You have worked hard over the course of your lifetime to build up your assets. You have also invested those assets wisely and prudently in an effort to grow your fortune. Now you need to make sure the assets you have accumulated are not at risk. The Waukegan asset protection planning lawyers at Hedeker Law, Ltd. explain how your assets might be at risk and how to protect them from those risks.
Risks to Your Assets
Unfortunately, the average person is unaware of the numerous and varied ways in which his/her assets might be at risk. While some risks are well-known, others are hidden. Of the following common ways in which your assets might be at risk, how many have you thought of already?
- 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 a rate of 40 percent. 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.
- Long-term Care Costs — the odds that you, or your spouse, will need long-term care (LTC) increase every year. If you do need LTC, the costs associated with that care could threaten your retirement nest egg. As a senior, you will likely depend on Medicare to cover most of your healthcare expenses; however, Medicare won’t pay for LTC as a general rule. If you continue to carry private health insurance after you retire, you will likely find that your policy also excludes LTC expenses, unless you purchased a separate LTC insurance policy. At an average annual cost of almost $100,000 nationwide as of 2018, and an average length of stay of close to three years, paying out of pocket means you could end up with an LTC bill that approaches $300,000.
- Divorce — 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.
- 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 a court is left to appoint someone, that person could seriously deplete your assets in a short period of time if they do not have your best interests at heart and/or have no experience managing assets.
- Family and other beneficiaries — your own beneficiaries may be the biggest threat to your assets. Imagine leaving a lump sum to a loved one who proceeds to blow through the inheritance in record time without anything of value to show for it? Likewise, a beneficiary with an alcohol or drug problem, or who is suffering from mental illness, may also waste an inheritance. Similarly, 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… and potentially 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.
How Can You Protect Your Assets from These Risks?
The good news is that each one of the above-mentioned risks has a corresponding solution within your estate plan. For example, careful planning that includes making use of tools such as the yearly exclusion can dramatically reduce your taxable estate. Incorporating a Medicaid planning component in your estate plan ensures that you will qualify for Medicaid if you need it to help cover the high cost of LTC. Entering into a prenuptial agreement and/or putting valuable assets in a trust prior to marriage can negate the risk of divorce. An incapacity plan allows you to decide who will step in and take control of your assets should the need arise. Finally, using a trust to distribute your estate assets instead of relying entirely on your Will allows you to retain a certain degree of control over how those assets are used as well as keeps the assets out of the reach of an in-law in the event of a divorce.
Contact Waukegan Asset Protection Planning Lawyers
Please join us for an upcoming FREE estate planning seminar. If you have additional questions or concerns about protecting your assets within your estate plan, contact the experienced Waukegan asset protection lawyers at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.