What Is an Asset Protection Trust?

An asset protection trust is a common tool used by seniors who are looking to safeguard their assets from Medicaid if they require long-term care in the future. In addition to protecting these assets from Medicaid, an irrevocable trust shelters assets from creditors and can help avoid probate on the assets within the trust. In order to be an effective advance planning tool, the trust must be irrevocable, which means it cannot be changed or terminated by the creator.

How Does an Asset Protection Trust Work?

The main purpose of an asset protection trust is to protect your hard-earned savings in the event you require care in the future and pursue Medicaid benefits. Since an irrevocable trust is viewed as a divestment by Medicaid, it must be funded at least five years before you require long-term care to ensure you outlast the five-year Medicaid lookback period.

No one can know for sure if and when they will need long-term care, so it’s always better to fund an asset protection trust sooner rather than later. Make sure you discuss this planning option with a legal or financial professional to determine whether it’s the right product for you.

Benefits of Purchasing an Asset Protection Trust

• Safeguard your nest egg from Medicaid and other creditors.

  When you fund assets into an irrevocable trust at least five years before you need long-term care, those assets will be protected from Medicaid estate recovery. As long as the trust is funded outside of the five-year lookback period, the transfer will not be considered a divestment.

• Avoid probate on assets within the trust.

  Since you can designate a beneficiary for your irrevocable trust, assets within the trust are effectively protected from the probate process. 

MAKE SURE YOU SPEAK WITH A QUALIFIED PLANNING PROFESSIONAL TO DETERMINE WHETHER AN ASSET PROTECTION TRUST IS RIGHT FOR YOUR SITUATION.