You want your legacy or lasting impact on others to be positive. Between your assets and your life insurance, you may anticipate leaving a significant inheritance or potentially making a substantial contribution to a charitable cause.
Sadly, the reality of estate administration could undermine those hopes. Specifically, your estate may have liabilities that reduce its value and therefore what you leave for others. If you recognize these risks, you can adjust your estate plan to reduce those liabilities and maximize what you pass to the people you love.
Your debts persist when you die
Did you know that you still have to try to pay back your credit card balances even after your death or that the hospital can make a claim in probate court for your final medical bills? The law passes responsibility for debts onto the estate of a recently deceased individual.
Creditors can bring claims in probate court, and their right to repayment is stronger than the right of family members to inherit anything from the estate. Much of your personal property could wind up sold to repay creditors because of debt.
Your estate has to pay for your Medicaid benefits
There are strict limits on how much property and income you can have if you request Medicaid benefits. However, the home that you live in usually won’t affect your application.
After you die, your personal property, including your home, could be subject to claims by the Kentucky Medicaid estate recovery program. They could seek full repayment for every cent the state spent on your treatment or long-term care.
Your estate must pay taxes
Estate taxes only apply to multi-million-dollar estates. If you don’t have that kind of personal wealth, then you don’t have to worry about estate taxes necessarily, but there could be income taxes and even capital gains taxes that affect what people inherent. The way that you structure your estate and also how you pass property to your family members will influence what taxes those transfers incur.
The good news is that advanced planning can help you minimize the impact of Medicaid benefits, personal debt and tax obligations on what you believe behind when you die. Learning more about what happens in probate court can help you create an effective estate plan.