Fall is often associated with back-to-school time, when many clients focus on their children’s educational future. This makes fall the perfect time for estate planning attorneys to remind their clients how important it is to take steps to secure their children’s financial future as well. By incorporating asset protection in their estate plan, clients can not only provide an inheritance for their children but also protect the inheritance from creditors, a soon-to-be ex-spouse, and poor money management that can quickly deplete hard-earned assets. 

A power of appointment is a provision that gives a person, the powerholder, the opportunity to change the ultimate beneficiary of the property subject to the power. Retaining a power of appointment can provide flexibility for future planning and can also provide taxation benefits, such as including the property in the powerholder’s estate.

A general power of appointment, per 26 U.S. Code § 2041(b)(1), “means a power which is exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate.” A limited power of appointment limits to whom the property can be appointed. While a general power of appointment is not advisable when planning using a Medicaid Asset Protection Trust, a limited power of appointment is acceptable in many jurisdictions. But what if the limited power of appointment allows property to be appointed to a non-profit organization and the Medicaid recipient is receiving care at a non-profit facility?

This issue was recently litigated in Massachusetts. 

Earlier this year, WealthCounsel, in conjunction with Trusts & Estates magazine, surveyed over 500 estate planning professionals to see what opportunities and challenges they and their clients face. The results indicate that, while there is stability within the industry overall, there are growing concerns from clients regarding proposed legislation that could have wide-ranging implications if passed.