When you write your will, it might seem safe to assume that your beneficiaries will receive their inheritance exactly as you planned. Unfortunately, Minnesota creditors and even divorced spouses can get in the way. You might want to place your assets in different types of trusts to keep them away from creditors.
How can you protect your assets?
In your will, you might decide to give your heirs and beneficiaries part of your life insurance payout. Your beneficiaries might get to keep their inheritance if they manage to stay debt-free. However, if one of your beneficiaries files for bankruptcy, their creditors might seize their inheritance to pay off their debts.
An estate planning attorney could help you create an irrevocable life insurance trust (ILIT). When you place the assets in a trust, you’ll appoint a trustee to distribute them to the beneficiaries. Under the law, the trustee can’t give these assets to anyone but the beneficiaries that you selected. This includes creditors and other third parties.
Similarly, if one of your beneficiaries is going through a divorce, their estranged spouse might argue that they should get part of their inheritance. You could place their assets in an ILIT, an IRA trust or another relevant trust that protects their assets. No matter what they lose in the divorce, they won’t have to give up their inheritance.
How do you form a trust?
You can choose from multiple options when forming a trust, each with its own set of benefits. An attorney could tell you which type is best for your situation and help you make one for each of your family members. You might also want to make trusts for other assets like savings accounts, investments and other properties. Just make sure that you choose someone you can depend on as the trustee.