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Worried about debt? Some estate planning steps could help

On Behalf of | Mar 12, 2021 | Estate Planning

As you reach retirement, one thing you may start looking at is how much debt you’re carrying. If you have a significant amount of debt, you’ll start focusing on paying it off.

If you are concerned that there may come a time when you won’t be able to afford to pay down debts or are worried that creditors could start coming after your assets and property, then you may want to talk to your attorney about setting up a trust for those assets.

How can a trust help you protect your assets if you die with debt?

An irrevocable trust is a special kind of trust that may help you protect your assets if you cannot afford to repay your debts or if you pass away with debt in the future. In fact, one of the top benefits of this kind of trust is that it removes any assets you include in it from your estate completely.

There is a catch with irrevocable trusts, and that is that you cannot make changes once you decide to put something into that trust. For example, if you put your home in the trust and gift it to your child, you may have no option to change that decision in the future.

When you put assets into an irrevocable trust, they are being taken out of your name. They go into the trust, which is monitored by a third party in many cases, and held until the trust is ready to be distributed.

That being said, you are getting some serious benefits from putting your assets into the trust. You will have the option of reducing the taxable value of your estate as well as removing assets from your estate, so that they are not able to be touched by collections agents or lenders.

A good irrevocable trust can make a big difference in how comfortable you feel about your assets and how well protected they are. Your attorney can go over some of the benefits of this kind of trust with you, so you can understand if it would be a good idea for your situation.