What do people get wrong when they think about asset protection? Plenty, according to Steven Rubin, a Certified Elder Law Attorney and partner at Drazen Rubin Law, a Life Care Planning Law Firm in Milford, Connecticut. In this article, Rubin talks about the top five misconceptions he encounters.
#1: Asset protection = not spending money.
For many seniors, thrift is their primary asset protection strategy. Rubin says this notion is a misguided one, especially for seniors in relatively good health who are aging at home and want to stay there. “Spending a little money to get someone to help with the lawn, the laundry, or snow removal can reduce the risk of a fall or other injury that could land the senior in an expensive long-term care facility,” notes Rubin, who has nearly a decade of experience advising seniors. Putting off home renovations that could increase the elder’s safety in the home is another example of a penny-pinching strategy that can often backfire. Many seniors resist the investment and then an accident lands them in a long-term care facility. “If you spend $5,000 to modify the home to increase your safety or you go to a facility that costs $8,000 to $16,000 per month, which one protected your assets more?” asks Rubin.
#2: Asset protection = giving up control.
Sometimes people who could benefit from an asset protection strategy resist it because they assume it means giving up control over assets. While it’s true that some asset protection measures mean ceding control, not all do. “With certain types of trusts, the asset doesn't actually become another person's property,” says Rubin. “It remains yours and you have some control over it, but it's still protected in case you need long-term care.”
#3: Goals don’t really matter.
Who are you protecting the assets for? It’s a question that seniors don’t always think to ask, but goals do matter. They matter a lot. “What you want to accomplish will determine what kind of asset protection strategy is most appropriate,” counsels Rubin. “Do you want to protect money for the next generation? Provide for a relative with special needs? Keep an inheritance out of the wrong hands, such as divorcing spouses or drug-using children? Each goal requires a different strategy.”
#4: You have to give away everything.
Many seniors believe that they have to give assets to somebody else in order to protect them. How much should you give away? Opinions differ, but Rubin advises establishing a trust only for those assets you’re comfortable giving up control over. “If you think you're going to need an asset or an income stream and you want to maintain control of it, don't put it in the trust,” Rubin advises. “You don't want to protect the money in a trust if you might need it because it’s not always easy to get it back out.”
#5: Asset protection is for everyone.
In reality, not everyone needs an asset protection plan. It depends on the circumstances. That’s why Rubin stresses the “why” behind his recommendations. “I want my clients to do only what they're comfortable doing,” Rubin adds, “and you can't be comfortable doing something if you don't understand how it works.”
Ultimately, working with an expert who can help you sort through the options may be the best asset protection strategy of them all.