Three Tips For Using A Trust To Protect Assets In Massachusetts

Asset protection is one of the most important aspects of comprehensive estate planning. It is too often overlooked. Asset protection requires deliberate planning under Massachusetts law. A properly structured trust can shield assets from certain creditors, preserve wealth for beneficiaries, and reduce exposure in high-risk professions. At Fisher Law LLC, we have extensive experience with trusts. Within this article, our Boston estate planning attorney provides three tips for using a trust to protect your assets in Massachusetts.

Tip #1: Understand the Limits of Revocable Trusts 

A revocable living trust does not protect your assets from your own creditors. Under M.G.L. c. 203E, § 505(a)(1), the property of a revocable trust remains subject to the claims of the settlor’s creditors during the settlor’s lifetime. If you retain the power to revoke or amend the trust, the law treats the assets as effectively yours. Revocable trusts serve probate avoidance and incapacity planning purposes. They do not function as asset protection devices. A creditor who obtains a judgment can reach trust property to the same extent the creditor could reach property held in your individual name. If your objective involves shielding assets from future liability, a revocable trust is generally not the right option. You need to consider an irrevocable trust. 

Tip #2: Use Irrevocable Trusts With Carefully Drafted Spendthrift Provisions 

An irrevocable trust can offer meaningful asset protection if drafted and funded properly. Once you transfer assets into an irrevocable trust and relinquish control, those assets generally cease to be your property for creditor purposes. Under Massachusetts law, spendthrift trusts are recognized as valid when certain criteria are met. Notably, a spendthrift clause restricts a beneficiary’s ability to transfer his or her interest and limits creditor access before distribution. This protection applies primarily to beneficiary interests, not to a settlor who retains beneficial rights. 

Tip #3: Coordinate Trust Planning With Medicaid and Long-Term Care Strategy 

Asset protection in Massachusetts frequently intersects with long-term care planning. Nursing home costs can exceed six figures annually. Medicaid eligibility rules impose strict asset limits. An irrevocable Medicaid Asset Protection Trust can preserve a primary residence and other qualifying assets if structured and funded well in advance. Here is a key legal point to be aware of:

• MassHealth enforces a five-year look-back period. Transfers into an irrevocable trust within five years of a Medicaid application may trigger a penalty period of ineligibility. Proper timing and drafting are essential.

The trust must limit the settlor’s access to principal. Retention of unrestricted access may cause the assets to remain countable for eligibility purposes. Income provisions require careful attention to avoid unintended tax and qualification consequences. Trust administration also matters. Trustees must observe fiduciary duties under Massachusetts law. 

Call Our Boston Trust Planning Attorney Today

At Fisher Law LLC, our Boston estate planning lawyer is a leader in asset protection. If you have any questions about using a trust to protect assets, we are here to help. Please do not hesitate to contact us today for a completely confidential initial consultation. Our firm provides asset protection services throughout the Greater Boston area.