Estate planning in California involves much more than ensuring that you leave enough money for your beneficiaries upon your death as well as minimizing your tax burden now and for your beneficiaries when they receive their inheritance. Protecting your estate from creditors is an important consideration when setting it up, especially if you have a business that may have liabilities or if you have received funds from a business that goes into bankruptcy. Proper planning can help protect your estate from creditors.
Fradulant Conveyance Laws Can Affect You
Fraudulent Conveyance Laws can come into play. Under certain circumstances, these laws can end up voiding a transfer of funds considered fraudulent, thus allowing a future creditor to attach your assets, even though you had no contact with the creditor at the time of the transfer.
Structures to Protect Your Assets
When you begin estate planning, consider setting up one of the following structures to help preserve your assets for your beneficiaries:
A protective trust to provide for your spouse or children
Transferring assets to acquire interest in an LLC or LLP
Transferring assets to an annuity or a similar instrument that will protect the principal funds
The Differences Among Protective Options
Trust asset protection provisions include a Spendthrift Clause, distribution limits for health, education and support and provisions that limit the use of real or tangible property.
When setting up an LLC or LLP, creditors have limited ability to access those funds. the assets can still be attached by creditors, but when you set up the LLC or LLP, you can restrict sales or transfers of funds, which can ultimately reduce their value and ultimately liability.
Annuities and similar financial instruments also protect the principal amount against attachment while allowing for regular payments over time.
It’s Never Too Early to Begin Estate Planning
Many individuals and couples in the 30s and 40s think that estate planning is something that they can put off. However, you should start thinking about it as soon as you begin to accumulate wealth. Estate documents can also be modified as your circumstances change.