How to Protect Your Estate from Creditors in Texas

 Posted on March 26,2024 in Estate Planning

Dealing with creditors can feel like a hassle, and you may feel like it seems like a setback, especially when they start making claims against your personal assets. Thankfully, a Texas lawyer can help provide several legal strategies to protect your estate from creditors’ reach.

Homestead Exemption

One of the most powerful tools available to Texans is the homestead exemption. This law protects the unlimited value of your primary residence, including the land it sits on up to 20 acres and is used as a residential use, from forced sale by creditors. You must own and live in the home as your principal residence to qualify.

Asset Protection Trusts

Asset protection trusts (APTs) are a popular way to protect your assets from potential creditors. By transferring ownership of your property into an irrevocable trust, you effectively remove it from your personal estate, making it much harder for creditors to access. Texas allows self-settled APTs, meaning you can be the beneficiary of the trust you create.

Retirement Accounts

Federal law protects many retirement accounts, including 401(k)s, IRAs, and certain qualified plans, from creditors. This protection applies to both contributions and earnings within the account. However, it is important to note that those funds may become vulnerable to creditor claims once you start taking distributions.

Life Insurance and Annuities

In Texas, the cash value of life insurance policies and annuities is generally protected from creditors up to certain limits. This exemption can provide a safe haven for some of your assets while allowing you to access them as needed.

Tenancy by the Entirety

For married couples in Texas, owning property as “tenants by the entirety” can offer powerful asset protection. Under this form of ownership, creditors of one spouse cannot seize the jointly owned property to satisfy the other spouse’s debt. This strategy can be particularly effective for shielding real estate and certain other assets.

Business Entities

If you own a business, forming a limited liability company (LLC) or corporation can help insulate your personal assets from business liabilities and creditors. These entities create a legal separation between your business and personal assets, providing additional protection.

Contact a Fort Worth, TX Estate Planning Attorney

While these strategies can be highly effective, it is crucial to seek professional guidance from a Dallas, TX estate planning lawyer. Having someone on your side who can help you navigate the challenges and develop a comprehensive plan tailored to your unique circumstances is beneficial. Mr. Gonzalez is not just a lawyer but is also a certified public accountant (CPA). Call Gonzalez Law, PLLC at 817-349-7330 for a free consultation.