Few start out planning for the worst case scenario. However, retirement is not always smooth as one would hope.
Plans for the future are usually based on expected needs. As the reality of these needs change, logic dictates that estate plans should change as well — especially when that modification could prevent financial hardship.
In broad terms, asset preservation is a set of practices with the goal to reduce unnecessary financial burden on an estate, including — but not limited to — drains by creditor claims. Example practices might include limiting income to avoid a higher tax bracket or establishing a trust to ensure resources are available for specific needs.
Some techniques are simpler than others. As explained by the Department of Labor, a qualifying retirement plan would typically provide a haven from debts, even during bankruptcy. Prudent use of these relatively safe accounts is usually essential to long-term strategy.
Asset preservation often serves to enable access to long-term health care programs. The staggering costs of nursing care have emptied the accounts of many retired people; medical bills are among the largest debts people hold later in life. US News reports that the average cost of a nursing home is nearly $9,000 per month. Although it may seem easier at first to pay out of pocket for these types of expenses, there is usually a better way.
Traditional estate planning and asset preservation strategies are sometimes at odds — what is a good idea for one could be detrimental to the other. Income calculations, taxes, state laws and ownership structures all influence which planning elements are best for the specific goal in mind.
There are various techniques one might use while preserving assets. Trusts, benefits programs or other strategies: It all depends on the needs of the people involved.