What is Asset Protection Planning?

People talk about “asset protection planning”. But what is it? And who should be doing it?

Asset protection planning focuses on protecting your money from the high costs of long-term care, such as nursing home care, home care, and assisted living. This can be accomplished by transferring money, investments, real estate or other assets into an irrevocable trust. However, asset protection planning is only effective if you make the transfers 5 years in advance. Accordingly, early planning is critical.

The benefits of asset protection planning include: qualifying for Medicaid benefits to pay for the costs of home care, nursing home care, and certain assisted living programs; preserving assets to pass on to loved ones; protecting assets for your spouse, including avoiding spousal refusal litigation; avoiding probate; and transfer and management of assets by the next generation.

Protecting assets is important to everyone; no one wants to spend down all their assets to pay for nursing home or other long-term care. The goal is to become eligible for Medicaid if and when the need arises. By planning ahead with an Asset Protection Trust, you can ensure that you will qualify when you submit a Medicaid application without spending down your family’s assets.

In order to protect assets, the Asset Protection Trust must be irrevocable. This means that the living trust cannot be revoked, amended or terminated by you alone, but can be with the consent of the trust beneficiaries.

An irrevocable trust set up for asset protection purposes can hold almost any type of asset, including your home, bank accounts, and investments. You cannot have access to the principal of the trust, but you can retain the right to receive the income (dividends and interest). After five years have passed, the assets held in the trust are protected with respect to Medicaid. You would not have to spend down those assets on the cost of care, and instead the assets are protected and will be inherited by your beneficiaries.

In this highly specialized area of law, it is imperative that you work with the experienced and knowledgeable Asset Protection attorneys at Cona Elder Law to be sure your assets are preserved and your loved ones protected.

Originally published in the June 2023 issue of Long Island Press.

Jennifer B. Cona, Esq. is the Founder and Managing Partner of Cona Elder Law, an award-winning law firm concentrating in the areas of elder law, estate planning, special needs planning, estate administration and litigation, and health care law. The firm has been ranked the #1 Elder Law Firm by Long Island Business News for eight consecutive years.  For additional information, visit www.conaelderlaw.com.