Your estate essentially determines your legacy when you die. You can plan how to distribute your property prior to your death so that you can create specific benefits or impacts for the people or causes that matter the most to you.
Unfortunately, it is altogether too easy for people to focus primarily on providing for family members or designating beneficiaries and less on addressing financial pitfalls that could diminish what they leave behind when they die.
There are three common financial issues that frequently arise during estate administration and could reduce what you pass to the people you love or the causes you support after your death.
Estate taxes
If you have a multi-million dollar estate, then there may be both state and federal estate taxes that apply to your property. If you don’t change the ownership of your most valuable assets and otherwise diminish the total value of your estate before you die, the millions of dollars in property that you own could trigger expensive estate taxes.
Creditor claims
Just like your belongings become estate assets, your debts become the obligation of your estate when you die. The representative of your estate may have to sell off your most valuable belongings in an effort to repay your creditors. Unless you protect specific property or designate resources to pay off your student loans and credit card balance when you die, those debts can drastically diminish what you have to pass to others.
Medicaid estate recovery efforts
If you require intensive medical support in the last years of your life, possibly due to living in a nursing home, Medicaid benefits can be a resource to pay for your care. Unfortunately, the Minnesota Medicaid estate recovery program will bring a claim against your estate and seek full repayment for every medical expense covered prior to your death.
The good news for those worried about one or more of these estate liabilities is that the same estate planning tool can help you work around all three of these liabilities. Integrating a trust into your estate can help you protect property from creditor claims, qualify for Medicaid benefits and minimize your estate tax obligations. Exploring different estate planning tools like trusts will help you achieve your goals while minimizing your risks.