Estate planning and asset protection go together. Anyone creating an estate plan should consider them as complementary and necessary. A solid estate plan protects your assets after your death and also does the same when you are alive.
Surprisingly, asset protection, sometimes, gets overlooked in estate planning. A key component of asset protection planning remains to prevent creditors from securing your assets. This is why you must be prepared through legal guidance and research when assembling an asset protection plan.
Options include irrevocable and spendthrift trusts
Certain trusts may be synonymous with effective asset protection plans. Here are two such options that will help you protect your estate:
- An irrevocable trust: Placing your estate into such a trust represents a transformation. How so? The assets no longer belong to you as they now belong to the trust. This trust represents a protective shield for assets, and creditors cannot reach them. However, you will not gain the same protection with a revocable trust, where your assets continue to remain under your control. Creditors can pursue assets in a revocable trust.
- A spendthrift trust: Such a tool also falls under the category of an irrevocable trust. Naturally, creditors cannot retrieve these assets for things such as unpaid bills and taxes. But an essential part of a spendthrift trust is that this tool also protects the assets within it from beneficiaries who have poor money-managing skills, excessive spending habits or detrimental personal habits such as gambling and addiction. The trustee only provides assets in small amounts – not one big sum – to beneficiaries.
These examples represent a solid way to protect your estate’s assets.
Good thinking amounts to good planning
A good amount of thinking goes into creating an estate plan. Along the way, you must consider a number of scenarios that may surface. What if you become mentally or physically incapacitated? Having a solid asset protection plan in place will protect your estate and its assets from the hands of creditors.