Are You Protecting Your Assets from All Threats?
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. 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 that, you must be aware of the numerous potential threats to those assets. Some of those threats are obvious while others are not. The Coral Gables estate planning attorneys at Stivers Law want to help you in protecting your assets and identifying any potential threats now so they do not cause problems later.
Protecting Your Assets: Identifying Potential Threats
- 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.
- Divorce. This one is something people often to think to protect against in their estate plan. 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.
- In-Laws. This is a threat that most people don’t even recognize as a threat. The damage your daughter or son-in-law could do to the value of your estate, however, is potentially devastating. When you make an outright gift to an adult child, whether as a lifetime gift or a bequest in your Last Will and Testament, the assets gifted become the property of your child which may also include his/her spouse once the gift is made. Those assets are then subject to division in a later divorce or to being squandered by a spendthrift spouse.
- Incapacity. 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 are married, your spouse would be the likely choice; however, even your spouse may not have the legal authority necessary to step in and take over control of your assets and finances unless you planned and made sure that he/she has the proper authority. If you are not married, a close family member might be willing to take over in your absence but would not have the legal authority to do so. Moreover, if more than one person wants to take over for you, a divisive legal battle could ensue.
- Nursing home/long-term care expenses. Nursing home/LTC expenses averaged over $100,000 per year across the United States in 2021. Although Medicaid will help cover your LTC costs, you must first qualify. Medicaid uses both income and “countable resources” (asset) limits when determining eligibility. The asset limit is low, typically no more than $2,000-$3,000. Some assets, such as a home, are exempt from your countable resources; however, after spending a lifetime building up your assets, your non-exempt assets can easily exceed the limit. If they exceed the limit, your application will be denied and you will be expected to “spend-down” your resources before applying again, putting your assets at risk.
Contact Coral Gables Estate Planning Attorneys
For more information on how we help demystify protecting your assets, please join us for an upcoming FREE webinar. If you have additional questions or concerns about how to protect your assets in your estate plan, contact the experienced Coral Gables estate planning attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.