Initially, the primary goal of your estate plan may be to simply create a roadmap for the distribution of your estate assets after your death. However, a comprehensive estate plan can accomplish far more by including additional estate planning tools and strategies. Asset protection is among the various goals and objectives you may wish to include in your overall estate plan. With this in mind, how do you know if you need to include asset protection planning in your estate plan?
Reasons to Include Asset Protection Planning
The best way to determine what additional components should be included in your estate plan is to consult with a Texas estate planning attorney. In the meantime though, here are a few common reasons people include asset protection planning in their comprehensive estate plan.
One of the biggest threats to your assets comes from your own creditors. Regardless of fiscal responsibility, your assets could become at risk from your creditors due to factors outside your control. For example, economic downturn, a business failure, or your own incapacity could all put you at risk. The bottom line is that you cannot foresee the future nor can you protect against every conceivable threat to your finances. As it implies, an asset protection plan may be able to protect your assets from these unforseen risks.
The State of Texas is a community property state in regards to marital property. HOWEVER, inherited assets aquired during the marriage are still at risk in a divorce, even though the inherited assets should qualify as separate property. For example, if inherited property of a spouse is co-mingled or not properly invested it could become subject to divisions. No one likes to consider the possibilty of their marriage coming to an end. However, inherited assets require special planning just in case divorce incurs.
Your Beneficiary’s Divorce
Your assets are also at risk in the event of the divorce of a beneficiary. Most often this occurs when you gift assets to a married adult child that later goes through a divorce themself. This might occur during or after your lifetime. There are ways to protect the assets you gift to a beneficiary as part of an inheritance; however, you must take preventative steps. Otherwise, the gifted assets could potentially remain vulnerable.
You may have gone through your entire life without giving Medicaid eligibility a second thought. In your retirement years, however, you or your spouse may need long-term care. At an average yearly cost of over $80,000 nationwide, paying for long-term care is no small feat. Your hard-earned assets could be at risk unless you can qualify for Medicaid benefits to cover these costs. Medicaid, however, will expect you to expend a significant portion of your hard-earned assets before covering any costs. Medicaid planning, a specific type of asset protection planning, can help protect your assets and help you qualify for benefits if and when the need arises.
Most families have one – a spendthrift. You know, that one family member who is notably bad with money? The reason for their irresponsibility could be an underlying addiction or a simple disregard for proper financial planning. Whatever the excuse, gifting assets outright to a spendthrift beneficiary is akin to throwing your money down the proverbial drain. Despite their bad habits, we may still wish to provide for our less than responsible loved ones. Creating an asset protection plan that protects your assets while still providing for a spendthrift beneficiary may be the solution.
How Can Asset Protection Planning Help?
Incorporating asset protection planning into your comprehensive estate plan could protect your hard earned money and assets from the various threats mentioned above. Keep in mind that you’ll likely need to discuss the methods you use to protect your assets with your Texas estate planning attorney. The important thing is to start incorporating asset protection planning into your overall estate plan early on to reduce the risk to your assets.
If you have additional questions or concerns about incorporating Medicaid planning into your estate plan, contact the experienced Texas estate planning attorneys at The Mendel Law Firm, L.P. by calling 281-759-3213 to schedule your appointment today.