Over the course of your lifetime, you will likely work hard and invest wisely in an effort to amass a respectable asset portfolio. If all goes well, you will have sufficient assets to live comfortably during your retirement years with something left over to pass down to your children and/or grandchildren. While acquiring assets is certainly important, protecting those assets should be of equal importance. An asset protection lawyer can help you protect your estate assets using a variety of asset protection planning tools and strategies that address the threats to those assets.
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.
Why Might Your Assets Be at Risk?
Over the course of your lifetime, there may be numerous potential threats to your assets. Some of those threats are fairly obvious, such as the risk that creditors or a divorce pose to your assets. Other ways in which your assets may be at risk are not as obvious, such as:
- 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.
- 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 own incapacity— the possibility of becoming incapacitated exists at all times, without regard to your age or apparent health. A tragic accident could render you incapacitated tomorrow. If you failed to plan for the possibility, someone not of your choosing to take control of your assets, putting them at risk. Including an incapacity planning component in your overall estate plan allows you to decide who will control your estate assets in the event of your own incapacity.
- 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 a North Dakota Asset Protection Lawyer
Please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding asset protection planning, contact the North Dakota asset protection planning attorneys at German Law by calling 701-738-0060 to schedule an appointment.