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Protecting assets during the estate planning process

On Behalf of | Oct 25, 2023 | Estate Planning |

An individual’s personal estate is comprised of all financial resources and property of every kind which they have acquired over their lifetime. When they die, those same assets become the focus of action in their estate plan, if they have taken the time to prepare one. The primary benefits of an estate plan are that it provides a set of legal documents which clearly explain to whom that individual wants their property to pass after their death, and under what circumstances. It also avoids having a probate court make those decisions for them according to the prevailing intestate succession laws. Put another way, if someone hasn’t set up an estate plan before they die, a state probate judge will determine who inherits their assets, and in what proportions.

Whenever the probate of an estate is opened, creditor actions can interfere with an individual’s legacy wishes, even when they’ve taken the time to safeguard them via estate planning. Creditors can make a claim against someone’s estate in probate court, forcing the personal representative of the estate to liquidate resources to pay off the deceased’s debts. There is also always the possibility of someone facing debt-related litigation while they’re still alive that could result in the loss of valuable property or liens against their resources. Thankfully, there are ways that people can effectively protect their assets when putting together an estate plan.

Asset protection planning involves ownership changes and trusts

Asset protection planning is often a key component of a strong estate plan. Anyone worried about creditor actions during their retirement or after their death may want to engage in asset protection planning as part of their estate plan.

Typically, this process involves changing the ownership of certain assets. One way of accomplishing that is by creating a trust and transferring certain valuable assets into that trust. A trust can hold real property, bank accounts and many other valuable assets, and once transferred there, will not become part of the individual’s estate, and will not become the subject of a probate court proceeding. They will also have protection from litigation while someone is still alive.

Sometimes, asset protection planning looks like preemptively transferring ownership to specific beneficiaries before someone dies. Adding a spouse or child to the deed of a home as a joint tenant with rights of survivorship is one way to protect the house from probate issues related to estate administration. Strategic gifts made to loved ones later in life can ensure that those assets go to selected beneficiaries instead of creditors.

The nature and amount of the financial resources and property which a person owns, and the various family relationships which they have, are primary factors in determining the best approach to asset protection planning for each individual. Taking proactive steps before creditors file a lawsuit is an effective way to protect resources during one’s elder years, and even after death. Seeking legal guidance is the best way to become informed about what options are available to you.