While much of the typical estate plan accounts for the distribution of your assets after your death, estate planning can also account for the distribution of assets while you are still alive. “Giving while living” is an estate planning tool that individuals should carefully consider with the help of an estate planning attorney. Here, the Maryland estate planning attorneys at Rodier Family Law discuss the concept of leaving assets to a beneficiary while you are still alive.
The Pros and Cons of Giving Gifts Outright
Leaving assets to a beneficiary during your life can be as simple as gifting them the assets. However, this strategy can have risks. If you are gifting cash, this may leave you in a perilous financial situation in the future if your income no longer covers your living expenses. While this method may be the most convenient way to leave assets to a beneficiary, individuals should strongly consider whether they wish to be dependent on their beneficiaries should an emergency situation arise. This solution may be best for those who have a higher amount of assets and a stronger safety net for future years.
Placing Assets in a Living Trust or Qualified Personal Residence Trust
A living trust allows you to transfer ownership of assets to your beneficiaries upon your death, protecting those assets from probate and any potential creditors prior to your death. A living trust can be either revocable or irrevocable, meaning the trust can be altered or made permanent. Discuss these options with a Maryland estate planning attorney to determine what would be best for your situation.
If your wish to gift your home to a beneficiary, and the home is of significant value, a qualified personal residence trust may be an appropriate estate planning strategy for you. A home that exceeds the estate tax exemption limit, which is currently $5.6 million for individuals and $11.2 million for married couples for federal estate tax, can be placed into this type of trust and given to beneficiaries at a fraction of its value, reducing the estate tax burden. For the majority of estate planners, this type of trust will not be necessary, but for those who own property worth a significant amount, this type of trust may be beneficial.
Making Considerations about Qualification for Medicaid
One benefit of gifting assets to beneficiaries prior to your passing would be to help you qualify for Medicaid, as Medicaid eligibility is income-based. It is important to note, however, that the gifts must be made more than five years prior to applying for Medicaid. Otherwise, you will incur a penalty and be unable to collect Medicaid for a portion of time equivalent to the amount you gifted divided by the cost of nursing home care in Maryland. Putting assets into a revocable trust will not incur this penalty, but the assets will still be counted as a part of your income to determine Medicaid eligibility.
Talk to a Maryland Estate Planning Attorney to Find the Right Estate Planning Solution for You
Deciding how your assets should be divided, whether before or after your passing, can be a complicated and stressful process. Estate planning is a vital tool for everyone, regardless of the size of their estate, and the best way to ensure your needs are met is to retain an experienced Maryland estate planning attorney to help you create an appropriate estate plan for you. The estate planning attorneys at Rodier Family Law want to help Maryland estate planners take control of their future and ensure their wishes are met. To learn more about the Maryland estate planning attorneys at Rodier Family Law, contact us today.