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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.

Call The Chubb Law Firm today at (916) 241-9661 to review your goals and discuss your options.

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I was absolutely without a clue as to how to begin or what I should do to establish an estate plan. I did know that I wanted someone I could trust, that was honest and I would have confidence in. I was referred to Heather by my friend who was being legally advised by Heather on another estate. She was very satisfied with her work and thought I might be happy with her service. At our consultation appointment, her presentation was very thorough. I had lots of questions, and she was easy to talk to and was able to guide me to just the kind of estate plan I needed. That was 10 years ago. Due to circumstances in my life, I have had to make changes to my plan, and I always go back to her for her legal services and guidance. I have recommended Heather before.
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