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Can you use estate planning to protect assets from creditors?

| Jul 24, 2020 | Estate Planning |

An estate plan is beneficial for many reasons. For example, these plans can help you to transfer assets according to your wishes and provide an opportunity to review your estate. When you take the time to review your estate, you may realize that it is vulnerable to creditors. There are estate planning tools that can help protect your estate from the reach of creditors.

Why would I want to protect my assets from creditors?

The less of your assets that go to creditors, the more there is for you and your loved ones to enjoy. These assets are your life achievement and you can take steps to protect your life’s work.

Who would qualify as a creditor?

Creditors can take on a variety of forms. A contractor that expects payment before completing work, an ex-spouse and even the Internal Revenue Service (IRS) can qualify as creditors.

What are some of these legal tools that help protect assets from creditors?

Trusts are one example. These legal tools can provide a very strong method of protection for your assets. The level of protection will depend on the type of trust that is created, and the method used to transfer assets into the trust. When protection from creditors is one of the primary goals of the trust, it is generally wise to include a spendthrift clause within the trust. This provision limits future distributions, helping to keep the funds within the trust safe from a creditor’s reach.

The options available depend on the details of your estate. As a result, it is important to discuss the benefits and risks of these legal tools with an attorney experienced in estate planning matters. This conversation will help to better ensure you create an estate plan that meets your goals.