By: Bryan Montana
Asset Protection is an important area of Estate Planning that, in a nut-shell, deals with preserving your hard-earned assets from potential costs such as Probate, Taxes and Long-Term Care costs. Here are five tips about Asset Protection that every person should know.
1. Probate – Where Am I?
Why don’t more people complain about probate? Because it’s hard to complain when you’re already dead. So what exactly is probate? Probate is a legal process by which your assets are gathered and inventoried, your bills are paid, and your remaining assets are distributed. It is a court-supervised process that is often lengthy and more expensive than you’d imagine. Note the following facts:
- In Ohio, a probate estate must remain open for a minimum of six months.
- Almost all of Ohio’s 88 Counties have approved fee schedules for attorneys administering a probate estate.
What does this mean for you? It means the lawyer who administers your estate will likely be entitled to a percentage of your estate, regardless of how “simple” you may think it is. This fee typically ranges between 3-5%, meaning that an estate of $400,000 could lose $12,000 – $20,000 in legal fees alone.
2. How Did I Get Here?
So how do you end up in probate? The first way is by doing nothing. If you die intestate (without a will) your estate will be administered through your County’s probate court and the laws of intestacy will determine who gets your assets. The second way is by having a will. That’s right, wills go through probate. T.V. would have us believe that the whole family simply takes a trip to the lawyer’s office and the lawyer reads off who gets what. Well much like any crime scene investigator will tell you, things aren’t always like they are on T.V.
3. Nursing Homes Cost What?!
Most of us hope to never need the nursing home. Ideally, we would die in our sleep of natural causes at a ripe old age with our loved ones at our side. Statistically, most of us will need some form of long-term care, whether it be assisted living, in-home care or the nursing home. In Ohio, the average cost of nursing home care is currently over $6,200 per month. There are only three ways to pay:
- Long-term Care Insurance
- Government Programs (Medicaid)
If you want to pay out-of-pocket the nursing home will gladly cash your check each month. There are, however, legal options available to help protect your hard-earned resources.
4. Why You Shouldn’t Just “Give It All Away”
Gifting can be a very useful tool in the asset protection tool belt. It can also cause serious unforeseen problems if done without counseling a legal professional. For example, giving away assets within five years of needing nursing home care can cause serious problems. Long story short: seek legal advice before engaging in gifting for the purpose of asset protection planning. For more information, see Gifting Do’s & Don’ts.
5. Back to the Basics – Medical Directives and Financial Powers of Attorney
What are the basics? These three documents are the basic foundation of any estate plan. Every person over the age of eighteen should have these documents in place. These are:
Advanced Medical Directives:
Living Will – a legal document stating your wishes regarding end-of-life treatment if you are ever terminally ill or in a permanently unconscious state.
Health Care Power of Attorney – a legal document stating who should make your medical decisions if you are unable to do so for yourself.
Durable Financial Power of Attorney – a legal document stating who should make your financial decisions should you become incapacitated and unable to do so for yourself.
For more information on these basic documents, check out our Estate Planning Lifecycle Guide.
There are many ways that your estate can be drained, often leaving little to nothing for your heirs. If you would like to learn more, check out our Asset Protection Guide, or contact AlerStallings for a consultation.
“A Lifetime Accumulating Wealth, An Afternoon Preserving It.”