How Car Accidents Impact Estate Planning
Car accidents have unfortunately become a common occurrence. According to Michigan State Police, there were 312,798 car accidents in 2018, which resulted in over 75,000 people being injured[1]. These injuries can lead to emergency room visits, extended hospitalizations, physical therapy, missed work, and they can also wreak havoc on your accounts and assets if you have not properly planned for your future.
Lawsuits can be, and often are, filed over car accidents. These will likely result in the person who was injured being owed money from the person who was at fault. Not properly planning for your assets can make it possible for creditors to reach those assets or accounts that was supposed to go to your loved ones after you pass away.
Take for example, a husband and wife who have not created any kind of estate plan yet. When the husband passes away, all the assets titled in his name will pass through probate to the wife. If the wife later hits a school bus filled with children causing injuries, a lawsuit would be filed and eventually a judgment will be issued against her. A typical car insurance policy would not provide adequate liability protection for a situation such as this, so money will have to come out of wife’s pocket, including everything the husband worked hard to earn for their family that she received through probate.
A Potential Solution
This case raises the important question, “How can I keep my hard-earned money away from my spouse’s, children’s or other beneficiaries’ creditors after I’m gone?”
The answer is making sure you take the time to properly plan for the future.
If bankruptcy or general creditor protection for your beneficiaries is something you want, you can create a trust and fund your accounts into the trust or name it as the beneficiary for your accounts, such as your life insurance and IRA’s.
A properly drafted trust that meets certain requirements and contains appropriate language can help safeguard the trust assets, while still allowing the trust to stretch distributions from the inherited IRA over the beneficiary’s life expectancy.
In our example, if the husband created a trust where the wife and their children are the named beneficiaries, he can write the terms in such a way that she is able to maintain control and keep creditors at bay from the funds in the trust. Accounts in her name only will be available to cover the cost of the accident lawsuit, while his hard-earned money is saved for the family’s benefit.
To
learn about different estate planning methods and how they can benefit you,
please contact our office at (248) 409-0256. We offer a free initial
consultation to learn more about our process.
[1] https://www.michigan.gov/documents/msp/2018_Year-End_for_Web_653222_7.pdf