If you already have an estate plan in place, or you are planning to create one soon, 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 may be at risk. To get you started, the Los Angeles trust lawyers at Collins Law Firm discuss some of the most common threats to your assets.
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 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 do not 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 into 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 an 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 over $100,000 per year across the United States in 2021. 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. If your countable assets exceed the limit, 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 Collins Law Group
For more information, please download our FREE estate planning worksheet. If you have additional questions about protecting your assets through comprehensive estate planning, consult with a Los Angeles estate planning lawyer. Contact the Collins Law Firm by calling (310) 677-9787 to register for one of our FREE estate planning workshops.