A fixed income could put your home at risk

On Behalf of | Dec 13, 2022 | Estate Planning |

Living on a fixed income is simply part of retired life. You have to scale back your daily cost of living expenses so that retirement savings, Social Security retirement benefits and possibly part-time income would be enough to pay all of your bills.

Evaluating your assets and carefully planning a realistic budget are key to financial stability during your retirement. You may also need to take steps to protect yourself against the possibility of unexpected complications. Perhaps your spouse ends up in a car crash and has rehabilitation costs that Medicare won’t cover. You need to address the possibility of facing expenses you can’t pay.

Anytime you find yourself in a position where someone can take legal action against you due to unpaid personal financial obligations, your house could be at risk. Those who engage in asset protection planning before retirement won’t have to worry about losing their home if they face a lawsuit later in life.

Creditors can come after your wages or your property

While you are still part of the workforce, a creditor taking you to court to force you to pay them back might ask for a garnishment of your wages. The state can intercept some of your income and send it directly to your creditor.

However, when you no longer have a job because you retired, creditors may come after your most valuable property. The courts can grant a lien against your home that can effectively force you to pay the debt with home equity when you refinance, sell or transfer the property. Creditors or lenders successfully placing a lien against your property could prevent you from transferring the home to your children as part of their inheritance when you die or leveraging it to fund your retirement.

How asset protection planning works

When you recognize that some of your assets could be vulnerable if you end up facing a lawsuit, you can act to protect that property. Asset protection planning often involves moving property into a trust or otherwise changing ownership so that it won’t be as vulnerable to lawsuits and creditor claims.

As added benefits, asset protection planning involving trusts will likely prevent Medicaid from forcing the sale of your home after you die and could streamline estate administration for your whole family. Taking the right steps to prepare for your golden years now will benefit you as you age and your loved ones after you die.