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Estate Planning Mistakes That Could Cost Your Family Thousands · The Legal Exchange

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  Speaker 1: This is The Legal Exchange with Todd Lutzke from the
• 0:04
  Speaker 1: law firm of Cushing & Dolan and Susan Powers of
• 0:07
  Speaker 1: the Armstrong Advisory Group. Each week, Todd and Susan will
• 0:10
  Speaker 1: discuss many topics, including estate planning, how to avoid probate,
• 0:13
  Speaker 1: and protecting your money from a nursing home. If you
• 0:16
  Speaker 1: need assistance in any of these areas or have a
• 0:18
  Speaker 1: question about another issue that may affect your future, call
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  Speaker 1: 866-848-5699 to make an appointment. That's 866-848-5699. Operators are standing by. Now,
• 0:31
  Speaker 1: here are your hosts, Todd Lutzke and Susan Powers.
• 0:37
  Speaker 2: Welcome into The Legal Exchange with Todd Lutzke. I'm Susan Powers,
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  Speaker 2: a financial advisor with the Armstrong Advisory Group, and I'm
• 0:44
  Speaker 2: joined by Todd Lutzke, a partner with the law firm
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  Speaker 2: of Cushing & Dolan with a master's in taxation.
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  Speaker 3: Welcome, Todd.
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  Speaker 2: How are you today?
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  Speaker 3: I'm never better than you.
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  Speaker 2: I'm great. Thank you. What do you have for us
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  Speaker 2: this week?
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  Speaker 3: You know, only one case.
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  Speaker 4: Okay.
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  Speaker 3: A Missouri appellate court case. And it's interesting because it's
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  Speaker 3: not really about the facts. This guy died with a
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  Speaker 3: trust and they ended up questioning whether or not the
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  Speaker 3: trustee of the trust breached their fiduciary duties. But it's
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  Speaker 3: more all about the language that was given to the trustee,
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  Speaker 3: which is sole and absolute discretionary powers over the documents,
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  Speaker 3: over the trust and how to handle things. And how
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  Speaker 3: did the court handle that language in deciding this case.
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  Speaker 3: And then I'm going to tell you all about why
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  Speaker 3: we use it for divorce proof and creditor protection. This
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  Speaker 3: is going to be a really good, good education. Now
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  Speaker 3: I'm not going to leave you hanging. We don't have only, yeah,
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  Speaker 3: we only have one, one case, but the second one
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  Speaker 3: is a real life story.
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  Speaker 2: Yeah.
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  Speaker 5: Yeah.
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  Speaker 3: I met this client, uh, 82 years old came in, uh,
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  Speaker 3: last week and, and wife died in January and he's
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  Speaker 3: got two kids, one estranged. And he basically never did
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  Speaker 3: any planning, kept putting it off, putting it off. And
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  Speaker 3: interestingly enough, he's worth about 5.6, 5.5 million. So we're
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  Speaker 3: going to see what the problems are in delaying your planning.
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  Speaker 3: And plus he's got one daughter that lives with him
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  Speaker 3: that he wants to take care of the rest of
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  Speaker 3: his life. So lots of interesting facts in this case.
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  Speaker 3: And I want to show you more about why there
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  Speaker 3: are so many issues when you don't plan. So please
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  Speaker 3: don't put it off. But folks, part of planning and
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  Speaker 3: part of putting your estate plan together might include gifting,
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  Speaker 3: or maybe not. People think gifting is really easy. We
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  Speaker 3: have the ability to give $ 15 million each without paying
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  Speaker 3: any gift tax these days. Sounds like a no-brainer. It's
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  Speaker 3: far from it. Folks, when you gift, you have to
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  Speaker 3: learn about capital gains tax issues, step up in basis
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  Speaker 3: that you lose. What about the estate tax savings versus
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  Speaker 3: the capital gains tax that I might be trapping? How
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  Speaker 3: do I give assets away? Do I want to control
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  Speaker 3: what I give away? Do I want to use trusts?
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  Speaker 3: Do I want to give away things where I can
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  Speaker 3: continue to enjoy what I gave away and still have
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  Speaker 3: it outside my estate? Are there any gift tax issues
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  Speaker 3: associated with it? Folks, there's so many things to think
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  Speaker 3: about in terms of gifting, not only how to gift,
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  Speaker 3: but what assets to gift. Call and get this guide
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  Speaker 3: and see if gifting is right for you. It gives
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  Speaker 3: you plenty of examples as to how and why gifting works.
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  Speaker 3: works and sometimes does not work. 866-848-5699 or LegalExchangeShow.com. Get
• 3:29
  Speaker 3: the guide. Again, 866-848-5699 or LegalExchangeShow.com. And you can also
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  Speaker 3: go to Cushing, Dolan, PC, our Instagram page for more information.
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  Speaker 3: Let's head over to Missouri. So in this case, we
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  Speaker 3: had an artist, Tom. Tom He died in 1975. Rita,
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  Speaker 3: his wife, died 11 weeks later. The trust they put
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  Speaker 3: together named, I guess, UMB Bank Trustee. The trust had artwork,
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  Speaker 3: had cash, had multiple real estate properties, had a lot
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  Speaker 3: of stuff in it. The trust also provided that it
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  Speaker 3: would divide all assets equally to the two kids. Held
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  Speaker 3: in trust for life.
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  Speaker 5: Good.
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  Speaker 3: I like this. The son, TP, he died... in 2010.
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  Speaker 3: Never married, no kids. So his share actually rolled into
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  Speaker 3: his sister's, Jesse's share. Okay. Again, working exactly the way
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  Speaker 3: trusts are supposed to work. Well, in 2019, Jesse and
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  Speaker 3: her kids decided to file a complaint against the trust
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  Speaker 3: for a whole plethora of things. Breach of trust duties,
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  Speaker 3: avoidance of self-dealing transactions, violations of the Prudent Investor Act,
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  Speaker 3: specifically failing to get proper valuations when selling artwork. And
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  Speaker 3: you lost some artwork.
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  Speaker 2: Lost it.
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  Speaker 1: Wow.
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  Speaker 3: There's a lot going on there. Well, the trial court
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  Speaker 3: rejected almost every single claim and complaint that they put together.
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  Speaker 3: And the trial court said the bank as trustee was
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  Speaker 3: given absolute sole discretion as it relates to dealing with
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  Speaker 3: trust assets. However, the bank did admit that it lost
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  Speaker 3: five pieces of artworks valued at $ 35, 000. And so they
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  Speaker 3: awarded Jesse $ 35, 000. Wow. Okay. Well, Jesse wasn't happy with that. No.
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  Speaker 3: So she appealed. The appellate court affirmed the trial court,
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  Speaker 3: concluding that the bank did not breach any fiduciary duty
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  Speaker 3: in not obtaining contemporaneous art appraisals. had sole discretion on
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  Speaker 3: how to handle all the trust assets, and Jesse would
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  Speaker 3: be needing to show that the bank abused its discretion
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  Speaker 3: and acted arbitrarily, but she could not do that. So
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  Speaker 3: that was the end of that. And I kind of
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  Speaker 3: like this, okay? I kind of like this decision, but
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  Speaker 3: let's talk about it from another perspective. We don't care
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  Speaker 3: about whether or not the art was valued in this case.
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  Speaker 3: What do we care about? We care about that a
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  Speaker 3: trust was done and that planning worked and how powerful
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  Speaker 3: the words soul discretion are versus a HEM standard, versus
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  Speaker 3: a health, education, maintenance, and support. If I pay it
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  Speaker 3: out for those reasons versus, nope, I got soul discretion.
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  Speaker 3: Big difference. So let's explore that. Okay. The trust, first
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  Speaker 3: of all, let's explore what the trust does. First of all,
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  Speaker 3: it likely provided for both spouses, which is nice. It
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  Speaker 3: had probably a general marital share, a state marital share,
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  Speaker 3: a Q-tip share, and a bypass share. It probably had
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  Speaker 3: built in, reduced the language, those buckets that were in
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  Speaker 3: there for each spouse allowed it to reduce the estate
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  Speaker 3: tax liability and avoid probate. Remember, folks, all these things
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  Speaker 3: are happening. Again, I don't care about the artwork being valued.
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  Speaker 3: All these things happened for the family because of this
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  Speaker 3: trust plan that was in place. Okay, so that goes
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  Speaker 3: on for both spouses. Then they both die. Well, now what?
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  Speaker 3: Now we divide everything into equal shares for the buckets
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  Speaker 3: for the kids, probably held in trust for their life,
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  Speaker 3: which is what it said. in which discretionary distributions could
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  Speaker 3: be paid out. So this is how I would have
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  Speaker 3: drafted it. Cushing and Dolan would have drafted it. We
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  Speaker 3: would have drafted it by putting in sole discretionary language.
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  Speaker 3: There we go again. So how does that work? The
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  Speaker 3: trustee in this case was a bank. We might have
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  Speaker 3: said that the independent trustee would be an accountant or
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  Speaker 3: a lawyer. Or let the children pick. So if the
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  Speaker 3: kids are level-headed, right, then I suggest that They get
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  Speaker 3: the power to remove and replace the disinterested trustee. So
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  Speaker 3: their level had to let them pick the independent trustee.
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  Speaker 3: And if they get mad at the independent trustee, let
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  Speaker 3: them remove the independent trustee. Also, the kids could be
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  Speaker 3: given the role of general trustee. So here I think
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  Speaker 3: the bank was both.
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  Speaker 2: Everything, yeah.
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  Speaker 3: I think the bank was serving as the general trustee
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  Speaker 3: and as the distribution trustee, if you want to call
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  Speaker 3: it that. So in this case, I would say, you
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  Speaker 3: know what? If you kids are level-headed, you could be
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  Speaker 3: the general trustee, but not the distribution trustee. But you
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  Speaker 3: can pick that independent trustee and remove and replace as
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  Speaker 3: you see fit. Okay. So if that's the case, this
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  Speaker 3: sole discretionary power to the distribution trustee and the fact
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  Speaker 3: that the kids don't own the property in the trust
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  Speaker 3: is what protects it from future divorces, is what protects it.
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  Speaker 3: from being taxed when they die.
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  Speaker 2: Right, because then it rolls to your grandkiddos.
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  Speaker 3: Just like this one did.
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  Speaker 2: Without being taxed.
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  Speaker 3: Estate tax-free. So in this case, it would roll to
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  Speaker 3: the grandchildren, estate tax-free. That's the bloodline planning that's built
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  Speaker 3: into something like this. And here, when one child dies
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  Speaker 3: without kids, as was the case, so it went to
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  Speaker 3: the surviving child, which is fine, but we might have
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  Speaker 3: that power to remove and replace the disinterested trustee, which
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  Speaker 3: allows the child who... A lot of power, meaning they
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  Speaker 3: could basically empty the trust if they really wanted to
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  Speaker 3: by picking their buddy. And that's okay because in this case,
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  Speaker 3: if this child knew they were not married and getting
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  Speaker 3: older and they had no kids, rather than die and
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  Speaker 3: leave it all to the sibling, I might say, I
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  Speaker 3: just want it and I want to go have fun
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  Speaker 3: with it.
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  Speaker 1: Sure.
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  Speaker 3: Well, that would be okay too. But by the same token,
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  Speaker 3: the child in this case did the right thing by saying,
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  Speaker 3: you know what? I don't have kids. I take it
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  Speaker 3: as I need it, and I want it to go
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  Speaker 3: to my nieces and nephews.
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  Speaker 2: And as long as they understand what the guardrails are
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  Speaker 2: there for and understand if they're going to empty it,
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  Speaker 2: what the implications of that are, I mean, it gives
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  Speaker 2: them that discretion to do it.
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  Speaker 3: Yeah, it's flexibility built in, but all the control, all
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  Speaker 3: the benefits. My point of this case was, folks, that's
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  Speaker 3: sole discretionary language. showing you the court really honors it,
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  Speaker 3: and it provides tons of benefits. So when we tell
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  Speaker 3: you to do this kind of planning, it works. Folks,
• 10:08
  Speaker 3: and the other thing that you need to know about
• 10:10
  Speaker 3: planning is gifting. So call and get the guide, Making
• 10:12
  Speaker 3: the Most of Gifting Your Assets, 866-848- 5699 or LegalExchangeShow.com
• 10:20
  Speaker 3: and you can download it right there.
• 10:22
  Speaker 2: You've been listening to Todd Lutzke, a partner with the
• 10:24
  Speaker 2: law firm of Cushing and Dolan. I'm Susan Powers, a
• 10:28
  Speaker 2: financial advisor with the Armstrong Advisory Group. We'll be back
• 10:31
  Speaker 2: in just a few minutes to The Legal Exchange with
• 10:34
  Speaker 2: Todd Lutzke.
• 10:36
  Speaker 1: Giving assets to your children during your lifetime may sound
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  Speaker 1: like a simple way to pass along your wealth, but
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  Speaker 1: the way you make the gift can have important tax consequences.
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  Speaker 1: Cushing and Dolan's new guide, Making the Most of Gifting Assets,
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  Speaker 1: make a big difference. Get Cushing and Dolan's new guide,
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  Speaker 2: You've been saying one more year for the past five years,
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  Speaker 1: You're listening to The Legal Exchange with Todd Lutzke, an
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  Speaker 1: expert in elder life planning and taxation. Need help with
• 13:43
  Speaker 1: your estate plan? Call Todd right now and make an appointment.
• 13:46
  Speaker 2: 866-848-5699.
• 13:46
  Speaker 1: That's 866-848-5699.
• 13:54
  Speaker 2: Welcome back into The Legal Exchange with Todd Lutzke. I'm
• 13:57
  Speaker 2: Susan Powers, a financial advisor with the Armstrong Advisory Group,
• 14:01
  Speaker 2: and I'm joined by Todd Lutzke, a partner with a
• 14:03
  Speaker 2: law firm of Cushing and Dolan with a master's in taxation.
• 14:06
  Speaker 2: Where are we headed now, Todd?
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  Speaker 6: Nowhere.
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  Speaker 3: We're going to a real-life story. We're going to stay
• 14:11
  Speaker 3: right here, Susan. Excellent. This is a situation that I
• 14:16
  Speaker 3: think we're going to learn a lot from about delay. Susan,
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  Speaker 3: we talk about people procrastinating. Procrastinators. All the time. And
• 14:25
  Speaker 3: you hear the word procrastination. You think that means nothing.
• 14:28
  Speaker 3: It means a lot. Sure.
• 14:30
  Speaker 2: Big implications.
• 14:31
  Speaker 3: And so let's play out the string here. So I
• 14:34
  Speaker 3: have this 82 year old gentleman comes into my office
• 14:38
  Speaker 3: and he says, Todd, I, I put off my planning
• 14:41
  Speaker 3: a long time. He walks in, sits down and tells
• 14:44
  Speaker 3: me that my wife died January of 2026.
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  Speaker 5: Okay.
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  Speaker 3: And, and We never had any planning done, even though
• 14:54
  Speaker 3: I've been trying to do my planning and I listened
• 14:56
  Speaker 3: to the show, all that stuff. I'm like, okay. He goes,
• 14:59
  Speaker 3: and just keep putting it off. I get it. So
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  Speaker 3: it turns out that he's got a house worth about $ 600, 000.
• 15:08
  Speaker 3: He's got an IRA account in his name worth about 2.6 million.
• 15:11
  Speaker 3: And folks, the kind of assets I'm talking about are
• 15:14
  Speaker 3: very important here. He's got a house, 2.6 million in
• 15:18
  Speaker 3: an IRA account. Another $ 2. 3 million, about $ 300, 000- ish or so
• 15:23
  Speaker 3: in cash, money markets, and CDs. And about $ 2 million
• 15:26
  Speaker 3: in various annuities, non-qualified annuities. Okay. Well, he has two kids.
• 15:35
  Speaker 3: One son who, for the last 15 years, has been estranged.
• 15:38
  Speaker 3: And that son has a child, so he's got one grandchild.
• 15:43
  Speaker 3: He's got one daughter. who actually lives with him. And
• 15:47
  Speaker 3: he explained to me that, you know, she's just not
• 15:49
  Speaker 3: very good with money or investing and, and, you know,
• 15:52
  Speaker 3: also not married and has no kids. And I, I
• 15:55
  Speaker 3: don't know, she's like 45 or 50 or something. Yeah. And,
• 15:59
  Speaker 3: and he said, you know, I just really want to
• 16:02
  Speaker 3: be able to take care of her. He has long-term
• 16:05
  Speaker 3: care insurance that pays out about 6,000 a month. Again,
• 16:08
  Speaker 3: nice mid policy, not a bite out of it. Yeah.
• 16:11
  Speaker 3: Not a Cadillac, but, but good. Um, And he now says,
• 16:16
  Speaker 3: I want to finally get my estate plan in order
• 16:18
  Speaker 3: and I want to provide for my daughter really for
• 16:21
  Speaker 3: her whole life. She's actually 46 years old. And I
• 16:26
  Speaker 3: want to figure out how best to do that. Oh,
• 16:29
  Speaker 3: and I also want to protect my assets from the
• 16:31
  Speaker 3: nursing home. So he gives me this laundry list of
• 16:36
  Speaker 3: his wish list. And folks, this is where you really
• 16:40
  Speaker 3: got to sit down and I tell people, As attorneys,
• 16:43
  Speaker 3: you've heard us, they call us counselors. I don't really,
• 16:46
  Speaker 3: but I guess we are.
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  Speaker 6: You are.
• 16:48
  Speaker 2: You have to counsel them.
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  Speaker 3: And here, you know, sometimes you're going to see when
• 16:51
  Speaker 3: I go through this to try to answer his questions
• 16:54
  Speaker 3: about how we're going to proceed. You have to tell
• 16:58
  Speaker 3: clients sometimes what they want is not what they need.
• 17:02
  Speaker 3: And so I think that's as important as a job
• 17:05
  Speaker 3: as doing the right thing for the client. So I'm
• 17:08
  Speaker 3: going to explain that. And I'm also going to explain
• 17:10
  Speaker 3: to you not only what we're going to do for him,
• 17:12
  Speaker 3: But what was the real problem here from the fact
• 17:17
  Speaker 3: that his wife died seven months ago, eight months ago?
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  Speaker 2: Ten, if you're looking to do the math.
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  Speaker 3: Oh, ten months ago. January, yeah. Ten months ago, and
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  Speaker 3: no planning was done. How painful is that now from
• 17:33
  Speaker 3: a tax perspective?
• 17:35
  Speaker 2: Lost opportunity for sure.
• 17:36
  Speaker 3: I'm going to show you all that, folks. Before I do, though,
• 17:39
  Speaker 3: I want you to remember we're giving away this guide.
• 17:41
  Speaker 3: It's making the most of gifting. Here, you know, is
• 17:45
  Speaker 3: gifting an opportunity for him? Well, we'll talk about that. Sometimes,
• 17:48
  Speaker 3: you know, when you're single, you say, I'm going to
• 17:49
  Speaker 3: hurry up and give things away to save mass taxes.
• 17:52
  Speaker 3: Maybe it's not the best thing to do. When you're
• 17:54
  Speaker 3: giving away assets, you have to make sure that what
• 17:56
  Speaker 3: you're saving and what the two taxes are that you're saving.
• 18:00
  Speaker 3: If I'm saving, you know, 10, 15% in mass estate taxes,
• 18:04
  Speaker 3: but I'm giving away assets that trap capital gains that
• 18:07
  Speaker 3: are potentially 28.8% plus a 4% millionaire's tax in mass,
• 18:12
  Speaker 3: that's not worth it. So folks, you got to understand
• 18:16
  Speaker 3: step up in basis, low basis assets versus high basis assets.
• 18:20
  Speaker 3: Which assets should I give away? Which assets should I keep?
• 18:23
  Speaker 3: Should I make gifts at all? Should I gift to trusts?
• 18:26
  Speaker 3: I don't want to give it outright to my kids.
• 18:28
  Speaker 3: Is there ways to give it where I can control
• 18:30
  Speaker 3: it and enjoy it for myself? Let's face it. I
• 18:36
  Speaker 3: as you think. Call and get the guide and see
• 18:39
  Speaker 3: how gifting fits into your estate plan. 866-848-5699 or LegalExchangeShow.com. Again,
• 18:52
  Speaker 3: 866-848-5699 or LegalExchangeShow.com. You can also go to Cushing, Dolan, PC,
• 18:57
  Speaker 3: our Instagram page for more information.
• 19:00
  Speaker 2: So many people don't plan in advance, Todd.
• 19:02
  Speaker 3: Oh, it's crazy. Well, let's talk about it. Let's go
• 19:06
  Speaker 3: with the problem first. Yes.
• 19:08
  Speaker 1: Right?
• 19:09
  Speaker 3: So in short, when you talk about estate plans, the
• 19:14
  Speaker 3: tax problems sort of jump off the page. What results
• 19:18
  Speaker 3: do we have here from his failure to get his
• 19:21
  Speaker 3: estate plan done? I want to start with that. So
• 19:25
  Speaker 3: if he dies tomorrow, his estate is worth $ 5. 5 million. Minus...
• 19:34
  Speaker 3: Minus $ 2 million for mass exemption.
• 19:38
  Speaker 2: So three and a half.
• 19:39
  Speaker 3: Leaves a three and a half estate value. The tax due,
• 19:42
  Speaker 3: about $ 605, 000.
• 19:42
  Speaker 5: Okay.
• 19:43
  Speaker 3: Give or take close to 15%. However, if they are
• 19:47
  Speaker 3: a married couple before his wife died, let's say in 2025,
• 19:50
  Speaker 3: they got together and they put together a simple joint
• 20:09
  Speaker 3: revocable trust.
• 20:10
  Speaker 5: Yep.
• 20:11
  Speaker 3: And put the home in, because they could, and put
• 20:16
  Speaker 3: the other assets in.
• 20:19
  Speaker 2: The non-retirement assets.
• 20:20
  Speaker 3: The non-IRA assets. You cannot, you're right, you cannot put
• 20:24
  Speaker 3: the IRA money in to the trust. Well, that would
• 20:27
  Speaker 3: total about $ 2. 9 million.
• 20:29
  Speaker 2: Okay.
• 20:31
  Speaker 3: Upon death of the wife, the IRA would pass directly
• 20:36
  Speaker 3: to the husband.
• 20:37
  Speaker 5: Mm-hmm.
• 20:37
  Speaker 3: And the 2.9 million would be in the trust.
• 20:40
  Speaker 5: Yep.
• 20:41
  Speaker 3: Fine. It's a joint trust, which is why we did
• 20:44
  Speaker 3: one trust and not two. So many people still, I
• 20:48
  Speaker 3: still get the comments. Oh, geez. I didn't even know
• 20:50
  Speaker 3: you could do a joint trust. I mean, I hear
• 20:52
  Speaker 3: this in the legal world. It's just mind blowing. Okay.
• 20:56
  Speaker 3: So we've got a joint trust. So now I know
• 20:59
  Speaker 3: the full 2 million of the 2.9 million. will be
• 21:04
  Speaker 3: pulled and deposited into the remainder share of that joint trust,
• 21:09
  Speaker 3: which is now irrevocable for the benefit of the husband
• 21:14
  Speaker 3: in this case. And $ 900, 000 left over would go into
• 21:19
  Speaker 3: the marital share, again, for the husband. But now we've
• 21:26
  Speaker 3: sheltered $ 2 million in the remainder share from ever being
• 21:30
  Speaker 3: taxed when husband dies.
• 21:31
  Speaker 2: When he dies, okay.
• 21:32
  Speaker 3: That's tucked away. It can grow estate tax-free for the kids.
• 21:37
  Speaker 2: So his $ 3. 5 million taxable estate in the first example,
• 21:42
  Speaker 2: the reality of it, would not be a $ 3. 5 million
• 21:45
  Speaker 2: estate if they had done planning.
• 21:47
  Speaker 3: It would be 5.5 minus 2. So his estate is
• 21:48
  Speaker 3: now 3.5.
• 21:49
  Speaker 2: Yeah.
• 21:49
  Speaker 3: But wait. He has his own $ 2 million exemption. Yeah.
• 22:01
  Speaker 3: So if you take three and a half minus two,
• 22:04
  Speaker 3: you're down to one and a half. The tax due
• 22:07
  Speaker 3: on one and a half is about.
• 22:08
  Speaker 1: $ 165, 000. Wow.
• 22:08
  Speaker 3: And it was $ 605, 000 without any planning.
• 22:09
  Speaker 2: You want to talk about painful.
• 22:17
  Speaker 3: About a $ 400, 000 savings. Now, folks, this is true because
• 22:21
  Speaker 3: people forget. Remember, Massachusetts used to only have a million
• 22:24
  Speaker 3: dollar exemption and everybody got excited in 2023 when the
• 22:27
  Speaker 3: exemption went to two million. And I did too. But
• 22:33
  Speaker 3: then I immediately started telling clients, now it costs you
• 22:36
  Speaker 3: twice as much if you don't plan. It's twice as
• 22:40
  Speaker 3: expensive not to plan. And this is that example. All right. Well,
• 22:47
  Speaker 3: We're stuck with that. We can't do much more. So
• 22:49
  Speaker 3: that's the joint trust, right? And it's better to do
• 22:52
  Speaker 3: a trust like that. Now, even at the end of
• 22:54
  Speaker 3: the day, you know, make sure we just went on
• 22:57
  Speaker 3: and took care of his daughter. We put language in
• 22:59
  Speaker 3: there that said he didn't care about grandchildren. There isn't
• 23:02
  Speaker 3: any of that. He just said, I want this to
• 23:04
  Speaker 3: pay out and empty by her reaching age 80. That's okay.
• 23:08
  Speaker 3: That way she constantly gets a flow of money. There's
• 23:11
  Speaker 3: no risk. We're not creditor protecting it. But we didn't
• 23:14
  Speaker 3: give her, we gave an independent trustee the power to
• 23:17
  Speaker 3: make sole discretionary distributions for more if she needed it,
• 23:21
  Speaker 3: but not the power to remove and replace. Folks, so
• 23:24
  Speaker 3: much to think about. I can't get it all out.
• 23:26
  Speaker 3: Call and get the guide, though. It's the most of
• 23:28
  Speaker 3: making gifts. See if it fits into your estate plan.
• 23:32
  Speaker 2: 866-848-7000.
• 23:35
  Speaker 3: 5-6-9-9 or LegalExchangeShow.com.
• 23:38
  Speaker 2: You've been listening to Todd Lutzke, a partner with the
• 23:41
  Speaker 2: law firm of Cushing & Dolan. I'm Susan Powers, a
• 23:44
  Speaker 2: financial advisor with the Armstrong Advisory Group. Todd will be
• 23:48
  Speaker 2: answering your listener questions when we return to The Legal
• 23:51
  Speaker 2: Exchange with Todd Lutzke.
• 23:54
  Speaker 1: Giving assets to your children during your lifetime may sound
• 23:56
  Speaker 1: like a simple way to pass along your wealth, but
• 23:59
  Speaker 1: the way you make the gift can have important tax consequences.
• 24:02
  Speaker 1: Cushing and Dolan's new guide, Making the Most of Gifting Assets,
• 24:06
  Speaker 1: explains what you should consider before transferring property, investments, or
• 24:09
  Speaker 1: other appreciative assets to your family. If you give away
• 24:12
  Speaker 1: an asset too soon, your children could end up with
• 24:15
  Speaker 1: a larger tax bill when they eventually sell it. In
• 24:17
  Speaker 1: some cases, holding on to that asset and letting your
• 24:20
  Speaker 1: children inherit it later could reduce the capital gains tax
• 24:23
  Speaker 1: they have to pay. That's why gifting isn't just about
• 24:25
  Speaker 1: what you give. When and how you give it can
• 24:28
  Speaker 1: make a big difference. Get Cushing and Dolan's new guide,
• 24:31
  Speaker 1: Making the Most of Gifting Assets, by calling 866-848-5699.
• 24:33
  Speaker 3: That's 866-848-5699.
• 24:33
  Speaker 1: Or you can request the guide online by visiting LegalExchangeShow.com.
• 24:43
  Speaker 1: The proceeding was paid for and the views expressed are
• 24:45
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 24:47
  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 24:50
  Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
• 24:52
  Speaker 1: other and are not affiliated.
• 24:55
  Speaker 7: For 10 years now, Circle K has been a proud
• 24:58
  Speaker 7: supporter of the DAV Department of Massachusetts. And Circle K
• 25:01
  Speaker 7: is honored to continue the partnership as the official convenience
• 25:04
  Speaker 7: store of the DAV Department of Mass. The DAV Massachusetts
• 25:08
  Speaker 7: helps veterans and their families access the benefits, resources, and
• 25:12
  Speaker 7: support they earn through their service. At Circle K, supporting
• 25:15
  Speaker 7: our veterans is more than a sponsorship.
• 25:18
  Speaker 1: It's a commitment.
• 25:19
  Speaker 7: Circle K, proudly supporting the DAV Department of Massachusetts for
• 25:22
  Speaker 7: 10 years strong.
• 25:24
  Speaker 5: Your life changes over time, and the amount you keep
• 25:27
  Speaker 5: in your emergency fund may need to change with it.
• 25:30
  Speaker 5: This is Mike Armstrong from the Armstrong Advisory Group. Our
• 25:32
  Speaker 5: new guide, Building and Sizing Your Emergency Fund, can help
• 25:36
  Speaker 5: you take a fresh look at the money you've set
• 25:38
  Speaker 5: aside for the unexpected. A new job, a move, a
• 25:41
  Speaker 5: growing family, or a sudden change in your income can
• 25:44
  Speaker 5: all affect how much you need in reserve. The guide
• 25:47
  Speaker 5: can help you review your essential monthly expenses, set a
• 25:50
  Speaker 5: target for your emergency savings, and decide where that money
• 25:53
  Speaker 5: should be kept so it's accessible when you need it.
• 25:56
  Speaker 5: Get your free copy of Building and Sizing Your Emergency
• 25:59
  Speaker 5: Fund by calling the Armstrong Advisory Group at 800-393-4001. That's 800-393-4001,
• 26:01
  Speaker 5: or you can request the guide online at armstrongadvisory.com.
• 26:11
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 26:14
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 26:16
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 26:18
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 26:21
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 26:23
  Speaker 1: advisory services. Giving assets to your children during your lifetime
• 26:27
  Speaker 1: may sound like a simple way to pass along your wealth,
• 26:29
  Speaker 1: but the way you make the gift can have important
• 26:32
  Speaker 1: tax consequences. Cushing and Dolan's new guide, Making the Most
• 26:35
  Speaker 1: of Gifting Assets, explains what you should consider before transferring property, investments,
• 26:40
  Speaker 1: or other appreciative assets to your family. If you give
• 26:43
  Speaker 1: away an asset too soon, your children could end up
• 26:45
  Speaker 1: with a larger tax bill when they eventually sell it.
• 26:48
  Speaker 1: In some cases, holding on to that asset and letting
• 26:51
  Speaker 1: your children inherit it later could reduce the capital gains
• 26:53
  Speaker 1: tax they have to pay. That's why gifting isn't just
• 26:56
  Speaker 1: about what you give. When and how you give it
• 26:58
  Speaker 1: can make a big difference. Get Cushing and Dolan's new guide,
• 27:02
  Speaker 1: Making the Most of Gifting Assets, by calling 866-848-5699. That's 866-848-5699.
• 27:10
  Speaker 1: Or you can request the guide online by visiting LegalExchangeShow.com.
• 27:14
  Speaker 1: The proceeding was paid for and the views expressed are
• 27:16
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 27:18
  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 27:21
  Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
• 27:23
  Speaker 1: other and are not affiliated. You're listening to The Legal Exchange,
• 27:27
  Speaker 1: and it's time for Ask Todd, the segment where Todd
• 27:31
  Speaker 1: will answer your questions about anything and everything that's included
• 27:34
  Speaker 1: in the estate planning process. Once again, here's Todd Lutzke
• 27:38
  Speaker 1: and Susan Powers.
• 27:41
  Speaker 2: Welcome back, Todd. We have a few questions from listeners
• 27:44
  Speaker 2: for you. First question comes from Marilyn in Hyannis, Mass.,
• 27:48
  Speaker 2: and Marilyn writes, I have three children and five grandchildren.
• 27:51
  Speaker 2: I would like to leave a little extra to one
• 27:53
  Speaker 2: of my granddaughters when I pass because she has some
• 27:56
  Speaker 2: health concerns. Am I able to do this without my
• 28:00
  Speaker 2: other beneficiaries finding out? Would it be better to revise
• 28:04
  Speaker 2: my trust with you or just name her as a
• 28:06
  Speaker 2: beneficiary on an account?
• 28:08
  Speaker 3: Oh, there's a lot more questions than I was expecting there.
• 28:12
  Speaker 2: Well, she's your client, by the way. This is a
• 28:13
  Speaker 2: mutual client of ours.
• 28:15
  Speaker 3: Okay, so the trust is my trust?
• 28:17
  Speaker 2: Your trust.
• 28:19
  Speaker 3: And it's irrevocable. Okay. So that's all extra little facts
• 28:23
  Speaker 3: that really matter.
• 28:25
  Speaker 2: So she does leave some to the grandkids and her
• 28:28
  Speaker 2: kids in the trust.
• 28:29
  Speaker 3: And, you know, I say that matters because first, I
• 28:32
  Speaker 3: think this is going to be helpful from, you know,
• 28:35
  Speaker 3: for other listeners, just because, you know, it's an irrevocable trust.
• 28:39
  Speaker 3: And I'm going to tell you that you can change it.
• 28:41
  Speaker 3: I mean, to me, that goes a long way for
• 28:44
  Speaker 3: clients that are so, you know, sort of caught up
• 28:46
  Speaker 3: with the word irrevocable that they can't get past it.
• 28:50
  Speaker 3: And they think they have no control. And I'm telling you, look,
• 28:53
  Speaker 3: some trusts, even like this one, you can actually change
• 28:56
  Speaker 3: an irrevocable trust. So query how irrevocable it is. But
• 29:00
  Speaker 3: it is irrevocable, but you can change it. So the
• 29:03
  Speaker 3: first question is, yes, you can change it. Easy peasy.
• 29:06
  Speaker 3: Next question is, can you do it without other beneficiaries
• 29:09
  Speaker 3: finding out? Another quick yes. Because It's your trust, and
• 29:14
  Speaker 3: you retain the power as donor to exercise a limited
• 29:20
  Speaker 3: power of appointment to change the beneficiaries of a trust,
• 29:25
  Speaker 3: but limited, that's why it's a limited power of appointment,
• 29:28
  Speaker 3: limited to a class of people consisting of a group
• 29:33
  Speaker 3: that you listed when you started the trust. In this case,
• 29:37
  Speaker 3: the class of beneficiaries would be kids of all generations
• 29:43
  Speaker 3: and probably throw in charity. So you can't add Cousin
• 29:46
  Speaker 3: Vinny later, but you can change amongst that group. And
• 29:54
  Speaker 3: the beneficiaries, the grandchildren are in the group of kids
• 29:59
  Speaker 3: of all generation so so yes you're going to be
• 30:02
  Speaker 3: able to change this and since you have the power
• 30:06
  Speaker 3: nobody else needs to know.
• 30:07
  Speaker 2: The trustee will know because they're gonna.
• 30:10
  Speaker 3: The trustee will not know this is when you die
• 30:14
  Speaker 3: oh the not i i thought while we're alive we
• 30:16
  Speaker 3: don't want anybody to know not when alive while we're
• 30:18
  Speaker 3: alive we don't want anybody to know and nobody needs
• 30:21
  Speaker 3: to know right just you don't or come in sit
• 30:24
  Speaker 3: with the lawyer we'll take care of you we'll change
• 30:27
  Speaker 3: the beneficiaries as you wish You're right. When you die,
• 30:32
  Speaker 3: ultimately beneficiaries will get to know what they're getting.
• 30:36
  Speaker 5: Individually.
• 30:36
  Speaker 2: And the trustee will know because they're going to pay
• 30:38
  Speaker 2: it out.
• 30:38
  Speaker 3: And the trustee will know, certainly, because they're going to
• 30:41
  Speaker 3: pay it out.
• 30:41
  Speaker 2: But they can't tell the other beneficiaries what you're getting,
• 30:45
  Speaker 2: what everyone's getting, right?
• 30:47
  Speaker 3: They don't have to do that. I mean, if you
• 30:49
  Speaker 3: really want to be secret about it, technically, if a
• 30:52
  Speaker 3: kid says, I want to see the trust, you might
• 30:55
  Speaker 3: be able to give them just the page that shows
• 30:57
  Speaker 3: his piece that's his pertains to them yeah you don't
• 31:00
  Speaker 3: have to show the whole amount but you redact it
• 31:02
  Speaker 3: yeah i mean you could you could redact i mean
• 31:04
  Speaker 3: at the end of the day it's it's you know
• 31:07
  Speaker 3: you got you can do an accounting if they want
• 31:09
  Speaker 3: one so they can i guess see what goes in
• 31:10
  Speaker 3: and out of the trust but technically it's good to
• 31:13
  Speaker 3: have just that.
• 31:13
  Speaker 2: Would she be better off just changing a beneficiary on
• 31:17
  Speaker 2: say an ira that.
• 31:18
  Speaker 3: She has Yeah, so that was the next question. Do
• 31:20
  Speaker 3: I want to just change an account? Well, I'm going
• 31:23
  Speaker 3: to say you could do that, and that saves you
• 31:25
  Speaker 3: some legal fees. You don't have to change the trust,
• 31:29
  Speaker 3: which is important. You don't have to just exercise the
• 31:32
  Speaker 3: power of appointment, which, by the way, means your will
• 31:34
  Speaker 3: needs to go to probate to change the trust. So
• 31:37
  Speaker 3: yes to those things. The downside of that is this
• 31:41
  Speaker 3: is an item that's not protected from the nursing home,
• 31:44
  Speaker 3: just out there, and when you die, that account may
• 31:47
  Speaker 3: or may not Oh, still be there. Exist. And so
• 31:50
  Speaker 3: if you really want this person to get something more,
• 31:55
  Speaker 3: I would say change the trust and make that switch.
• 31:58
  Speaker 3: So again, I think great news just for folks to
• 32:01
  Speaker 3: understand how flexible these irrevocable trusts can be. And folks,
• 32:05
  Speaker 3: these irrevocable trusts, when you put money in them, put
• 32:08
  Speaker 3: assets in them, it's not even a gift. But the
• 32:11
  Speaker 3: guide we're giving away tells you how to make gifts
• 32:14
  Speaker 3: and what's the most you can make out of your gifting.
• 32:17
  Speaker 3: And so It actually talks about what happens when you
• 32:20
  Speaker 3: set up a joint account, bank or investment. What about
• 32:24
  Speaker 3: from a Medicaid perspective, never mind just gifting perspective? It
• 32:28
  Speaker 3: also talks about, you know, how to gift assets. So, folks,
• 32:32
  Speaker 3: do you want trusts? Do you want to give away
• 32:34
  Speaker 3: low basis assets, high basis assets? There's so many taxes
• 32:39
  Speaker 3: involved in gifting assets. that you really need to understand
• 32:42
  Speaker 3: whether gifting is right for you or not. And there's
• 32:45
  Speaker 3: plenty of examples in the guide. It's about 10, 12
• 32:47
  Speaker 3: pages long. 866-848-5699 or LegalExchangeShow.com. Again, 866-848-5699 or LegalExchangeShow.com. You
• 33:03
  Speaker 3: can download it right there. Otherwise, you can go to Cushing,
• 33:06
  Speaker 3: Dolan PC as well for more information on Instagram.
• 33:09
  Speaker 2: Our last question comes from Jonathan in Springfield, Mass. And
• 33:12
  Speaker 2: Jonathan writes, what happens when a beneficiary designation differs from
• 33:17
  Speaker 2: what is in a will? My mother's intention was to
• 33:20
  Speaker 2: divide all of her assets equally between myself and my sister,
• 33:24
  Speaker 2: as was stated in her will. However, I have learned
• 33:27
  Speaker 2: that she had several accounts that listed just my sister
• 33:31
  Speaker 2: as a beneficiary. Does the will supersede these designations to
• 33:35
  Speaker 2: honor her wishes? What happens to the accounts held jointly
• 33:38
  Speaker 2: between my mother and my sister?
• 33:40
  Speaker 3: So we've got joint accounts and some with designated beneficiaries, right?
• 33:45
  Speaker 3: So we've got some that are joint, some that are
• 33:47
  Speaker 3: designated beneficiaries, and we have a will.
• 33:52
  Speaker 2: And a will that says 50-50, brother and sister.
• 33:55
  Speaker 3: The will's 50-50 and there's no trust involved here at all?
• 33:57
  Speaker 1: No.
• 33:58
  Speaker 3: Okay. Yes, you could have a problem. but I don't
• 34:01
  Speaker 3: know unless you see the will. So I'll give you
• 34:05
  Speaker 3: the answer both ways so that you can look at
• 34:08
  Speaker 3: your will and see if you've got the paragraph that
• 34:11
  Speaker 3: we at Cushing and Dolan use to prevent this potential
• 34:16
  Speaker 3: problem I'm about to explain. So if the will says 50-50,
• 34:21
  Speaker 3: remember the will addresses probate assets only. So if you're
• 34:26
  Speaker 3: avoiding probate, it doesn't matter what the will says.
• 34:31
  Speaker 2: Okay, so the will does not supersede.
• 34:34
  Speaker 3: It does not. That's the cleanup document.
• 34:36
  Speaker 4: Right?
• 34:36
  Speaker 3: So if it's just drafted, just to start the conversation,
• 34:41
  Speaker 3: it addresses only probate assets. So if I've got a
• 34:45
  Speaker 3: joint account that goes directly to the surviving joint owner,
• 34:50
  Speaker 3: it never gets addressed by the will.
• 34:53
  Speaker 2: Because it doesn't go to probate.
• 34:54
  Speaker 3: Because it doesn't go to probate.
• 34:55
  Speaker 5: Okay. Right?
• 34:57
  Speaker 3: If I have a designated beneficiary... Mm-hmm. It also doesn't
• 35:01
  Speaker 3: go to probate. It's addressed by the beneficiary and would
• 35:05
  Speaker 3: pass directly to the beneficiary. So it doesn't matter that
• 35:10
  Speaker 3: the will said 50-50 because these are assets that are
• 35:13
  Speaker 3: not addressed by that direction. Okay. Good, you avoided probate,
• 35:18
  Speaker 3: I guess. That's a good thing. Yeah. But like you say,
• 35:23
  Speaker 3: in this case, could you have caused a problem? Well, yeah, if...
• 35:28
  Speaker 3: you know, the lion's share of the assets are joint
• 35:31
  Speaker 3: with one kid, you arguably have disinherited the other kids.
• 35:37
  Speaker 2: And you might have just put them on because they
• 35:39
  Speaker 2: live near you for convenience purposes, something like that. Right.
• 35:43
  Speaker 3: And so you could be running into the situation where,
• 35:46
  Speaker 3: you know, I just wanted them to be able to
• 35:48
  Speaker 3: pay a bill and help me pay some check. But
• 35:52
  Speaker 3: you didn't think about the fact that that's all going
• 35:54
  Speaker 3: to go to them. And it would. And it would.
• 35:57
  Speaker 3: So I think that's the general rule. The fix is
• 36:03
  Speaker 3: in our wills, we have language that says, I'm paraphrasing, right?
• 36:11
  Speaker 3: It is my understanding that I might die with assets
• 36:15
  Speaker 3: that are owned jointly. And I also understand that that
• 36:21
  Speaker 3: would normally avoid probate, but I want to specifically treat
• 36:24
  Speaker 3: those as probate assets. I do not want them to
• 36:29
  Speaker 3: avoid probate. I want them to go through my will.
• 36:32
  Speaker 2: So that fixes those accounts.
• 36:33
  Speaker 3: That fixes those accounts because that'll run right.
• 36:36
  Speaker 2: What about beneficiaries?
• 36:37
  Speaker 3: Yeah, beneficiaries, it doesn't fix those. So if you've got
• 36:40
  Speaker 3: the designated beneficiary, it's going to go right according to
• 36:42
  Speaker 3: the beneficiary. So folks, not good. And that's addressed in
• 36:45
  Speaker 3: our guide, right? For gifting, how to join. What if
• 36:47
  Speaker 3: you put your house in a joint, throw a kid's
• 36:50
  Speaker 3: name on a house or a vacation home, or a
• 36:52
  Speaker 3: rental property. What are the ramifications of that kind of gift? Folks,
• 36:56
  Speaker 3: don't do that. Think about how to gift, high basis
• 36:59
  Speaker 3: versus low basis. Getting the most out of gifting assets,
• 37:06
  Speaker 3: 866-848-5699 or LegalExchangeShow.com, and you can download it right there.
• 37:11
  Speaker 2: If you have a question you'd like to ask Todd,
• 37:13
  Speaker 2: visit his website, LegalExchangeShow.com, and click on the Ask Todd tab.
• 37:18
  Speaker 2: Maybe I'll be able to read your question in the air,
• 37:20
  Speaker 2: and hopefully his answer will stop you from becoming one
• 37:23
  Speaker 2: of his next real-life stories. You've been listening to Todd Lutzke,
• 37:27
  Speaker 2: a partner with the law firm of Cushing & Dolan.
• 37:30
  Speaker 2: I'm Susan Powers, a financial advisor with the Armstrong Advisory Group.
• 37:34
  Speaker 2: We'll be back with more after this quick break on
• 37:36
  Speaker 2: The Legal Exchange with Todd Lutzke.
• 37:39
  Speaker 1: Giving assets to your children during your lifetime may sound
• 37:42
  Speaker 1: like a simple way to pass along your wealth, but
• 37:44
  Speaker 1: the way you make the gift can have important tax consequences.
• 37:48
  Speaker 1: Cushing and Dolan's new guide, Making the Most of Gifting Assets,
• 37:51
  Speaker 1: explains what you should consider before transferring property, investments, or
• 37:55
  Speaker 1: other appreciative assets to your family. If you give away
• 37:58
  Speaker 1: an asset too soon, your children could end up with
• 38:00
  Speaker 1: a larger tax bill when they eventually sell it. In
• 38:03
  Speaker 1: some cases, holding on to that asset and letting your
• 38:06
  Speaker 1: children inherit it later could reduce the capital gains tax
• 38:08
  Speaker 1: they have to pay. That's why gifting isn't just about
• 38:11
  Speaker 1: what you give. When and how you give it can
• 38:13
  Speaker 1: make a big difference. Get Cushing and Dolan's new guide,
• 38:16
  Speaker 1: Making the Most of Gifting Assets, by calling 866-848-5699. That's 866-848-5699.
• 38:25
  Speaker 1: Or you can request the guide online by visiting LegalExchangeShow.com.
• 38:29
  Speaker 1: The proceeding was paid for and the views expressed are
• 38:31
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 38:33
  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 38:36
  Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
• 38:38
  Speaker 1: other and are not affiliated.
• 38:40
  Speaker 6: An unexpected car repair, medical bill, or sudden loss of
• 38:43
  Speaker 6: income can put a strain on your finances. That's where
• 38:46
  Speaker 6: an emergency fund can help. This is Chuck Zada from
• 38:48
  Speaker 6: the Armstrong Advisory Group. Our new guide, Building and Sizing
• 38:51
  Speaker 6: Your Emergency Fund, helps explain how to build a cash
• 38:54
  Speaker 6: reserve for those unanticipated expenses. The key is to save
• 38:57
  Speaker 6: regularly and make it part of your monthly budget. Start
• 39:00
  Speaker 6: with an amount you can manage and build from there.
• 39:02
  Speaker 6: You can also use things like a bonus or tax
• 39:04
  Speaker 6: refund to help grow the fund faster. Just as important
• 39:07
  Speaker 6: is knowing when to use that money. Routine bills and
• 39:10
  Speaker 6: planned expenses should be part of your regular budget, helping
• 39:13
  Speaker 6: you preserve your emergency fund for when you really need it.
• 39:16
  Speaker 6: Get your free copy of this new guide by calling 800-393-4001.
• 39:18
  Speaker 3: That's 800-393-4001.
• 39:18
  Speaker 6: Or you can request the guide at armstrongadvisory.com. The proceeding
• 39:21
  Speaker 6: was paid for by Armstrong Advisory Group.
• 39:29
  Speaker 1: A registered investment advisor. Nothing in the ad or in
• 39:31
  Speaker 1: any Armstrong guide is specific financial, legal, or tax advice.
• 39:34
  Speaker 1: Consult your own financial, tax, and estate planning advisors before
• 39:36
  Speaker 1: making any investment decisions. Armstrong may contact you to offer
• 39:38
  Speaker 1: investment advisory services. Giving assets directly to your children may
• 39:42
  Speaker 1: create problems you didn't expect. Cushing and Dolan's new guide,
• 39:46
  Speaker 1: Making the Most of Gifting Assets, explains how giving away
• 39:49
  Speaker 1: property or investments could mean losing control of those assets.
• 39:52
  Speaker 1: Learn about your options before you give assets away. Call
• 39:55
  Speaker 1: 866-848-5699 or visit LegalExchangeShow.com. The proceeding was paid for and
• 40:01
  Speaker 1: the views expressed are solely those of Cushing and Dolan.
• 40:03
  Speaker 1: Cushing and Dolan and or Armstrong Advisory may contact you
• 40:05
  Speaker 1: offering legal or investment services. Cushing and Dolan and Armstrong
• 40:08
  Speaker 1: Advisory do not endorse each other and are not affiliated.
• 40:10
  Speaker 4: For many Massachusetts veterans, getting to a medical appointment isn't
• 40:14
  Speaker 4: always easy. That's why the Disabled American Veterans Department of
• 40:17
  Speaker 4: Massachusetts provides free transportation to VA medical appointments through its
• 40:22
  Speaker 4: network of dedicated drivers. Every mile helps a veteran get
• 40:26
  Speaker 4: the care they've earned through their service. You can help
• 40:29
  Speaker 4: by volunteering or making a donation. Learn more at DAVMA.org.
• 40:35
  Speaker 4: That's DAVMA.org.
• 40:41
  Speaker 1: You're tuned to The Legal Exchange with Todd Lutzke. If
• 40:44
  Speaker 1: you or a loved one needs a nursing homestay, call
• 40:46
  Speaker 1: Todd right now at 866-848-5699 and let him make sure
• 40:50
  Speaker 1: your assets are protected. That's 866-848-5699 or visit him online
• 40:54
  Speaker 1: at LegalExchangeShow.com.
• 41:00
  Speaker 2: Welcome back into The Legal Exchange with Todd Lutzke. I'm
• 41:03
  Speaker 2: Susan Powers, a financial advisor with the Armstrong Advisory Group,
• 41:07
  Speaker 2: and I'm joined by Todd Lutzke, a partner with the
• 41:09
  Speaker 2: law firm of Cushing & Dolan with a master's in taxation. So, Todd,
• 41:14
  Speaker 2: this month is all about the spirit of giving. We
• 41:17
  Speaker 2: are coming up on the season of giving with Thanksgiving.
• 41:21
  Speaker 3: We are.
• 41:21
  Speaker 2: The holidays.
• 41:23
  Speaker 3: I'm there. I'm all about it. I know.
• 41:24
  Speaker 2: Too quickly. But anyway.
• 41:26
  Speaker 3: I am the giver. Yes.
• 41:27
  Speaker 2: So a lot of people do like to gift to
• 41:30
  Speaker 2: their family. So I want to go over some basic
• 41:33
  Speaker 2: giving kind of guidelines for people. Sure. So just regular giving.
• 41:39
  Speaker 2: How much are you allowed to give away each year
• 41:43
  Speaker 2: per person?
• 41:45
  Speaker 3: And people are always confused about this because when I
• 41:48
  Speaker 3: tell them how much you can give away, they're like, well,
• 41:50
  Speaker 3: wait a minute.
• 41:51
  Speaker 2: What?
• 41:52
  Speaker 3: I thought you could only give away $ 19, 000. You know,
• 41:55
  Speaker 3: I'm like, all right, there's two different kinds of giving.
• 41:58
  Speaker 5: Yeah.
• 41:58
  Speaker 3: So let's start with your question. This $ 19, 000 number that
• 42:05
  Speaker 3: many people hear. And by the way, if you've been
• 42:07
  Speaker 3: listening over the years, you know that that number started
• 42:09
  Speaker 3: at 10. Everybody still even thinks the 10 is still
• 42:12
  Speaker 3: out there. The $ 10, 000 per year per person gift is,
• 42:18
  Speaker 3: Has increased for inflation over the years. It is now
• 42:21
  Speaker 3: at $ 19, 000 per year per person. In English, that means
• 42:26
  Speaker 3: that I or you can give away $ 19, 000 to anybody
• 42:33
  Speaker 3: I want.
• 42:34
  Speaker 2: Doesn't have to be a relative.
• 42:35
  Speaker 3: Anybody I want once a year.
• 42:38
  Speaker 2: And if you're married.
• 42:40
  Speaker 3: And I don't have to file any gift tax return
• 42:44
  Speaker 3: or report anything to the government. It is a 100% freebie. Perfect.
• 42:51
  Speaker 2: And if you're married, that means a married couple can
• 42:54
  Speaker 2: give away $ 38, 000 per year.
• 42:57
  Speaker 3: Per kid. Per head. Yeah, per head, if we're talking
• 43:00
  Speaker 3: about kids. I mean, obviously, I said to anybody, but
• 43:02
  Speaker 3: we're probably only going to give it to kids.
• 43:04
  Speaker 2: Yeah, and we're going to talk about the higher-level gifting in.
• 43:06
  Speaker 3: A few minutes. $ 38, 000, that's a big number, right?
• 43:09
  Speaker 2: If you have a lot of heads, you can move
• 43:11
  Speaker 2: a lot of money, for sure.
• 43:12
  Speaker 3: You can move hundreds of thousands in no time.
• 43:14
  Speaker 2: So let's say for those folks that have done trust
• 43:17
  Speaker 2: planning with you and they want to do some giving
• 43:20
  Speaker 2: over the holidays, where should they be gifting from? Should
• 43:25
  Speaker 2: they be making a gift from their trust or from
• 43:29
  Speaker 2: their personal funds?
• 43:30
  Speaker 3: Yeah, so that's going to require a little more digging.
• 43:34
  Speaker 3: Let me explain. If I have a revocable trust, right?
• 43:39
  Speaker 1: Mm-hmm.
• 43:41
  Speaker 3: It does makes zero difference whether I give it from
• 43:44
  Speaker 3: my revocable trust or from my personal bank account that's
• 43:48
  Speaker 3: not in the revocable trust. Obviously an IRA I might
• 43:51
  Speaker 3: not want to because it's a taxable event, but wouldn't
• 43:54
  Speaker 3: make any difference. If I have a Medicaid income only trust,
• 44:01
  Speaker 3: that could make a difference depending on how old you are.
• 44:04
  Speaker 3: If the assets in the trust are already beyond five
• 44:07
  Speaker 3: years and then I have assets outside the trust, If
• 44:11
  Speaker 3: I was to give away assets that were outside the
• 44:14
  Speaker 3: trust to grandkids, that creates a new five-year waiting period
• 44:19
  Speaker 3: for Medicaid eligibility on the value on that gift.
• 44:22
  Speaker 2: So just that amount of the gift.
• 44:24
  Speaker 3: Just for that gift. But still, it's going to disqualify
• 44:26
  Speaker 3: me from applying for Medicaid. So I might not want
• 44:29
  Speaker 3: to do that. But if I gave it out from
• 44:33
  Speaker 3: the trust, there is no five-year waiting period because for
• 44:36
  Speaker 3: Medicaid purposes, I don't own it.
• 44:38
  Speaker 4: Right.
• 44:39
  Speaker 3: So that would be a good idea.
• 44:40
  Speaker 2: Because you've already, everything that transferred into the trust, you've
• 44:44
  Speaker 2: already started that five-year clock on those dollars.
• 44:46
  Speaker 3: It's over. Say it's beyond five years. You're good. And
• 44:50
  Speaker 3: there's more. Wait, there's more. What if I've done, I've
• 44:54
  Speaker 3: got clients who have done slats, spousal lifetime access trusts
• 44:59
  Speaker 3: and gifting, and they've got stuff outside their estate, and
• 45:01
  Speaker 3: they're like, well, I want to make a gift. I
• 45:03
  Speaker 3: would not gift... from assets that you already put in
• 45:08
  Speaker 3: irrevocable trusts that are designed to be outside of your estate. Okay.
• 45:13
  Speaker 3: You gain nothing from that. I would then be gifting
• 45:17
  Speaker 3: assets that I have in my estate because we're not
• 45:19
  Speaker 3: worried about Medicaid. We're worried about estate taxes. So if
• 45:23
  Speaker 3: I have assets in my hands still, those are the
• 45:27
  Speaker 3: assets I want to give away because that's going to
• 45:29
  Speaker 3: help me reduce my estate tax liability. So there you go.
• 45:33
  Speaker 2: And does the recipient, do they need to put it
• 45:35
  Speaker 2: on their tax returns as income?
• 45:37
  Speaker 3: No, no. That's a beauty of a gift, folks, that
• 45:42
  Speaker 3: there is no income tax on a gift ever, regardless
• 45:49
  Speaker 3: of the value.
• 45:49
  Speaker 5: Why?
• 45:50
  Speaker 3: Because it's a gift. It's not income. Okay. Hard stop. Folks. Gifting,
• 45:56
  Speaker 3: we're talking about it, making the most of gifting. Here,
• 45:59
  Speaker 3: we've already had a couple of questions. Where do you
• 46:01
  Speaker 3: gift from? That's a whole nother question, right? It makes
• 46:03
  Speaker 3: a difference. What kind of assets do I gift? High
• 46:06
  Speaker 3: basis versus low basis. I got to be mindful of
• 46:09
  Speaker 3: capital gains taxes that I might be trapping versus the
• 46:12
  Speaker 3: estate taxes that I'm saving. Which one is better? You
• 46:15
  Speaker 3: need to think about it. Do I want to give
• 46:17
  Speaker 3: away assets to a trust like we talked about, or
• 46:20
  Speaker 3: do I want to put them in a trust that
• 46:22
  Speaker 3: I can still benefit from? Do I want to just
• 46:24
  Speaker 3: add a child's name to a vacation home? Is that
• 46:29
  Speaker 3: a completed gift? Folks, so many things to think about
• 46:32
  Speaker 3: when you're gifting. Call and get the guide. Find out
• 46:35
  Speaker 3: if gifting fits into your estate plan and how it
• 46:38
  Speaker 3: might or might not fit in. 866-848-5699 or LegalExchangeShow.com. Again,
• 46:43
  Speaker 3: 866-848-5699 or LegalExchangeShow.com.
• 46:55
  Speaker 2: And Todd, I know there are different types of trust
• 46:57
  Speaker 2: that you can use when you're using gifting as a
• 47:00
  Speaker 2: strategy to reduce your estate taxes. What kind of net
• 47:05
  Speaker 2: worth would you be looking at to use gifting to
• 47:08
  Speaker 2: reduce your taxable estate?
• 47:10
  Speaker 3: Yeah, so this is really a difficult question.
• 47:15
  Speaker 2: I have faith you can answer it.
• 47:16
  Speaker 3: Let's make up some facts to help us understand. So
• 47:22
  Speaker 3: I have an existing client who came in, turns out
• 47:24
  Speaker 3: that that this business we wanted to give away came
• 47:28
  Speaker 3: back at a value lower, much lower than he thought,
• 47:30
  Speaker 3: but he's confident it's going to explode in value. So
• 47:34
  Speaker 3: the total estate is about 22 million.
• 47:37
  Speaker 1: Okay.
• 47:37
  Speaker 3: So it's under 30. Well, and he says, well, we
• 47:40
  Speaker 3: can also give away a bunch of real estate. So
• 47:43
  Speaker 3: I'm like, now, if you're under 30 million these days, right.
• 47:47
  Speaker 4: $ 30 million is what I can shelter with basic estate
• 47:51
  Speaker 4: planning and pay no federal tax and die owning it,
• 47:56
  Speaker 4: keep it.
• 47:58
  Speaker 3: Why would I want to do that? Well, I'd want
• 48:00
  Speaker 3: to do that because I'm going to pay no 40%
• 48:03
  Speaker 3: federal tax on any of that money. And in addition,
• 48:07
  Speaker 3: by keeping it, I am going to get every one
• 48:10
  Speaker 3: of those assets that have any gain, whether it's an
• 48:14
  Speaker 3: investment portfolio or real estate.
• 48:17
  Speaker 5: Mm-hmm.
• 48:18
  Speaker 3: The built-in gain all goes away. So now I'm saving
• 48:23
  Speaker 3: 40% plus 28.8% capital gains tax because that's gone. And
• 48:30
  Speaker 3: maybe 4% mass millionaires tax.
• 48:33
  Speaker 1: Right.
• 48:33
  Speaker 3: That's a lot of taxes that I'm saving. I'm going
• 48:36
  Speaker 3: to keep the asset. If on the other hand, I decided, no,
• 48:40
  Speaker 3: I'm not motivated by that because I still owe on
• 48:43
  Speaker 3: 22 million. I'm going to owe a lot of Massachusetts tax.
• 48:46
  Speaker 1: Yep.
• 48:46
  Speaker 3: Cause I can only shelter 4 million in mass. I
• 48:49
  Speaker 3: get that. But if I start giving away assets to
• 48:52
  Speaker 3: save the mass tax, which is at a rate of
• 48:55
  Speaker 3: on an estate this large, the rates probably 16%. Okay.
• 48:59
  Speaker 3: So that's the top bracket. So I'm giving away assets
• 49:03
  Speaker 3: to save only 16% in mass. Cause remember I'm not
• 49:06
  Speaker 3: saving anything federally. Right.
• 49:08
  Speaker 2: Cause you already wiped it out.
• 49:09
  Speaker 3: I'm already can wipe it out with my planning. So
• 49:13
  Speaker 3: now the question is, if I'm going to save 16%
• 49:15
  Speaker 3: by giving assets away, that's okay if it's cash or high.
• 49:20
  Speaker 3: basis assets. But if I'm giving away assets that have
• 49:24
  Speaker 3: built in gain, where there could be the 28.8% carry, remember,
• 49:29
  Speaker 3: you give away the asset, you build in the gain,
• 49:31
  Speaker 3: I'm trapping 28.8% plus 4% mass millionaires tax.
• 49:34
  Speaker 1: Wow.
• 49:39
  Speaker 3: That's 34% versus 16%. You know what? I might want
• 49:44
  Speaker 3: to pay the 16% and eliminate the capital gains tax.
• 49:48
  Speaker 3: Because when you die owning these assets, you get a
• 49:51
  Speaker 3: new basis. Very important that people understand that distinction. So
• 49:55
  Speaker 3: you really have to think about what you're going to
• 49:58
  Speaker 3: give away and if it makes sense when you compare
• 50:02
  Speaker 3: capital gains tax versus estate tax.
• 50:05
  Speaker 2: Yeah.
• 50:06
  Speaker 3: It's not easy, folks. You have to run those numbers
• 50:08
  Speaker 3: and you have to really look at what assets you're
• 50:11
  Speaker 3: thinking of giving away. And that's what this guide is
• 50:13
  Speaker 3: going to show you. It's going to run through some
• 50:15
  Speaker 3: examples about gifting, the tax ramifications of gifting, and whether
• 50:20
  Speaker 3: it makes sense for you to gift, right? That's most important.
• 50:23
  Speaker 3: You may, quite frankly, need help. So obviously call your
• 50:26
  Speaker 3: estate planning lawyer to get some guidance as well.
• 50:28
  Speaker 5: 866-848-5699.
• 50:33
  Speaker 3: Or LegalExchangeShow.com. You can download it right there. Again, 866-848-5699,
• 50:41
  Speaker 3: or LegalExchangeShow.com to download the guide today.
• 50:44
  Speaker 2: Todd Lutzke from the law firm of Cushing and Dolan,
• 50:47
  Speaker 2: thank you so much.
• 50:48
  Speaker 3: Thank you, Susan. Always a pleasure.
• 50:50
  Speaker 2: I'm Susan Powers, a financial advisor with the Armstrong Advisory Group.
• 50:53
  Speaker 2: We thank you for joining us today, and we'll be
• 50:55
  Speaker 2: back again next week on The Legal Exchange with Todd Lutzke.
• 51:00
  Speaker 1: Giving assets to your children during your lifetime may sound
• 51:03
  Speaker 1: like a simple way to pass along your wealth, but
• 51:05
  Speaker 1: the way you make the gift can have important tax consequences.
• 51:09
  Speaker 1: Cushing and Dolan's new guide, Making the Most of Gifting Assets,
• 51:12
  Speaker 1: explains what you should consider before transferring property, investments, or
• 51:16
  Speaker 1: other appreciative assets to your family. If you give away
• 51:19
  Speaker 1: an asset too soon, your children could end up with
• 51:21
  Speaker 1: a larger tax bill when they eventually sell it. In
• 51:24
  Speaker 1: some cases, holding onto that asset and letting your children
• 51:27
  Speaker 1: inherit it later could reduce the capital gains tax they
• 51:29
  Speaker 1: have to pay. That's why gifting isn't just about what
• 51:32
  Speaker 1: you give. When and how you give it can make
• 51:34
  Speaker 1: a big difference. Get Cushing and Dolan's new guide, Making
• 51:37
  Speaker 1: the Most of Gifting Assets, by calling 866-848-5699.
• 51:39
  Speaker 3: That's 866-848-5699.
• 51:40
  Speaker 1: Or you can request the guide online by visiting LegalExchangeShow.com.
• 51:50
  Speaker 1: The proceeding was paid for and the views expressed are
• 51:51
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 51:53
  Speaker 1: or Armstrong Advisory may contact your offering legal or investment services.
• 51:56
  Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
• 51:59
  Speaker 1: other and are not affiliated.
• 52:00
  Speaker 3: Seeing some high volume out there on those.
• 52:02
  Speaker 7: Roads today, folks.
• 52:04
  Speaker 2: Sound familiar?
• 52:05
  Speaker 6: The Braintree split is backed up.
• 52:06
  Speaker 2: If your commute feels endless, it might be time to
• 52:09
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• 52:12
  Speaker 2: to or because you think you have to? At the
• 52:14
  Speaker 2: Armstrong Advisory Group, our financial advisors help individuals and families
• 52:18
  Speaker 2: build retirement income plans designed around their goals, savings, Social Security,
• 52:23
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• 52:28
  Speaker 2: If you're concerned about what path you're on or have
• 52:30
  Speaker 2: questions about your financial plan, we may be able to help.
• 52:33
  Speaker 2: Visit armstrongadvisory.com and schedule a no-obligation meeting. The Armstrong Advisory Group.
• 52:39
  Speaker 2: We answer only to you. Schedule your meeting today at armstrongadvisory.com.
• 52:44
  Speaker 2: That's armstrongadvisory.com.
• 52:46
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 52:49
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 52:51
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 52:54
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 52:56
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 52:59
  Speaker 1: advisory services. Giving assets directly to your children. may create
• 53:02
  Speaker 1: problems you didn't expect. Cushing and Dolan's new guide, Making
• 53:06
  Speaker 1: the Most of Gifting Assets, explains how giving away property
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  Speaker 1: or investments could mean losing control of those assets. Learn
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  Speaker 1: about your options before you give assets away. Call 866-848-5699
• 53:15
  Speaker 1: or visit LegalExchangeShow.com. The proceeding was paid for and the
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  Speaker 1: views expressed are solely those of Cushing and Dolan. Cushing
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  Speaker 1: and Dolan and or Armstrong Advisory may contact your offering
• 53:26
  Speaker 1: legal or investment services. Cushing and Dolan and Armstrong Advisory
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  Speaker 1: do not endorse each other and are not affiliated.
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  Speaker 4: For many Massachusetts veterans, getting to a medical appointment isn't
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  Speaker 4: always easy. That's why the Disabled American Veterans Department of
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  Speaker 4: Massachusetts provides free transportation to VA medical appointments through its
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  Speaker 4: network of dedicated drivers. Every mile helps a veteran get
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  Speaker 4: the care they've earned through their service. You can help
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  Speaker 4: by volunteering or making a donation. Learn more at DAVMA.org.
• 53:55
  Speaker 4: That's DAVMA.org.