Estate Planning Myths and Misconceptions: All Trusts Protect Your Assets

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Some myths contain an element of truth.  An example of this is the notion that all trusts will protect your assets against long-term care costs, divorce, lawsuits, and other threats.  The truth is a bit more complicated: while some types of trusts provide excellent asset protection, others do not.
 
When most people think about trusts, a revocable trust is the one they have in mind.  While a revocable trust provides a number of benefits, such as avoiding the delays, frustration, and expense of Massachusetts probate, it will not protect your life savings against the high cost of long-term care, creditors, etc.
 
On the other hand, irrevocable trusts, when properly designed and implemented, can provide an almost unsurpassed level of asset protection from long-term care costs.  They can also protect your assets against creditors, divorce, lawsuits, and more.
 
Why is an irrevocable trust better than a revocable trust at protecting assets against the cost of long-term care?  Assets in a revocable trust are still available to the grantor (the person creating the trust).  MassHealth considers those assets available to pay for long-term care.  This is not the case with an irrevocable trust, as long as it addresses the latest laws governing MassHealth eligibility.
 
There’s a catch – of course.  In order for the assets in the irrevocable trust (usually your home) to be unreachable by MassHealth, you need to give up virtually all control of that asset.  You must have someone in your life who you trust implicitly to manage the asset honestly, and you must be willing to hand over control of the asset to that person.  Many clients are quite understandably not comfortable with this and choose not to create an irrevocable trust.  Other clients go ahead with it – it’s a very individual decision, based on your own family structure, financial position, values, and risk tolerance. 
 
Trust planning is a complicated area of the law.  As always, I am available to help you decide if an irrevocable trust is right for you.
 
Until next time, take care…

Alexis
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P.S. Don’t forget, in the coming days I’ll be making two presentations about long-term care planning.  

On Wednesday, May 11, at noon I’ll be at The Cordwainer in Norwell.  A light lunch will be served.  You can register for the “lunch and learn” at The Cordwainer by calling (617) 921-1753 or by emailing Shari Flight at sflight@cordwainermemorycare.com.
 
On Thursday, May 12, also at noon, I’ll be making a similar presentation online with financial advisors Dan Galli and Karen Van Voorhis.  To register for the webinar, click here.
 
I hope you’re able to attend one of these free events.