An important part of estate planning is protecting your assets from creditors. While your named beneficiaries may not have any outstanding creditors currently, it is best to plan for and protect those assets in case of any change. Common creditors may include VISA bills, judgment liens, child support payments, IRS bills, and outstanding medical bills.
If you are looking for protection of your assets from a creditor, a trust may be a good option in your estate plan. There are two common types of trust: a revocable living trust and an irrevocable trust. If you are looking for immediate protection of your assets, an irrevocable trust may be something that would work for you. With an irrevocable trust, once the trust is created and assets are transferred into the trust, those assets become protected against creditors. However, once an irrevocable trust is created, the terms of the trust cannot be changed and you no longer have title to those assets. Assets within the trust become trust property.
Another option for a trust is a revocable living trust. A revocable trust gains creditor protection when the grantor dies, instead of immediately after creation. The revocable living trust will become an irrevocable trust upon the grantor’s death and be given creditor protection at that time. The terms of the trust, as well as assets within the trust, can change during the grantor’s life. A revocable trust can also be terminated up until the grantor’s death. Once the trust becomes irrevocable upon death, the trust gains creditor protection.
Certain types of creditors may be able to access the funds within a trust even when the trust has creditor protection. If a beneficiary of an irrevocable trust owes money to the Internal Revenue Services (IRS) or in child support cases, it is possible for these creditors to access the trust funds designated for the beneficiary. Other creditors such as VISA card bills or medical bills would typically be unable to reach the trust. Additionally, any asset that has a debt associated with it, like a mortgage, car loan or anything put up for collateral, would be reachable in a trust as well.
At Sullivan Law, we offer estate planning packages at a flat and reasonable fee. We also offer free consultations to discuss what your needs are, what you would like to do, and how that can be best accomplished. Everyone’s needs are different, and your wishes should be clearly listed and understood.
Call us at 248.917.1351 or email at asullivan@sullivanlawonline.com to schedule your free consultation today and start an estate plan for your small business. We look forward to working with you!