Many people have an overly-simplistic concept of what should transpire during estate planning. Creating a will is important, but it is far from the only step necessary for the protection of an individual later in life and the support of their loved ones after their death. There are numerous other issues that people may want to address beyond just naming a guardian for their children or designating beneficiaries for their property in a will. Many people engage in asset protection planning at the same time that they create or review their estate plans.
Particularly if people are close to retirement age, they may need to think carefully about their financial needs later in life. The following are some of the benefits of creating an asset protection plan as part of a comprehensive estate plan.
Protection from major losses in court
Asset protection planning is a highly-personalized process. People identify the assets that they believe are vulnerable and then alter how they hold those assets. Oftentimes, creating a trust is part of that process. Assets held in a trust are less at risk when creditors or other parties file lawsuits against an individual. Therefore, asset protection planning can help ensure that someone can retain their resources including their financial accounts and their home, even if they face lawsuits later in life.
Maximizing the legacy someone leaves behind
Even if someone reviewing their estate plan does not worry about facing a lawsuit or falling behind on their financial obligations, asset protection planning can still be beneficial. Creditors still owed an outstanding balance when someone dies can make a claim against an individual’s estate. Debt-related claims can substantially reduce the value of an estate and how much other people inherit from it. Given that most people prefer to leave as much as possible for the people or causes they care about, asset protection planning before they die can be a way to maximize the legacy they leave after their passing.
Increasing Medicaid approval odds
Asset protection planning can reduce the personal resources directly owned by an individual. They could then potentially be in a better position to apply for Medicaid if they need long-term care later in life. Medicaid has strict rules regarding income levels and countable assets. Those who alter how they hold resources may qualify for Medicaid more readily when they need benefits. Their loved ones also have less reason to worry about Medicaid estate recovery efforts after they die.
The asset protection planning process can give someone peace of mind later in life and may help ensure that someone leaves behind a worthwhile legacy for the people that they love. Estate planning can address a variety of challenges, including future Medicaid applications and creditor lawsuits, not just someone’s legacy. Planning for unusual scenarios can yield numerous benefits for those concerned about creditor activity as they age or after they die.
