Don’t leave your beneficiaries drowning in debt!
How can a Trust Fund protect against this?
One of the reasons for setting up a trust is to keep the assets in the trust separate from one’s personal assets. A benefit of this is that assets which are held in a trust are protected from creditors, for example should the settlor become insolvent or be declared bankrupt. However, there are limits on such protection.
If beneficiaries of your estate owe money, their creditors and the courts generally do not care what assets they use to settle a debt. One source of cash a creditor may try to obtain is an inheritance your beneficiaries have received. Generally, if your beneficiaries receive an outright inheritance, it can be claimed by creditors and used to pay off liabilities.
As a trust fund does not belong to individual beneficiaries it is a useful tool. Trust funds can be loaned to a beneficiary and they are priority repayment if the beneficiary runs into financial problems.
A trust also protects your wealth from the creditors of the beneficiaries. Creditors usually can’t force distributions from a trust, but they can assert claims against income and principal that are distributed to the beneficiaries. The money is safe as long as it is in the trust.
A trust isn’t needed or appropriate in every case. You need to consider your goals and realistically assess your beneficiaries, and then decide if it would be better to let your beneficiaries inherit the wealth outright or through a trust.
Want to find out more and discuss your particular situation? Call me on +44 7831 379562 (UK) or +34 622 374 738 (Spain), or email me at email@example.com to arrange a confidential chat.
Warm regards, Sally