Should I include an asset protection trust in my Indiana estate plan?

It is important to protect your wealth as well as acquire it. Even the most meticulously designed estate plan can fail if assets are not adequately protected. Asset protection trusts (APT) are a great way to protect your assets from potential risks. The Indianapolis attorneys at Frank&Kraft will help you decide whether an asset protection trust (APT) is right for you by explaining the structure, benefits, and different types of asset-protection trusts. Asset protection trusts are similar to other trusts in that they require a Grantor, who creates the Trust, a Trustees, who manages it, and one or several beneficiaries, who benefit from its assets. What makes an APT unique is its ability shield assets from external claims. Assets transferred to an APT are no longer legally owned by the Grantor, making it much more difficult for creditors to get access to them. APTs are also customizable to meet specific estate planning objectives, such as preserving assets for future generations or enabling Medicaid for long-term care. The benefits of incorporating an asset protection trust into your estate plan include:

Protecting Assets from Creditors:

APTs are especially beneficial for individuals in high-risk professions such as medicine or law, where lawsuits are common. Entrepreneurs and business owners also find value in APTs as a safeguard against personal liability.

• Preserving Family Wealth: These trusts can ensure that assets are preserved for future generations. By shielding wealth from creditors, lawsuits, divorces, or mismanagement, APTs help ensure assets are distributed according to the Grantor’s wishes.
• Planning for Long-Term Care: Many seniors rely on Medicaid to cover long-term care costs. Medicaid Asset Protection Trusts allow you to protect assets while still meeting Medicaid eligibility requirements. By transferring assets into a trust early, you can avoid complications caused by the Medicaid “look-back” period.
• Streamlining Asset Transfer: Assets held in an APT bypass probate, allowing for a quicker and more private transfer to beneficiaries after the Grantor’s death. This not only reduces costs but also keeps personal financial information confidential.
• Balancing Protection and Flexibility: Some APTs allow the Grantor to retain a degree of control or access to assets while still enjoying the trust’s protective benefits. This flexibility can make the trust more practical for everyday needs.
• Types of Asset Protection TrustsChoosing the right asset protection trust depends on your unique goals and circumstances. Below are the most common types of APTs and their uses:

Domestic Asset Protection Trusts (DAPTs):

Domestic asset protection trusts are established in the United States under specific state laws. Only a few states (including Indiana but not

• ) have legal frameworks that recognize DAPTs. Massachusetts does not allow DAPTs. States like Nevada, South Dakota and Alaska have robust asset protection laws. In states where DAPTs are allowed, they offer a strong level of protection against certain creditors.Foreign Asset Protection Trusts: Also referred to as offshore trusts, these are established in jurisdictions outside the United States, such as the Cook Islands, Belize, or the Cayman Islands. These countries have legal systems which offer strong protections to trust assets and shield them from creditors. Foreign APTs offer superior asset protection but are more expensive to set up and maintain than domestic trusts. They also have complex legal and financial requirements. Moreover, they carry risks tied to the economic and political stability of the host country.
• Medicaid Asset Protection Trusts (MAPTs): For individuals planning to rely on Medicaid for long-term care, MAPTs provide a way to protect non-exempt assets while meeting Medicaid eligibility requirements. Assets that are placed in a Medicaid Asset Protection Trust (MAPT) will not be counted as part of the Medicaid application, provided they were transferred before the “look-back period”. This type of trust is particularly valuable for seniors concerned about the high costs of long-term care and wishing to preserve wealth for their heirs.
• Special Needs Trusts: Parents or guardians of children with disabilities often use special needs trusts to provide ongoing financial support without jeopardizing eligibility for government assistance programs such as Medicaid or Supplemental Security Income (SSI). Assets held in the trust are not considered income or resources for the beneficiary, ensuring continued access to vital benefits while safeguarding funds for the child’s care.
• Spendthrift Trusts: A spendthrift trust is designed to protect assets from both creditors and beneficiaries who may not make sound financial decisions. These trusts have a spendthrift clause, which gives the Trustee the power to decide how and when the funds are distributed. This ensures the trust’s assets are used responsibly and according to the Grantor’s intentions.
• Can We Help You Incorporate an Asset Protection Trust into Your Indiana Estate Plan?For more information, please join us for an upcoming FREE seminar. Contact the Indianapolis estate planning attorneys of

Frank & Kraft

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