Ways to Protect an Inheritance from Creditors
Bequeathing assets involves more than naming beneficiaries. Creating a proper estate plan offers individuals and families the ability to protect their assets for loved ones after they’re gone. Unexpected claims could drain accounts and threaten properties that were intended to be passed on to beneficiaries. There are asset protection tools that help avoid these situations and minimize exposure to creditors.
April is Financial Literacy Month. In an effort to help spread awareness so that individuals can make better decisions with their finances, our North Carolina estate planning attorneys review the benefits of trusts for structuring assets that protect funds from creditor claims against beneficiaries:
After you’re gone, your beneficiaries may experience bankruptcy, lawsuits, or other claims from creditors. If bank accounts or real estate are left to beneficiaries outright, creditors may legally make claims on these assets. However, a properly structured trust will stop a creditor from attaching a beneficiary’s interest in the trust. Trusts may also protect claims from spouses should the beneficiary divorce. When you create a trust you may choose guidelines on how beneficiaries are permitted to use trust assets (education, maintenance, or otherwise). Living trusts are popular estate planning tools because they can be terminated or updated whenever desired, and they can contain continuing trusts for loved ones. However, Wills can also include trusts that are funded after your death (testamentary trusts). Even if your loved one faces creditor issues one day, they will still retain benefits from the trust you created for them.
Trusts are just one type of tool that can be used to protect an inheritance from creditors. Full utilization of state and federal exemptions and the use of limited liability companies can also be very effective. Discuss the options available to you with a North Carolina estate planning attorney.