Estate planning is a multifaceted endeavor, and there are several different important issues to take into consideration. We will look at five of them in this blog post.
Your ability to provide for your loved ones after you are gone will be impacted by the expenses that you incur during your elder years. Long-term care is extremely expensive, and most senior citizens will need help with their activities of daily living eventually.
How much are we talking about? You are looking at an average expense of over $80,000 a year in Ohio as a whole, and costs have been rising over recent years. The number may be much larger if you need nursing home care a couple of decades from now.
Medicare does not pay for living assistance, so you have to look elsewhere for support. For many, the answer is Medicaid. This government program does pay for long-term care, but it is need-based. To qualify for Medicaid, many people give assets to their loved ones. This is referred to as a Medicaid spend down.
Though this sounds easy enough, it is complicated by the five-year look back period. To obtain timely eligibility, you have to complete all gift giving at least 60 months before you submit your application
There is an estate tax in the United States, and it can have a significant impact on your family’s financial future, because it carries a 40 percent maximum rate. You can transfer unlimited assets to your spouse tax-free, but transfers to others are potentially subject to the estate tax.
The amount that you can transfer before the estate tax would become applicable is called the estate tax exclusion. The amount of this exclusion is $11.4 million. Anything that you are transferring that exceeds this amount could be subject to taxation.
Some states have state level estate taxes that sit apart from the federal death tax. Ohio used to be among them, but our tax was repealed in 2013. However, if you own valuable property in a state that has an estate tax, it could be a factor, even though you are a resident of the Buckeye State.
The existence of these taxes is the bad news, but the good news is that you can implement tax efficiency strategies if you are exposed to estate taxes.
You may have concerns about the spendthrift tendencies of some people on your inheritance list. To react to this dynamic, you could include spendthrift protections when you are devising your estate plan.
People With Disabilities
People with disabilities often rely on Medicaid for health insurance, and as we have stated previously, this is a need-based program. An influx of money could result in a loss of benefit eligibility.
It would be possible to convey assets into a special needs trust to assist a loved one with a disability. The assets could be used to improve the beneficiary’s quality of life, but eligibility for Medicaid would not be impacted.
Incapacity planning is another thing that you should consider when you are planning your estate. If you create durable powers of attorney, you can appoint agents to act on your behalf in the event of your incapacitation. A living trust can include disability protections as well, and you can add a living will to state your life-support preferences.
Take Action Today!
We have provided some sound but general information in this blog post. If you would like to discuss your inheritance planning goals with a licensed attorney, our firm can help.
You can send us a message through our contact page to set up an appointment, and we can be reached by phone at 513-721-1513.
- What You Need to Know about Planning for Elder Care - March 21, 2023
- Can a Trust Be Contested? - March 16, 2023
- Ohio Medicaid Limits for 2023 - March 14, 2023