The Veterans Asset Protection Trust can be a beneficial option for many of your elder law clients that are looking for long-term planning options. The Veterans Asset Protection Trust is an intentionally defective grantor trust and can be considered as an option for clients who are wartime Veterans or the surviving spouses of a wartime Veteran. This trust is designed to meet the eligibility requirements from the Veterans Administration (VA) of a complete gift or complete relinquishment.  

When it comes to assets, the most significant for Veterans is typically his or her residence. As long as a Veteran retains that home, it does not count as part of his or her net worth for VA-eligibility purposes and instead qualifies as a “non-countable resource.” If a Veteran is collecting a monthly pension benefit, however, and later sells the home, those proceeds will disqualify him or her from receiving any further Veterans’ pension benefits. This disqualification remains intact until the Veteran spends the proceeds down to an allowable asset level.

The Medicaid Family Protection Trust is an option that should be considered for elder law clients that are interested in protecting not only their own assets, but those of their children or other beneficiaries from falling into unintended hands. It is an irrevocable trust that can shield clients’ assets from creditors or anyone that may attempt to obtain assets in the event of an unpleasant family situation, for example. Then, the assets are passed in further trusts after the grantor’s death, to keep the assets in a protected status. Some scenarios where this would be beneficial include a child’s divorce where an ex-spouse is attempting to get to family assets, or in the event that a biological child or legal dependent may be in a bad debt or even an addiction situation, which would put the parental assets at risk.

Essentially, the Medicaid Family Protection Trust includes some of the same benefits of a Medicaid Asset Protection Trust but provides added asset protection. This trust is also appropriate for Medicaid planning.

WealthCounsel member lawyers have shared that, while their clients aren’t always ready to talk about Medicaid or the future need for long-term care, they are willing to talk about asset protection for their family and the ability to protect assets from any creditors that could threaten their legacy. The Medicaid Family Protection Trust also provides protection of assets should the need for Medicaid arise.

We've given you a quick comparison of four types of asset protection trusts used in elder law, but we wanted to take it one step further and break down each type into more detail. The first trust we will cover is the most popular trust created in Elder Docx: the Medicaid Asset Protection Trust.

For elder law attorneys, the Medicaid Asset Protection Trust can be a complex asset protection trust to understand. While it has many benefits, there can also be some drawbacks, so it’s important to know when and why you might want to recommend this type of trust to your elder law clients.

While the Medicaid Asset Protection Trust is not for everyone, it can be an effective trust for protecting a family’s financial security in certain circumstances.