Estate planning provides peace of mind knowing that an individual or couple can legally protect some assets from future creditors. To be sure, transferring an asset without getting something of similar value in return could lead to legal problems.
In certain circumstances, however, individuals can transfer assets to protect them from subsequent unforeseen events.
An irrevocable trust may be an option
One way to avoid the appearance of fraudulent behavior is to move assets into an irrevocable trust. This involves transferring ownership of assets to the trust instead of the owner. This can work as long as the transfer is done before incurring the alleged debt. Moreover, the individual may still be able to indirectly benefit from assets placed in the trust, such as establishing oneself as a beneficiary.
Business owners also have options
Business owners also can transfer certain assets in exchange for an interest in an LLC, LLP or annuity. Since the individual no longer owns the original asset, it cannot get seized by creditors. The interest paid to the individual for the original asset is similarly shielded.
The timing is important
As already pointed out, the individual cannot validly transfer assets to an irrevocable trust or the LLC if they know that they owe a debt to the creditor. It is always best to consult an attorney who handles estate planning or business law to ensure that these transfers are legal. At that time, the attorney may also be able to identify other financial opportunities for the individual. Taking such actions can provide peace of mind knowing that they shield critical assets for the next generation.