Are you leaving a substantial inheritance to one or more of your loved ones? If so, then one of the most powerful ways that you can use your estate plan is to make sure their inheritance is protected long after you’ve passed away. How do you do this? You build an asset protection plan into your estate plan, with the use of lifetime trusts for your loved ones.

Protection Against What?

What, exactly, are you protecting your loved ones against? There are three main threats to the inheritance of any beneficiary:

• Creditors. If your spouse or child’s inheritance isn’t protected, then it’s vulnerable to claims by their creditors.
• Divorce. If your spouse or child inherits property from you outright, without the protection of a lifetime trust, and later goes through a divorce, his or her spouse may be able to claim a portion of the property.
• Lawsuits. If your beneficiary is the defendant in a lawsuit, and the party bringing the lawsuit wins a judgment for money damages, then inherited property is fair game for payment of that judgment.

Why a Lifetime Trust?

A properly established lifetime trust is essential to protecting your beneficiary’s inheritance because, while property is under the ownership and control of the trust, it’s beyond the reach of those who might otherwise have a claim to it. Once property is released to your beneficiary, though, it’s considered his or her ordinary property, and it’s vulnerable to those claims. This is why leaving property outright is not effective. And, even leaving property in stages is not the best plan.

A Word to the Wise

If you’re considering building one or more lifetime trusts into your estate plan, it’s crucial that you get the help of a qualified estate planning attorney – one with experience in asset protection. A trust that’s not properly worded is useless for protecting your loved ones.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

There are many ways to protect your assets but to do that, you’ll need to have a clear idea of where you want to end up in terms of your financial future. What are your financial goals? And, how can you protect all that you’ve worked so hard for?

• Retirement Plans are a great way to protect your assets in your later years. These can take the form of individual retirement accounts, salary reduction simplified employee pension plan; and the savings incentive match plan for employees. These accounts are transfer-on-death accounts, meaning that they’ll pay straight to the beneficiaries without having to go through probate.

• Life insurance is also a form of asset protection and involves a payout to beneficiaries when the holder of the insurance policy dies. There are a wide range of life insurance polices, including term, whole and variable.

• A Living Trust not only allows your heirs to bypass the probate process, but it also keeps your estate private, making it harder for overzealous sales people and con artists to target your loved ones.

• A Spendthrift Trust is a type of irrevocable trust that keeps your assets away from creditors and lawsuits. This might be a good option if you’re worried about a greedy ex or business deals that have gone bad.

Of course, this is just a small list of the ways to protect your assets. To learn more, contact our office today.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.