How Do I Avoid Paying My Creditors?

The short answer is that you can’t. That’s not what we do at our office. In fact, in most instances, transferring assets to avoid paying creditors is no legal and that’s not what our purpose is in trying to guide people in asset protection. If you have creditors, you need to pay them. If you don’t have the money to pay your creditors or if you want to try to work out a better deal in paying them, whether it’s less money than you truly owe or if you want to come to some type of structured payment, that’s something you’re at liberty to do, but you can’t avoid paying your creditors.

If you have creditors, it is too late to engage in asset protection planning, unless you intend to file for bankruptcy, which is not something we assist with. When debts are already due, you’ve passed the point where you have the ability to engage in asset protection planning because any attempt to transfer your assets is considered a fraudulent conveyance in the state of New York and your creditors will have the right to bring a lawsuit to unwind the transfer and collect payment.

If you have substantial creditors, I advise any client or potential client to seek out a bankruptcy attorney. Bankruptcy is not one of our practice areas at C. Haner Law, PLLC. We do, however, have a lot of friends and colleagues who are excellent bankruptcy attorneys. If you find yourself drowning in debt, feel free to call us; you will be referred to a qualified bankruptcy attorney.

How Do I Ensure My Child Will Not Waste Their Inheritance?

While we could never guarantee that child would not waste their inheritance, we can work with a client to set up an appropriate estate plan, typically by employing a standalone trust or creating testamentary trusts, which will limit the child’s access to any proposed inheritance, thereby minimizing the possibility that the inheritance will be wasted.

In working with a knowledgeable Trusts & Estates attorney, a client can creates trusts that only allow for distribution to a child upon the happening of certain events, for example, a client can limit the ability of child to access the inheritance unless the inheritance is needed for educational purposes. Another way to limit a child’s ability to access their inheritance is by only allowing for payment to the child upon the child attaining a certain age.

The whole idea behind these trusts is to prevent the child from receiving their inheritance outright. In creating these trusts, the client is well advised to select a Trustee who will ensure compliance with the terms of the trust. If the proposed trustee is not firmly committed to ensuring the child does not receive their inheritance before a specified event, or for a specified purpose, the client should select someone they know will follow their wishes.

In terms of specifying ages at which a child would receive an inheritance, the client can either select an age at which the child will receive his/her inheritance outright, and in full, for example, the child receives his/her entire inherence at age 30, or the client can ladder ages for payment, for example, 1/3 will be paid to the child outright at age 25, 1/3 will be paid outright to the child at age 30, and the final 1/3 will be paid outright to the child at age 35. Keep in mind that in specifying ages for distribution, once the child turns the preselected age, the child receives either the whole or a portion of their inheritance outright, and, at this point, there is no further assurance that the child will not waste the inherence received.

When specifying an age for distribution to the child is not appropriate, the client would better advised in creating a trust that allows the Trustee absolute discretion in making or refusing to make distributions to the child. With these types of trusts, the child is typically required to ask the Trustee for distributions and inform the Trustee what the distributions are needed for. After review by the Trustee, the Trustee can approve or deny the request as they see fit. If the child is particularly troubled, the Trustee could be given permission only to make distributions for the benefit of the child, and not directly to the child. This scheme avoids the inheritance from being paid to the child directly, and allows the Trustee to pay vendors for items the child needs, such as paying the child’s college tuition, room and board, etc.

What Is The Best Way To Leave Money To My Disabled Child?

If a client has a disabled child, the client should create a Supplemental Needs Trust for the child. A Supplemental Needs Trust can either be contained in a client’s Last Will and Testament, which is called a Testamentary Supplemental Needs Trust, or the Supplemental Needs Trust can be a standalone Trust. With a Testamentary Supplemental Needs Trust, the client does not fund the Supplemental Needs Trust during life, but, instead, the Testamentary Supplemental Needs Trust is funded upon the client’s death as part of the probate process. The benefit to a Testamentary Supplemental Needs Trust is the client can have free access to their assets during lifetime, including the ability to pay for the disabled child’s needs as they see fit. In contrast, a standalone Supplemental Needs Trust is funded during the client’s lifetime. A benefit to creating a standalone Supplemental Needs Trust is the Supplemental Needs Trust is already funded prior to the client’s passing, ensuring the disabled child will have the benefit of the assets transferred into the Supplemental Needs Trust immediately. A second advantage to the standalone Supplemental Needs Trust is, in creating a standalone Supplemental Needs Trust, the client can avoid the cost, expense and uncertainty of a probate proceeding, which, in some instances, can leave the Testamentary Supplemental Needs Trust underfunded or unfunded. If utilizing a Testamentary Supplemental Needs Trust, the client must ensure sufficient assets are includable in their probate estate to fund the Trust.

Whether using a Testamentary Supplemental Needs Trust or a standalone Supplemental Needs Trust, once the Supplemental Needs Trust is funded, the Trustee will manage all assets for the benefit of the beneficiary. The Trustee of a Supplemental Needs Trust is prohibited from making distributions from the Trust directly to the disabled child, which could cause the disabled child to lose government benefits. The true purpose of the Supplemental Needs Trust is to ensure the disabled child receives certain conforms provided by the Supplemental Needs Trust, such as birthday parties, vacations, etc., without the child losing the government benefits the child is receiving.

In addition, a Supplemental Needs Trust is structured to provide outright distribution to non-disabled children once the disabled child dies. Because distributions from Supplemental Needs Trust to disabled children tend to be smaller distributions, often the non-disabled children, who will receive distributions once the disabled child dies, receive a substantial distribution. By utilizing a Supplemental Needs Trust, a client with a disabled child get the benefit of knowing both that the disabled child will receive distributions from the Supplemental Needs Trust to increase the disabled child’s standard of living during life and that the client’s non-disabled children will ultimately inherit the balance of the Supplemental Needs Trust upon the disabled child’s passing.

For more information on Asset Planning, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (516) 888-5381 today.