Your estate plan helps protect you by allowing you to name an executor whom you trust. It gives you control over your legacy and allows you to leave something meaningful for each of the people you love.
The sad truth is that no matter how well you plan, issues can arise that will undermine the legacy you ultimately leave behind. For example, your family members could challenge your last will. If the Minnesota probate courts side with the family member challenging your estate plan, state law rather than your documents may ultimately determine who receives which assets from your estate.
As if that wasn’t a frustrating enough issue to try to plan for, there are also financial matters that could substantially diminish the value of your estate. What two financial issues could potentially reduce what you leave behind for your loved ones?
Debt and Medicaid benefits
Any of your personal creditors can make a claim against your estate. They can continue seeking compensation until there are literally no assets left to pass on to your family members.
You don’t just have to worry about your personal debt to a hospital or your credit card balances. Even if you get Medicaid benefits to cover your medical costs, the Medicaid estate recovery program can come after the assets in your estate, including your home. Just like any other creditor, the Medicaid estate recovery program can compel the liquidation of your estate assets to repay the benefits you received while alive.
Tax obligations
The more your estate is worth, the greater the likelihood of estate taxes affecting what your loved ones receive. The exemption for estate taxes in Minnesota is currently several million dollars, but some people will have to worry about triggering state and federal estate taxes.
Even if they don’t have to pay estate taxes, there may be income taxes assessed against any proceeds earned through estate sales. An executor will usually have to pay all outstanding tax obligations before distributing any property to your intended beneficiaries.
Honestly assessing your financial circumstances and thinking about your legacy wishes can help you craft an estate plan that protects you and the legacy you want to leave when you die.
