Tag: asset protection

Owning your own home can be a good step to building wealth and securing your future.  Purchasing the right real estate can be a good investment, if you buy at the right time in the right area.  Your estate plan should work hand in hand with your real estate purchases, as for most people, their residence is one of their most valuable assets.  There are many choices regarding how to best handle your real estate in your estate plan.  A Qualified Personal Residence Trust, or “QPRT,” is just one possible solution you may want to consider.

A QPRT may be the right trust for you and your estate plan if you plan to leave your home to a particular person in the future.  Typically a QPRT is used when parents want to make sure to pass their home on to their children.  With a QPRT, the person who creates the trust chooses a specific time limit during which he or she will continue to reside in the home.  At the end of that specific term, the home is transferred directly to the named beneficiary.  If the trust creator wants to continue to reside in the home after it is transferred from the trust to the beneficiary, then he or she will need to pay rent to the beneficiary.

The primary benefit to using a QPRT is to reduce potential tax liability.  For tax purposes, the value of the home is fixed at the time it is transferred into the trust.  The value of the home will count toward your lifetime gift tax exemption, not your overall estate tax limit.

There are a few drawbacks to using a QPRT.  The most obvious is that if you pass away before the end of the time limit specified in the trust documents, then the trust is destroyed and your home will revert to being part of your estate.  If you have a high number of assets, this could create an estate tax liability.  Moreover, if the home has significantly increased in value since the purchase, the beneficiaries of the trust could face a significant capital gains tax in the future, which could possibly erase any gift tax savings enjoyed because using the QPRT.

QPRT planning can be beneficial when done properly. We have extensive experience in assisting our clients choose the right estate planning tools to fit their needs.  Call us at 818.340.4479 today for a consultation.

Real estate ownership is a cornerstone of many peoples’ American dream, as is protecting one’s assets from catastrophic illnesses and judgments.  Investing in our futures and that of our family is an essential step to ensure future stability, and purchasing the right real estate can be a key piece of that future estate plan.  While the first big real estate purchase for most families is the marital home, it is becoming more and more common for families to purchase and maintain rental properties as a supplemental source of income as well as an investment for the future.  When purchasing rental properties and acting as a landlord, you should keep in mind how these investments fit into your estate plan and your long-term plan for asset protection.

One common strategy used by rental property owners to protect assets is to form a Limited Liability Company, or “LLC.”  An LLC is one of the most simple type of business structures.  The primary advantage to setting up an LLC and handling your landlord affairs like a proper business is that you can insulate your assets.  Any landlord knows that lawsuits are common, ranging from housing discrimination to property damage after a water pipe bursts.  If you do not have the proper business structure, the tenant can sue you personally.  This means that if he or she is successful in the suit, then any judgment awarded will have to come out of your personal assets.  However, if you have set up an LLC, the tenant will have to sue the LLC instead of you personally.  The tenant will not be able to recover any damages against your personal assets, including high value assets you intend to pass on to your friends and family such as your family home.

While a revocable living trust is usually not a creditor protection plan, it helps when it is irrevocable.  With a revocable trust, you can be the person placing the property into the trust, the trustee, and also the beneficiary.  Your tenants can pay their rent directly to the trust.  When you pass away, the real estate can pass immediately to your intended heirs without having to have the real estate pass through probate.  However, unlike an LLC, a living trust does not provide insulation from law suit liability.  If this is your chosen strategy, you should consider purchasing more insurance to make sure potential lawsuits are covered.

We have extensive experience helping our clients understand their options for protecting their assets and estate planning.  Contact us at 818.340.4479 today to talk about your plans for the future.

Everyone we speak with says they want to avoid going into a nursing home and want to protect their assets, if they are forced to go there.  Looking forward to retirement is an exciting time. During retirement, we will have the time to invest in our hobbies and spend time with our families.  Unfortunately, when our health starts to fail, it may become necessary to reside in a nursing home to ensure the appropriate level of medical care.  What many people do not realize, however, is that Medicare and most regular health insurance policies do not cover the cost of long-term nursing home care.  With the cost of nursing homes soaring past $8,000 per month or even more, it is important that you understand how your potential nursing home requirements fit in with your plans for asset protection.

Assuming your private insurance does not cover long-term nursing home stays, and you do not have a long-term care policy, you will need to pay for this care out of pocket.  This means that the assets that you would like to pass on to your friends and family will have to be used to pay for the costs of your extended residential care stay.  After your assets are sufficiently drained, you may be able to apply for Medi-Cal, which provides health insurance care to adults with low incomes and few assets, as does Medicaid.  Medi-Cal and Medicaid will provide coverage for your nursing home requirements, as well as other medical services, but in order to qualify for coverage under these programs, you will have to have assets and income under specific levels.  This means that if you have too many assets, you will have to use these assets to fund your nursing home care out of your own pocket.  Only after all of your assets are depleted down to $2000 (single) and $3000 (married) under the threshold eligibility requirement can you receive Medi-Cal benefits.  There are some other ways and programs under which you may qualify for Medi-Cal which are unrelated to assets.

With proper estate and Medi-Cal planning, however, you can pass on your assets to your heirs and beneficiaries while maintaining your ability to apply for Medi-Cal.  Timing of this estate planning is very important.   It is also important to note that some assets are exempt from the total asset calculation, including the family home if at least one spouse will continue to reside there.

If you have questions about protecting your assets while you require long-term nursing home care, contact us today.  Our experts in Medi-Cal planning can discuss your estate and what we can do to help protect your assets or qualify you for Medi-Cal. Call us at 818.340.4479 or email us for a complimentary consultation appointment at Info@SirkinLaw.com.