The Castle Trust is a modern asset protection trust that can avoid probate, protect assets from lawsuits and protect against the devastating cost of long-term care. The Castle Trust is different from a basic revocable living trust. A revocable living trust can avoid probate and control the distribution upon death, but a living trust offers no asset protection while you are alive. If asset protection is a goal (nursing home or lawsuits) then a Castle Trust may make more sense to protect you and your family.
The History of the Castle Trust
The Castle Trust is based on age old principles of common law and has those principles have been tested in court, for Medicaid and long-term care scenarios.
The Castle Trust is a form of irrevocable trust. In the past, irrevocable trusts were used for estate tax protection and asset protection purposes. Think of the wealthy families of the past, Rockefellers, Kennedys, etc.
Irrevocable Trusts for Estate Tax Purposes | The Old Way
Estate Planning Attorneys would use irrevocable trust to protect against estate taxes. For example, in the past if you had more than $600k in assets, you would have had to pay an estate tax upon death. With an irrevocable trust, we could have moved money out of the estate. Now that estate tax exemption, is over $11 million dollars. Most people arn't concerned about estate taxes anymore, they are concerned about long-term care. With that change in need, we need a change in type of irrevocable trust.
Irrevocable Trusts For Medicaid/Nursing Home Spend-Down Protection
The use of trusts for nursing home or Medicaid planning has been going on for decades. The use of irrevocable trusts, including Medicaid Asset Protection Trusts, has been going on since the 90's. So, it's nothing new, to utilize a trust like the Castle Trust.
The government is aware of the planning and in fact, do not look unfavorably to the planning. The reason we can say that is that prior to 2005, Medicaid would look back 3 years to see if you moved money or set up a trust like a Castle Trust. If you have, they would penalize you with a divestment penalty.
In 2006, they changed that lookback period to 5 years, because so many estate planning lawyers and elder law attorneys were doing similar types of trusts. So, they are aware of these types of trusts. Second, they grandfathered in any prior planning. What that means, is that if we met and did a Castle Trust in 2005 with a 3 year lookback, then they changed it to 5 years in 2006, they allowed us to keep the 3 year lookback period. So, they did not penalize the people who would plan ahead and get their ducks in a row.
Why Utilize a Castle Trust
A Castle Trust is a trusted, proven, type of trust that provides probate avoidance, control of distribution upon death and asset protection during life.
Benefits of a Castle Trust:
- Long-term Care Protection
- Lawsuit Protection
- Probate Avoidance
- Asset Protection for the Next Generation
- Avoids Trustee Problems
Why Haven't I Heard of The Castle Trust
If you haven't heard of a Castle Trust, my bet is that you will soon. Clients are not concerned about estate taxes and people are living longer, which means that the devastating cost of long-term care is a high priority for many people.
You may be asking "why didn't my estate planning attorney" tell me about this type of trust or "my financial advisor or CPA haven't heard of this." These are common statements. I wish I had a better answer, but my response is that there are different levels of knowledge and different areas of expertise.
Black Belt Level of Knowledge
It is similar to martial arts, there are white belt, blue belt, purple belt, brown belt, and black belts. A black belt knows more and has a deeper level of knowledge than a white belt, blue belt, etc. In fact, the lower belts don't even know what they don't know.
As a Certified Elder Law Attorney (CELA), we are thought of as black belts when it comes to estate and elder law. We've proven to our peers and passed a 6 hour exam on estate planning and elder law. Any attorney can say they know a topic, but CELAs have proven it. Not all attorneys have the same level of knowledge and if you are dealing with a CELA, you can rest assured they have a deep level of knowledge in estate planning and elder law.
Do you want to learn more about The Castle Trust and whether it is a good fit for your family? Then attend one of our free, weekly, workshops.