A crucial and, sometimes, overlooked aspect of estate planning includes asset protection. With an estate plan, you know that you have long wanted to protect your assets after your death. You must understand that you can do the same while you are alive, too.
An instrumental aspect of asset protection planning is creating ways that prevent creditors from getting their hands on your assets. A trust is an effective tool. You must understand, though, that preparedness is a crucial factor in asset protection. Well before creditors come into the picture, smell vulnerable assets and attack, you must research and implement an asset protection plan.
Irrevocable trusts remain solid options
Here are some ways to create an effective asset protection plan:
- Place your estate in an irrevocable trust managed by a trustee. Assets in an irrevocable trust no longer belong to you, they belong to the trust. As result, the trust protects these assets from creditors. The same cannot be said for a revocable trust in which your personal assets remain in your control. Creditors can go after these assets and readily will.
- Set up a spendthrift trust, which also is an irrevocable trust. Creditors clamoring for unpaid medical bills, utility bills and taxes cannot get this money. Such a trust also protects the assets from its beneficiaries who may not be adept at handling money or just have some questionable spending and personal habits. Trustees dole out the assets in small increments to beneficiaries rather than giving them a large sum.
You want to protect your family’s financial interests. Start by doing so through asset protection planning, which is a good way to begin doing that. You want your assets shielded from creditors if you become physically and mentally incapacitated as well as after you die.