Keeping it in the Family by Protecting Your Estate

Nicole Cole |

An estate takes lifetimes to build but can be lost in the blink of an eye. Most of us don’t imagine assets that took decades to accumulate being drained in a few short years, but in some cases this is exactly what happens. Here are some of the top risks to an estate and some easy ways to manage those risks. It’s important to note that all these risks, and the strategies to deal with them, are best dealt with while the person looking to leave a legacy is still alive and healthy. It’s far more difficult, if not impossible, to protect an estate “after the fact”.

Counting on death AND taxes

A quality estate plan takes into account that fact that if we die with significant wealth, Uncle Sam is going to take a big piece of the pie.

This is particularly painful if assets aren’t easily liquidated. Consider the example of an individual or couple that is heavily invested in real estate. Vacation homes and commercial properties make a wonderful gift for the next generation, but if their value is significant enough they can trigger high estate taxes. Even if a family wants to part with these hard-earned assets they can take months or years to sell, and in the meantime the tax man needs to be paid.

This is a situation where the right kind of insurance may provide enough cash on hand to pay estate taxes on these properties and keep them in the family for generations to come. This way the full value of the real estate is kept by the inheritors, the government is paid in full, and the estate plan is fulfilled without drama.

Inheritors are unpredictable, especially when nobody is watching

When leaving significant wealth to children and grandchildren it’s hard to know what they will do with it. Personal issues like spending habits, failed relationships and substance addictions can quickly deplete even the best funded inheritance.

For this reason it can make sense to consider putting assets into a trust so as to control the pace and purpose of distributions. As an added benefit a trust can help protect assets from creditors, meaning that inheritors who are sued or owe money won’t necessarily lose their inheritance to a lender or litigious third party. Trusts can be expensive and often difficult to establish and maintain. It is recommended that you seek the counsel of a legal professional to discuss your specific situation.

The costs of nursing homes and late life care are rising dramatically

Few things are more frustrating for than for a family to watch a well thought out estate plan, built on a lifetime of savings, get depleted by escalating end of life care costs. Medical technology has done marvels increasing life spans, but this means that it’s possible to survive with debilitating illnesses and injuries for years. The level of care needed to cope with these health issues can make quick work of even the most robust savings and investments, leaving nothing for the families of the afflicted.

Long term care insurance is one potential way to offset the risk this poses to an estate. The right coverage can provide funding for nursing costs and leave an estate intact for years to come.

Insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2024 Advisor Websites.