In Indiana, minimizing the impact of creditors on an estate is an important aspect of estate planning.
By taking certain steps, you can protect your assets. You can also ensure that more of your estate goes to your heirs.
Create a living trust
A living trust is a legal document that places assets in a trust during your lifetime. The trust then holds and manages these assets for the benefit of the beneficiaries. Since you no longer own the assets in the trust, they will not be not subject to creditors’ claims later.
Gift assets during your lifetime
By giving away assets, such as money, property or valuable items, you reduce the size of your estate. This means there will be fewer assets available for creditors to claim after death. Do stay within the limits set by the Internal Revenue Service to avoid gift taxes.
Hold joint ownership with rights of survivorship
Another way to protect assets is by holding property jointly with rights of survivorship. In this arrangement, when one owner dies, the property automatically passes to the surviving owner(s) without going through probate. Creditors cannot claim the property, as it does not become part of your estate.
Pay off debts
Be proactive about paying off debts since this means fewer claims on the estate. This can include paying off credit card balances, personal loans and other liabilities.
Use beneficiary designations
Designating beneficiaries on accounts such as life insurance policies, retirement accounts and bank accounts can help protect these assets from creditors. When there is a beneficiary, these assets pass directly to the beneficiary. They bypass the estate and avoid creditors’ claims.
Maintain proper documentation
Keep up-to-date lists of assets, debts and beneficiaries. Proper documentation helps ensure a smooth process and can prevent disputes among heirs and creditors.
By following these tips, you can plan your estate to minimize the impact of creditors and make the process go easier.