One of the worst nightmares for wealthy people is to lose all of their assets to creditors. They have some options to protect against that possibility.
One potential creditor that wealthy people do not often think about is their spouse. In a divorce, a spouse can quickly turn from a former partner to someone whom the deceased wealthy person owes a lot of money.
For years, the wealthy have sought to guard against that possibility by entering into prenuptial agreements. However, many later find that their prenuptial agreement has holes in it. In fact, their agreement may not limit the amount they owe an ex-spouse, or at least as much as they thought it would.
Recently, Private Wealth discussed that possibility in “Cracks In Your Assets?”
Another possible way of protecting assets, such as an individual business, is to turn that business into a partnership or LLC. However, that is not a perfect solution, since the creditor can still intercept any payments from the entity to the wealthy debtor.
A newer solution is to create a self-settled asset protection trust. After a short period of time, assets in these trusts are untouchable by creditors.
Seventeen states now allow these trusts.
Another possibility is to use an offshore trust since U.S. courts do not have jurisdiction over them in most cases.
If you would like to make sure your assets are protected in the future, then talk to a wills and trusts attorney about your options.
Reference: Private Wealth (April 21, 2017) “Cracks In Your Assets?”
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