Many of my clients are deeply concerned about how litigious our society has become and fear that their assets may one day be taken by creditors. As a result, they desire to legally protect their assets from creditors, including the possibility of divorce. If you share these concerns, I want you to be aware of an important technique that can asset protect an inheritance and provide an important piece of your estate plan.
The traditional estate planning process focuses exclusively on passing assets downstream to beneficiaries (i.e., to children and grandchildren), often ignoring a potential inheritance from parents or other family members. However, Americans are living longer and longer and trillions of dollars will change hands in the coming decades. Most of these assets will be transferred in a manner that is not protected from the claims of creditors or former spouses.
The laws of most states, including North Carolina, prohibit so-called "self-settled trusts" - an irrevocable trust you establish for your benefit, yet which purports to protect the trust assets from creditors. Therefore, once you receive an inheritance, it is too late to asset protect it. For potential inheritances, we can, by creating an Inheritance Trust to be the recipient of the inheritance, protect these assets. An Inheritance Trust legally protects the inherited assets yet allows you to access them as necessary. It also may remove a substantial portion of the assets from your potential taxable estate, thereby saving estate taxes at your death.
If you want to know more, please contact me.
Patrick
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