The average adult spends a lifetime accumulating property and then must make difficult decisions about assets when they retire. Heirlooms often wind up donated, forcing aging adults to downsize their own property for comfort and ease of estate administration later.
Once your children move out of the house, for example, you may be acutely aware of how you have more space than you personally need. When you start creating a detailed estate plan, you may realize that you have long stored items that no one in your family wants that you should get rid of now. Downsizing as you get older is a smart move, but it can lead to risk as well.
How do you protect yourself as you downsize property in your golden years?
Keep apprised of gift tax on capital gain rules
How much tax you have to pay for selling your personal property and how much you can give your family members without triggering taxes changes from year to year. Especially if you would like to make as much of a gift as possible for several years, it is important that you understand the tax implications of large gifts.
Selling your property can also trigger massive taxes, depending on the nature of the items. Collectibles like art can trigger particularly high tax rates when compared with other categories of property.
Think about how to protect those assets in the future
The property you want to keep, whether it is your prized collection of classic film memorabilia or your home, could be at risk if you accrued debt as you grow older. In fact, if you apply for Medicaid benefits, the state government could come after your property.
Asset protection planning can help preserve your assets from creditors’ claims as you grow older and from estate claims after you die. There are tools available for different assets, and your goal for what happens with those assets will also influence the best way to protect yourself while making big financial moves as you prepare for retirement.
Thinking about your long-term needs can help you protect yourself with a trust or other important estate planning documents as you age.
