Estate planning seems complicated, and that is largely, because it can be, especially as you age. However, one such item that can be overlooked, especially by those who do their plan online is protecting their New York, New York, estate plan from creditors.
Do I really need creditor protection?
Yes. Picture this: There is a knock at your door. It is someone looking for your neighbors. You direct them there, and even ask them to not walk on your lawn. Of course, they walk across your lawn to your next-door neighbor, and they fall and break their ankle. You are on the hook for their fall.
That means that you must pay for their medical bills and their pain and suffering. If you do not have adequate homeowner’s insurance, you will be expected to pay out of your pocket and assets, even if that means dipping into assets meant for your heirs.
The first way to protect liquid funds is to max out your retirement accounts, like your individual retirement accounts and qualified plans. These have protections in bankruptcy proceedings and civil court proceedings. Speak with your attorney to get specific limits, but often they are unlimited or at the million-dollar level, with inflation adjustments.
Next, make sure the family home is filed as your homestead in the county where it exists. In most states, your homestead is protected from creditors. This can be up to a limit or unlimited, depending on local laws. Check with your New York City metro area estate planning attorney.
Annuities and life insurance
Annuities and life insurance are also protected from creditors in most states. They can be funneled into a trust for the benefit of your heirs to avoid probate. They can also have cash surrender values that you may be able to use later in life for other purposes, should you no longer need them as part of your estate plan.
The bottom line
Asset protection may not seem like an important aspect of your estate plan, but if you need it, it quickly becomes the most important part of it. Do not wait to need it. Because if you need it and do not have it, it will already be too late.