Legal Options to Protect Your Assets

Legal Options to Protect Your Assets

By David E. Inabinett, Brinkley Walser, PLLC

Whether you have a limited number of assets or are very wealthy, most people want to have a say about what will happen to those assets after their death. If you die without a last will and testament in North Carolina, the distribution of any assets remaining after payment of your debts will be decided by the courts. This may lead to those assets being given to someone you would not normally choose. Having a will in place outlines your wishes for the distribution of your property. Once filed with the court after your death, this document becomes your voice during the probate process. For those with limited assets and simple estates, a will may be sufficient.

If, however, you wish to avoid the probate process or any number of other situations exist, a will alone may not be the best choice. If your assets have grown significantly, there is a family business to consider, there is a divorce situation, you have a special needs dependent, there are questions about Medicaid eligibility, or you own significant art, jewelry or collectibles, you may wish to review other asset protection options with an estate planning attorney. Here are some commonly asked questions:

What is the exemption amount on an estate?

The current (2014) estate tax exemption is $5.34 million per individual (double that if you are married). Estates under these thresholds are not subject to federal estate tax as long as a federal Form 706 is filed within nine months of the individual’s death.

Do all estates have to go through Probate?

Not necessarily. In a situation where the deceased does not have a will or has only a basic will outlining his or her wishes, the estate will generally go through probate. Essentially the will is filed with the court, becoming a matter of public record, and the process of identifying all assets and liabilities begins. Creditors have a limited time to file claims or lose their right to payment. Once all debts are paid, the remaining assets in the estate are distributed based on the terms of the will. This process can be time consuming and expensive.
There are techniques that allow an individual to structure his or her assets such that when he or she dies, the probate process is unnecessary. This includes setting up certain types of trusts while you are still alive.

How do I protect a child with substance abuse issues?

Many families have loved ones who might be incapable of managing any inheritance left to them upon the death of a parent or other relative. This includes individuals with substance abuse issues, money management issues, mental illness or those with special needs. Leaving assets in trust for these individuals upon your death and naming a trustee to manage the trust fund can protect your beneficiaries and ensure funds are available for their future care.

How can I shelter my assets from expensive nursing home costs, especially if my spouse will continue to live in our marital home and require support?

The basic rule is that you are not eligible for Medicaid coverage for long-term nursing care until you have exhausted all but $2,000 of your assets. That said, there are many caveats to that rule. A portion of assets may be excluded under the community spouse resource allowance so that the spouse of the person needing care will continue to have assets to cover his or her own living expenses and care. This number changes on a regular basis, but it is still not much money when you consider the cost of living and the possibility your spouse may also need nursing care in the future.

An irrevocable trust is one tool available to protect your assets from possible nursing home costs or other liabilities. Such a trust can also protect assets in the event your spouse remarries after your death and ensures your assets are distributed based on your wishes and do not end up distributed to family members of your spouse’s new husband (or wife).

Each family situation is different, and estate planning choices may depend on the types of assets and liabilities owned/owed, who the beneficiaries will be, whether those beneficiaries are on good terms or might dispute the terms of your will, if you own a business, etc. I recommend everyone speak to an estate planning attorney to ensure you have chosen the best estate planning tools for your specific situation. Once those tools are in place, remember to update your plan with any life changes (divorce, birth of a child, death of a spouse, etc.) and review the plan every two to three years.