Although it may seem like estate planning and bankruptcy are two completely different topics, estate planning can help you effectively manage your assets and protect them against bankruptcy if you ever need to file.
In your estate plan, you have several options that can help you protect assets against bankruptcy.
To protect your assets, put together a trust
One of the first things you can do to better protect your assets is to put together a trust and to move your assets into it. Trusts are often used in estate planning to help skip probate court, but they can also help you avoid lawsuits from creditors seeking your assets to repay a debt.
When you place assets into a trust, those assets are taken out of your name. As a result, they technically no longer belong to you. It’s important to note that this only applies to certain kinds of trusts, such as irrevocable trusts.
For IRAs, you have the option of placing the IRA into an IRA trust. This trust is specifically designed to protect IRAs against bankruptcy and creditors who wish to collect against them.
You may also want to place your real estate into a trust. Why? If you get into trouble financially, your home is a major asset. While you could sell it to pay off your debt in some cases, you could also protect it against liens or being sold to repay debt by placing it into an irrevocable trust.
If you plan to pass your home on to your children when you pass away, this kind of trust is beneficial in keeping the home safe until that time.
Strong estate planning protects your assets in life and death
It’s the truth that good estate planning will protect your assets when you’re alive as well as when you’ve passed on. Being able to protect your assets against creditors is just one of the benefits of trusts and other methods that you can learn more about when you work with your attorney on your estate plan. Start planning as soon as you can, because asset protection may rely on your forward thinking.