Estate planning and asset protection have to work together. Small estate planning errors can undermine an otherwise effective asset protection plan after the debtor’s death. A Florida appeals court issued a ruling recently where a debtor’s life insurance policy intended for the benefit of his children ended up in the hands of his creditors after his death.
The decedent/debtor owned a life insurance policy on his own life in the amount of $250,000. He had living trust leaving everything equally to his children. The life insurance policy designated his living trust as its beneficiary. The living trust had a provision that directed the successor trustee to pay all of the decedent’s enforceable debts. The decedent’s creditor sought to require the trustee to pay from the living trust the life insurance proceeds to the extent necessary to satisfy the creditor’s money judgment against the decedent.