Living Trusts and Asset Protection: Get an Umbrella Insurance Policy.

What a muddled post title...

Anyway, many clients erroneously think that a Living Trust offers asset protection from taxes, creditors and others. In short, a Living Trust does not provide any form of asset protection.

This is because a Living Trust is revocable by the person who created it (the settlor). When such a trust is revocable, the assets held by the Living Trust are treated as if the settlor owned them, (which they do). You cannot hide what you own.

Asset protection can be had by other means including, but not limited to creating a Family Limited Partnership or LLC and having a trust hold an interest therein. Too much for this post.

What to do?

What I find that for many clients who inquire about asset protection is that obtaining an umbrella liability insurance policy will give them the added liability protection they seek. Here is a quick explanation about umbrella policies from about.com.

So who should get an umbrella liability insurance policy? Anyone who is worried about getting sued, who has a swimming pool, who has teenage drivers or who owns rental properties to name a few good situations to consider getting such a policy.

An umbrella liability insurance can be obtained from your insurance provider if you already have your home and auto insurance coverage with them. You can gain an extra 1 to 5 million dollars in coverage above and beyond your existing policy limits.

Premiums for an umbrella insurance policy are rather inexpensive. A million dollars of coverage will cost around $300 to $400 annually. This is a very small price to pay for additional liability protection.

Contact your insurance agent for more information. [It boggles my mind why more insurance agents do not educate their clients about this type of policy or suggest it as part of an annual review of your insurance needs.]