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Why asset protection is an important part of some estate plans

| Apr 13, 2020 | Estate planning |

You have spent your entire life building up what will become your estate when you die. From the investments you have made to the equity you have slowly built in your primary residence, the value of your estate reflects a lifetime of work, saving and financial sacrifice.

Unfortunately, it is possible for older adults with significant health needs to wind up burning through a lifetime’s worth of assets and income in only a few years if they require nursing home care or other substantial medical assistance later in life.

It is possible for medical companies that you owe money to as well as government insurance programs like Medicaid to go after your assets while you live or your estate after you die in an attempt to recoup the expenses you incurred later in life. Asset protection planning now helps ensure that you will have some tangible legacy to leave behind for your loved ones and will not spend the last years of your life in utter poverty due to medical costs.

Asset protection often involves alternative ownership

One of the simplest and most straightforward means of asset protection involves using your more substantial assets, such as your home, to fund a trust. You can create multiple different kinds of trusts, each of which has different benefits depending on whether your focus is leaving behind an inheritance or ensuring you have assets to rely on later in life.

Typically, in order to qualify for Medicaid if you need more intensive care as you age, you will have to completely diminish your own personal assets and likely pay thousands of dollars out-of-pocket for your own medical care before Medicaid will protect you. Engaging in asset protection planning earlier in life can improve your chances of qualifying for Medicaid and leave some of your valuables aside for you later in life or as a legacy for your loved ones after you die.

Asset protection can also ensure that creditors, like hospitals or nursing homes, cannot sue you or your estate and seize your more valuable assets, like your home. Taking steps to protect your assets long before creditors attempt to get their hands on them will generally be your best option, which is why asset planning can be a beneficial part of both retirement and estate planning.