Your estate plan doesn’t just explain who will receive what property from you when you die. It also strongly influences how people remember you. The inheritance that people receive from you will have a dramatic influence on your ultimate legacy.
Protecting that legacy is as important as planning it properly in the first place. When you die, your financial situation could diminish what your loved ones inherit from your estate. Your executor has a legal obligation to repay your debts before they distribute assets to your loved ones. Asset protection planning can help prevent creditors from making claims against your most valuable assets.
What is asset protection planning?
The property in your name is vulnerable when you are alive and after you die. If someone brings a lawsuit against you now, the courts might use your current property to repay any amount awarded to them in a judgment. Or, the court may grant a lien so that you can’t transfer or sell the property without paying the judgment first.
After you die, tax authorities, private creditors and even Medicaid recovery programs can bring claims against your estate and the assets within it. Everything from your bank account to your home could wind up liquidated to repay creditors. During asset protection planting, you make changes to how you hold property to protect it from such claims.
Moving property into a trust can protect it both while you are alive and after you die. Arranging for property to transfer to someone else and immediately at the time of your death can also prevent it from going through probate and thereby eliminate creditor claims against those assets.
Considering your debts and liabilities can help you decide what steps are necessary during estate planning, possibly including asset protection.