Your estate plan can do much more for you than you likely realize. Like many people, you probably envision executing a Last Will and Testament that provides for the distribution of your estate assets when you think about estate planning. Your Will, however, is only the starting point for a comprehensive estate plan. A comprehensive estate plan does provide for the distribution of your estate assets to loved ones after your death; however, it also helps to grow your estate assets during the course of your lifetime, protect you and your loved ones in the event of your incapacity, and ensure that your wishes are honored at the end of your life. In order to do all of that, you will need additional estate planning tools beyond just a basic Will. One estate planning tool that can help protect your assets is an irrevocable trust.
Do I Need to Worry about Asset Protection?
In a word – yes. Everyone should be concerned about protecting their assets in their estate plan because there are many more possible threats to those assets than you likely realize. For example, just a few of the most common potential threats to your estate assets include:
- Divorce – your own divorce could easily put your assets at risk as a result of the division of marital assets that occurs in almost every divorce. While you may have thought of this, and planned accordingly by executing a pre-nuptial agreement, have you considered how the divorce of an adult child could also threaten your assets? Imagine that you gifted a vacation home to your child, only to watch as the court awarded that property to your child’s spouse in a divorce!
- Bankruptcy – no matter how careful you are with money, it is impossible to completely rule out the possibility of filing for bankruptcy at some point. Factors such as the economy and your own health cannot be controlled and could lead to the need for you to file for bankruptcy protection. That, in turn, could result in the loss of assets.
- Long-term care – the longer you live, the better the odds are that you (or a spouse) will eventually need long-term care (LTC). The cost of that care could deplete your assets in record time. Medicaid can help; however, if you failed to plan ahead, qualifying for Medicaid will require you to “spend-down” your assets first.
- Beneficiaries – a spendthrift beneficiary could squander your hard-earned assets in a short period of time. If you gift those assets outright, you have no control over what the beneficiary does with them after they have left your estate.
How Can an Irrevocable Trust Help?
Understandably, you don’t want your hard-earned assets to be lost to divorce, bankruptcy, LTC, or any other potential threat. The best way to prevent your assets from being lost is to remove them from the threat of loss altogether. One way to do that is to establish an irrevocable trust to hold the assets. As the named implies, and irrevocable trust is a type of living trust that the Settlor cannot modify or revoke once it is created. Because the trust is irrevocable, the law considers the trust to be a separate legal entity. As such, assets transferred into the trust become the property of the trust. Consequently, any asset you transfer into an irrevocable trust is no longer owned by you, meaning it is not part of your estate. Because you no longer own the asset, it is out of the reach of creditors, spouses, Medicaid, and other potential threats. Just because you transfer assets into an irrevocable trust, however, does not mean you can no longer benefit from the assets. The terms of the trust can provide you with continuing benefits while simultaneously protecting the assets from a wide variety of potential threats. Talk to your Massachusetts estate planning attorney about establishing an irrevocable trust if you are concerned about protecting your hard-earned assets.
If you have additional questions or concerns regarding the creation of a Massachusetts irrevocable trust, contact the experienced Massachusetts estate planning attorneys at Debruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.