How Can an Estate Plan Protect Assets from Creditors?

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You may want to protect your assets from certain collection activities without having them considered illegally hidden or otherwise an attempt to defraud your creditors. Rest assured, there are ways to accomplish this with a comprehensive estate plan. Follow along to find out how an estate plan may work to protect your assets from creditors and how a proficient Putnam County estate planning attorney at The Law Office of Andres D. Gil, PLLC can work to ensure that your beneficiaries are equally protected when you are no longer around.

How can an estate plan protect my assets from my creditors?

So long as your assets are not tied to an estate plan, they may be “up for grabs,” so to speak. For example, your creditors may garnish certain assets upon your bankruptcy filing. That is, your unsecured creditors may receive distributions from your bankruptcy estate based on what is owed to them, while secured creditors may reclaim the assets serving as your collateral in your bankruptcy estate. At the very least, these creditors may obtain a judgment from the bankruptcy court, stating that your debt is not eligible for discharge.

Of note, you may find yourself susceptible to similar collection activities upon undergoing divorce proceedings or civil lawsuit proceedings. Without further ado, you may protect your assets from the collection activities of your creditors by initiating any of the following estate planning strategies:

  • You may transfer your ownership rights over certain assets to a trust (i.e., irrevocable trust, offshore trust, qualified personal residence trust, etc).
  • You may transfer your long-term savings into certain protected retirement accounts (i.e., 401k, Roth IRA, etc).
  • You may declare your home as a homestead, in accordance with New York State laws.
  • You may purchase or increase your liability or umbrella insurance policy.
  • You may establish a business entity (i.e., LLC), formalize your business partnerships, and separate your business assets from your personal assets.

How can a comprehensive estate plan protect my beneficiaries from their creditors?

Say that you are fortunate enough to not encounter creditors’ collection activities throughout your lifetime. With this, you may have successfully distributed the amount of assets you promised and intended for your beneficiaries to inherit. However, you may hold onto the fear that these assets may now be left vulnerable to your beneficiaries’ due creditors.

This is when a comprehensive estate plan is deemed beneficial. For example, your beneficiaries’ creditors may be barred from going after the assets your beneficiaries received from your established irrevocable trust. The same cannot be said for any assets they receive outright. Again, similar protection may be offered if your beneficiaries ever undergo divorce proceedings or civil lawsuit proceedings.

This is all to say that there are many benefits to establishing an estate plan to consider carefully. So please do so with a talented Putnam County estate planning attorney at The Law Office of Andres D. Gil, PLLC. We look forward to having a conversation with you.

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