When you plan your estate, you should certainly be aware of the looming threats that can reduce the inheritances that you will be able to leave to your children. With this in mind, we will look at some of the sources of estate erosion in this post.
Elder Financial Abuse
As reprehensible as it is, a very significant percentage of elders are victimized by financial abuse. A study that was conducted by MetLife Mature Market Institute in 2008 found that at least $2.6 billion is lost every year through instances of elder financial abuse.
A subsequent study that was conducted a few years later upped the figure to an incredible $36.5 billion annually. That is certainly bad enough, but researchers have found that only a fraction of the cases are actually reported to the authorities.
In a lot of instances, the abuse goes unreported because the victim is trying to protect a family member or caregiver that is the culprit. Of course, seniors are also victimized by identity thieves, scam artists, and fraudsters.
Fortunately, there are things you can do from a legal perspective to mitigate your exposure to elder financial abuse.
Financially successful people have to be concerned about possible exposure to federal and/or state-level estate taxes. The federal estate tax packs a heavy punch with a 40 percent maximum rate, but it is only applicable on transfers that exceed $11.58 million.
This dollar figure is called the exclusion, and it is updated annually to account for inflation, so you will see a higher number next year. It should also be noted that the entire structure can be changed via legislative mandate.
Here in Connecticut, we have a state-level estate tax to contend with as well. The Connecticut state exclusion is $5.1 million, and the rate is a graduated rate that goes from 7.2 percent to 12 percent.
If you are exposed to either or both of these taxes, there are estate tax efficiency strategies that can be implemented to control the damage.
Nursing Home Bills
Most seniors will need living assistance at some point in time, and over one third of them will reside in nursing homes. Nursing facilities and assisted living communities are very expensive, and Medicare does not cover custodial care.
We are talking about more than $100,000 a year in our area, and the expenses can be doubled for married couples. Medicaid will pay for this type of care, but you cannot qualify unless you can demonstrate a significant level of financial need.
You can essentially give your loved ones their inheritances in advance in an effort to qualify for Medicaid, but you have to complete the gift giving at least five years before you apply. An irrevocable income-only Medicaid trust can be the ideal solution.
Lawsuits and Creditor Claims
They say that we live in a litigious society, and a lawsuit settlement or judgment can certainly take a bite out of your legacy. Asset protection should be a source of concern for small business owners and people that are in high-risk professions. There are various different ways to proceed, and the optimal course of action will depend upon the circumstances.
Schedule a Consultation Today!
As you can see, action is required to preserve your legacy for the benefit of your loved ones. We can gain an understanding of your situation, explain your options, and help you put a plan in place when you make your decisions.
If you are ready to set up a consultation appointment, we can be reached by phone at 860-548-1000. There is also a contact form on this website you can use to send us a message.