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3 expenses that can drastically reduce someone’s legacy

On Behalf of | Aug 24, 2023 | Estate Planning

Someone who invests the time and energy to create a thorough estate plan often wants to provide a specific standard of living for their loved ones after their death and/or leave a legacy that influences how people view them posthumously. Usually, having the biggest impact will require that someone makes smart decisions that maximize what people receive from their estate.

Sadly, testators in New Hampshire sometimes overlook factors that can drastically reduce how much their loved ones actually receive. There are certain kinds of financial obligations that take priority over the inheritance rights even of spouses and children when someone dies. If these expenses are not properly planned for, one’s legacy could be impacted significantly as a result.

Estate, income and capital gains taxes

Tax obligations don’t automatically end with someone’s death. Instead, some of those responsibilities transfer to their estate. The estate will provide the funding for someone’s last income tax return if they owe money. The estate itself could be responsible for income taxes if the sale of estate resources produces $600 in funds. The sale of large assets could trigger capital gains taxes. Finally, multi-million-dollar estates may be subject to federal estate taxes even though New Hampshire does not impose a state estate tax.

Personal debts

A successful professional might die with tens of thousands of dollars in student loans still due. They might have hospital bills from their final medical treatments prior to their death or large credit card balances. Unless someone has resources set aside to cover those responsibilities, their estate will have to pay those debts before anyone inherits property. Creditor claims in probate court can completely consume what someone may have intended for their loved ones to inherit.

Medicaid estate recovery claims

Many older adults rely on Medicaid benefits to pay for nursing home care or support in their homes in their golden years. Medicaid is only available to those with limited resources, and the state will seek repayment for any benefits utilized from an individual’s estate after their death. Family members may have to sell an individual’s home or liquidate their other remaining personal property because of estate recovery efforts initiated by the New Hampshire Medicaid program.

Probate costs also usually take precedence over the rights of beneficiaries and heirs. Planning for the financial obligations that could affect someone’s legacy may give a testator more control and peace of mind about what they’re leaving behind.

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