Indeed, one of the most important functions of estate planning is to leave a legacy for ones heirs. Whether the legacy includes real property, money or investments, it is critical to make sure that ones estate is not compromised by creditors. Because of this, careful thought must be exercised as to how proper protections may be put into place.
This post will give a primer on basic tips to shield your estate from potential creditors. The following is not legal advice. Questions regarding your individual situation should be answered by an experienced attorney.
Purchasing insurance – The primary reason that people get sued is so that an offended party may recover money damages. Because of this, insurance can act as a shield by paying off creditors that seek compensation after an accident or other legal dispute.
Creating separate LLCs Real estate can be protected by placing ownership of the property in a separate limited liability company. This enables the property to be owned by a separate legal entity that does not have a connection to you.
Contribute to 401k plans Retirement plans also provide a measure of protection because they are shielded from creditor actions under the U.S. Bankruptcy Code and ERISA. Essentially, there is more emphasis and value placed on people planning for retirement than creditors seeking relief.
Creating real estate trusts The same concept applies with separate LLC with real estate trusts.
If you have questions about these or other creditor protection strategies, an experienced estate planning attorney can advise you.