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When you're considering setting up trusts, something you may want to consider is an irrevocable trust. Irrevocable trusts have a few benefits that you may not see with others.

Why? When you create an irrevocable trust, you're taking assets out of your hands. That means that you can:

  • Protect your assets against creditors if you die with debt
  • Assign assets to specific children, family members or friends
  • Save money on your tax bill by limiting the value of your estate

There are many different kinds of irrevocable trusts, which is why it's a good idea to talk to your attorney about creating one if you're interested. Some possible kinds of irrevocable trusts to consider include:


When you realized that you weren't going to be able to catch up on your bills, it upset you a lot. You felt like you were a failure and that you would always be struggling with debt.

You should know that most people go through a situation like yours at one time or another. Whether it's because of a medical emergency, a lost job or another problem, financial issues can be a result. There is no shame in needing help, and bankruptcy is one option that you can pursue.

Chapter 7 bankruptcy is a type of bankruptcy that allows you to eliminate the majority of unsecured debts, like credit card debts or medical bills. In exchange, you may need to give up (or liquidate) some of your assets. You won't always have to give up items in your possession, however, depending on the exemptions you can use and what you own.


One of the most important things you can do while setting up a trust as part of your estate plan is to ask “what if” questions about the future. These questions can help you plan accurately for your children.

For instance, you may be considering an incentive trust on the grounds that you want your children to keep working. You know that you can leave them enough money that they could quit their jobs. An incentive trust can incentivize them to work by stating that they have to be employed to get a yearly payout from the trust, rather than just leaving them the money.

This all sounds good, but what if the country goes into an economic depression? This is not your children's fault, but they could get fired. Since they're unemployed, they won't qualify for the payout. This leaves them with nothing. Wouldn't you rather set the trust up to help them out at a time like this, when they need it most?


Your children count on you to support them throughout the time they live at home. They usually don't worry about what's going to happen to them if you and their other parent both pass away, but this is something that you need to consider. As their parent, you have the responsibility to set a plan in place for them now just in case the unthinkable happens.

When you're setting up the estate plan, one critical component is the guardianship designation. You must ensure that you're thinking carefully about who is going to raise the children if you aren't able to. This person must be able to keep up with the kids and raise them in a manner in which you'd approve.

If you have more than one child, you can name one guardian who will raise them all. You can also name a different person for each child. You have to do what you feel will be in each child's best interest because the court will consider this if the guardianship has to be put into place.


If you have a lot of debts, you're far from alone. The average American household now has a debt load of $137,063 — and that's probably not going to change any time soon. For people who are in their senior years, that often leads to a lot of worry about what happens to those debts when they die.

Here are some things to know:

  • Your mortgage may have a pay-off clause. Check the loan documents you signed when you took out the mortgage on your home. Many banks and credit unions offer insurance that will pay off a property if the homeowner dies before the loan is repaid. Lacking that, your mortgage will have to be paid off through your estate before the rest of your assets are distributed.
  • Credit card debt and other bills may also pursue your estate for payment. However, the credit card companies, doctors and hospitals that probably hold most of your debts can only pursue what's actually in your estate — not anything that bypasses it.
  • Some debts die with you. Federal student loans are a big concern for a lot of people, but your executor can have them dismissed by providing proof of your death to the appropriate party. (Other student loans, including those with cosigners and private loans, are handled like other debts. Creditors can pursue your estate for payment.)
  • Assets that transfer directly to your heirs can't be taken to pay your debts. For example, if you have an insurance policy that names your adult child as your beneficiary, that policy will pay directly to your child — and it doesn't matter what kind of debts you left.

Ultimately, if you're worried about your debts when you die, the good news is this: Your children won't inherit them. However, they can take a sizable bite out of your estate. Proper estate planning, including the use of trusts, can help you minimize that issue and leave more for your heirs.

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