You may think of your estate plan in terms of your ability to direct the distribution of your assets after you are gone; however, a well drafted comprehensive estate plan can achieve more than that. In fact, your estate plan can – and should – help protect and grow your assets while you are alive to maximize the value of the estate you leave behind. To explain, the estate planning attorneys at Legacy Care Law Firm discuss how estate planning can help you protect your assets.
Why Do I Need to Worry about Protecting My Assets?
Whether you are just saving money for your retirement years or hoping to pass down a sizeable inheritance to future generations, you probably started saving money and amassing assets early in your working life. It is not enough, however, to focus on increasing the value of your asset portfolio. You need to actively work to protect your assets as well. Consider just a few of the ways in which your assets could be at risk:
- Incapacity. Incapacity can strike anyone at any age. If you experience a serious illness or are involved in a tragic accident, you may not be capable of controlling your assets for a significant period of time. To protect those assets, you need to have a plan in place that ensures someone of your choosing takes control.
- Marriage. You likely already realize that divorce could put your assets at risk; however, that is not the only threat that marriage poses. You could be held liable for your spouse’s debts and jointly held property could even be at risk. You may also inadvertently turn separate property into marital property by c-mingling assets. Another potential threat comes from the marriage of an adult child. Your hard-earned assets could be lost to a daughter or son-in-law for the very same reasons.
- Business losses. If you own a small business, debts of the business or an economic downturn can threaten your personal assets. In addition, the business could fail to make the transition to the next generation after your death without proper planning.
- Long-term care expenses. We all stand about a 70 percent chance of needing some type of LTC by the time we reach retirement age. With the average cost of that care running close to $150,000 in Massachusetts and New Hampshire, LTC could easily wipe out your retirement savings if you are forced to pay for it yourself – and Medicare will not help.
- Gift and estate taxes. State and/or federal gift and estate taxes can dramatically diminish the value of the estate you pass down to loved ones if you fail to plan. At the rate of 40 percent, federal gift and estate taxes alone could cause almost half of your estate to be lost to Uncle Sam.
- Your beneficiaries. Problematic beneficiaries can pose a real threat to your assets. Whether because of addiction, mental illness, or just poor money management skills, the assets you pass down to a beneficiary can disappear overnight with nothing left to show for it.
Estate Planning Tools and Strategies That Help Protect Your Assets
The good news is that there are numerous estate planning tools and strategies that can help you protect your assets so that you can enjoy your retirement years and hopefully have something left to pass down to loved ones after you are gone. Because the tools and strategies you employ should be directed at the specific threats you face, it is always best to work with an experienced estate planning attorney when deciding how best to protect your assets in your estate plan. Some commonly used tools and strategies, however, include:
- Spousal strategies. To protect your assets from loss because of your marriage or that of a beneficiary you may decide to use a pre-marital agreement. Choosing the right type of joint ownership and keeping separate assets in a trust agreement can also help protect against this threat.
- Asset protection and/or spendthrift trust. Assets held in an irrevocable living trust are generally out of the reach of your own creditors and other third parties. Including a spendthrift provision within a trust can also protect assets from debts and creditors of the trust beneficiary.
- Business succession planning. Incorporating a business succession planning component into your overall estate plan lets you plan for the possibility of your own incapacity, retirement, or death. Not only can you choose and prepare your successor, but you can also set the business up to successfully transition to new ownership.
- Medicaid planning. Medicaid will cover LTC expenses; however, you must meet the program eligibility requirements. To make sure that your assets do not create an obstacle to eligibility, and to protect those assets from the spend-down requirements, include a Medicaid planning component in your estate plan now.
- Tax avoidance strategies. To avoid losing a significant percentage of your estate to taxes, you need to incorporate tax avoidance tools and strategies into your estate plan as early as possible. For example, using the yearly exclusion allows you to transfer up to $17,000 worth of assets to an unlimited number of beneficiaries tax-free every year.
Are You Ready to Learn More?
For more information, please join us for an upcoming FREE seminar. If you want to learn more about how estate planning can help protect your assets, contact our estate planning attorneys in our North Andover, Woburn, and Beverly offices at (978) 969-0331. Our Salem and Nashua, New Hampshire office can be reached at (603) 894-4141.
- How Do I Make Changes to My Last Will and Testament? - September 21, 2023
- Building a Legacy: The Importance of Estate Planning for Parents - September 14, 2023
- Gifting to Grandchildren - September 12, 2023