permit residents and in some cases others, to set up trusts that protect their assets from lawsuits. Many other clients have told us about asset protection plans and articles that they have read but which are not really effective under Pennsylvania law. In this post and a few future posts, we will examine a few of the most common misconceptions and we will alert you to a few of the most important strategies and tools that do work.Common
Joint Assets Are Protected from Our Creditors and from Lawsuits:
Patially true and partially false. It is true, that when husbands and wife hold assets jointly, that those assets cannot be reached by the indiviual creditors of one spouse. However, if you are found to both be liable, your jointly held assets might be reached in litigation. For example, if you jointly own a house or car and someone is injured by the car or at the nouse, they might get a jusdgment against both owners. Now they can reach jointly owned property.
Also, if there is a lawsuite against one spouse that goes to judgment against that spouse, and the husband or wife predeceases that spouse, the assets all become the property of the survivng spouse. Then, that spouses judgment creditors can reach the asset.
Finally, jointly held assets are not protected from medicaid and nursinghomes, and if you own assets joinmtly with a child, that child's creditors might be able to reach that child's interest in the account.
Assets in A Living Trust Cannot Be Reached By Creditors
Largely false. In most states, including Pennsylvania, a self created trust - one that you create and controll - the person who creats and controls the trust is treated as the owner of those assets and they can be reached by creditors. There are, however, Irrevocable Trust strategies that can be effectivly used to protect assets for your spouse, children and grandchildren.
For more information on the misconceptions about asset protection and the strategies that really work for Pennsylvania residents, be sure to subscribe to this blog or check back regularly. You can also read this brief artcile that we have posted about asset protection. Just click here.
David M. Frees III Esquire
For up to date estate and asset protection information follow David on Twitter - Just click here to follow.