As you prepare your estate plan, you may be exploring strategies to better protect your assets. An asset protection trust is one of the most effective tools for safeguarding your wealth and ensuring it is preserved for future generations. At Keystone Elder Law P.C., we specialize in helping middle-class families across Pennsylvania protect their assets and secure their financial legacy. Below, our Mechanicsburg asset protection attorneys provide a comprehensive guide to asset protection trusts, including their benefits and how to set one up.
What Is an Asset Protection Trust?
An asset protection trust (APT) is a specialized legal entity designed to shield assets from creditors, lawsuits, and other financial risks while preserving them for your beneficiaries. In Pennsylvania, an APT is always established as an irrevocable trust, meaning the grantor (the person creating the trust) cannot easily modify or dissolve it once it’s established.
This irrevocable status is critical because it ensures that the assets within the trust are no longer legally owned by the grantor, providing robust protection. While this structure may seem inflexible, it is the foundation for safeguarding assets against various financial threats, including creditor claims and long-term care costs.
The Estate Planning Benefits of an Asset Protection Trust
Asset protection trusts offer numerous advantages, making them an essential tool in many estate plans. Here are three key benefits:
1. Shielding Assets from Creditors
One of the primary reasons individuals set up asset protection trusts is to safeguard their wealth from creditor claims. Once assets are transferred into the trust, they are no longer considered the property of the grantor. This means they are generally out of reach for creditors, lawsuits, or liens. This protection is especially valuable for individuals in high-liability professions, such as doctors or business owners, who may face legal or financial risks.
2. Medicaid Eligibility for Long-Term Care
Long-term care expenses, such as nursing home stays, can quickly drain a family’s resources. Medicaid can help cover these costs, but eligibility requires applicants to meet strict asset limits. By transferring assets into an APT well before applying for Medicaid—typically at least five years due to the Medicaid look-back period—individuals can reduce their countable assets while preserving their wealth for their loved ones. This strategy ensures financial support for long-term care without sacrificing the family’s financial security.
3. Avoiding Probate
Another significant advantage of an APT is that it allows your assets to bypass the probate process. Probate in Pennsylvania can be time-consuming, expensive, and public. Assets held in an APT are distributed directly to your beneficiaries, saving them time, reducing legal costs, and maintaining privacy. Unlike probate proceedings, which are part of the public record, the terms of an APT remain confidential.
How to Set Up an Asset Protection Trust
Creating an asset protection trust requires careful planning and attention to detail. Follow these steps to ensure the process is handled correctly:
- Consult an Estate Planning Attorney
An experienced estate planning attorney is essential for establishing a legally sound APT tailored to your needs. Your attorney will assess your financial situation, goals, and potential risks to recommend the best trust structure. - Identify the Assets to Protect
Determine which assets you want to transfer into the trust. Commonly included assets are real estate, investment accounts, and other valuable property. Ensure these assets align with your overall estate planning goals. - Choose a Trustee
Select a trustworthy individual or institution to serve as the trustee. The trustee will manage the assets within the trust according to the terms you establish. - Draft the Trust Documents
Your attorney will prepare detailed documents outlining the trust’s terms, beneficiaries, and the trustee’s responsibilities. These documents serve as the foundation for the trust’s operations. - Transfer Assets into the Trust
Once the trust is established, you must formally transfer ownership of the selected assets to the trust. This step ensures the assets are protected under the trust’s legal framework.
Is an Asset Protection Trust Right for You?
An asset protection trust may be the ideal solution if you want to:
- Safeguard your assets from creditors or lawsuits.
- Protect your family’s wealth while qualifying for Medicaid to cover long-term care expenses.
- Avoid the time, cost, and public exposure of the probate process.
Every family’s financial situation is unique. Consulting with a knowledgeable estate planning attorney is the best way to determine whether an APT aligns with your goals and circumstances.
Contact Our Mechanicsburg Asset Protection Attorneys Today
At Keystone Elder Law P.C., we have extensive experience helping Pennsylvania families create customized estate plans, including asset protection trusts. If you have questions about APTs or other estate planning tools, we are here to provide the clarity and guidance you need. Contact us today to schedule a fully confidential consultation. From our Mechanicsburg office, we proudly serve families throughout Cumberland County and the surrounding region, helping them secure their financial future with confidence and peace of mind.