Asset preservation has become a hot topic in estate planning, and with good reason. Without the right estate documents in place, your assets can begin to vanish when you die.
While many estate planning strategies exist that can help with asset preservation, trusts often go overlooked. Trusts can help safeguard your wealth for future generations while you retain control over their distribution.
Two main trust categories
A trust can be revocable or irrevocable. Revocable trusts allow you to keep control over the assets during your lifetime, and they offer the flexibility to make changes as needed. Unfortunately, revocable trusts do not provide creditor protection.
By contrast, irrevocable trusts transfer asset ownership away from you to the trust itself, providing robust protection from creditors and lawsuits. Once established, these trusts cannot be altered without the consent of their beneficiaries.
Three trusts to consider
In addition to general trusts, there are various types of trusts tailored for asset protection. These include the following:
- Charitable trusts allow you to support charitable causes while receiving tax benefits. They can also help reduce estate taxes.
- Qualified personal residence trusts (QPRTs) allow you to transfer your home to beneficiaries at a reduced gift tax value while retaining the right to live there for a specified period.
- Medicaid asset protection trusts (MAPTs) help individuals qualify for Medicaid by transferring assets out of their ownership, preventing them from being counted towards Medicaid’s asset limits.
Creating asset protection trusts requires comprehensive knowledge of Pennsylvania wills and trusts laws. With experienced legal guidance, you can determine which estate planning tools will help you achieve your wealth preservation goals.