In order to pass family assets onto the next generation, people can set up a trust. While this is meant to protect these assets, it is important to know that it does not always protect them from creditors if the family has certain debts. If the individual who creates the trust or their beneficiaries files for bankruptcy, it is possible for the trust to be seized to repay their debts. Continue reading below to learn more about what can be done and contact an experienced New York estate planning attorney for guidance.
What is the Difference Between a Revocable and Irrevocable Trust?
When discussing the idea of debt when estate planning, it is important to know the differences between two main types of trusts: a revocable trust and an irrevocable trust. Revocable trusts allow the grantor to have complete control over it until they die, meaning the assets are legally considered their property as long as they are alive. When they pass, their beneficiaries will assume ownership. An irrevocable trust does not allow grantors this right to have access to the trust they create. While beneficiaries may not yet have access to the assets, they are considered the owners of the trust by law. When creating this trust, it is possible for a “spendthrift” provision to be added so the trust can be protected from credit seizure if the beneficiary files for bankruptcy one day.
What are the Benefits of a Trust?
A person may choose to create either a revocable or irrevocable trust for a variety of reasons. One being the benefits they offer, depending on what they need for their estate. Some of the benefits of an irrevocable trust can include:
- Estate tax reduction
- Asset protection
- Charitable estate planning
Some of the benefits of having a revocable trust can include the following:
- Planning for mental disability
- Avoiding probate
- Protecting privacy
Contact our Firm
If you or a loved one needs assistance creating an estate plan and wish to speak with an experienced attorney, contact the Law Office of Andres D. Gil, PLLC today.