A comprehensive estate plan can provide protection during your lifetime and allow you to preserve assets and income while still gaining eligibility for government programs such as MassHealth to pay for long term care needs. This month, we discuss using your estate plan to stay in control of your assets.
~ Wendy Guthro, Attorney & Counsellor at Law
"When I dare to be powerful, to use my strength in the service of my vision, then it becomes less and less important whether I am afraid."
~ Audre Lorde
Using an Estate Plan to Stay in Control of Your Assets
Experienced estate planning attorneys use a variety of strategies to protect assets from creditors, reduce tax liability, and qualify for long term care benefits. Different tools help fulfill different goals, so you need to discuss your specific objectives with your legal advisor before taking action.
Asset Protection Trusts
Many people use revocable trusts in their estate plan to enable their assets to pass without the delays and expenses of probate. Because these trusts can be changed or revoked at any time during the creator’s lifetime, they provide virtually no protection for assets other than probate avoidance and related issues.
To protect assets, an estate planning attorney will use some type of irrevocable trust. Once you place property into an irrevocable trust, you cannot retrieve it or change the terms of its distribution, so you must be certain the trust terms will operate the way you want before funding the trust.
Once you place assets into the trust, they technically belong to the trust, not you, so they reduce the value of your property for Medicaid/MassHealth long term care eligibility. The trustee will manage those assets, and eventually, ownership will pass to the beneficiaries. While the trustee cannot give the property back to you, the trustee can distribute proceeds from the trust to you. For instance, you could receive dividends from an investment portfolio that you place in a trust or rental income from real estate you put in a trust.
To qualify for Medicaid/MassHealth benefits, you must transfer assets into the trust at least five years before you try to establish eligibility. But if you place assets in an irrevocable trust too early, you may regret your decisions because changing circumstances may cause you to want to take a different strategy. An estate planning attorney can help you determine the right time for a transfer and work with your financial advisors to ascertain which assets should be transferred to an asset protection trust.
If you aim to protect your assets from other creditors—either yours or those of a spouse or beneficiary–then different considerations will apply. You need to take care to ensure the transfer is not fraudulent under Massachusetts law. This is another area where advice from a knowledgeable attorney is crucial.
Asset Protection Through Gifting
A way to protect assets and decrease your net worth to save on estate taxes and qualify for long term care paid by Medicaid/MassHealth is through gifting assets. In 2022, federally, you can gift $16,000 to each of your children and grandchildren, or anyone you wish, each year without triggering a gift tax liability. This allows you to preserve assets within the family tax-free. An annual planned gifting strategy should be discussed with your financial advisor and tax professional to determine if this asset protection strategy is right for you.
Keep in mind that the same five-year rule applies to assets given as gifts as to assets transferred into an irrevocable trust. You need to make gifts five years before you intend to start trying to establish Medicaid/MassHealth eligibility.
Talk to Your Estate Planning Attorney About the Best Ways to Protect Your Assets
At GuthroLaw, we help clients achieve various objectives through different asset protection strategies. While it is best to start early, we can help even in situations where an immediate need places pressure on the family finances. We invite you to contact us today to learn more about how we can assist with an asset protection plan for your family. Call us at 781-229-0555 or click on the button below to contact us online.
Noteworthy – Retirement Account Plans and Funding a Trust
It is usually not recommended to transfer the ownership of a retirement account to a Trust, revocable or irrevocable, as it results in a taxable event to the owner. Instead of changing ownership of the retirement account, you should designate a beneficiary to receive the proceeds upon your death using the beneficiary designation form provided by the retirement financial institution. These forms are often available online. If your Trust is drafted to receive retirement assets, you may wish to name the Trust as the beneficiary. The beneficiary designation selection on retirement assets is often fact specific and should be discussed with your financial team to help determine the best option for you.
Wendy Guthro Presents at Camp Morning Star
Attorney Guthro was honored to share leadership advice at a Catholic girl's retreat at Camp Morning Star in New Hampshire this summer. It was a great opportunity to speak with future women leaders and encourage them in their spiritual journeys. Thank you to the Sisters at the Slaves of the Immaculate Heart of Mary in Harvard, MA for the invitation to speak.
Word of the Month
Ineffable definition, adjective:
incapable of being expressed in words; indescribable
An ineffable beauty descends upon the canyon as the sun begins to set.
Do you have an idea for our next Word of the Month? Please send your suggestions to firstname.lastname@example.org.
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To provide clients with optimum service, we focus our practice on Estate Planning, Estate & Trust Administration, Probate, Asset Protection and Elder Law issues. If you have a question, need advice or counsel, contact us online or call 781-229-0555.
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Attorney and Counsellor at Law
Seventeen Treetop Court Burlington, Massachusetts 01803 United States
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