Stay ahead of rising long-term care costs to ensure there's something left to inherit.
A standard estate plan often falls short for one important goal.
An Asset Protection Plan can do everything an Estate Plan can do: protect clients’ families from probate and keep the hands of third parties (creditors, spouses, and litigation opponents) off the inheritance they want to pass on. But an Asset Protection Plan also meets one other goal that is extremely important to many of our clients. It can protect assets from the rising costs of long-term care that can devastate families and their life savings. A standard Estate Plan can’t protect assets from long-term care costs like nursing home, assisted living, and home caregiver fees.
One Asset Protection Planning tool we often use is the Asset Protection Trust. The Asset Protection Trust offers most of the benefits of the Revocable Living Trust, plus it protects from long-term care costs any assets titled in the name of this Trust.
But while the added benefits of an Asset Protection Trust are obvious, some aspects are less desirable to certain clients. First, the Asset Protection Trust must be irrevocable, meaning clients can’t amend or modify the terms of the Asset Protection Trust in the future. However, this doesn’t mean the assets titled in the name of the Trust can’t be rearranged, sold, or changed; it means only the actual terms of the Trust can’t be changed.
Also, unlike the Revocable Living Trust, our clients can’t serve as the trustee or be a named beneficiary of their Asset Protection Trust. They must name some other trusted person, possibly a child or other family member, to these roles. This means our clients don’t have direct control over or access to the assets titled in the name of an Asset Protection Trust; that’s how the Trust shelters assets our clients seek to protect. But the assets aren’t locked down: the named trustee may freely access trust assets when needed.
Setting up an Asset Protection Trust isn’t the same as putting assets directly in the name of our clients’ children, something we usually advise against for liability, tax, and other reasons. The protected assets titled in the name of this Trust no longer belong to our clients; but they don’t belong to our clients’ heirs yet, either.
It’s important to note that in many cases, to best shield assets an Asset Protection Trust must be established five years before the need for long-term care arises. Asset Protection Planning with an Asset Protection Trust isn’t something clients can do last-minute, when long-term care needs have already arisen or are just around the corner.
Whether a client chooses to pursue an Estate Plan or an Asset Protection plan depends primarily on that client’s priorities. If protecting assets from the costs of long-term care is the primary objective, then an Asset Protection Plan is often the best option. If flexibility and direct control are more important to the client, then an Estate Plan might be better.
Recent Asset Protection Articles
Recent Asset Protection Questions
Ready to make a plan? We are here for you.
You don’t have to go another day without a plan. We can help develop a plan that fits your unique situation.