We all need some assets, some amount of stuff to provide for our and our family’s needs. Once you have figured out how much stuff you need, or identified what you consider especially important to pass along to future generations or to your favorite charities, it is worrisome to realize you could lose these resources.

Hazards to your nest egg can come from many directions. For example, your assets can be left exposed and vulnerable if you’re in a high-risk profession, such as in the medical profession, where you may be more likely to be sued. Your plans can also be undone by unexpected bankruptcy or other unfortunate financial turns. Maybe lawsuits aren’t a concern, but you’re stressed when wondering if you’ll have enough money to pay for long term care.  Perhaps you’ve heard about people having to sell their home and spend down to their last nickel to get Medicaid assistance to pay for nursing home-level care, and the prospect of doing so makes you shudder. No matter which scenario keeps you up at night, you can act now by creating an Asset Protection trust to guard against those risks.

• Creditor Protection. In our Estate Planning Workshop you learn a basic and critical rule of creditor law: if you can get to it, your creditors can get to it. This means if you unintentionally injure someone, say in a car accident or a slip-and-fall in your home, and you’re found liable, you owe the injured person as much of your assets as needed (after any insurance payments) to pay them the amount for which you’re liable. It doesn’t matter that they want to take your family beach house of three generations, or that you’d intended to use the assets they’ve come after to help a grandchild with college. The person with a judgment against you can take those assets.

  You may wonder: “Can’t I just protect my stuff once I know I’m going to be sued?” In a word, No, because another central creditor law concept is that if you try to move and hide your stuff knowing you’ve got potential liability on the horizon, the court can make you “undo” the transaction.

  Deciding to create an Asset Protection trust for creditor protection boils down to your personal circumstances and risk tolerance. Do you think it is likely you will need creditor protection in the future? If your answer is “No,” are you and your family okay with the outcome – potentially losing your assets – if you’re wrong? Your thoughtful consideration of these questions will help you decide if this type of planning is important for you.

• Medicaid Long Term Care Pre-Planning. We’re all living longer, but not necessarily healthier, and as a result we need more care in our later years. No one likes this prospect, but if you can’t fully care for yourself, you will need the help of others to meet your basic needs. How do you pay for that assistance?  Long term care is incredibly expensive. A private room in a Virginia nursing home could cost you $100,000 per year — or possibly even more. Few Virginia families can afford ongoing long term care costs that can quickly eat away at your entire life savings. So, what to do?

  Medicaid Long Term Care is a needs-based, government benefit program that supplements your income to pay for long term care. To qualify, you must medically need nursing home-level of care and be financially (income and asset) qualified. If you only need a little help, you will not qualify medically. The financial qualification requirements are strict and draconian. A long term care Medicaid applicant cannot have more than $2,000 of “countable” assets in their name. Everything else must be spent down or converted to “non-countable” assets before they will qualify. It is a startling prospect to realize you must give up a lifetime of savings to get assistance in your time of greatest need, potentially leaving nothing for your family.

  You may wonder what, if anything, you can do today to qualify for Medicaid Long Term Care in the future. Options exist, especially if you start today, well in advance of needing long term care. Medicaid Pre-Planning involves identifying resources that may be available to pay the substantial costs of in-home, assisted living, or nursing home-level care. A well-crafted long term care plan can provide protections for a well spouse and/or minor or disabled children, as well as preserve some assets and leave a legacy for your family or your charities of choice. One element of the strategy includes creating an Asset Protection trust and transferring some portion of your assets to the trust.  Under current law, the assets in the Asset Protection trust are not considered available resources for you or your spouse and if this planning and the transfers are completed more than five years prior to your or your spouse’s Medicaid application, Medicaid will not impose a penalty for transferring the assets into the Asset Protection trust.

  In sum, you can shape your future and your legacy to protect from an abrupt Medicaid Long Term Care spenddown, but effective long term care planning must start early. The sooner you act, the easier it will be to develop a workable plan that will protect more of your assets. Without a proper long term care plan in place, it becomes more difficult to protect assets from nursing home care costs. As with other planning, long term care plans must always be developed on a case-by-case basis. One size most definitely does not fit all.

• Asset Protection Trusts. A trust is a legal entity that holds assets (stuff), and an Asset Protection trust is a type of irrevocable trust. As the term “irrevocable” implies, once you create the trust and put your stuff in the trust you can’t revoke the trust and return the assets back to yourself.  You must name someone else (often a trusted child or family member) as the (potential) beneficiary of the trust assets during your lifetime. For some, this may be a bitter pill to swallow, but the corollary to if you can get to it, your creditors can get to it is if you can’t get it, your creditors can’t get it.  Giving up access to the principal (or principal and income) makes these resources unavailable to your creditors and/or considered “unavailable” under Virginia’s Medicaid Long Term Care rules.

  Although you can’t put your hands directly in the “cookie jar” you can have some limited use of the resources in your Asset Protection trust. If your home is in the trust, you can continue to live there. You can sell the home and the trust can buy a different one if you decide it’s best to do so. You can continue to receive dividends and income from a trust owned investment account.

  You can retain other important powers even with an Asset Protection trust. You can serve as trustee, you can change who will serve as trustee at your incapacity or death, you can change who your lifetime beneficiaries are, and you can even change the distribution provisions at your death.

Everyone becomes a legal adult, responsible for their medical and financial

decisions, when they turn 18 years old.  When a vulnerable adult is unable to provide for their own safety, financial, and medical needs and protection, it is crucial to create the structures to ensure they are fully protected. You can protect the vulnerable loved ones in your family by taking the following actions:

• Special Needs Planning. Special Needs Planning provides an individual with a disability the private and public support and resources to lead as rich, full, and rewarding a life as possible. This planning is often multi-generational, as grandparents, parents, and siblings coordinate to provide support for the individual with the disability throughout his or her life, including after the death of the parents.

  The person with special needs may rely on needs-based benefits (Supplemental Security Income and Medicaid) to meet their basic needs. Special needs planning is essential to preserve access to these critical benefits while enhancing the disabled person’s quality of life. Under federal regulations, Supplement Security Income and Medicaid are subject to very strict income and asset limits. An inheritance or life insurance benefit left directly to an individual with special needs could have devasting consequences and potentially disqualify them from much needed government benefits. The good news is that through proper special needs planning, you can enhance their quality of life and provide them with financial benefits without causing an unintended disruption to or cessation of the benefits they rely upon.

  Planning may include adult guardianship, establishing a Medicaid-compliant special needs trust, creating protections in family members’ estate planning documents, judicious spend-down of excess resources, or establishing specialized accounts.

• Adult Guardianship. When an individual with an incapacity cannot create a plan and does not already have a plan in place, a guardian and/or conservator is needed to manage the person’s medical, legal, and financial affairs. Incapacity can result from dementia, accident, stroke, injury, or, in the case with many young adults with special needs, the individual may have been born with a condition that limits their ability to make their own decisions or care for themselves.

  Adult guardianships require court involvement. The process starts with the filing of a petition and can take several months.  A separate attorney will be appointed to investigate the petition and provide a recommendation to the court as to the necessity of the guardianship and the suitability of the person who is proposed to serve as guardian.  At a hearing on the matter, the court will decide if the guardianship is necessary and, if so, appoint someone to serve.  Guardians (who make medical and personal decisions) report their actions to the local department of social services.  Conservators (who manage the finances) report to the local commissioner of accounts.

  Parents can file for guardianship of their soon-to-be-adult children once their child with special needs is 17 ½ years old.  Family members of older adults can file at any time.  Although there is never a perfect time to undertake this responsibility, delaying the inevitable creates more frustration and stress when the immediate need to act arises and no one has the power to do so.