The Pros and Cons of a Family Protection Trust

A Family Protection Trust (FPT) is a legal method allowing you to segregate your assets from taxation, cost of care fees, and other risks to your estate. Also known as an asset protection trust, inheritance tax protection trust, or home protection trust, a family protection trust protects family wealth from outside risks.  The beneficiaries of a family trust are most generally related such as children, grandchildren, or other loved ones.  The assets funding the trust may include family-owned businesses, homes, farms, life insurance, and “rainy day” savings.   as well as other family trusts.  

*This blog is for educational purposes only and should not be considered legal advice. The use of the Paths Law Firm website does not constitute a client-lawyer relationship.

In simple terms, a family protection trust can be thought of as a safety deposit box holding ownership of a family’s property and assets.  This includes things such as a family business, a home, life insurance, stocks, savings, bonds, other trusts, and any other assets you want to keep safe.  While the assets are in a family trust, they can be accessed if the trust is designed appropriately.  This allows assets to be added to the trust, assets in the trust can be sold, and the trustee can even borrow against assets in the trust.  Beneficiaries can even receive the assets anytime depending on the family’s desires.

safety deposit box

What is the Purpose of a Family Protection Trust?

A Family Trust is an inter vivos discretionary trust.  This means that the trust is established by an individual during their life and may be referred to as a living trust.  The trust is best for managing select assets to support the designated beneficiaries.  The primary purpose of a family protection trust is to protect the chosen assets and property placed in the trust.  The individuals named as the trustees hold the assets on behalf of the beneficiaries designated on the trust.  All assets, including money and property, placed in the trust are segregated from your estate and protected from many of the risks possibly affecting the estate.

Should Everyone Have a Family Protection Trust?

There are pros and cons of having a Family protection trust.  Whether or not having this type of trust is good for you and your family depends on the type of assets making up the estate and the family dynamics. 

The funds in an FPT are kept in an account separate from an individual’s name or estate.  Because of this separation, the trust may need to file a tax return.  The tax aspects of these trusts can be better explained by a tax professional.  Most attorneys who help draft these types of trusts should make it easy to understand the tax aspects.  The protections of the trust are only valid if the family follows the trust rules.  The assets in the trust should be spent last in order for the trust to provide the most benefit.  If the trust funds are not needed immediately, the trust can provide considerable protection.  Before setting up a Family Protection Trust it is important to get legal counsel to discuss the pros and cons as it relates to your specific situation. 

family protection trust

What Events or Factors Can Cause Loss to an Estate?

There are many factors impacting the assets of an individual’s estate causing a reduction in the money and property meant to be passed on to family members and loved ones including:

  • Taxes, specifically inheritance tax.
  • Cost of care for long-term-nursing home services.
  • Claims made against an estate by a family member left out of a will.
  • Disinheritance, whereupon death, your spouse remarries and passes your property to their new spouse and their family, excluding your children.
  • Costs Associated with Probate.
  • If assets are left to your children as a gift, the funds can be exposed to their divorce, lawsuits, or bankruptcy.

How Can I Protect My Estate to Reduce Risks?

Reducing the risks to your estate allows you to have more available later for care or to pass on more to your family.  Setting up a family protection trust can help mitigate risks.  This is a good option for individuals wanting to ensure their spouse can continue living in their family home, with the knowledge the estate will at some point, be passed to their children or other beneficiaries of choice.  There are many different types of trusts available to protect your assets however, the best trust depends on your estate.  For information on estate planning and asset protection options, contact Paths Elder Law to schedule a consultation.

risk mitigation

What Are the Pros and Cons of a Family Protection Trust?

Setting up a family trust is a difficult decision as there are many things to consider.  Part of the decision should weigh the pros and cons and how they will impact the goals for your estate. 

Pros of a Family Protection Trust

A family protection trust has many benefits to protect and manage assets and how those assets are inherited.  The following are some of the pros of setting up a family trust:

  • Ensures assets are kept in the family – When a child dies, the funds in a family protection trust will stay in the family for the benefit of grandchildren. This is an important consideration as it protects children in the event a surviving spouse decides to remarry.
  • Provides management of assets (protecting vulnerable family members) – A family trust can help to protect a vulnerable beneficiary who makes bad spending decisions or is at risk of another person encouraging them to make bad spending decisions.  Some individuals can manage finances better than others and a family protection trust can be used to ensure the assets left to them are well-managed for their benefit.
  • Bankruptcy protection – If a son or daughter has financial issues and needs to file bankruptcy, the family protection trust should be designed so assets titled in the trust are protected.  This is because the assets of the trust do not legally belong to the beneficiary.  They can be used for the beneficiary, but the terms of the trust and the discretion of the trustee places needed barriers in the way from being considered as owned by the beneficiary.  The funds are still available to them, but creditors are not able to make a claim against the trust.
double taxation protection
  • Divorce protection – For similar reasons as explained above, funds in a family protection trust are more protected in the event of divorce than funds in a beneficiary’s name. Whether or not the protection is absolute will depend on the state laws and how funds are used; however, funds in a family trust are more likely to be excluded in a divorce settlement.
  • Lawsuit protection – If the beneficiary of a family trust is sued, funds in the trust should be protected from judgments.
  • Medicaid benefits – Although a family protection trust is different from a special needs trust, it can be set up so funds in the trust are not required to be spent down in the event of disability and the need for Medicaid benefits. This can also apply when a child becomes elderly and needs Medicaid coverage for long-term care nursing home benefits.  This can even be used now for older parents.
  • Avoids double taxation – Funds in a family protection trust are not included in the taxable estate of a child. While this may not apply for most people in relation to the 2021 federal estate tax threshold, which is currently set at $11.7 million, the state in which you reside may have a lower threshold than the federal threshold.  This means many estates would be subject to additional taxation.
  • Flexibility to adjust for changes in the law – Modern trust deeds generally have limitations on rights of variations when it comes to dealing with changes in the law.
  • Confidentiality – Family trusts are confidential because they are not publicly registered.

Cons of a Family Protection Trust

Family protection trusts have many pros, and some cons should be considered.  The following are some of the cons of setting up a family protection trust:

  • Cost – The fees associated with preparing a plan including a family protection trust is usually more than a plan without one.  It’s not common and many attorneys try to avoid the need for a professional trustee, but if one is appointed, there are fees associated with using them.  If the family protection trust is being used for an older parent, hopefully, there are great individual choices available to use as the trustee.
  • Tax returns – Once a family protection trust is funded, the trust may need to file its tax returns. Typically, the trust does not pay taxes and the returns are for reporting purposes only.  Designed properly, the person with the lowest tax base will be recognizing the trust income on their tax returns.  The trust funds can be used to help pay any additional taxes.
  • Following the rules – While a professional trustee may be most familiar with a fiduciary’s duties, most individuals choose to name their children as the trustees of their trusts. This does save on the cost of a professional trustee.  With proper counsel and careful review of the trust, there is little risk a child may run afoul of their duties. 
filing tax returns

Be Aware of the Medicaid 5-Year Look Back Period

One of the benefits, as mentioned above, of a Family Protection Trust, is protection of assets in the event a beneficiary needs Medicaid for long-term care or nursing home expenses.  It is important to have an understanding of the rules associated with Medicaid’s 5-year look back period in regard to this type of trust.  Simply stated, Medicaid can look back 5 years in their financial analysis to make a determination of whether an individual qualifies for nursing-home Medicaid benefits

The law allowing a 5-year look back also required the transfer was for the purpose of qualifying for Medicaid.  If the trust is funded during a period with no or minimal diagnosis that should lead to the nursing home, a strong argument may be only because of an intervening event (such as a car accident) are they in the nursing home within the 5 years.  It is more certain the plan will work if you have the 5 years, but if not, all is not lost.

If we only consider the 5 years and not the exceptions, this means for the trust plan to work best, it should be set up and funded at least 5 years before Medicaid is needed.  After the 5-year period has passed, the assets in the trust are no longer countable assets.  In fact, if done correctly, Medicaid legally does not even know any of the transfers occurred. 

Should someone need nursing home care within the 5 years, this trust also provides a deadline for privately paying for long-term care costs.  It is important Medicaid is not requested within the 5 years as a penalty period will be assessed and the penalty period is not limited by the 5 years.  The length of time for the penalty period is based on the amount of assets transferred within the 5 years.

family protection rules

Final Thoughts

While the decision to create a Family Protection Trust is different for each person, this type of trust helps safeguard assets and protect legacies from unexpected circumstances that may occur in the future.  At Paths Elder Law we understand the importance of protecting your future and the future of your family for generations to come.  We have close to 30 years of experience setting up wills and trusts, asset protection, nursing home Medicaid,  VA and other benefits, probate, and guardianship.

We have been extremely successful in helping our clients protect their legacy and mitigating issues related to the cost of care, and more.  If you would like more information or resources on how we can help, contact Paths Elder Law.  Bringing you one step closer to the peace of mind you want and need.

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Community Relations

Jeane M. Fracassa

Community Relations

Jeane M. Fracassa

Jeane Fracassa – a dedicated and accomplished professional who retired with an impressive 38-year service record from the Kansas City Missouri Police Department. Throughout her illustrious career, Jeane served as a Civian Supervisor in the Communications Unit, where she played a pivotal role in ensuring efficient and effective communication within the department.

Even in retirement, Jeane’s commitment to community service remains unwavering. Currently, she serves in various capacities within Community Relations at Paths Law Firm. Actively engaged in the Lee’s Summit and Overland Park communities, she proudly represents the law firm.

In all aspects of her life, Jeane Fracassa exemplifies the values of community, compassion, and family. Her commitment to making a difference and her love for exploration make her a remarkable individual, whose presence brightens the lives of those she encounters. Whether at work, with family, or during her travels, Jeane’s genuine care for others and her zest for life make her a truly remarkable and inspiring person.

Administrative Assistant

Laura E. Messer

Administrative Assistant

Laura E. Messer

Laura is the Law Firm’s marketing assistant, supporting all marketing tasks, including managing calendars, researching upcoming events, updating marketing software and spreadsheets, and partnering with organizations to maintain relationships that benefit Paths Law Firm’s clients.  Laura is also the law firm’s professional photographer as she provides the professional photographs for the headshots, organizations, events, and networking.

Laura has over 10 years of experience as a professional photographer.  She is also Adobe and Microsoft Certified.  She graduated from Columbia College, Columbia, Missouri with her Bachelor of Arts degree, Magna Cum Laude, in Behavioral Psychology (minors in Social Work and Criminal Justice), and her Photographic Craftsman degree from Professional Photographers of America. She is certified as a Qualified Mental Health Professional, Certified Gentle Teacher, Medicaid Billing Certified, Crisis Intervention Counselor, and a Missouri Notary.

Laura has been married more than 26 years and has a daughter and a son. She has four brothers, a niece, and a nephew. Her four spoiled pets that love her attention. A lot of Laura’s off time is spent taking photos and she is an internationally published photographer. Laura owns a studio on the historic Independence Square. 

Administrative Assistant

Holly D. Bramble

Administrative Assistant

Holly D. Bramble

Holly is our newest member of the administrative team. She is hardworking, has proven organizational skills and excellent communication skills. Holly has transitioned to the Estate Planning field from healthcare administration where she gained valuable knowledge that has contributed to her success here at Paths.

Holly enjoys spending time with loved ones, cheering for the Chiefs, and relaxing on the beach.

Administrative Assistant

Tressa L. Purdy

Administrative Assistant

Tressa L. Purdy

Tressa has the important role of being a client’s initial point of contact as the law firm’s receptionist for all locations.  She also welcomes, assists, and cares for clients at the Lee’s Summit office. Additionally, she provides support in an administrative capacity for the attorneys, staff, and clients.  When you meet Tressa, the first quality many note is her readiness to be of assistance.

 

Tressa is a graduate of Park Hill High School with extensive administrative experience and executive level management. Tressa brings a stability and comfort to the law firm experience having worked in a variety of industries and having lived in six different major metropolitan cities.

 

Tressa has a daughter, two sons, and one grandchild.  In her free time, she enjoys her family and friends, loves being outdoors, gardening, bike riding and bird watching. Indoor hobbies include scrapbooking, painting cookies, and cheering on Chiefs football. She is a Kansas City native but enjoys traveling but is always happy to be back in her hometown.  

Attorney

Kathleen E. Overton

Attorney

Kathleen E. Overton

Kathleen Overton is an attorney and owner at Paths Law Firm. She has more than 17 years of experience advocating for those with special needs and navigating the state and federal agencies formed to help the disabled and elderly. At Paths Law Firm, Kathleen’s practice focuses on helping the elderly qualify for nursing home Medicaid, creating estate plans to protect beneficiaries, as well as a lot of time planning and forming businesses. Kathleen also enjoys helping clients form non-profit organizations and obtain 501(c)(3) tax exempt status.

 

After attending law school at the University of Oklahoma, Kathleen began representing clients before the Social Security Administration. Eventually her practice switched to federal court appeals and Kathleen spent years representing clients before the Eastern and Western District of Missouri, the District of Kansas, and the Eighth Circuit Court of Appeals. Kathleen has since focused her practice on estate planning and elder law after watching clients struggle to find ways to financially care for loved ones with special needs or aging parents.

 

Kathleen lives in the Northland with her husband and four children. She spends her free time attending soccer matches and ballet performances with her children and starting endless home improvement projects with her husband. 

Medicaid paralegal

Tena K. Dooley

Medicaid Paralegal

Tena K. Dooley

Tena is a Medicaid Paralegal.  She is very meticulous and organized.  She works closely with the attorneys, clients, and State representatives. 

Tena has an associate in applied science and has over 20 years of office management experience. She has two daughters and one grandson.

Tena enjoys spending time with her family.  She enjoys everything outdoors and her hobbies include fishing and gardening.

PARALEGAL & ACCOUNTANT

Sydney R. Morris

PARALEGAL & ACCOUNTANT

Sydney R. Morris

Sydney is the law firm’s internal accountant and one of their experienced paralegals having been with Paths Law Firm since 2017. She is a primary point of contact for estate planning and business planning.

Sydney graduated with honors from the University of Missouri Kansas City in 2022 with her Bachelor of Science Degree in Accounting. She is a Bloch Launchpad, Phi Theta Kappa, and National Honor Society alumni.

In her free time, Sydney enjoys spending time with her husband, reading, baking and going on long walks. 

SENIOR ADMINISTRATIVE ASSISTANT

Christy L. Phillips

SENIOR ADMINISTRATIVE ASSISTANT

Christy L. Phillips

Christy has three years of experience in elder law working for seniors and their families. She is currently the Senior Administrative Assistant and organizes the day to day functions of the office and makes sure everything runs smoothly. When asked why she loved what she does, Christy said at Paths Law Firm, she gets the opportunity to help clients in more ways than one. Her favorite parts of the job are getting to know the clients and helping them get their questions answered. 

Christy’s experience in the finance industry has been extremely beneficial to her role as the Senior Administrative Assistant. Christy has a special place in her heart for the elderly and attributes this to the relationship she had with her grandparents. 

Christy was raised in Ogden, Utah and moved to Independence, MO, when she was ten years old. She has been with her high school sweetheart for 25 years and they have two beautiful children together. Her daughter works in the medical industry, and her son currently attends High School and plays Baseball. When Christy is not working, she enjoys crafting and spending time with her family and friends.

Christy’s experience in the finance industry has been extremely beneficial to her role as Benefits Coordinator. There have been many influences that went into her decision to select the field of Elder Law. Christy has a special place in her heart for the elderly and attributes this to her relationship with her grandparents.

When asked why she loves what she does, Christy said that at Paths Elder law, she gets the opportunity to help clients in more ways than one. Her favorite part of her job is getting clients approved for Medicaid or VA benefits as it is a huge relief for them and their loved ones.

Christy was raised in Ogden, Utah, and moved to Independence, MO, when she was ten years old. She has two children that keep her busy and fill her life with joy! Christy’s daughter cheers for Avila University, and her son plays competitive baseball for the Bucks and races BMX locally for the Motorcycle Closeout Team.

When Christy is not working, she enjoys crafting and making homemade gifts for her loved ones and raising her kids to be healthy, happy, and positive humans.

 

Practice Areas

  • Medicaid Benefits
  • VA Benefits

 

Professionalc Memberships and Affiliations

  • Missouri Notary

FINANCIAL MANAGER

René A. Fracassa

Rene A. Fracassa, Paths Law

FINANCIAL MANAGER

René A. Fracassa

René is the Financial Manager at Paths Law Firm overseeing all aspects of revenue, expenses, and financial planning. She is also responsible for general office management, including assisting in many of the administrative matters that periodically arise. 

 

René earned her Bachelor of Science in Hotel and Restaurant Management from Central Missouri State University in Warrensburg, Missouri and soon thereafter worked her way through management at The American Restaurant where she worked almost 17 years before relocating to the country of China.

 

René is the Financial Manager at Paths Law Firm overseeing all aspects of revenue, expenses, and financial planning. She is also responsible for general office management, including assisting in many of the administrative matters that periodically arise. 

 

René earned her Bachelor of Science in Hotel and Restaurant Management from Central Missouri State University in Warrensburg, Missouri and soon thereafter worked her way through management at The American Restaurant where she worked almost 17 years before relocating to the country of China.

 

René is the Financial Manager at Paths Law Firm overseeing all aspects of revenue, expenses, and financial planning. She is also responsible for general office management, including assisting in many of the administrative matters that periodically arise. 

 

René earned her Bachelor of Science in Hotel and Restaurant Management from Central Missouri State University in Warrensburg, Missouri and soon thereafter worked her way through management at The American Restaurant where she worked almost 17 years before relocating to the country of China.

 

René is the Financial Manager at Paths Law Firm overseeing all aspects of revenue, expenses, and financial planning. She is also responsible for general office management, including assisting in many of the administrative matters that periodically arise. 

 

René earned her Bachelor of Science in Hotel and Restaurant Management from Central Missouri State University in Warrensburg, Missouri and soon thereafter worked her way through management at The American Restaurant where she worked almost 17 years before relocating to the country of China.

 

In her spare time, René is currently quite active managing multiple generations of her family, including parents and grandkids.  René has had great impact on the lives of many women teaching discipling and teaching and abundance of Bible Studies. Her former career in management and event planning trained her well to juggle all the activity.

MARKETING MANAGER

Hilary R. Tichota

MARKETING MANAGER

Hilary R. Tichota

Hilary plays a vital role in managing the Marketing Department at Paths Law Firm.  She is excellent at bringing new ideas and sharing valuable resources with the law firm and our community. Hilary has been with the law firm since the beginning, working in nearly every role which is invaluable in her marketing endeavors as she brings a unique set of skills into the Marketing Department.

Hilary is nearly complete in her Bachelor’s of Arts Degree in Marketing at Park University.  She has earned the honor of being listed in National Honors Society, Phi Theta Kappa, and the Dean’s List. Hilary is always looking for new and innovative ways to share the law firm’s message.

While not working, Hilary spends her time with her family at their rural home. They tend to their chickens and honeybees and enjoy the solitude of country living.

SR. PARALEGAL & OPERATIONS MANAGER

Jennifer A. Bronson

SR. PARALEGAL & OPERATIONS MANAGER

Jennifer

Jennifer is the Sr. Paralegal and Operations Manager at Paths Law Firm.  She oversees the firm’s probate department as well developing, implementing, and managing all the firm’s administrative processes having been with the law firm almost from the beginning.  She enjoys client contact as well as behind-the-scenes operations.

 

Jennifer began her legal career in 1990 as a legal secretary.  She has worked in small and medium sized firms, as well as court operations.  She has her Paralegal Certificate from Boston University, Law Office Management Certificate from University of Central Missouri, and she is a Master Financial Coach. 

 

Jennifer has two daughters, twin sons, and twin grandsons.  She spends as much time as she can with them.  She enjoys reading, listening to podcasts, and tending her yard. 

ATTORNEY

Russell A. Fracassa (Rusty)

ATTORNEY

Russell A. Fracassa (Rusty)

When asked what he wants to do, his reply was “I just want to sit at the kitchen table and work directly with people.” Rusty enjoys working with clients providing experienced advocacy and supporting them through their unfamiliar and overwhelming situations. Due to all the challenges faced by seniors, it is essential to work with an experienced elder law attorney who has expertise in the law, issues, and concerns affecting seniors and their families.

Rusty brings more than 30 years legal experience and expertise working for seniors and their families as an elder law attorney in Kansas City and surrounding. Prior to law school, Rusty was an accountant and his first couple years practicing law was as a tax attorney. This provides invaluable experience in his current practice of law. Rusty’s focus is helping protect seniors’ assets from taxes and long-term care costs, benefit qualification, and navigating more complex family scenarios in their estate planning.

Rusty has personally experienced the loss every parent fears, caring for a spouse suffering with cancer and the treatment, and working with aging parents through all stages of their lives.  He intimately understands the challenges faced by individuals and their caretakers when capacity or health declines, how to prepare for it, and the legal matters while in the midst of it.  He may not be able to eliminate his client’s grief, but he strives to provide clients with peace of mind.

In 2010, Rusty’s faith and love led him and part of his family to China as Christian missionaries. He and his wife, went permanently, but ended up dedicating 3 years to that ministry. They returned to Missouri to help with grandchildren after a family tragedy and later began anew with Paths Elder Law. The goal is providing compassionate care through legal advocacy.

Rusty has multiple degrees and advanced study spanning his Bachelor’s of Arts in Business Administration – Accounting at Rockhurst College (now Rockhurst University), Masters of Arts in Accounting and in Intercultural Studies, as well as his Juris Doctorate from the University of Missouri at Kansas City School of Law.

When Rusty is not practicing law, he enjoys spending time with his family, grandchildren, and excessive eating at local restaurants.

Practice Areas

  • Wills and Trusts
  • Estate Planning
  • Asset Protection
  • Medicaid Benefits
  • VA Benefits
  • Probate
  • Guardianship and Conservatorships
  • Education

 

BSBA and Master’s in Accounting, Master’s in Inter-Cultural Studies, and Doctorate in Juris Prudence

  • Rockhurst University
  • Liberty University
  • University of Missouri – Kansas City


Admissions to Practice

  • Missouri


Professional Memberships and Affiliations

  • State Bar of Missouri
  • National Academy of Elder Law Attorneys (long-time Member)
  • Elder Counsel (Charter and Ongoing Member)
  • Missouri Association of Trial Attorneys (Past Member)
  • Kansas City Metropolitan Bar Association
  • Missouri State Bar Committees – Elder Law, Estate Planning, Probate