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Asset Protection: Elderly Planning, Trust Formations & Estate Taxes

There are a practically unlimited number of ways that a person could become liable for a debt to a third party creditor (medical setbacks, injuries from traffic accidents, negligent acts, injuries from altercations, slander, tax assessments, etc.). Trying to foresee every possible scenario that could result in liability is very difficult to do. It is the goal of insurance to protect us from these types of things, but maintaining adequate coverage for every possibility can be difficult.

If you have accumulated material wealth, taking asset protection precautions in excess of just typical insurance coverages may be prudent. The common idea behind asset protection is that a creditor cannot collect on a debt if there are no assets from which to collect. If you don’t own any assets, nobody could expect you to liquidate something to pay off your debts. When creditors run into debtors with no assets, they reluctantly acknowledge it and eventually give up on their attempts to collect.

One of the largest expenses for most retirees today is medical care. With daily technological advances in medical treatments and the related increases in like expectancy, it seems that this trend will continue. It is becoming more and more common for the elderly among us to spend at least some portion of their lives in assisted living facilities. Many people that reach a point where an assisted living facility is needed are not in a financial position to pay for the services they need. There are assistance programs through Medicaid and the V.A. that may cover these types of expenses for people that can’t afford to pay for them. If a person owns assets (equity in property, retirement accounts, etc.), then that person generally won’t qualify for assistance until those assets have been depleted. The cost of living in these environments can be excessive and can quickly eliminate retirement funds or other forms of wealth that we may have accumulated. There are a lot of similarities between living expenses incurred at an assisted living facility and a third party creditor: both will pursue collection from your assets until your assets are exhausted. If you don’t own any assets, a future service provider (just like a prospective future creditor) can’t expect you to liquidate something to pay your expenses.

Legitimate planning opportunities may exist to transfer your assets out of the reach of prospective future creditors or service providers. Development of an asset protection plan may be able to accomplish this for you. The formation of trusts and/or the implementation of extensive estate tax plans are common instruments utilized in the development and implementation of an asset protection plan. Before creating instruments or implementing transactions aimed at protecting assets, it is important that you have consulted with an experienced professional to be sure that your intended course of action is legitimate and that tax ramifications and other considerations have been addressed.

At Burkhart, Peterson & Company, we have tax Attorneys, Certified Public Accountants (CPAs), Enrolled Agents, and Insurance Agents on staff. After developing a comprehensive understanding of your financial situation and other circumstances, we can recommend an asset protection plan that may benefit you and assist you in obtaining the services of an experienced legal professional that will be involved in developing the appropriate legal instruments that it is comprised of.

Please contact our office if you are interested in providing a new level of protection to your accumulated wealth by having us recommend an asset protection plan for you.