Your estate plan should protect your assets while you are here as well as ensure they are distributed according to your wishes when you are gone. For your plan to protect your assets though, you must first identify the possible threats to those assets. Some of the ways in which your assets might be at risk are obvious; however, there are also likely ways in which your assets are at risk that you have not considered. To help you keep your assets safe, the Los Angeles estate planning attorneys at Schomer Law Group, APC explain five threats to your assets that you may not have considered.
- Federal 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 the rate of 40 percent and 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. People often count on being able to use the lifetime exemption to avoid owing gift and estate taxes; however, you do not know how much your estate may be worth at the time of your death. It is better to assume that your estate will be subject to the tax and plan accordingly than to mistakenly count on being exempt.
- Beneficiaries. Your beneficiaries could be the biggest threat of all to your assets if you are not careful. Almost every family has a spendthrift – someone who simply is not good with money for one reason or another. Many families also have a member who has struggled with alcohol or drug addiction or has a gambling problem. Leaving assets directly to these beneficiaries is akin to throwing them in the trash in some cases. Fortunately, there are ways to provide for beneficiaries who should not be handed a lump sum of money. A trust, for example, allows you to provide for a beneficiary but only under the watchful eye of a Trustee who manages the trust assets and distributed them according to your wishes.
- 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. That may mean entering into a pre-nuptial agreement prior to the marriage, or it could mean keeping separate assets in a trust, so it is clear from a legal perspective that they are not marital assets.
- Long-Term Care Costs. 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 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 $140,000 in California as of 2021, and an average length of stay of close to three years, paying out of pocket means you could end up with a LTC bill that approaches $500,000. For over half of all seniors currently in LTC, Medicaid is the answer. Qualifying for Medicaid, however, can threaten your retirement nest egg if you fail to incorporate Medicaid planning into your estate plan.
- Incapacity. Have you ever considered what might happen if you were to become incapacitated tomorrow? If you failed to plan for the possibility of your own incapacity, more than one person may want to take over for you, causing a bitter and divisive legal battle that might create a rift in the family for many years to come. Moreover, because you didn’t plan, you have no control over who is appointed to control your assets. The way to prevent such an outcome is to include an incapacity planning component in your estate plan.
Contact Los Angeles Estate Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about how to keep your assets safe, contact the experienced Los Angeles estate planning attorneys at Schomer Law Group APCby calling (310) 337-7696 to schedule an appointment.
A graduate of Boston University School of Law, Scott P. Schomer is a frequent lecturer on estate planning and elder law issues, having discussed these important issues on local and national television. A seasoned courtroom advocate, Scott has obtained combined judgments and verdicts in excess of twenty-five million dollars for his clients. Scott has served as a member of the Los Angeles Superior Court Probate Volunteer Panel (PVP Attorney), Probate Settlement Panel and a Judge Pro Tempore. Scott's expertise has been recognized by his peers with such accolades as a life-time membership in the Multi-Million Dollar Advocates Forum, the Five Star Wealth Manager designation, and repeated nominations as California Super Lawyer.
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