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Why many people need to consider asset protection planning

On Behalf of | Sep 1, 2021 | Estate Planning

When people think of estate planning, they usually think about deciding who they want to inherit their various personal assets. However, estate planning should be a more comprehensive process than that.

If you don’t think ahead about personal expenses, debts and medical needs in your golden years, you may not have any assets left over after you die to leave anything for loved ones. Asset protection planning has become an increasingly popular component of modern estate planning.

Why do so many Americans make specific plans to protect their assets as they age or after they die?

Care in your golden years can be prohibitively expensive

Many Americans do not adequately prepare for retirement. They may need to rely on Social Security benefits rather than retirement savings. They may not have enough resources set aside to help them cover the cost of living independently as they age, let alone the often exorbitant expenses associated with living in a nursing home.

No one can predict what will happen with their health when they get older, although those who have a family history of cognitive decline or Alzheimer’s disease may be at elevated risk for dying in extreme debt or needing Medicaid in the last years of their life. Your creditors could sue you before you die or come after your estate at the end of your life.

Hospitals and nursing homes can make claims against your estate for any unpaid balance you have at the time of your death. Although they can’t go after your family members for those debts, in most cases, they can consume all of the property left in your estate. Even the Medicaid estate recovery program could come after everything you own, including your house, to seek repayment for the benefits the program offered you.

How does asset protection planning work?

At its most basic, asset protection planning involves changing how you hold ownership of assets so that creditors can’t make claims against them in court while you were alive or against your estate after you die. The exact property you have and your personal situation will dictate how you protect your assets. You might make gifts to trusted family members or move property into a trust.

Asset protection planning can be important when you create or revisit your estate plan as you approach retirement age.