Financial Fitness: Protect Your Assets

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The following article appears in the Canton Citizen’s 2017 Financial Fitness Guide. See this week’s edition for information and tips from local professionals on a wide range of financial topics, including asset protection, real estate, tax preparation, and much more.

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As many as 80 percent of folks who inherit a retirement plan immediately liquidate it, which decreases the value instantly by 25 percent or so for federal income taxes. In one fell swoop the money is reduced by 25 percent! Next some bills are paid, then a vacation, and finally when they’re down to a few thousand dollars they decide to put it into a retirement plan, but they’ve lost most of it. It is not the rainy day fund you intended it to be. I can help you to guard against that.

Atty Brian Mahoney

Attorney Brian Mahoney

Bad things can happen to good people and they happen unexpectedly, so we plan to protect our families. In the 2014 U.S. Supreme Court case of Clark v. Rameker, the Supreme Court ruled there was no protection for an adult child who inherited an IRA. He lost hundreds of thousands of dollars needlessly. I can draft a trust that would prevent that from happening to your children.

The average probate takes 24-36 months and costs $8,000 to $20,000. The use of trusts can avoid probate.

If you or a loved one does not have a durable power of attorney and became disabled, then your family would need a conservator appointed in the Probate Court, which will take at least three to six months and cost $3,500 to $7,000! If a person becomes disabled without a health care proxy, the family will need to have a guardian appointed in the Probate Court, which will take as long and cost as much as the conservator — and during a time of stress it is a complete waste.

In today’s litigious society, everyone who owns property should record a homestead for their home, which will bulletproof up to $500,000 in home equity in the event you were sued — all for a recording fee of only $36! If you don’t record one, then you still have the automatic homestead, but only up to $125,000.

Special needs trusts can allow assets to be given to a disabled child or adult while they maintain eligibility for public assistance benefits programs. A disabled person can now establish their own special needs trust!

Federally you will have no estate tax if your estate is under $5.49 million. If your estate is worth $999,999.99 when you pass away in Massachusetts, you will pay nothing in state estate taxes. But if your estate is worth $1 million and 1 cent, then all of it is taxable and your Massachusetts estate taxes would be about $33,000! I can help you avoid or decrease estate taxes. For a married couple worth $1.8 million, the surviving spouse’s estate would pay a state estate tax of $80,000, but if the right type of trust system is used, the Massachusetts state tax will be reduced to $0.

If the family who was worth $1.8 million also owned $1 million in life insurance, their estate tax would be in excess of $160,000! But with another trust called an irrevocable life insurance trust, we could legally reduce Massachusetts estate taxes to $0.

The average cost of a nursing home is $400 per day or $144,000 per year. So in three to five years, the value of most homes will be lost. There are ways to avoid this waste. Homes can be deeded into an irrevocable trust or a life estate. Five years after creating your trust or life estate, your home will become a so-called non-countable asset for Medicaid purposes, which means you will save your home for your family.

Attorney Brian Mahoney is in his 34th year of practicing law. His practice includes estate planning, probate, elder law, special needs trusts, and asset protection. Call him at 781-828-0083 or visit www.attybrianmahoney.com.

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