Assets File Folder Used in Estate PlanningYou’ve worked hard your whole life to provide your loved ones with a sense of financial security. Unfortunately, without a comprehensive estate plan that utilizes sound asset protection strategies, everything you’ve worked for could be at risk.

Parties Who May Have a Claim to Your Assets

After you become incapacitated or pass away, there are several parties who may have a potential claim to your assets—thus preventing your heirs from accessing your estate as you intended.

  • Nursing home. If you need nursing home care, Medicaid benefits can help pay some of the costs. Unfortunately, accepting Medicaid also gives North Carolina the right to go after your estate to recover their expenses. Without an asset protection plan in place, your children could lose the right to inherit the family home and other assets you wanted to provide for their future.
  • Lawsuit judgments. It’s not just people who are guilty of criminal acts who get sued. If you cause a serious car accident or someone is hurt on your property, you could be looking at a lawsuit that wipes out a lifetime of savings unless your wealth protection strategy includes sufficient liability insurance. Professionals in high-risk careers, such as physicians, often need to take special precautions to ensure that both their professional practices and personal assets are protected.
  • Creditors. When you pass away owing money, creditors can attempt to collect the debt from your estate. Beneficiaries listed in a will are only awarded assets after debts have been repaid, so your heirs could be left with nothing if you haven’t planned properly.
  • Unhappy adult children. Although most parents divide assets equally among their adult children, there may be good reasons to choose another arrangement. Your child may have special needs that prevent them from ever living independently, a history of managing money poorly, or a serious substance abuse problem. Or, one of your children may have made a great financial sacrifice on your behalf by quitting their job or reducing their work hours to serve as your caretaker. Children who are unhappy with your chosen arrangement may not want to respect your wishes.
  • Ex-spouse. When an estate plan hasn’t been properly updated, an ex-spouse may still have a valid claim to your assets—even if you’ve been divorced for several years.
  • Court costs. If your estate hasn’t been structured to avoid probate, court costs can limit what your heirs can inherit.
  • Taxes. Your tax burden depends on the size of your estate, but certain strategies can be used to minimize what is owed.

Potential Strategies for Asset Protection

Bank accounts, stocks, bonds, vacation property, rental property, and sole proprietorship businesses are some examples of common assets that can be subject to claims by creditors or other parties after your incapacitation or death. An asset protection strategy safeguards your wealth by increasing your protected assets. These may include:

  • Retirement plans. Qualified retirement plans such as a 401(K), Individual Retirement Accounts (IRAs), and Roth Individual Retirement Accounts (Roth IRAs) can be protected in many circumstances. However, inherited retirement plans and those received from a former spouse are more difficult to protect due to recent changes in federal law.
  • Real estate. The North Carolina Homestead Exemption can be used to safeguard up to $35,000 of equity in a home for a single person or $70,000 for a married couple with a joint creditor. In addition, when a married couple owns real estate as “tenants by the entirety,” the property is protected from the creditors of just one spouse.
  • Life insurance. Policies are protected by the North Carolina Constitution and the North Carolina statute. If the plan is structured correctly, cash from the policy should pass to your heirs after your death without being subject to creditor claims.
  • College savings. Under North Carolina law, a maximum of $25,000 in 529 plans used to save for post-secondary education can be protected if certain legal requirements are met. 

Get Personalized Advice You Can Trust From An Experienced Asset Protection Attorney 

Asset protection is a complex subset of estate planning, so it’s crucial that you contact an attorney who can provide advice that is personalized to fit your unique situation. Call our office in Wilmington or fill out the contact form on this page to schedule a free 15-minute consultation with a member of the Legacy Lawyers legal team.

 

John J. Peck
Wilmington Elder Law, Estate Planning & Asset Protection Attorney