Did you know that estate plans, and the legal documents included in them, could help you protect your assets from bankruptcy during your lifetime? If you ever end up thinking about bankruptcy, you may note that there is a potential to have to liquidate your assets or to pay down what you owe with assets in your possession.
You don’t want to have to do that, and you don’t want creditors trying to place liens on the items you’ve gathered over time. To help avoid that problem, consider setting up a family trust.
What is a family trust?
A family trust is a trust that passes on your assets to a third party. Then, that party holds your designated beneficiaries’ assets until you pass away. At that time, they may distribute the assets or manage them in the way that you intended.
How can this help you during your lifetime? You may have a home that you’d like to pass on to your children and protect from creditors. By placing the home into a trust, it’s no longer in your name even if it’s in your possession. Once you pass away, the home will transfer to your children. During your lifetime, that home, in most cases, will be untouchable by creditors. There are exceptions, but this option, when used correctly, is a good way to protect your most valuable assets.
The family trust doesn’t just protect your assets during your lifetime. It also helps protect them from creditors after you pass away. The estate does need to cover debts you have at your death, but assets that are not in your possession can’t be used to pay them. They’re essentially untouchable, which is what you want if you want to keep your assets whole for your heirs.
Trusts may make a difference for your estate
Trusts can be the difference between losing assets to creditors, having to spend them down for Medicaid or losing them in probate. Using a strong trust is a good way to protect your assets for your heirs, so they can be passed down and help build generational wealth.