Asset Protection Trust

What is an Asset Protection Trust?

An asset protection trust, or an APT, is a self-settled trust designed to hold your assets and protect them from unanticipated creditors, lawsuits, and other threats to your estate. An APT must be in effect in advance of any threats to your assets. APT will not remove obligation on existing debt and will not protect your assets if you default on any existing debt. If assets are currently under the threat of tax or bank leans, lawsuits, or foreclosure an AST will not protect your assets. ASP will not protect your assets from illegal transactions or acts.

Who should have an Asset Protection Trust?

APT are becoming popular for clients that do not have Long-Term Care insurance to pay for Nursing Home or they cannot medically qualify for Long-Term care insurance. APTs can be a valuable financial planning tool not only for the wealthy but also for middle income families that want to keep their assets safe and to make sure their family inherits their assets.

What kind of assets does an Asset Protection Trust cover?

An APT can cover a variety of important assets, including:

• Cash, checking and savings accounts bank CDs
• Intellectual property
• Business assets, such as farm equipment and inventory
• Jewelry, antiques
• Recreational assets, like boats, RVs
• Real estate, farmland, time shares, residential property, and rental property
• Securities, investments, highly appreciated assets

What level of assets are needed to warrant an Asset Protection Trust?

There is an assumption that a person needs to be wealthy to consider an asset protection trust. There is no set dollar amount for consideration to justify the creation of an APT. If we were driven to give a dollar amount for APT consideration the minimum dollar amount would be $150,000. This amount would include everything a family owns that does not have a beneficiary assignment. The $150,000 also including the fair market value of their home or farm.

What is the difference between an APT and a Last Will and Testament?

With a Last Will & Testament your estate is required to go through Probate that involves a Probate judge and attorneys. The Probate can cost a family 3% to 8% of the probate assets. An APT does not require any Probate. A family can settle an estate at their kitchen table with no Probate judge or attorney involvement and save the family thousands of dollars. A Last Will and Testament will not provide any protection or management of assets while you are living.

Last Will & Testament is only effective after the Testator is deceased. An APT will manage and protect your assets while you are living and after you are deceased. Protection of assets while you are living is becoming increasingly more important due to the increase of life expectancy. Death comes in two forms, physical death, and financial death. A financial death is when medical expenses has consumed all your assets while you are living, and you must depend on your family for support. APT could prevent the total loss of assets due to increasing medical expenses.

Can an APT protect me and my family from losing our assets to Medicare or a nursing home?

For people who do not have medical insurance, setting up an APT can help them protect their assets. Many people do not have insurance that will pay for an extended stay in a nursing home. An APT will not pay the cost of Nursing Home expenses however a properly constructed APT will prevent Medicaid and Nursing Homes from taking your home or farm, and will allow your family to inherit what you have worked for all their life.

Can an attorney help me establish an APT?

Most local attorneys can provide a family with what is called a Living Trust. A Living Trust is better than a Last Will and Testament and will eliminate probate costs on your estate, but does not protect assets from the Nursing Home or Medicaid. Trust and asset protection are specific areas of law that does not receive a lot of attention in law school and most attorneys will not have the level of knowledge required to create a APT. A client should only use an estate or elder law attorney for establishing an APT.

How can Elder Care Financial Resources help me establish an APT?

Though Elder Care Financial Resources is not a Law Firm, our 40 years of experience have allowed us to form connections with estate planning and elder law attorneys. We can utilize these resources to help you and your family establish an APT at discounts not available to clients because of the vast number of clients we bring to attorneys.

Considerations

Many of our older clients have inform us that they do not need a Trust because they have known families that sold or gave their house or farm to their children for $1 dollar. Prior to the 2005 Deficit Reduction Act there were creative efforts to qualify for Medicaid and prevent Medicaid or the Government from seizing a family’s asses to reimburse Medicaid for the cost of providing medical care to a family member in a Nursing Home. A five-year look-back for a transfer of assets for Medicaid qualification was imposed by the enactment of the 2005 Deficit Reduction Act and any transfers must be for Fair Market Value. This new regulation prevents a person from transferring assets to another person or Trust and then apply for Medicaid. The transfer of assets to another person or Trust must be done five years in advance of applying for Medicaid benefits. An asset transfer should only be completed by personnel experienced in asset transfers because significant tax penalties can be created for the recipient of an asset transfer.

The five-years look back regulation have created problems for clients that delay the decision process. You need to ask yourself, ”when will I be admitted to a Nursing Home?” You don’t know. If you had set up the APT five-years in advance of a Nursing Home admission Medicaid will pay the full cost. The annual Nursing Home cost in 2019 was $100,090 per years. If no trust was set up, you or your family will pay the full cost of Nursing Home.