What Is Asset Protection?
As an elder law and estate planning firm, protecting client assets is one of our primary areas of focus. We help individuals and families from all walks of life protect their hard-earned assets from a wide range of threats, including long-term care costs, divorce and remarriage, creditors, lawsuits, predators, estate and inheritance taxes, and more. To accomplish this, we frequently design and implement customized trusts.
Consider the following statistics:
- Long-term care costs are rising rapidly, and the average annual cost of a private room in a Pennsylvania nursing home already exceeds $130,000
- Approximately 50 percent of marriages in the United States end in divorce
- More lawsuits are filed in the United States each year than in the rest of the world combined
- While few of us have to worry about federal estate taxes, thanks to the current $11.7 million exemption for individual filers ($23.4 million for couples filing jointly), Pennsylvania is one of only six states that levies an inheritance tax
Clearly, there is no shortage of threats to your assets. The question is, how can we protect them?
Revocable and Irrevocable Trusts
One of the first questions many clients ask is whether or not they need a trust. The answer is that it depends on the client’s particular needs and goals. These, in turn, determine the type of trust, or combination of trusts, if any, the client needs.
Let’s start with a quick definition. A trust involves one party, known as a grantor, giving another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. So, basically, a trust retitles assets to achieve the goals of the grantor.
There are many different trusts, capable of accomplishing a wide range of goals. However, it is useful to divide trusts into two categories, revocable and irrevocable. As the names imply, a revocable trust can be changed or terminated (revoked) by the grantor, while an irrevocable trust cannot.
With regard to asset protection, revocable trusts are generally used to protect the inheritance of children and other beneficiaries, while irrevocable trusts are typically used to protect the grantor’s assets. For example, if you want to protect your assets against long-term care costs, an attorney may recommend an irrevocable trust. Other goals that can be accomplished by irrevocable trusts include estate and inheritance tax minimization, protection against lawsuits and creditors, efficient charitable giving, and more.
As for when to use a revocable trust, here are a few examples:
- You are worried about your adult children getting divorced and don’t want their inheritance to go to ex-spouses
- Your adult children have credit problems and you want to protect their inheritance from creditors
- Your adult children are spendthrifts, or have behavioral problems, and you want to protect their inheritance from their own poor decisions
- Your children are minors and you want to make sure they won’t receive their inheritance until they are mature enough to manage money wisely
- You want to protect your privacy and avoid the delays of probate. A trust, unlike a will, allows your estate to avoid probate
Contact a Pennsylvania Asset Protection Attorney
These are just some examples of situations where you might want to consider a trust-based plan. At Cardinal Estate Planning, we can design and implement a customized plan to protect your hard-earned assets for your enjoyment today and that of your loved ones after you pass away. We invite you to contact us at your earliest convenience to discuss your unique needs and goals.