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Does your estate plan address debts as you age?

On Behalf of | Nov 11, 2021 | Estate Administration & Probate |

Estate planning often includes thinking about your golden years carefully. If you have saved for much of your adult life for your retirement, you may have resources set aside to cover your cost of living expenses and no debt.

Careful financial planning might mean that you can theoretically pay for two decades of a comfortable retirement in your own home. However, your savings likely don’t account for a sudden or dramatic change in your health. If you get into a car crash after retirement or experience significant cognitive decline, your monthly expenses will likely increase substantially.

You may require medical care that Medicare does not cover or need to start paying for your cost of living expenses with a credit card because of your other bills. If you haven’t addressed possible future debts in your estate plan, that might mean you leave nothing for the people that you love.

Those debts don’t just disappear when you die

Debts in your personal name can affect the people closest to you even after your death. If anyone else is a cosigner on the account, they will be responsible to repay it regardless of how much of the debt they personally accrued.

Even if you don’t have a cosigner, creditors can make a claim against the assets in your estate. Medicaid could come after your property if you receive benefits. The Medicaid estate recovery program can claim everything from your bank account to your primary residence as a way to repay the state for the Medicaid benefits you received. They can claim every last cent from your estate, leaving nothing for your children and other loved ones.

Asset protection planning can be a way for older adults to protect their property and their legacy from creditor claims.

Creditors can’t claim what isn’t in your name

Asset protection planning often dovetails nicely with Medicaid planning. The creation of a trust can help someone protect certain assets from creditor claims in the future. When you are no longer the owner of an asset, it won’t be part of your estate when you die, making it harder for creditors or Medicaid to make a claim to those assets.

Even if you are financially responsible now, the possibility of major debts later in life could still affect your legacy and the people you love. Thinking about many possible scenarios can help you create the best estate plan possible.