Asset preservation trusts are strategic estate planning tools designed to help safeguard personal or family wealth against future risks. They can be effective for shielding assets from creditors, long-term care costs and other financial liabilities. They also help maintain eligibility for public benefits.
Selecting the right trust or trusts depends on your goals, assets and timing. Here are three trusts to explore that may offer you strong asset protection.
Medicaid asset protection trust
This trust can help you qualify for long-term care benefits without depleting your estate. Assets placed in this trust are no longer countable for Medicaid eligibility after a five-year look-back period. As the grantor, you can receive income from the trust, but you cannot access the principal.
Good for: Preserving family homes and savings for future generations.
Qualified personal residence trust
Designed to protect a residence from estate taxes and future legal claims, this trust can allow you to live in the home for a set term. Afterwards, the property transfers to beneficiaries at a reduced taxable value. These are complex trusts and require careful structuring to meet IRS requirements.
Good for: Shielding high-value homes expected to appreciate.
Spendthrift trust
This type of trust helps protect assets from the beneficiary’s creditors and their own impulsive spending. The trustee controls distributions, helping ensure funds are used responsibly and per the trust’s terms. Beneficiaries cannot sell or pledge their interest, which helps preserve the trust’s value.
Good for: Protecting assets for young or financially inexperienced beneficiaries.
When drafted carefully and with an eye for legal detail, these trusts can protect your wealth now and long after you pass away.
