This blog is inspired by a recent episode of the Red Wagon Estate Planning and Elder Law Show, Protecting Your Assets: A Detailed Look at Trusts, Q & A Part 1. We had so many thoughtful questions from our listeners about how trusts work for asset protection that I wanted to expand on it here and give you a more complete explanation. My goal, as always, is to help you make informed choices for your family.
At Bellomo & Associates, we’ve noticed more people asking how to protect their homes, savings, and investments from long-term care costs, lawsuits, or other risks. That’s where the right kind of trust comes in. But there’s a lot of confusion about which trusts actually protect your assets. So let’s break it down.
Why Asset Protection Trusts Matter
One of the most common misconceptions is that a revocable living trust protects your assets. A revocable trust is great for avoiding probate and keeping your affairs private, but it doesn’t shield your property from creditors or nursing home costs because you still legally own everything in it. For true protection, we use a specially drafted irrevocable asset protection trust. With this trust, you transfer ownership to the trust while keeping control through trusted people you name as trustee and beneficiaries. That way, your assets are no longer considered yours for purposes like Medicaid qualification, but you can still live in your house and enjoy your income if set up properly.
Some folks have asked if a pure grantor irrevocable trust is better. The answer really depends on your situation, and it’s something you should never try to figure out through a quick Google search. Every state has different laws, and the wrong kind of trust could leave you unprotected.
How Asset Protection Trusts Fit Your Lifestyle
We also talked about how these trusts interact with continuing care retirement communities (CCRCs). Some people think they don’t need a trust if they aren’t planning to move to a CCRC, but then plans change later. With the right planning, your trust can still protect you even if you choose a CCRC later. It’s also helpful for managing different kinds of property, whether it’s your home, a vacation house, or rental properties. The trust helps you separate ownership from control so you can protect your assets while keeping the ability to use them.
We covered an important topic that comes up a lot—timing. Many clients worry that it’s too late to set up a trust. The earlier you plan, the more options you have, and you can start the five-year Medicaid lookback clock sooner. That doesn’t mean you can’t plan later, but early planning almost always results in better protection.
Finally, we cleared up confusion about domestic asset protection trusts (DAPTs). These are allowed in only a handful of states and aren’t the same as the irrevocable trust we use here in Pennsylvania. Knowing the difference is key.
Why We Do What We Do
I believe education is the most important part of estate planning. My own family’s struggles showed me just how devastating a lack of knowledge can be, and I’m committed to making sure our clients don’t go through that. That’s why we offer free workshops, take time to explain things in plain language, and answer every question you bring.
If you’d like to learn more, visit our website or join one of our upcoming workshops. You can register here: Register for a Workshop or call us at (717) 845-5390. We’d love to help you protect what matters most.
Keep tuning in to the podcast and sending us your questions. They’re what keep these conversations going and help us serve you better every day.
