Asset protection trust: when is the right time? - Sykes Elder Law

Certified as an elder law attorney by the National Elder Law Foundation under authorization of the Pennsylvania Supreme Court

Certified as an elder law attorney by the National Elder Law Foundation under authorization of the Pennsylvania Supreme Court

Readers of our blog know of the power of an asset protection trust in protecting the elderly’s assets from nursing home spend-down, scams, undue influence, creditors, and various other hazards people encounter in their senior years.

This post addresses the question of timing: when should someone create and fund an asset protection trust?

The correct answer for any particular client will depend on the client’s age, health, amount of assets, long term care insurance (if any), and other considerations.

But it is possible to give some general advice about timing.

It is probably too late to establish and fund a trust when you are now entering a nursing home. At that point, most clients are better off with another strategy, such as a Medicaid spend-down plan, or (if assets or income are substantial) a plan to pay from income and preserve principal.

At the other end of the spectrum, it is probably too early for an asset protection trust when you are still accumulating assets, or when you need or want free access to what you have accumulated. People in early retirement may want to consider long term care insurance as an option if their health allows them to qualify for coverage.

The optimal time is when your health is such that you are likely not to need nursing care for the next five years (or at least three years) and at a time when you feel it is unlikely you would need access to the funds you wish to protect.

Having long term care insurance coverage for at least two or three years can make it more beneficial to establish a trust later in the game. Also, if you have more funds than are needed to pay for care during the entire five-year look-back period, starting a trust may make sense even if you are approaching the need for nursing care.

We can help you make a determination about whether now is the right time to have an asset protection trust by meeting with you to make some calculations, discuss your goals, and weigh your options.

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