Your estate plan should be geared toward accomplishing a number of inter-related goals. One of the most important of those goals is protecting your assets. While you may be aware of some threats to your assets, your assets may also be at risk in ways of which you are unaware. To help keep your assets safe, a Vero Beach asset protection attorney at Kulas Law Group discusses common threats to your assets and how to protect them.
Divorce
People often to think to protect against divorce in their estate plan; however, the threat from a divorce may be more serious than you realize. Even in states without community property laws, a divorce could seriously threaten your assets if you do not make a conscious effort to protect them. All states acknowledge separate property in some form, usually defined as assets owned prior to marriage or inherited during the marriage. What many people do not realize, however, is that co-mingling separate property can convert it to marital property. In addition, income derived from separate property is often considered marital property. Anything considered marital property is fair game for division during a divorce unless you took steps to protect it. That may mean entering into a pre-nuptial agreement prior to the marriage, or it could mean keeping separate assets in a trust so it is clear that they are not marital assets.
Federal Gift and Estate Taxes
The federal gift and estate tax is effectively a tax on the transfer of wealth that is collected from your estate during the probate of your estate. Every taxpayer is subject to federal gift and estate taxes at the rate of 40 percent, though many operate under the potentially mistaken belief that their estate assets are not significant enough to incur the tax. The tax applies to all qualifying gifts (almost all gifts are considered “qualifying” gifts) made during a taxpayer’s lifetime as well as all estate assets owned by the taxpayer at the time of death. People often count on being able to use the lifetime exemption to avoid owing gift and estate taxes. The problem with that is that you may not realize how much your estate is really worth, or more importantly, how much it will ultimately be worth at the time of your death. It is better to assume that your estate will be subject to the tax and plan accordingly than to mistakenly count on being exempt.
Long-Term Care Costs
The odds of you, or your spouse, needing long-term care (LTC) increase every year. If you do need LTC, the costs associated with that care could threaten your retirement nest egg. As a senior, you will likely depend on Medicare to cover most of your healthcare expenses; however, Medicare won’t pay for LTC as a rule. If you continue to carry private health insurance after you retire, you will likely find that your policy also excludes LTC expenses, unless you purchased a separate LTC insurance policy. At an average annual cost of over $100,000 in Florida as of 2019, and an average length of stay of close to three years, paying out of pocket means you could end up with a LTC bill that exceeds $300,000. For over half of all seniors currently in LTC, Medicaid is the answer. Qualifying for Medicaid, however, can threaten your retirement nest egg if you fail to plan ahead because you may be required to “spend-down” your non-exempt assets before Medicaid will approve you for participation in the program. Incorporating Medicaid planning into your estate plan now is the best way to plan for this possible threat to your assets.
Incapacity
Have you ever considered what might happen if you were seriously injured in a car accident tomorrow? If those injuries prevented you from managing your assets, who would do so for you? If you failed to plan for the possibility of your own incapacity, more than one person may want to take over for you, causing a bitter and divisive legal battle that might create a rift in the family for many years to come. Moreover, because you didn’t plan ahead, you have no control over who is appointed to control your assets. Instead, you can only hope that they do an adequate job. The way to ensure that your estate assets are controlled by someone of your choosing is to include an incapacity planning component in your estate plan.
Contact a Vero Beach Asset Protection Attorney
To learn more, please join us for an upcoming FREE seminar. If you have additional questions about protecting your assets, please contact an experienced Vero Beach asset protection attorney at Kulas Law Group by calling (772) 398-0720 to schedule a consultation.
