A basic estate plan typically focuses on how your assets will be distributed after you are gone. In order to have assets left to distribute, however, you need to protect the assets you have throughout your lifetime. To help you accomplish this important estate planning goal, the Fargo asset protection attorneys at German Law Group discuss the top three asset protection tools.
- Domestic Asset Protection Trust. A Domestic Asset Protection Trust (DAPT) is an irrevocable self-settled trust established under the special laws of one of the limited number of jurisdictions that allow the Settlor (also referred to as the Grantor or Trustor) to be designated a permissible beneficiary with access to the funds in the trust account. As of 2019, only 17 states have DAPT friendly laws and North Dakota is not one of them. A properly drafted and structured DAPT prevents creditors from reaching the trust’s assets. If a DAPT were set up under the laws of a non-DAPT jurisdiction, the general rule is that the Settlor’s creditors can access as much of the trust as can be distributed to the trust Settlor. In addition to providing asset protection, a DAPT offers other benefits, including state income tax savings when situated in a no-income-tax state.
- Prenuptial Agreement. Also referred to as a pre-marital or antenuptial agreement, a prenuptial agreement is a legally enforceable agreement that is entered into by a couple in contemplation of marriage that creates a plan for how issues will be handled in the event of divorce or the death of a spouse. A prenuptial agreement must be finalized before the couple marries and will become effective as soon as the parties are legally married. A properly drafted and executed prenuptial agreement can be 100 percent enforceable in most states. The primary purpose of most pre-nuptial agreements is used to determine how assets will be divided in the event of divorce or death. Spousal support, or alimony, can also be addressed in a pre-nuptial agreement. This might entail one party waiving the right to request spousal support in the event of a divorce or it could set forth an alimony schedule based on factors such as the length of the marriage and/or the number of children born during the marriage. As a general rule, courts favor enforcing prenuptial agreements as long as the court is convinced that the agreement was entered into knowingly and voluntarily and the terms are clear and fair to both parties.
- Medicaid Trust. by far one of the biggest threats to your retirement nest egg is the high cost of long-term care. If you are already in your retirement years, you stand a 50-75 percent chance of eventually needing some type of LTC services, as does your spouse if you are married. In North Dakota, the average yearly cost of LTC for 2018 was just over $140,000. Because neither Medicare nor most health insurance plans cover LTC expenses, you could be forced to pay out of pocket if you don’t plan for the possibility of needing LTC. Medicaid will cover LTC costs; however, you must qualify for benefits. One of the most problematic eligibility requirements for seniors is the asset limit. If you own non-exempt assets valued above the (very low) limit, your application will be denied and you will be expected to “spend-down” those assets. In essence, this means you will need to rely on those assets to pay your LTC bills until those assets are depleted. One way to avoid the loss of your retirement nest egg is to incorporate a Medicaid trust into an overall Medicaid planning component within your estate plan. A Medicaid trust is a specialized irrevocable living trust that protects your assets while helping to ensure that you to qualify for Medicaid if you need to in the future.
Contact Asset Protection Attorneys
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about the best way to protect your assets, contact the North Dakota asset protection attorneys at German Law Group by calling 701-738-0060 to schedule an appointment.