As you get older, you will think more frequently about what you will leave to the people you love. The inheritance that your children, grandchildren and other loved ones receive will serve as a reminder of you. Their inheritance is also one last way for you to positively impact their lives.
You likely want to give as much as you can to the people you love, which requires identifying risk factors that could diminish how much you leave behind after you die, such as the four issues below.
Just because you could qualify for lines of credit without a co-signer doesn’t mean those debts die with you. Your creditors have a legal right to seek repayment from your estate even after your death. Your executor will have to repay all of your outstanding debts before they can start distributing property to your family members unless you have planned ahead to protect your assets against creditor claims.
Medicaid estate recovery
If you go into a nursing home or require extensive medical care in your final years of life, Medicaid can protect you. However, you have to repay the benefits you receive.
Medicaid can make a claim against your estate for everything from your house to the last dollars in your bank account. As with private creditors, only proper planning ahead of time can protect your major assets from claims by Medicaid estate recovery.
Taxes can diminish large estates quickly. The more property you have, the higher the potential estate tax rate your executor will have to pay. The federal estate tax maxes out at a staggering 40% tax, demanding proper planning unless you want almost half of what you leave behind to go to Uncle Sam instead of to your family.
Some degree of probate oversight may be unavoidable for your estate, but a disputed estate could cost your loved ones tens of thousands of dollars.
Planning your estate to limit challenges, keeping your family informed about your wishes and even adding penalties to your estate plan can all be ways to prevent someone from dragging your estate through court in the hope of receiving a larger share of inheritance than what you intended to give them.
All of these issues are problems you can plan ahead for when drafting your estate planning documents. Recognizing the risks that could impact your legacy can help you create a better estate plan that leaves the most property possible to your loved ones.