123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Investing---Finance >> View Article

Asset Protection Trust In Veterans Benefits Planning

Profile Picture
By Author: Dale Krause
Total Articles: 15
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

An Asset Protection Trust ("APT") is an Intentionally Defective Grantor Trust. An Intentionally Defective Grantor Trust is a trust that treats the assets in the trust differently for income tax purposes than for estate tax and gift tax purposes. The veteran will be the grantor, but not a beneficiary. The trust utilizes Internal Revenue Code § 671-677 which afford differential tax treatment for income tax purposes.

For most veterans their major asset is their residence. As long as the veteran retains the home it is not part of his or her net worth for Veterans Administration ("VA") eligibility purposes; it is a "non-countable resource." However, if the veteran qualifies for the monthly pension benefit and later sells the home the proceeds will disqualify the veteran from receiving any further Veterans pension benefits - until the veteran spends down to an allowable asset level.

However, if the residence was placed in the trust prior to the VA application and later sold by the trustee the sale proceeds would not jeopardize the veteran's pension benefits. Additionally, if the veteran needs Medicaid benefits ...
... more than five years following the date the trust was established and funded (the later of the two events) the trust corpus will not be part of the veteran's Medicaid application.

The veteran will be the grantor of the trust and the veteran's children will be the beneficiaries. The trust agreement provides rights and duties of the trustee so that the trustee can make discretionary distributions to the beneficiaries. Also, it is recommended that the trust agreement provide for a trust protector who has an absolute power to remove and replace the trustee who is not acting in the best interest of the trust's purpose. By establishing the trust the veteran can have more control over how the assets in the trust are going to be distributed and used, although the veteran has no legal right to the trust's corpus.

Some advantages of Intentionally Defective Grantor Trusts include:
The trust can hold and sell a veteran's residence and keep the proceeds. The proceeds will not disqualify the veteran for pension benefits or Medicaid during the lifetime of the veteran;
The proceeds from the sale of the residence will not be subject to estate recovery by Medicaid;
The trustee can sell the residence with the grantor still being able to take advantage of Internal Revenue Code § 121 - capital gain exemption up to $250,000;
At the death of the grantor, the trust assets will receive a stepped-up basis for income tax purposes; and
It will keep the assets out of the hands of irresponsible children.

Total Views: 246Word Count: 461See All articles From Author

Add Comment

Investing / Finance Articles

1. Innovative Accounting Solutions For Modern Businesses
Author: Business Tax & Money House

2. Can Someone With Bad Credit Still Get A Short Term Loan Online?
Author: Jockey Ferguson is a financial adviser of Fast Pay

3. How To Manage Cash Flow For Online Retailers
Author: Thomas Edward

4. A Detailed Guide Set Up A Company In Ireland
Author: LSC and Partners - Corporate Tax Consultancy LSC

5. Rupay Credit Cards: Your Ticket To Exclusive Rewards And Benefits
Author: Priya

6. Top Upcoming Telegram Airdrops You Don’t Want To Miss!
Author: Cryptoreach

7. The Art Of Diversification - Building A Robust Portfolio For Long-term Stock Market Performance
Author: Broker Analysis

8. 10 Effective Strategies To Boost Real Estate Lead Generation In 2024
Author: Horizon Consultants

9. How To Choose The Best Financial Advisors In Indianapolis For Your Future
Author: Kurt Supe

10. What Are The Requirements For Applying For A Personal Loan?
Author: divya negi

11. Investment Banking Companies In Hyderabad: Your Guide To Financial Excellence
Author: Verity knowladge solutions

12. No Credit Check Payday Loans
Author: Daniel

13. A Complete Guide On All Cfo Services
Author: Vibhay Ranjan

14. Navigating Success: The Role Of Venture Capital Deal Flow Management Software
Author: Fundwave

15. Streamlining Investment Strategies: The Rise Of Fund Management Software
Author: Fundwave

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: