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Bankruptcy Asset Protection with Illinois Estate Planning

Des Plaines and Hoffman Estates Asset Protection Lawyer Safeguards Property in Bankruptcy

The key to asset protection and shielding property from creditors in bankruptcy is to engage in comprehensive estate planning long before any major creditor issues arise. This is particularly important for business owners and entrepreneurs in Illinois, who may be financially secure at the time, but wish to make certain investments or start companies that have inherent future risks.

An asset protection lawyer at our estate planning law firm near Chicago works closely with clients to develop strategies to minimize a person’s financial risk for investment and business transactions. These bankruptcy asset protection strategies are best done as wise business and financial planning when a person is solvent, not to avoid creditors. Anyone with significant assets who wishes to get involved in business transactions or investments is wise to prepare a comprehensive estate plan as early as possible.

Why Do You Need an Asset Protection Plan Long Before Filing Bankruptcy?

When a person waits to try to shield property or assets until considering bankruptcy from creditor troubles, it may be too late to protect the assets. When assets and property are transferred in anticipation of bankruptcy, such transfers may run afoul of state fraudulent conveyance laws and the Bankruptcy Code.

A bankruptcy trustee’s avoidance powers include the ability to take back conveyances of property made within 90 days of filing, or even up to one year for insider transfers, such as transfers to family members or business partners. The only way to truly protect assets is to plan for the future long before any financial problems arise with by putting in place an asset protection plan.

What are Common Asset Protection Strategies?

There are a number of asset protection strategies that help reduce risk and maximize wealth of a prudent investor or businessperson. The following are only a few approaches to estate planning asset protection in Illinois; an asset protection lawyer at our will review the entire financial picture to bring the best approach possible to reach the client’s goals.

Irrevocable Trusts, Spendthrift Trusts, Insurance Trusts

One way to ensure money or property is protected from creditors is to place the assets into an irrevocable trust. This type of trust releases the person who funds the trust (the “settlor” or “grantor”) from having any control of the assets contained within the trust. Another benefit of irrevocable trusts for estate planning is tax minimization and keeping assets out of probate.

A common type of irrevocable trust for this purpose is a “spendthrift trust,” which allows the settlor to gift a beneficiary the assets of the trust to only be spent under certain conditions and under the watchful eye of a named trustee.

Another strategy is to purchase a comprehensive insurance policy with umbrella coverage, which would apply if homeowner’s insurance or car insurance policies are maxed out after a tragedy or unexpected event. This policy should be placed in an irrevocable trust for the benefit of a spouse or family member to shield the policy from future creditors (including estate taxes).

Business Formations
An important consideration for potential business owners looking to incorporate is to utilize a Limited Liability Company (LLC) or Limited Liability Partnership (LLP). One of the many benefits of these types of Illinois business formations is a bankruptcy trustee would be limited to solely the contribution by the owner filing bankruptcy and not the entirety of the assets of the company as a whole.

Prenuptial Agreements, Postnuptial Agreements and Property Titles

Married or engaged individuals are wise to include their spouse as an essential part of an estate plan. This may include the use of prenuptial and postnuptial agreements to shield a spouse’s property and liability from creditors. There are also differently types of titles to property that can secure a spouse’s share from creditors and/or to avoid probate.

Asset Protection Lawyer in Hoffman Estates and Des Plaines Serving Chicago

This page is a brief overview of only a few possibilities to protect assets from potential future bankruptcy in Illinois as well as the risks that come with financial investment and entrepreneurship. Bankruptcy asset protection will only work if the estate planning is done far in advance of any creditor issues that may arise down the line. Do not wait to maximize your assets, minimize liabilities and protect your family from future financial unknowns.

To discuss bankruptcy asset protection strategies with a qualified estate planning attorney, reach out our firm by calling us directly at (847) 310-0025. You can also fill out our online estate planning contact form to have someone from our office get back to you shortly.

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