When you die, an entire lifetime of assets will pass through probate to the people that you love. Your estate plan probably leaves clear instructions about who should inherit which assets. You likely want to leave meaningful and valuable items to your spouse, your children and even your grandkids.
Unfortunately, all of that planning could wind up wasted if your creditors consume your estate. Probate rules require that your executor repay all of your debts before they distribute any property to your family members. A trust could help you protect your biggest assets.
Assets in a trust don’t have to go through probate
Settling debts is an important part of the probate process. Your debts don’t necessarily pass to anyone else, but your estate has ultimate responsibility for them. The executor of the estate will have to notify creditors about the death and then provide information about assets to the courts.
Only when they have repaid all outstanding debts can the executor then hand out assets to beneficiaries. Your executor takes on personal risk if they distribute anything to your loved ones while there are still unpaid debts with a legitimate claim against your estate. You can avoid the risk of a hospital or credit card company forcing the sale of your assets by keeping them out of probate court.
Assets that don’t pass through probate won’t be vulnerable to creditor claims. Transferring the ownership of a house or other major assets to a trust can be a great way to protect those assets from creditors’ claims after you die. Thinking ahead about possible probate challenges can help you create an estate plan that truly supports your intended legacy.