Some people employ a minimalist approach to the estate planning process. They draft wills to leave instructions about the distribution of their property when they die or name a guardian for their children and do not bother addressing any other estate planning needs.
Many other adults create very thorough estate plans that protect them later in life and after personal emergencies in addition to protecting their final legacies and their dependents. Asset protection plans can be useful for people in a variety of different situations. A thorough asset protection plan can help preserve key resources as someone ages and even after their death. The following are some of the reasons that those planning their estates may want to create asset protection plans.
Concern about living on a fixed income
After someone retires, they may not have any income beyond what they receive from Social Security, a pension or a structured retirement plan. If someone either lives longer than they anticipate or encounters unexpected expenses, their creditors might decide to take legal action against them. Creditor lawsuits could endanger valuable assets that people rely on during their retirement years. Asset protection plans help preserve those resources even if someone experiences financial challenges.
Worries about Medicaid benefits
Occasionally, older adults may find that they need significant medical support as they age. Many retired individuals discover that Medicare doesn’t cover some of the more expensive aspects of long-term care later in life. Medicaid might be the only way to pay for certain services, such as space in a nursing home. If people do not plan ahead of time to qualify for Medicaid, they may be unable to get coverage in a timely fashion when they need it the most. Asset protection planning can alter the ownership status of key resources, making it easier for people to qualify for Medicaid coverage later in life.
The desire to leave something for loved ones
Another common reason that people consider asset protection planning is to preserve their resources for their loved ones after their deaths. An asset protection plan might involve changing the ownership of key assets to a trust. Doing so reduces the likelihood that creditors could lay claim to those assets after someone’s death. When someone uses a trust to hold valuable property, those assets do not have to pass through probate after they die in many cases. Individuals can preserve key resources for the next generation by protecting them from both creditor estate claims and Medicaid estate recovery efforts.
Ultimately, identifying and acting to protect one’s most valuable assets can be a smart estate planning move.