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Modern Estate Planning Blog

Elder Law & Special Needs Planning

Good Credit Doesn’t Mean Your Nest Egg Is Safe From Bill Collectors | Sacramento Trust Lawyer

October 3, 2011

You’ve worked hard. You’ve built up a nice nest egg. Do you need to worry about creditors getting their hands on it?

You just might!

This is because the money that you leave to your beneficiaries may be at risk if they have money troubles. Even though you may think that leaving money to someone who has money problems may be a lifesaver for them, it may not.

You see, if you leave cash or property to someone as an outright bequest, it becomes their property. And bill collectors will know about it and will immediately begin proceedings to get their hands on it. This means that the money that you worked hard to earn and wanted to leave to your heirs could almost immediately fall into the hands of bill collectors.

This is why I frequently suggest that my clients who have this concern set up a trust for the benefit of the heir rather than leaving money to them outright. The trust needs to be written with very specific language to provide protection from creditors. But if it is written with liberal distribution instructions, it can allow for nearly unrestricted use of the assets while still protecting them from creditors.

Some people mistakenly believe that if they accept an inheritance and then immediately give it to their heirs or put it into an asset that is protected from creditors. Unfortunately, if you already have creditors lurking, this transfer will most likely be challenged as fraudulent. If the challenge is successful you will need to undo the transfer, which makes your inheritance available to bill collectors once again.

It is important to point out that not every trust will give you protection from creditors. You need specific language in your trust to ensure that the assets are transferred in the right way. Most trust you create for yourself, often know as living or revocable trusts, do not provide this protection.

If you have concerns about your heirs and you want to protect your hard-earned assets from bill collectors, be sure to meet with an experienced Sacramento estate planning attorney who can help you protect it.

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CLIENT Story

I totally see the difference between your service and your typical legal estate planning service. The experience you mentioned where you get this big document you don’t understand and a trust that never gets funded was EXACTLY our first experience. It cost a small fortune too. Really - it is the difference between providing a legal document and providing an estate planning service.
Susan

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