While most people fully pay their final debts from their estate, some folks do have more debts than assets when they die. Other decedents may have pending lawsuits against them, or are sued after they die. Your goal then is to arrange your affairs so that your assets will pass to your heirs free of lawsuit or creditor claims. There are ways to accomplish this. One option is to title your property jointly or as tenancy-by-the-entirety. In most states, jointly owned property passes to the surviving joint owner free of creditor claims against the deceased owner, though there are exceptions. Titling assets jointly with right of survivorship (JTWROS), or as husband and wife as tenants-by-the-entirety is only one option when you want your interest in property to pass creditor free upon your death to your surviving co-owner. Another option is to bequeath your property through an irrevocable trust that you fund during your lifetime and before you have creditors, as later transfers to the trust may be recoverable by the creditor as a fraudulent transfer. Your trust, of course, must also be protectively structured. Still another option is to make lifetime gifts to deplete your estate – provided these gifts aren’t fraudulent transfers. Another option is to invest in fixed annuities or other investments that transform your wealth into an exempt income stream for yourself or your heirs. Its death benefit – or future payments – would pass debt-free to your survivors and sidestep creditor claims.
