Is It Time for an Asset Protection Trust?
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Most people don’t think about protecting their assets until something bad happens, like a lawsuit, nursing home bill, or financial crisis. But by then, it might be too late. Truly, the best time to protect your assets is before you’re at risk.
That’s where an asset protection trust can come in.
These powerful legal tools can help shield your home, savings, or other important assets from future threats, but they only work if you plan ahead. In other words, if you’re already being sued, it’s too late to establish this trust. So how do you know if it’s time to consider one?
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1. You’re Concerned About Long-Term Care Costs
This is the big one. Nursing home care can cost $100,000 or more per year, and it’s not covered by Medicare. Medicaid can help, but only if you meet strict income and asset rules. If you wait too long to plan, you risk losing thousands, if not hundreds of thousands of saved assets.
A properly structured asset protection trust can help preserve your assets and still allow you to qualify for Medicaid, as long as it’s set up early enough.
2. You Own Property You Want to Keep in the Family
Whether it’s the family home, a vacation cabin, or a rental property, you may want to keep real estate in the family rather than see it sold to pay off care costs or creditors. Placing property in an asset protection trust can help make that happen, while still allowing you to live in the home or otherwise use the property during your lifetime.
3. You Work in a Profession That Comes With Legal Risk
Doctors, business owners, contractors, real estate investors - these and other professions come with a higher chance of being sued. Even if you carry some form of liability insurance, lawsuits can be financially devastating.
An asset protection trust can create a legal “firewall” between your assets and potential claims, keeping what you’ve saved out of reach of future lawsuits or creditors.
4. You’re Helping Adult Children (But Want to Be Careful About It)
It’s wonderful to support your children or grandchildren…but what if they go through a divorce, bankruptcy, or lawsuit of their own? If you give them money or property outright, it may not be protected.
Asset protection trusts can also be used to leave assets to your children in a way that protects them from their own future problems, while still giving them access and benefits.
5. You Want to Preserve Your Legacy No Matter What
At the end of the day, most people set up an asset protection trust because they want peace of mind. They’ve worked hard, saved carefully, and want to make sure that effort benefits their family - not the government, creditors, or outside forces.
This type of planning isn’t just about money. It’s about keeping control, maintaining dignity, and leaving something meaningful behind.
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So don’t wait for a crisis. Asset protection trusts are powerful, but they don’t work retroactively. Once a lawsuit is filed or a health crisis hits, it may be too late to take advantage of this type of planning. If any of the reasons above sound familiar - or even if you’re just curious - it’s worth having a conversation now.
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Understanding the Tax Impact of Non-Citizen Spouses in Estate Planning
What You Need to Know When Your Spouse Isn’t a U.S. Citizen
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When it comes to estate planning, one of the most important goals is making sure your loved ones are taken care of after you’re gone. But if your spouse isn’t a U.S. citizen, some of the rules are different, and if you’re not careful, those differences can lead to unexpected taxes and complications.
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Here’s what you need to know.
Normally, when one spouse passes away, they can leave an unlimited amount of assets to the surviving spouse without any estate tax. This is called the “unlimited marital deduction,” and it’s one of the cornerstones of most estate plans.
But here’s the catch: The unlimited marital deduction only applies if the surviving spouse is a U.S. citizen.
If your spouse is not a citizen (even if they’ve lived in the U.S. for decades or have a green card) this deduction is not automatically available. That means the estate could owe significant federal estate taxes after the first spouse dies, just because of citizenship status.
So why does the IRS treat non-citizen spouses differently? The main reason is that the IRS wants to make sure it can collect taxes. A U.S. citizen spouse is more likely to remain in the country and follow U.S. tax laws. A non-citizen spouse might return to their home country, putting future tax payments out of reach. To avoid this, the IRS limits the tax-free transfer of assets at death unless certain conditions are met.
Thankfully, there’s a way to preserve the tax benefits of the marital deduction—even if your spouse isn’t a U.S. citizen. It’s called a Qualified Domestic Trust, or QDOT.
A QDOT is a special type of trust that allows a non-citizen spouse to receive assets from their deceased spouse without triggering immediate estate taxes. Here’s how it works:
- The assets are placed into the QDOT instead of going directly to the surviving spouse.
- The trust must meet specific IRS requirements, including having a U.S. Trustee.
- Income from the trust can be distributed to the surviving spouse.
- Principal can also be distributed, but under stricter conditions (and may be taxed).
- Any estate taxes that would have been due are delayed until the surviving spouse takes certain distributions or passes away.
This gives the surviving spouse access to the assets while also giving the IRS assurance that it can collect taxes later, if necessary.
So, if you or your spouse is not a U.S. citizen, it’s important to bring this up when creating or updating your estate plan. Without the right tools, like a QDOT, you could unknowingly leave your family with a large tax bill at a very difficult time.
Even better: early planning gives you options. In some cases, a non-citizen spouse may choose to become a U.S. citizen as part of the overall strategy. Or, couples may decide to shift how assets are owned or gifted during life to reduce estate tax exposure.
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Estate planning is never one-size-fits-all, which is especially true for families with international ties. Whether you’re just getting started or you’ve had a plan in place for years, make sure your plan reflects your family’s unique situation.
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