If you hope to be able to pass down assets to loved ones after you are gone, you must first ensure that the assets you accumulate over the course of your lifetime are protected. To do this, you may benefit from the assistance of an asset protection lawyer. An asset protection lawyer will help you recognize any potential threats to your assets and assist you in devising strategies to address those threats. While some of those threats are well-known, you will likely find that there are also unknown threats to your assets that you must include in your asset protection plan as well.
What Is Asset Protection Planning?
Asset protection planning seeks to place your assets beyond the reach of potential creditors and other threats to those assets. As the legal maxim says, “If you don’t own it, they can’t take it from you.” While some of the strategies used in asset protection planning are very complex, others are as simple as having an “at-risk spouse” transfer title to property to the name of a non-risk spouse. An asset protection lawyer will work with you to identify the specific threats to your assets and incorporate tools and strategies into your estate plan to prevent those threats from causing the loss of your hard-earned assets.
Potential Threats to Your Assets
When you think about protecting your assets, you probably think about protecting them from creditors. Creditors are, of course, always a potential threat to your assets; however, there are other threats as well that must be considered, including:
- Nursing home/long-term care expenses – nursing home/LTC expenses average over $80,000 per year across the United States. 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. You cannot have “countable resources” valued at over $2,000 or your application will be denied and you will have to “spend-down” your resources before applying again. It is this requirement that potentially puts your assets at risk. To protect your assets from the Medicaid spend-down requirement, include Medicaid planning in your estate plan now.
- Your divorce–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 before the marriage. To prevent the loss of assets as a result of a divorce, a pre-marital agreement is an option.
- Re-marriage of your spouse — many couples create reciprocal estate plans, meaning that both individual plans call for all assets to be gifted to the surviving spouse upon death. If you have children, the agreement is that the surviving spouse will then pass down those assets to your children upon his/her death. What happens if your spouse ends up remarrying after your death? The new spouse now has a potential claim to your assets in the event of a divorce and becomes a legal heir to your spouse’s estate. Careful estate planning that may include a trust can prevent this from happening.
- Gift and estate taxes— the federal gift and estate tax is essentially a tax on the transfer of wealth that is collected upon the death of a taxpayer. The tax applies to both gifts made during a taxpayer’s lifetime and to assets gifted to a beneficiary at the time of the taxpayer’s death. Historically, the federal gift and estate tax rate fluctuated on a regular basis; however, the American Taxpayer Relief Act of 2012 (ATRA) permanently set the rate at 40 percent. This means that if you have a moderate to large estate, and you do nothing to limit the impact of federal gift and estate taxes on your estate, your estate could lose almost half of its value when you die because of estate taxes. Including tax avoidance strategies in your estate plan is the best way to avoid the loss of estate assets to Uncle Sam.
Contact Illinois Asset Protection Planning Lawyers
For additional information, please download our FREE estate planning worksheet. If you have additional questions or concerns regarding asset protection planning in the State of Illinois, contact the experienced asset protection planning lawyers at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.
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