Estate planning clients frequently state that one of their estate planning goals is to “protect assets.” However, when asked what specifically they want to protect their assets from, they often have only a vague idea. Here are six examples of life events where proper planning can help meet these goals:
1. Protect from family disputes. Relying on verbal expressions of wishes or informal written instructions from family members or friends can be a recipe for confusion and litigation. If you wish to avoid disputes among your beneficiaries upon your passing, you should establish a comprehensive, written estate plan that carefully articulates their wishes.
2. Protect from liability. For example, if you own rental or commercial real estate and are worried about being sued by tenants or others, the following options offer different levels of protection:
A. Setting up a Limited Liability Company (commonly known as an LLC);
B. Transferring the property to an appropriate trust
C. Purchasing appropriate property and liability insurance coverage
3. Protect from beneficiaries’ creditors. Instead of leaving assets outright to a child or other beneficiary, creating a trust that will hold an inheritance for the beneficiary’s lifetime can protect your assets from being used for unintended purposes in the event the child or other beneficiary gets divorced or sued, has creditors, or is financially irresponsible. This type of trust can be particularly important if the beneficiary is a minor or young adult, and/or is disabled.
4. Protect from long-term care costs – advance planning. This is a very common concern that is raised as people approach retirement age and beyond. Assets can be protected from long-term care costs by establishing and funding an appropriate type of trust or through a carefully-coordinated gifting plan. Most of the planning options must be completed at least five years prior to applying for MassHealth, a needs-based public benefit program that can pay for long-term care costs.
5. Protect from long-term care costs – crisis planning. Although advance planning is optimal, there are some last-minute options that apply in certain limited circumstances. For example, an elder may transfer his or her home to a blind, disabled or minor child; to a child who meets the criteria of a “caretaker child;” to a sibling who has an ownership interest in the home and has lived there for at least one year; or to transfer assets to a special needs trust for the sole benefit of the disabled beneficiary.
6. Protect from disabled beneficiaries’ care costs. If a beneficiary has a disability and receives (or is expected to receive) public benefits, then leaving assets outright to that beneficiary can have unintended negative consequences. The receipt of assets may disqualify the beneficiary from the public benefits programs on which they rely, thereby running the risk of their inheritance being used to pay for benefits or services that would otherwise be provided by the government. By establishing a Supplemental Needs Trust to hold that beneficiary’s inheritance, assets can be protected so they can be used to supplement the beneficiary’s public benefits, and the beneficiary can avoid the stress and cost of losing public benefits.
These are just a few examples of how proper planning can protect your assets. Making the effort to establish a robust estate plan can give you peace of mind that your loved ones will be protected and your hard-earned assets will be spent the way you intended.
