Debt is a standard part of the modern American household. Very few families can operate without some form of debt, whether they have credit cards or just a mortgage on their home. Your debts can affect your finances for the rest of your life, at least until you repay them in full.
If you fall behind on payments, your creditors might even be able to take legal action against you. Creating a trust can be a way to protect your property from creditors. Asset protection planning is sometimes part of estate planning, and it frequently involves the creation of a trust.
How does this process potentially protect you as you age and your family after you die?
Asset protection planning will keep creditors from suing you
While you are in control of your finances now, you can have medical issues when you get older that consume your resources or diminish your income. If you fall behind on some accounts, your creditors might take aggressive collection actions against you, including taking you to court.
Your bank accounts and your most valuable property, like your home, could be vulnerable in a debt-related lawsuit. Asset protection planning, such as moving your major assets into a trust, will make it much harder for your creditors to sue you while you are alive. It will impact their ability to place a lien against your property.
Asset protection planning also protects your estate
The amount that you owe doesn’t just disappear when you die. Co-signers could be accountable for the full balance that you owe. Even if you don’t have co-signers for your biggest account, your creditors could bring claims against your estate.
Your executor might have to spend every single cent that you have set aside to repay medical debts and credit card balances unless you act before your death to protect those assets. When you create an asset protection plan or change the way that you hold ownership of your major assets, creditors will have a much harder time taking legal action against your property. Integrating a trust into your estate plan can help you protect your stability as you age and your legacy after you die.