As in many other states, wills in Georgia can be contested by the beneficiaries named on it, if they suspect there were fraudulent or improper conditions involved in the signing of the will. In some situations, a beneficiary may simply feel like he or she has been shorted his or her inheritance or given a smaller amount than expected, triggering him or her to initiate a will contest in an attempt to receive what he or she considers to be his or her fair share. There are ways to prevent your beneficiaries from contesting a will simply because they are unhappy with what they are getting.
What Kind of Trust Can Shield Assets from Creditors?
If your goal is to have a flexible way to plan for how your estate will be distributed among your descendants while avoiding the troubles brought on by probate, you will likely want to choose a revocable living trust. However, because it can be amended or canceled at any point during the creator’s lifetime, it does not offer much in terms of debt protection. The assets placed in a revocable trust can be taken back anytime, which means they are still part of your taxable estate and thus subject to creditor claims. When you die, this type of trust becomes irrevocable. Whether it will protect your assets from your beneficiaries’ debtors will depend on how your trust is crafted and on the provisions included regarding distribution of assets.
In contrast, an irrevocable trust cannot be changed or amended once created. The assets you place in this type of trust leave your taxable estate altogether, becoming property of the trust. You may still benefit from the assets during your lifetime, but you will no longer own them and thus may likely not pay estate taxes. Most importantly, creditors cannot demand you close out the trust in order to pay off any debts. Once again, it must be properly crafted in order to protect your beneficiaries the same way.
What Happens if Someone in Debt Opens an Irrevocable Trust?
While an irrevocable trust does offer protection from claims made by creditors, things can quickly escalate to illegal territory when an individual knowingly sets up a trust with the goal of evading debt. For example, if you place a real estate property into an irrevocable trust after you have already gotten involved in a dispute with a creditor, that creditor may come after the title of said property and sue your irrevocable trust to get the property back in order to pay off your debt. Irrevocable trusts are legal entities on their own, and as such, can be sued for any wrongdoing.
In this case, planning ahead is the best strategy. If you place your assets in an irrevocable trust long before you ever accrue any debt, you will be protecting your estate from creditors with less risk of being sued or committing debt evasion. Always consult with your attorney or tax professional before making any decisions regarding trusts and debt protection.
Can a Lien Be Placed Against an Irrevocable Trust?
A lien is a legal claim placed over someone’s property with the goal of securing debt repayment. A lien can be placed against an irrevocable living trust in some circumstances, depending on whether the lien is against the grantor or the beneficiary. Voluntary and mechanic’s liens remain in place, regardless of assets being part of the trust or not. Generally speaking, living trusts are not the best tools to protect your estate against liens—but there are other alternatives.
If you are concerned about protecting your assets from creditors, consult the legal team at Oren Ross & Associates. Our estate planning law firm team will be happy to answer all your questions. Schedule an appointment at (678) 250-4281.
