How to Better Protect Your Assets from Creditors: Lessons from In Estate of Holdaway 

A California Superior Court in the case of In Estate of Holdaway recently ruled in favor of a creditor who was attempting to collecting on a deceased person’s estate. Following the individual’s death in 2013, a creditor in 2014 filed a petition for probate and seeking compensation for $90,875 on a debt. This claim was based on four loans the creditor made to the deceased individual and in-home services provided to the deceased individuals. In 2015, a trial court issued an order showing why the creditor’s petition should not be dismissed for failure to prosecute. 


Later in 2015, the trial court ordered that the case should be dismissed without prejudice. In 2016, the deceased individual’s son filed a competing petition for probate, which stated that the deceased individual had left all of his assets to a family trust. The trial court later granted this competing petition. After this, in 2017, the son rejected the creditor’s claim against the estate, which led the creditor to challenge this denial. 


In arriving at its decision, the Court of Appeal stated that the trial court does not have a power authorizing it to extinguish the claim of a creditor in such a way based on the mere stipulation that others are interested in the estate. As a result, the appellate court reversed matters and remanded the case to the trial court.


Ways to Protect Your Assets


If you fail to properly protect your assets, there is a risk they can be taken by creditors. Some of the estate planning strategies that you can take to protect your assets include:


  • Account receivable financing. For business owners, it is possible to borrow against receivables and place this money into a non-business account. This makes the debt-encumbered asset less attractive to creditors and can leave assets that would be otherwise collectible by creditors unreachable.
  • Protection caps. Retirement accounts have a cap of $1 million against bankruptcy proceedings, although this cap can be increased if necessary. This cap can help to protect assets greater than $1 million placed in these accounts.
  • Qualified retirement plans. Employer-sponsored retirement plans have unlimited protection from bankruptcy. 
  • Remove equity. One of the best ways to protect your assets is to remove the equity from them and place that cash into assets that your state protects.
  • Transfers. Some people have discovered that transferring assets to a spouse’s name is one of the best ways to protect against creditor collections. 
  • Trusts. Many individuals who have engaged in estate planning have discovered that trusts can be used to protect assets from creditors. Asset protection trusts are a certain type of trust that can be used to protect a person’s assets from collection attempts by creditors.


Speak with an Estate Planning Lawyer


To learn more about how to protect your assets from creditors, it can help to speak with an experienced estate planning lawyer. Contact Ettinger Estate Planning today to schedule a free initial consultation.

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