A key aspect of estate planning is safeguarding and preserving your assets from potential risks, such as creditor claims, lawsuits, and the high costs of long-term care. If you’re considering an asset protection trust, you may wonder: Is it worth the investment? While the answer depends on your unique circumstances, asset protection trusts offer a range of advantages and can be highly effective for many individuals and families, including middle-class households. Below, our Mechanicsburg asset protection attorneys outline the key benefits of these trusts to help you decide whether this estate planning tool is right for you.
Advantage #1: Shielding Assets from Creditors and Lawsuits
One of the primary benefits of an asset protection trust is its ability to create a strong legal barrier against creditor claims and lawsuits. When you transfer assets into an asset protection trust, those assets are no longer owned by you—they are owned by the trust itself. This separation provides significant protection, making it far more difficult for creditors to access these assets.
Asset protection trusts are especially beneficial for individuals in professions with a higher risk of liability, such as doctors, business owners, and real estate developers. By shielding your wealth from potential lawsuits or creditor claims, you gain peace of mind knowing your hard-earned assets are safe.
Advantage #2: Long-Term Care Planning (Medicaid Eligibility)
Long-term care expenses, particularly for nursing homes or assisted living, can quickly deplete your life savings. In Pennsylvania, the average annual cost of a private room in a nursing home exceeds $110,000. Medicaid offers financial assistance, but eligibility is limited to those with minimal assets, often requiring individuals to “spend down” their savings to qualify.
An asset protection trust can help you preserve your wealth for future generations while ensuring Medicaid eligibility. By transferring assets into the trust at least five years before applying for Medicaid (to comply with the look-back period), these assets are no longer counted as part of your estate. This strategy allows you to secure Medicaid benefits while protecting your family’s financial legacy.
Advantage #3: Retaining Control Over Your Assets
While an asset protection trust is a type of irrevocable trust, meaning you can’t simply revoke it after it’s created, it still allows you to retain significant control over your assets. As the creator of the trust, you can:
- Specify who the beneficiaries are and how the assets will be distributed.
- Establish clear conditions and timelines for distributions.
- Appoint a trusted individual or institution as the trustee to manage the assets on your behalf.
This control is especially valuable for families with younger heirs or beneficiaries who may not yet have the financial responsibility to manage large inheritances. You can ensure that your wealth is distributed in a manner that aligns with your wishes, protecting your assets and your family’s future.
Advantage #4: Simplified Setup with Legal Guidance
While the concept of an asset protection trust may seem daunting at first, the process is straightforward when you work with an experienced estate planning attorney. An attorney who specializes in asset protection can:
- Evaluate your unique financial situation and long-term goals.
- Recommend the appropriate type of trust structure to meet your needs.
- Ensure the trust complies with Pennsylvania law and federal Medicaid regulations.
- Help you transfer assets seamlessly into the trust.
A skilled attorney will make the process efficient and manageable, giving you confidence that your trust is set up correctly and serving its intended purpose.
Are Asset Protection Trusts Right for You?
Whether an asset protection trust is worth it depends on your specific financial goals, family circumstances, and risk factors. This estate planning tool is particularly valuable if you:
- Want to shield your assets from creditors, lawsuits, or other financial threats.
- Are concerned about the high costs of long-term care and want to qualify for Medicaid while protecting your family’s inheritance.
- Have significant assets you’d like to protect for future generations.
- Want to ensure your heirs receive their inheritance according to your wishes.
By working with an experienced estate planning attorney, you can determine if an asset protection trust is the right choice for your circumstances and learn about alternative or supplemental strategies that may also meet your needs.
Contact Our Mechanicsburg, PA Asset Protection Attorneys Today
At Keystone Elder Law P.C., we understand the importance of protecting your wealth and your family’s future. Our Mechanicsburg estate planning attorneys have extensive experience in creating and managing asset protection trusts, and we’re here to help you navigate this process with confidence. If you’re considering an asset protection trust or have questions about estate planning, we encourage you to reach out. Contact Keystone Elder Law P.C. today to schedule a private, no-obligation consultation. Located in Mechanicsburg, we proudly serve families throughout Central Pennsylvania, offering tailored legal solutions to protect what matters most.