Protecting Your Estate from Creditors

Of all the functions of estate planning, one of the most essential includes safeguarding your assets upon death or incapacitation. After all, you may have family members who would otherwise be left vulnerable after your passing. As you clarify the terms in your Will or Trust, you’ll want to shield your estate from creditors and do what you can now to avoid Probate.

Understanding Probate Assets

Probate is when your estate’s Will is validated. That’s also when the executor of your estate pays outstanding bills and distributes assets according to the terms of the Will or Trust.

Certain types of assets, called probate assets, are subject to the probate process. They include bank accounts, personal property, real estate, and other assets not transferred through Trusts. They also have no designated beneficiaries. In contrast, assets like 401(k)s, IRAs, and other retirement funds can have beneficiaries whose names must appear on beneficiary designation forms. Therefore, they don’t count as probate assets.

Probate assets are what the executor uses to pay outstanding bills and debts. For example, you may have bills for nursing home or hospital care, credit cards, or other outstanding debts. Some people or entities may file claims against your estate to collect on those debts. Typically, it’s the estate in probate that’s responsible for the payment of these outstanding bills.

The Importance of Beneficiary Designation

Beneficiary designation is a powerful means of protecting your assets. More specifically, when planning for your estate’s management after your passing, ensure your retirement assets go to your beneficiaries, not your creditors.

Assume you have $400,000 in your IRA and 401(k), and you named beneficiaries to which those funds will be allocated. The good news is that medical providers and others wanting payment for bills cannot touch your $400,000 because you’ve already designated them to your named beneficiaries.

Also, suppose your estate is worth $50,000, but you owe medical providers $75,000. These claimants only have a legal right to the $50,000 in your estate.

Get Answers to Estate, Probate, and Will Questions

The critical takeaway is to protect your assets from creditors through beneficiary designation. The legal professionals at Donnellon, Donnellon, & Miller can help you understand the probate process and how to protect your assets. They’ll help with designation forms and other logistics to help you keep your funds safe from persistent claimants. Call 513-891-7087 today to talk to an experienced and caring Will and Trust lawyer. You can also fill out our online contact form to get assistance with all your estate needs.