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Asset Protection

Protecting assets is a major component of the estate planning process, and should be factored into all cases, including consideration of insurance options such as umbrella policies and long-term insurance.

Protecting the principal residence from future creditors can be accomplished via different types of declarations of homestead.  For married couples, their principal residence can be best protected simply by owning it as tenants by the entirety, instead of placing it into a revocable trust.  (This is a major flaw in the revocable trust sales pitch at free seminars.)

Protecting other real estate or a business interest by segregating it in a formal business entity such as a corporation or an LLC can often be advisable.

Assets can be protected for the next generation(s) by older persons by establishing irrevocable trusts, to minimize the risk of losing the assets due to a lengthy and expensive nursing home stay.  Asset protection planning for the next generation can be accomplished by leaving the inheritance in a generation-skipping trust controlled by the family rather than leaving assets to them outright.

Some people believe that just because they have established a trust, their assets in it are protected, but that belief is incorrect.  If you can take the assets back out of the trust, or if the Trustee can give the assets to you, then a creditor suing you or the MassHealth agency can validly claim that the assets are still yours.


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