Parental Protection Trusts are an option for your elder law clients in cases where traditional irrevocable asset protection trust planning isn’t an option and the best option is to divest themselves of assets by giving them away — usually to children. The children can then use those assets to establish a Parental Protection Trust. Essentially, this type of trust is a third-party special needs planning tactic that is established for the parent’s benefit, with the client’s children being the third party.

When children establish a Parental Protection Trust, it allows them to donate whatever funds they wish into that trust to be set aside for the benefit of the parents. Assets are put into the trust and those funds are preserved until the parent’s death. At that time, any remaining assets are distributed back to the children.

How a life insurance policy fits in

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.

The different types of asset protection trusts which can be established for the elderly population can be confusing and overwhelming — not only for clients but even for elder law attorneys themselves. Particularly if you are a new elder law attorney, knowing which trust is right for your client can seem daunting.

But with some knowledge about these different types of trusts, you can glean the insight you need to properly advise your clients. In this article, we’ll take a look at four types of trusts — Medicaid Asset Protection Trusts, Medicaid Family Protection Trusts, Veterans Asset Protection Trusts, and Parental Protection Trusts — and when to use them.