While you may have a will in place to ensure that your estate is divided between your spouse, children, and loved ones, that may not be enough to ensure that your heirs are taken care of after your passing. Our estate planning lawyers in Raleigh are sharing a closer look at asset protection strategies that keep creditors from getting your loved ones’ shares of their inheritance.
What Is Asset Protection?
Asset protection refers to methods used to protect one’s wealth or assets from being taxed by the government, seized by creditors, or awarded in a lawsuit settlement or judgment. Because hiding, concealing, or creating fraudulent transfers of assets is illegal under the 1984 Fraudulent Transfer Act, it’s important to follow ethical legal practices when implementing asset protection strategies.
Asset Protection Trusts
The most common way to safeguard your wealth and property is through an asset protection trust. Unlike a revocable living trust that you create to pass on assets to your loved ones that you can change and modify over the course of your life, an asset protection trust is specifically designed to shield your estate and assets against creditors.
Asset protection trusts are irrevocable, meaning that any assets placed within the trust are permanent and can’t be removed, except by the trustee who manages the assets. You transfer money, property, or other assets into the trust, and while you can’t access it, neither can any individuals or organizations to whom you owe money.
Foreign Asset Protection Trust
While 17 states allow domestic asset protection trusts, North Carolina is not one of them. Instead, you would want to work with an attorney to create a foreign asset protection trust that must abide by the laws of the jurisdiction where you created the trust, rather than U.S. laws. There are two key benefits to this:
- If a creditor sues you in a United States civil court, your trust is outside the United States’ jurisdiction and may not be enforced by the country where your trust is held
- Foreign asset protection trusts may have stronger privacy protections related to not disclosing assets that are located within the trust
Is an Asset Protection Trust Right for You?
If you’re concerned about a lawsuit or creditors coming after your assets or estate, especially after you pass away, an asset protection trust is an excellent way to ensure that your heirs will receive an inheritance. For example, if you have a business and someone is injured, they may sue you for damages. Depending on your business structure, the victim may be able to access your personal assets, but if they’re in an asset protection trust, the victim could not.
Trusts also ensure that your heirs don’t have to go through a lengthy probate process in order to get their inheritance after your passing. Probate is the legal process in which the executor of your estate gathers your belongings, properties, and wealth, pays off any leftover debts that can’t be discharged, and distributes the rest to heirs in accordance with your will. Providing a trust means that your heirs will get their inheritance almost immediately.
However, the one serious drawback of an asset protection trust is that once the assets are transferred, you can’t take them back out.
Schedule a Consultation with an Estate Planning Attorney in Raleigh Today
If you are ready to plan for the future and better protect your heirs to ensure they receive their rightful inheritance, we can help.
Protecting your Privacy ~ Your privacy is our primary concern. At Kirk, Kirk, Howell, Cutler & Thomas, LLP., we understand the importance of protecting your privacy and will never share your contact information with a 3rd party. Contacting our law firm does not imply any form of an attorney-client relationship.
Wills & Estates - Case Review