For many people creating their estate plans, they primarily consider how to make sure that their legacies are passed to their heirs and organizations they have supported through their lives. However, the prospect of debt can derail the best intentions. Essentially, creditors may look to a deceased’s estate to settle debts the person has left behind, and this could leave beneficiaries without the assets they were promised through a will.
To avoid this scenario, there are a number of ways to plan your estate. This post will highlight a few.
Establish a trust – There are several benefits to establishing a trust as part of your estate plan. Avoiding probate is one of them, but an often overlooked benefit is protecting your assets from creditors. Essentially, the property titled in the trust is not necessarily owned by the testator, which means that creditors may not be able to seize them to settle the person’s estate.
Include beneficiaries on financial accounts – By listing a beneficiary on one’s financial accounts, they may pass to them without having to be transferred through probate. Also, once passed, they may not be within reach of creditors since the beneficiary was never a party to a contract between the creditor and the other party.
Incorporate POD or TOD designations – For the uninitiated, POD means pay-on-death and TOD means transfer-on-death. These designations also help in bypassing probate and transferring money in accounts to beneficiaries. For the same reasons that we alluded to before, account with these designations can be protected from creditors.
If you have additional questions about planning your estate with protecting it from creditors in mind, an experienced estate planning attorney can help.