You want to be sure your heirs will receive as much of your estate as you can pass on to them. An important part of accomplishing this is to think about ways that you might lose money during your lifetime. From there, you can come up with estate plans that protect your wealth from unnecessary loss.
The Motley Fool provides some background on a few common ways individuals lose large amounts of money. Anticipating these risks to your assets is an important step to coming up with the right estate plan to address them.
Claims by creditors
If you run up large amounts of debt, creditors could come after your bank account or your property depending on the situation. By the end of the process, you could be out a lot of money that you had wanted your children to inherit. However, if you place certain possessions and money in an irrevocable trust, you may shield those assets from creditor claims.
Court judgments against you
If you own a business, you could expose your personal money to lawsuit risks unless you structure your business as an independent entity. This may also help you pass the business along to your children if you wish. As an alternative step, you could set up an irrevocable trust to protect your money in case you work in a profession that exposes you to greater lawsuit risk, like being a doctor.
Nursing home expenses
Think about your life when you become older and may require nursing home care. Staying in a nursing home can eat up a lot of your money, and you cannot qualify for Medicaid if you have too much in assets or income. To prepare for this possibility, you may create a Medicaid asset protection trust to house enough assets so that your asset threshold qualifies for the program.
