Whether you have drafted a will or created a trust, your estate plan allows you to pass property to the people you love or the causes that you value when you die. Your biggest assets, like financial accounts and your primary residence, are likely among the property that you designated for specific beneficiaries in your estate plan.
Whatever legacy you have planned, circumstances may destroy those plans. Significant debt or the need for Medicaid benefits could mean that assets you wanted to pass to your loved ones are instead claimed by creditors in lawsuits against you later in life or by claims against your estate after you die.
If the creditor has a valid claim about an unpaid debt, then the courts could put a lien against your property now while you are alive or order the liquidation of your assets from your estate to pay debts or Medicaid benefits after your death.
You can plan ahead to preserve assets
Thankfully, there are strategies available for those who want to preserve assets and protect their legacy from debts. Asset protection planning requires a careful review of your current financial circumstances and goals for your estate.
You can then make certain strategic changes, like adding a trust to your estate plan, that will protect some of your property from creditors. If your home is held in a trust rather than in your name, for example, it won’t pass through probate when you die and therefore won’t be subject to creditor claims against your estate.
The kind of property you own and your long-term legacy goals will determine the best options for you, but it is typically necessary to engage in asset protection planning long before you face a creditor lawsuit. Similarly, Medicaid planning should occur at least five years before you think you will need to apply for benefits if you expect to avoid a penalty for any transfers you complete.
Protecting your assets helps the people you love
Asset protection planning is a way for someone to protect their own stability during their golden years when they may have to live on a fixed income and ensure that they leave a lasting and meaningful legacy for the people they care about or the causes to which they have dedicated part of their life.
Taking the time to create the right estate plan can help you achieve your goals and give you peace of mind as you age.