How To Keep Your Estate out of the Hands of Your Creditors

Keeping Estate from Creditors

Throughout your life, you’ve worked hard to save money, spend responsibly, and even leave a little (or a lot) to your family when you’re gone. It makes sense that you would not want to see it frittered away on things that would probably make you roll over in the grave. There are countless reasons why greater levels of control might just make sense as part of your estate plan depending on your particular circumstances. If you desire greater control over the disposition of assets in your estate after death, a lifetime protection trust might be a good option for you.

ASSET PROTECTION

Do any of your children or other beneficiaries have creditor problems arising from unpaid debts? If so, those creditors have the right to attach all or a portion of the assets your beneficiaries inherit to satisfy these debts. However, as long as assets are held as part of your living trust for their benefit, assuming the trust contains appropriate spendthrift language, your beneficiaries’ creditors will not have access to those funds.

DIVORCE

Do you think there is a good chance that one of your children or other beneficiaries will get divorced? If so, the assets they inherit from you could very easily end up being split with their spouse in a divorce if they are not maintained in separate accounts. As long as a beneficiary’s assets are held as part of a lifetime protection trust, they are off limits to the beneficiary’s spouse and would not be divided in the event of divorce.

DRUGS/ALCOHOL

When a beneficiary’s judgment is severely impaired as a result of drug or alcohol abuse, a lifetime protection trust is one of the best ways to insure that distributions are only made for such beneficiary’s necessities, and will not be wasted or dissipated. It is possible to give your trustee broad discretion when to make distributions to a beneficiary with substance abuse problems, including the authority to require that a beneficiary submit to drug/alcohol testing prior to receiving any distributions.

CHOOSING THE RIGHT TRUSTEE

Choosing the right trustee is an important consideration of a lifetime protection trust. In some circumstances, it may be appropriate to have the beneficiary serve as trustee of his or her own trust; however, in other circumstances, especially where there are serious concerns about the assets being wasted or dissipated by the beneficiary, it will be necessary to choose an independent trustee.

A lifetime protection trust is an excellent way to gain a higher level of control over the distribution of your estate when there are concerns that assets could be wasted or distributed by the beneficiary. Consult a qualified estate planning attorney to determine if a lifetime protection trust makes sense as part of your estate plan.

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