Part 3 of 3 – protect your assets so that your potential creditors don’t claim all of your estate. Plenty of options – just plan ahead!
Probate is essentially a state-mandated mechanism to make sure your estate pays all of its creditors before paying its beneficiaries. So, in order to make sure your estate’s assets don’t get substantially depleted by creditor claims, you’ll need to reduce the size of your estate. There are a number of ways to do this, and some of them are the same strategies used to avoid estate tax penalties.
First, you could invest your assets in retirement accounts, transfer-on-death accounts, and life insurance. All of these accounts are considered non-probate assets – as in, not part of your estate, so not subject to your estate’s creditor claims. These assets transfer immediately upon your death and can be a practical and simple solution to potential creditor claims.
Next, you could utilize irrevocable trust-based planning which will remove your assets from your legal ownership and control. If you don’t control your assets, your creditors cannot make a claim against them after you die as they’re not part of your estate.
You could also create a holding company for your assets and transfer legal title of them to the company. This method is similar to the use of irrevocable trusts. Remove your assets from your legal control and you can avoid having them in your estate.
You can also plan to use life insurance to pay off outstanding debts. For instance, if you know you’ve got $50,000 in student loan debt, you could get a term life police for $50,000 (or more) in benefits specifically to pay the student loan debt and avoid having that amount taken from your estate. People can also use life insurance to pay anticipated estate tax penalties.
Author Bio
Paul Yokabitus
Founder & Estate Planning Lawyer
Paul Yokabitus is the founder of Cary Estate Planning, where he helps North Carolina families protect what matters most through wills, trusts, probate, and special needs planning. Known for his “planning, not paperwork” approach, Paul turns complex legal concepts into clear, practical strategies so clients feel informed and confident at every step. He has been recognized as a Business North Carolina Legal Elite attorney and a Super Lawyers Rising Star, and was named to the Triangle Business Journal’s 40 Under 40. A graduate of Campbell University School of Law, Paul lives in the Triangle with his wife, Alix, and their two sons.
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How We Help North Carolina Families
Paul and his team at Cary Estate Planning are fully committed to creating a personalized experience to develop thorough and comprehensive estate plans. They value their clients and go above and beyond to make sure that no details are missed. I would highly recommend Paul to anyone looking to create an estate plan.
I was referred to Paul by my Real Estate Attorney and I could not say enough about how exceptional the client service has been from everyone I spoke to. The communication is prompt and I feel like they really took the time to answer all my questions and set things up exactly as I wanted, but also recommended things to make it easier on my family down the line.
After attending one of Paul’s estate planning seminars, my husband and I knew we wanted Paul to assist us with our estate planning. His honest, professional approach to this necessary part of life put us at ease with the process. We will continue to recommend Paul and Cary Estate Planning.
We had a great experience working with Paul Yokabitus and the team at Cary Estate Planning to set up our Will and Estate Plan. The process was clear and easy, and in the age of COVID, our signing session was very well done, easy, and safe.
The Cary Estate Planning team will make sure that you have the information you need to be confident in your estate planning decisions. I learned so much from videos, a one-on-one in-person consultation, the website, emails, and a newsletter mailed the old fashioned way. The fee is very reasonable given the importance of estate planning. No matter the size or number of your assets, don’t procrastinate like I did!
Paul is a masterful attorney. He’s very good at taking your intentions and defining that into a durable Trust and Will. Best of all he is as simple and plain-spoken as you like. Or as fast as intellectual as you may be. It’s all about your your speed and your desired outcomes. Would strongly recommend this firm.
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