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How to plan your estate to provide protection from creditors

If are considering an estate plan, or have been advised that you should have one, understand that the basic purpose of an estate plan is to enable you to pass wealth and property to your heirs as you see fit. However, if your estate is currently fraught with debt, your beneficiaries could be affected by creditors who will seek to settle the debts you have left behind.

As such, this post will provide a few ways to make sure that your estate is properly shielded from creditors. 

Create a trust – Most people appreciate trusts because they essentially eliminate the need to transfer items through probate, but it could also serve as a way to shield your assets from creditors. Basically, if you set aside property and other assets in a trust, you don’t necessarily own them, but you may still maintain some measure of control. This way, the property can be specifically designated for certain purposes, such as paying for a beneficiary’s tuition.

Title IRAs in proper accounts – Because of the U.S. Supreme Court’s decision in 2014 regarding retirement assets that are passed to a beneficiary, creditors could claim them in the event the beneficiary seeks bankruptcy protection. To prevent this, creating a special IRA trust can help in holding creditors at bay.

List beneficiaries on your accounts – Another way to avoid creditor actions is to list a beneficiary on an account so that when the primary owner passes away, the assets will transfer to the beneficiary directly.

If you have additional questions about preventing creditors from seizing assets meant for your beneficiaries, an experienced estate planning attorney can help. 

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