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A common planning goal is ensuring that our hard-earned money, property and other assets are distributed to family members, loved ones and other beneficiaries according to our wishes – and not taken by third parties. That goal can be reached by including asset protection in your estate plan.

Asset protection is a planning process that takes risks into consideration. An asset protection plan utilizes numerous methods to prevent money and property from being taken by or transferred to a third party, including the government (Medicaid and taxes), creditors and people ranging from family members to total strangers. The overall goal is to preserve assets for the appropriate use of the current owners and their families and beneficiaries.

What are some asset protection estate planning tools?

01

Joint tenancy with rights of survivorship

Joint tenancy with rights of survivorship (JTWROS) is a method of titling assets, such as real estate or a bank account, that gives two or more people equal ownership interests in that asset. When an owner dies, the property is owned by the survivors without probate. However, this strategy exposes the jointly owned assets to the creditors and divorces of all owners.

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02

Powers of appointment

The holder of the power of appointment has the ability after the owner's death to re-evaluate any changed circumstances of the family or tax law to determine the best possible outcome for the assets. For example, they could stop or redirect a distribution that would otherwise be lost to a third party.

03

Prenuptial and postnuptial agreements

These detailed agreements can waive claims to property or assign property upon divorce rather than litigate which spouse gets what. A prenuptial or postnuptial agreement could disclaim any interest in gifts from a spouse's parents.

04

Limited liability companies

Limited liability companies can protect your personal assets from your business' liabilities and your business' assets from your personal creditors.

05

Revocable and irrevocable trusts

A revocable trust does not protect assets from the grantor's life events, like divorce and long-term-care. It can, however, protect assets from beneficiaries' life events. An irrevocable trust provides asset protection for both the grantor and the beneficiaries.

06

Life estate deeds

A life estate deed involves deeding the property to another person, called a remainderman, while reserving a life estate for yourself, the life tenant. The life tenant has sole right to occupy the property and is responsible for its maintenance and upkeep. The remainderman will own the property when the life tenant dies. If the life estate deed is recorded more than five years before the life tenant's Medicaid application, the property is not subject to spend down and will not be subject to Medicaid estate recovery.

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What are some common reasons to be concerned about asset protection?

  • Medicaid eligibility and estate recovery
  • Spendthrift beneficiaries
  • Beneficiaries with substance abuse problems
  • Special needs beneficiaries
  • Bankruptcy risks
  • Lawsuits and judgments
  • High-risk professions
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Graphic of our Asset Protection and Estate Planning booklet
To learn more about asset protection and estate planning, request your copy of "Asset Protection and Estate Planning" today.