How Can I Protect My Estate from Creditors?


If a creditor files a lawsuit against you to recoup the money you owe them, and you lose the case, you may lose substantial assets such as your home. Therefore, taking the necessary steps to protect your assets from lawsuits, creditors, and even spouses while estate planning is important. If you have assets in the form of businesses, real estate, stock, or other resources, you understandably want to do what you can to protect your wealth. Please continue reading to learn how to protect your estate and how a knowledgeable Montgomery County Asset Preservation Attorney can help you minimize financial exposure. 

How Can I Protect My Property From Creditors?

While estate planning, it’s crucial to include an asset protection plan that preserves wealth and limits tax liability. It’s essential to shield your assets well before any issues arise where it may become necessary. Fortunately, there are several methods you can use to safeguard your assets from creditors.

Firstly, you can establish a trust. There are different types of trusts, but regardless of which you choose to develop, assets in a trust avoid probate. An irrevocable trust, however, is the best option to shield your assets from creditors effectively. This type of trust can’t be altered once it’s created. Unlike a revocable trust, you don’t retain control of your assets. This trust protects your assets from creditors because once it’s set up, you no longer legally own the assets used to fund it. Therefore, this change of ownership means that credits are not authorized to satisfy debts owed against assets held in an irrevocable trust.

Furthermore, a creditor can’t access your retirement plan. Assets placed in Roth individual retirement accounts (IRAs) are protected in bankruptcy proceedings and creditor lawsuits. However, it’s crucial to note that creditors can access retirement funds if an individual owes alimony.

How Can I Protect My Assets Through a Business Structure?

Furthermore, another asset protection strategy is to create a business and establish a Limited Liability Company (LLC). Business owners often utilize this legal structure as it can protect their assets from being seized by creditors. This means your home, car, and bank account would be safe from business creditors. Alongside LLCs, insurance policies can protect your estate. Life insurance policies and annuities are protected under state laws. This means they are exempt from seizure by creditors who’ve obtained a court judgment against them.

If you’re considering creating an asset protection plan, please don’t hesitate to contact an adept attorney from the legal team at JD Katz, who can help you take the necessary steps to protect your wealth and limit your tax liability.