If you are entering your “Golden Years” you have probably spent several daces of your life working hard, saving, and investing wisely in order to accumulate sufficient assets to live comfortably during your retirement years. If all goes well, you may even have assets left over to pass down to future generations. While you may finally be able to kick back and stop worrying about making money, do not make the mistake of thinking you no longer have to worry about protecting the money you already made. Asset protection planning should always be a component of a comprehensive estate plan, including your “Golden Years” estate plan.
Is Asset Protection Planning Different for Seniors?
Asset protection should be a consideration in every estate plan, without regard to your age or the size of your estate. Whether you have already amassed a fortune or you are just starting out, you undoubtedly want to protect the assets you do have at any given point in your life. Seniors face some of the same potential threats to their assets as their younger counterparts; however, as you near your retirement years there are unique threats to your assets that you will need to focus on, requiring a review and likely update to your estate plan. As a senior, assets protection planning considerations include:
- 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 after you die. Every estate is potentially subject to federal gift and estate taxes. The tax applies to all qualifying gifts made during a taxpayer’s lifetime as well as all estate assets owned by the taxpayer at the time of death. By way of illustration, assume that you made gifts during your lifetime totaling $6 million in value. At the time of your death, you owned assets valued at $14 million. The combined total of $20 million would be subject to federal gift and estate taxes. Although the federal gift and estate tax rate fluctuated historically, the American Taxpayer Relief Act of 2012 (ATRA) permanently set the rate at 40 percent. Without any deductions or adjustments, that $20 million estate would owe $8 million in federal gift and estate taxes. A handful of states, including Illinois, also impose a state estate tax. The tax operates essentially the same way the federal estate tax does in terms of what is taxed and when; however, where the federal gift and estate tax rate is fixed at 40 percent, the Illinois tax rate varies depending on several factors.
- Long-Term Care – as you age, the likelihood that you (or a spouse) will need long-term care (LTC) increases dramatically. The cost of that care can threaten your retirement nest egg. Nationwide, a year in LTC cost, on average, over $80,000 in 2017 and the average length of stay was about three years. Because neither Medicare nor most health insurance plans will cover expenses related to LTC, you may need to qualify for Medicaid. Medicaid, however, imposes both income and asset limits as part of its eligibility guidelines. If the value of your non-exempt assets exceeds the limit ($2,000 in most states), you may have to “spend-down” your assets before Medicaid will find you eligible. Incorporating Medicaid planning into your estate plan early on can prevent the loss of valuable retirement nest egg assets.
- Probate – probate is the legal process that follows your death. If your estate requires formal probate, it can drain your estate of valuable assets as well as hold up the distribution of assets to loved ones. By including probate avoidance strategies in your estate plan you can protect assets meant for loved ones as well as save them the time and grief involved in going through a lengthy probate of your estate.
Contact an Asset Protection Planning Attorney
Please join us for a FREE upcoming seminar. If you have questions or concerns regarding asset protection planning for seniors, contact an experienced Illinois asset protection planning attorney at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.