Why do so many people create asset protection plans?

On Behalf of | Aug 11, 2021 | Estate Planning |

Estate planning can involve many different steps depending on a person’s needs and family circumstances. Those with big families, specific plans for their personal legacies or highly valuable assets often have to engage in more than just basic estate planning. They need to think about what will happen as they grow older and integrate those concerns into their plan.

For example, older adults with some personal property but not enough to ensure permanent financial independence may want to plan ahead to qualify for Medicaid in case they have to move into a nursing home. Those with millions of dollars in assets may need to plan for estate taxes.

People in both of these categories could also potentially benefit from creating an asset protection plan while doing general estate planning.

What is an asset protection plan?

As you get older and after you die, the property you have acquired during your life becomes vulnerable to taxation and other risks. When you die, as much as 40% of the total value of your estate could go to federal estate taxes. If you don’t have enough to worry about estate taxes, creditors or even Medicaid we could come after your assets.

Claims related to debts, taxes or even a civil judgment against you could affect what assets you have in your golden years and what property you have to leave for the people you love. Asset protection planning involves someone changing ownership of certain assets or restructuring how they hold their property. By making changes and thinking ahead, testators can protect their property from creditor claims, Medicaid recovery and even taxation.

Asset protection planning gives you a strong financial foundation as you age

When you reach an age where you can no longer remain competitive in the employment market, you will depend almost entirely on the assets you already have or on benefits you have accrued during your working life. If Medicare and private insurance aren’t enough to cover your care expenses, you may have to spend everything you own before you can receive Medicaid.

Asset protection planning ahead of time will reduce your personal assets, making it easier to qualify for Medicaid. It will also protect the property like your house from claims by creditors that could ultimately consume everything you acquire during your life. Not only does asset protection planning help ensure you have resources to depend on when you age, but it will also protect the legacy that you leave behind for the people you love when you die.

Exploring asset protection planning when creating or reviewing your estate plan can be a smart move for people and many different financial situations.