People set up trusts in order to pass family assets onto the next generation of loved ones. This is done in order to protect these assets. However, it is important to know that doing so does not always protect them from creditors in the event that the family has certain debts. If a person creates a trust and either them or their beneficiaries file for bankruptcy, the trust could be seized to repay these debts. Continue reading below to learn more about what can be done and contact an experienced Alabama estate planning attorney for guidance.
What is the Difference Between a Revocable and Irrevocable Trust?
When discussing estate planning and debt, it is important to know the differences between two types of trusts that are commonly used: a revocable trust and an irrevocable trust. A revocable trust allows a grantor to have control over the assets until they die, meaning they are legally considered the owner of the property as long as they are alive. When they die, the beneficiaries will assume ownership. On the other hand, an irrevocable trust does not let grantors maintain ownership to the trust they created. While beneficiaries may not have access to the assets yet, they are considered the owners by law. It is possible for a “spendthrift” provision to be added to this trust so that it can be protected from credit seizure in the event that a beneficiary files for bankruptcy one day.
What are the Benefits of a Trust?
There are many reasons why a person may choose to create a revocable trust or irrevocable trust depending on their needs. One of these reasons being the benefits they offer. 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
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Stone Crosby, P.C. has proudly served clients in Alabama for over 100 years. Our firm has experience handling matters including divorce and family law, estate planning and administration, business law, employment law, class actions, consumer protection, business law, real estate law, among many others. If you require quality legal representation, contact our firmtoday to schedule a consultation.