If you already have an estate plan in place, or you are planning to create one in the near future, a primary motive for that plan is likely to protect and provide for loved ones after you are gone. To accomplish that goal, however, you must protect the assets you have while you are here. To ensure that you assets are safe, you must first recognize the myriad of ways in which they way be at risk. To get you started, the Westport estate planning attorneys at Nirenstein, Horowitz & Associates, P.C. discuss some of the most common threats to your assets.
- Gift and Estate Taxes – every estate is subject to federal gift and estate taxes. The tax can wreak havoc with your estate plan if you have a moderate to large estate and you fail to incorporate sufficient tax avoidance strategies into your estate plan. In addition, some states, including Connecticut, also impose a state gift and estate tax. Between the two, the assets that are ultimately passed down to loved ones could be significantly diminished if you don’t address the risk well ahead of time.
- Divorce – Most people realize that their own divorce puts their assets at risk. What you may not have thought about is how the divorce of a beneficiary could also threaten your assets. 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. The same applies if an adult child gets divorced. An inheritance you left for him/her could end up in the hands of a son or daughter-in-law after a divorce.
- Business failure – you may operate under the belief that by incorporating you are protected from personal liability for the debts and liabilities of a small business; however, it may still be possible to come after your personal assets by “piercing the corporate veil.”
- Spendthrift beneficiaries –a spendthrift could go through a sizeable inheritance in record time without anything of value to show for it. A beneficiary with an alcohol or drug problem, or who is suffering from mental illness, could also squander and inheritance if left to his/her own devices.
- Incapacity — if you were seriously injured, or fell seriously ill, tomorrow, what would happen to your assets? Who would take over control of your assets? In the wrong hands your assets could disappear during your incapacity.
- Nursing home/long-term care expenses – long-term care (LTC) expenses averaged around $100,000 per year across the United States in 2018. 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, your non-exempt assets are likely worth 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, effectively putting your entire retirement nest egg at risk.
Contact Westport Estate Planning Attorneys
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about how to protect your estate assets, contact the experienced Westport estate planning attorneys at Nirenstein, Horowitz & Associates, P.C. by calling (860) 548-1000 to schedule an appointment.
- Can I Leave an Inheritance With Strings Attached? - February 2, 2023
- Are These Items Missing From Your Estate Plan? - January 17, 2023
- Advance Property Liquidation Can Streamline the Estate Administration Process - January 3, 2023