People create a trust in order to pass their assets onto the next generation of their loved ones. However, if the family has certain debts, it is important to be aware that a trust does not necessarily protect the assets within it from creditors. If the individual who creates the trust or their beneficiaries files for bankruptcy, it is possible that the trust can be seized in order to repay those debts. Continue reading below to learn more about what can be done in these situations and contact an experienced New York estate planning attorney for assistance.
What is the Difference Between a Revocable and Irrevocable Trust?
When a grantor or beneficiaries of a trust have debt, it is important to know the characteristics and differences of two types of trusts: a revocable trust and an irrevocable trust. When a revocable trust is created, the grantor has control of it until they die. This means the assets within it are legally considered their property as long as they are alive. Their beneficiaries will assume ownership when they pass away. Alternatively, a grantor is not in control of an irrevocable trust. While beneficiaries do not always have access to the assets when it is created, they are still considered the owners of the trust by law. A “spendthrift” provision can be added to this type of trust so that it can be protected from credit seizure if the beneficiary files for bankruptcy.
What are the Benefits of a Trust?
There are many reasons why a person may choose to create either a revocable or irrevocable trust. When making this choice, it is important to pick the one that is right for the wishes you have for your estate. Some of the benefits of an irrevocable trust can include:
- Estate tax reduction
- Asset protection
- Charitable estate planning
Some of the benefits of having a revocable trust can include the following:
- Planning for mental disability
- Avoiding probate
- Protecting privacy
Contact our Firm
The Lauterbach Law Firm is proud to serve clients throughout Rockland County who are faced with legal matters related to estate planning, real estate, foreclosure defense, landlord-tenant law, business law, and criminal defense. If you require the services of an experienced team of attorneys, contact The Lauterbach Law Firm today to schedule a consultation.