of that child to access it. That gift could be safe from any lawsuit as well because legally the giver does not own the money in that trust...the trust owns it and it can't be taken back. Irrevocable trusts are useful for special circumstances but do not translate into an advisable way to hold personal property or assets where the Trustor wants to maintain control or influence over those assets. Some have suggested that an Irrevocable Trust is a good way to provide asset protection for their assets against lawsuits and creditors. Remember that when you place your assets into an Irrevocable Trust you lose control over them because you cannot be the Trustee. A Trustee must be appointed who is independent from you and cannot be related to you by blood, marriage, or employment. That Trustee can control, buy, sell, or invest your assets in any way they see fit so long as they believe it is better for the trust...even if you disagree with what they are doing. Their first loyalty is to the Trust not to you necessarily. Quite often people will appoint the lawyer who created the Trust to be the Trustee but there are a lot of horror stories related to that idea. There are other more suitable ways to structure your assets in entities that you can manage that will give you the lawsuit protection you desire. I will be happy to discuss them with you if that is your interest.
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