By Chuck Roulet, Estate and Elder Law Planning Attorney | Licensed in Florida and Minnesota
A family I know had $900,000 between them when they sat their son down and explained the plan.
Paid-off home. Savings. A life insurance policy. Nearly a million dollars they had spent a lifetime building, all of it intended to pass to their two children when they were gone.
When both parents passed away, the children received $60,000. Between them.
Nothing went wrong. Nobody made a mistake. No one was careless or dishonest. The money disappeared because of three completely predictable, completely avoidable forces that the family simply never planned for.
Unfortunately, I see this all too often. Usually, it is a client coming in to work with us who watched their parents lose everything and who want to ensure it doesn’t happen to them. And the families it happens to are almost never the ones who ignored their finances. They are the ones who thought they had a plan.
The 3 Things Most Likely to Shrink — or Eliminate — Your Inheritance
1. Long-Term Care Costs
This is the single largest financial threat to any inheritance, and it is the one almost no family plans for adequately.
In Florida right now, a private room in a memory care facility or nursing home costs between $140,000 and $180,000 per year. In Minnesota, it runs $150,000 to $180,000. The average person with Alzheimer's disease requires three to five years of full-time residential care. At $150,000 a year for five years, that is $750,000 — most families' entire savings, gone before a single dollar is inherited.
And here is the assumption that makes this so much worse. Most families believe Medicare will cover it. Medicare does not cover long-term custodial care. It covers short-term skilled nursing following a hospitalization, and it stops after 100 days. For years of memory care, it provides essentially nothing.
Medicaid will pay for long-term care — but qualifying means spending down most assets first. And after your parent passes away, the state can file a claim against the estate to recover what Medicaid paid. The family home your parents intended to leave you can be required to be sold to reimburse the government.
This is the force that turned $900,000 into $60,000. And it is preventable with the right legal plan.
2. Probate — Slower, More Public, and More Expensive Than You Think
Most people know probate is something to avoid. Very few know how expensive it actually is.
In Florida, guidelines for attorney fees for probate are set by state statute and calculated on the gross value of the estate — not what is left after debts. On a $600,000 estate, the statutory attorney fee alone is $18,000. Add the personal representative fee, court costs, and other expenses, and a straightforward Florida probate can cost $25,000 to $45,000 — and take several months to a year or more to complete.
During that period, assets are frozen. Your family cannot access them. Everything sits in legal limbo — and it is all public record. Any neighbor, creditor, or distant relative can look up exactly what your parent owned and who received it.
A will does not avoid probate. A will almost guarantees probate. Assets held in a properly funded revocable living trust, by contrast, pass to beneficiaries privately, quickly, and without court involvement. Probate is a planning failure — and it is almost always preventable.
3. Income Taxes on Inherited Retirement Accounts
This is the one that surprises families most consistently — and the one many financial advisors underestimate as well.
When you inherit a traditional IRA or 401(k) from a parent, you inherit the tax liability along with the account. Every dollar you withdraw is taxable as ordinary income. And since the SECURE Act took effect in 2020, most adult children who inherit an IRA must fully withdraw — and pay taxes on — the entire account within ten years of the parent's death.
The old strategy — called the stretch IRA — where beneficiaries could take small distributions over their own lifetime and let the rest grow tax-deferred for decades — is gone for most people.
On a $300,000 inherited IRA, a working adult in a mid-range tax bracket could easily pay $75,000 to $105,000 in taxes across that ten-year window. Your $300,000 inheritance becomes $195,000 to $225,000 after taxes — before you spend a dollar of it.
There are strategies to reduce this. Roth conversions during the parent's lifetime, strategic beneficiary designation planning, timing distributions across the ten-year window. But all of them require advance planning. None of them can be done after the fact.
So What Can Actually Be Done?
Every one of these forces is addressable with the right legal plan, put in place at the right time.
A Medicaid Asset Protection Trust can shelter the family home and savings from nursing home spend-down and Medicaid estate recovery — but it requires a five-year lookback window, which means the sooner you start, the more protected you are.
A properly funded revocable living trust eliminates probate entirely — along with its costs, delays, and public exposure.
Roth conversion planning, coordinated between an estate planning attorney and a financial advisor, can significantly reduce the tax burden on inherited retirement accounts before the account owner passes.
For a complete breakdown of how each of these works — including real family stories, specific dollar figures for Florida and Minnesota, and the legal tools available at every stage — read our full article here: "Your Parents Think They're Leaving You $500K. Here's What You Might Actually Get."
Ready to Talk? Call Us Today.
Whether you are a parent who wants to make sure your intentions actually land, or an adult child who wants to understand the real risks to the inheritance you are counting on — a conversation with an experienced estate and elder law attorney is the most valuable step you can take.
Call us today to schedule your consultation at (941) 909-4644 for our Sarasota County, FL office or at (763) 420-5087 for our Minnetonka, MN office.
Or fill out the contact form on this page and a member of our team will reach out to schedule your consultation.
In the meantime, if you would like to discover more, here are some additional resources for you:
Free Resource: Download "Save Our Home"
Our free guide walks through exactly how families use legal planning to protect their home and savings from long-term care and nursing home costs — including strategies most families never hear about until it is too late.
Click here to download your copy.
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Roulet Law Firm, P.A. | Licensed in Florida and Minnesota | Nearly 30 Years of Experience | Rouletlaw.com
About the Author
Chuck Roulet is an estate and elder law planning attorney at Roulet Law Firm, P.A., with offices in Minnetonka, Minnesota and Venice, Florida. He is licensed in both states and has nearly 30 years of experience helping families protect their homes, life savings, and legacies. He has been featured in USA Today, CNN, The Epoch Times, and other national media, and is the author of several books including The Florida Snowbird Guide.
This post is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney regarding your specific situation.
