Hopefully, you are aware of the need to have a comprehensive estate plan in place. That plan, however, should accomplish more than just directing the distribution of your estate assets after you are gone. In order for you to have any assets left to distribute, for example, you must protect the assets you acquire over the course of your lifetime. To do this, you may benefit from the assistance of an asset protection lawyer. An asset protection lawyer will help you recognize any potential threats to your assets and assist you in devising strategies to address the threat.
Potential Threats to Your Assets
- Nursing home/long-term care expenses – Nursing home/LTC expenses average over $80,000 per year across the United States. Although Medicaid will help cover your LTC costs, you must first qualify. Because Medicaid is a needs-based federal program, the program uses both income and asset limits when determining eligibility. The asset limit is very low as a general rule. An individual cannot have “countable resources” valued at over $2,000 or their application will be denied. Some assets, such as a home, are exempt from your countable resources; however, after spending a lifetime building up your assets, you likely have considerable assets totaling more than $2,000. If that is the case, when you apply your application will be denied and you will be expected to “spend-down” your resources before applying again. It is this requirement that potentially puts your assets at risk. The key to protecting assets when you suddenly need to qualify for Medicaid is to include Medicaid planning in your estate plan now.
- Your divorce–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 before the marriage. To prevent the loss of assets as a result of a divorce, a pre-marital agreement is an option.
- Re-marriage of your spouse — many couples create reciprocal estate plans, meaning that both individual plans call for all assets to be gifted to the surviving spouse upon death. If you have children, the agreement is that the surviving spouse will then pass down those assets to your children upon his/her death. A reciprocal estate planning approach makes sense, as long as both parties stick to the agreement. What happens though, if your spouse ends up remarrying after your death? Remember, if your assets all passed to your spouse at the time of your death, that means that when your spouse remarries he/she brings your combined assets into that new marriage. The new spouse now has a potential claim to those assets in the event of a divorce. Moreover, the new spouse also becomes a legal heir to your spouse’s estate once the marriage takes place. If those assets were intended to be passed down to your children upon the death of the surviving spouse, the new marriage could threaten that plan in several ways. Careful estate planning can prevent this from happening.
- Gift and estate taxes-– the federal gift and estate tax is essentially a tax on the transfer of wealth that is collected upon the death of a taxpayer. The tax applies to both gifts made during a taxpayer’s lifetime and to assets gifted to a beneficiary at the time of the taxpayer’s death. Historically, the federal gift and estate tax rate fluctuated on a regular basis; however, the American Taxpayer Relief Act of 2012 (ATRA) permanently set the rate at 40 percent. This means that if you have a moderate to the large estate, and you do nothing to limit the impact of federal gift and estate taxes on your estate, your estate could lose almost half of its value when you die because of estate taxes. Including tax avoidance strategies in your estate plan is the best way to avoid the loss of estate assets to Uncle Sam.
Contact an Asset Protection Lawyer
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding asset protection, contact an experienced Florida asset protection lawyer at Kulas Law Group by calling (772) 398-0720 to schedule an appointment.