Our Clear Lake estate planning lawyer from Badeaux & Associates understands that people with significant assets are all generally concerned about the best method to protect their valuable property from a potential lawsuit that could result in attachment to those assets. There are some ways that real estate and financial instruments can be protected. Many of those individuals attempt to establish a trust for protection, but there are differences in trust types. And, those differences directly affect any claim that a creditor may make against the owner of those assets. It is always a good idea to consult with a Clear Lake estate planning lawyer before making any decision on how to best protect assets and wealth.
A revocable living trust cannot protect assets from creditors in the event of a lawsuit or or a bankruptcy. According to the law, a revocable living trust asset is still the designated property of the trust owner, who is also usually deemed as the trustee. This trustee designation provides the legal authority to maintain oversight of transferring those assets, which leaves the assets as property of the trustee. Assignment of a second trustee in a revocable living trust will not protect assets either. However, property can be transferred in and out of a living trust before the owner is deceased, and those assets can be transferred to the proper individual before inheritance becomes an issue in probate. The actual purpose of a revocable living trust is maintaining liquidity of the assets while avoiding probate altogether after the trust owner is deceased.
Irrevocable trusts are designed to let an individual put certain assets in an established trust without the authority to control those assets. In this manner, the purpose of an irrevocable trust is to separate the property from the trust owner. In addition, any income generated by the trust assets are also property of the trust. They do not apply to the primary trust maker’s income statement and are not taxable as income. Because of the ownership designation and the irrevocable status of the trust, the assets included in the trust are not accessible for creditors to attach or susceptible to confiscation as a result of a lawsuit. Once this trust is established it cannot be revoked, so the decision to use this protection method is final.
There are a few alternate ways wealthy individuals can protect their assets. One method for very wealthy people is establishing a complex trust and transfer the money out of the United States, along with assigning a foreign trustee. State law can also be utilized in some cases when wealth can be transferred to financial institutions in states that have legislation protecting debtors from creditors. This can be very effective in a bankruptcy case when retaining homes during bankruptcy is a primary concern. Limited liability companies, or family limited partnerships, are also an effective method of protecting assets through corporate structure of the family, often used when the family actually operates a successful business or an investment group. And of course, insurance is an excellent method of protecting and growing wealth by paying a policy in full that could also reap excellent earnings beyond the premium investment.
It is always a good idea for families who have considerable wealth to seek advice from an experienced and effective Clear Lake estate planning lawyer from the Law Firm of Badeaux & Associates and let him/her evaluate your need for estate planning to protect personal assets and avoid probate court after the death of the primary asset owner. Call (281) 486-4737 today.