What is a Castle Trust? Is a Castle Trust Safe to Invest In?

“What is a Castle Trust and is a Castle Trust Safe to Invest in?” are common questions people ask at many of our estate planning workshops. Hopefully, this blog posts clears up some of the confusion around the Castle Trust–which is a form of modern asset protection trust that protect against long-term care costs and lawsuits.  While many lawyers and financial planners are not aware of it, the principals it is based on have been around for decades.

What is a Castle Trust?

A Castle Trust is an asset protection trust that relies on principles that are decades old, to protect families from the devastating cost of long-term care and nursing home care. One of the main purposes of the Castle Trust is to shield families concerned about long-term care costs from nursing home or Medicaid spend-down.

If assets are placed into a Castle Trust and the family makes it five years before they need nursing home care, then everything inside of the Castle Trust is protected and never needs to be spent-down on long-term care costs in a nursing home.

The Castle Trust is an asset protection trust that is a form of irrevocable trust that allows for changes to beneficiaries and changes to the trustees. So, it is a irrevocable trust that allows for flexibility. The trust is very different than the old, irrevocable trusts used for estate tax planning where you had to give up control. Many professionals including attorneys and financial advisors are so used to the old form of irrevocable trust, that they assume “irrevocable” means, you cannot make changes. That is not at all the case.

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Is a Castle Trust Safe to Invest In?

The Castle Trust is very safe and secure to invest in. In fact, security is the number one factor individuals invest in a Castle Trust because assets held inside of the Castle Trust (bonds, mutual funds, checking accounts, life insurance, real estate, etc) are shielded from long-term care costs and lawsuits. Safety is one of the number one reasons why clients like the Castle Trust.

Some people are concerned that the Castle Asset Protection Trust sounds too good to be true, or is some type of untested, new form of planning. This could not be farther from the truth.

The Castle Trust is based on decades of history. For example, all we have to do is look back to 2006 to see that prior to 2006, Medicaid had a 3 year look back period. In 2006, because so many attorneys were using irrevocable trusts, similar to the Castle Asset Protection Trust, they changed the look back period to 5 years.

That tells us the government is aware of this type of planning. But taking it a step further, they do not look unfavorably to people who plan ahead and set up asset protection trusts, because when they made that change, they grandfathered in all prior planning.

In other words, if we had set up a Castle Asset Protection Trust in 2005, then the government changed the law in 2006, they would have allowed us to keep the previous 3 year look back period for Medicaid.

So, yes, the Castle Trust is safe to invest in. It’s created to build in safety for your assets and it’s been tested in court and for Medicaid purposes.

Learn More About Castle Trusts, Estate Planning, Retirement Planning and Elder Law

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To take the next step and learn if a Castle Trust, or any of our other estate planning tools are a good fit for your family, we invite you to attend one of our weekly estate planning workshops to become more educated than many financial planners and lawyers on estate planning, elder law, long-term care planning, Medicaid and VA Benefits.

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