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Owning your home with a life estate · The Legal Exchange

0:01
Speaker 1: This is the Legal Exchange with Todd Lutsky from the
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Speaker 1: law firm of Cushing and Dolan and Susan Powers of
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Speaker 1: the Armstrong Advisory Group. Each week, Todd and Susan will
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Speaker 1: discuss many topics including estate planning, how to avoid probate,
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Speaker 1: and protecting your money from a nursing home. If you
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Speaker 1: need assistance in any of these areas, or have a
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Speaker 1: question about another issue that may affect your future, call
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Speaker 1: eight six six eight four eight five six ninety nine
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Speaker 1: to make an appointment. That's eight sixty six eight four
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Speaker 1: eight five six ninety nine. Operators are standing by. Now
0:31
Speaker 1: Here are your hosts, Tod Lutsky and Susan Powers.
0:37
Speaker 2: Welcome into the Legal Exchange with Todd Lutsky. I'm Susan
0:40
Speaker 2: Powers of Financial Advice with the Armstrong Advisory Group and
0:44
Speaker 2: I'm joined by Todd Lutsky, a partner with the law
0:46
Speaker 2: firm of Cushing A. Dolan with a master's in taxation.
0:50
Speaker 2: Welcome Todd. How are you today?
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Speaker 3: I'm never better on you?
0:53
Speaker 2: I'm great. Thanks. What do you have for us this week?
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Speaker 3: Couple of cases? So we've got a Supreme Court case
0:59
Speaker 3: in Maine that we're going to deal with it deals
1:01
Speaker 3: with someone who doesn't pay their real estate taxes, but
1:07
Speaker 3: the property is owned jointly, and then the town places
1:11
Speaker 3: leans and do the leans sever the joint tendancy of
1:15
Speaker 3: the property. And what happens when someone dies without a
1:17
Speaker 3: will with this property? Is it joint? Is it not joint?
1:21
Speaker 3: You can already see the problem.
1:23
Speaker 2: Sure, that's going to work out, swim.
1:25
Speaker 3: You can already see the problems with this situation. So
1:29
Speaker 3: we'll talk a little bit about that. And then there's
1:31
Speaker 3: a Connecticut appellate court case where we're dealing with again,
1:36
Speaker 3: sort of a joint revocable trust right. So this is
1:39
Speaker 3: different where many people think about husband trust wife trust.
1:43
Speaker 3: This is a joint trust between husband and wife. And
1:46
Speaker 3: they were married and this property came, you know, in
1:51
Speaker 3: and out during the marriage and this trust, and then
1:54
Speaker 3: she filed for divorce. And we're going to find out,
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Speaker 3: you know, what happens to this held property? Is it
2:01
Speaker 3: if it's in the trust? Is it severable? Is it
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Speaker 3: marital property? Is it not marital property? We're gonna find out,
2:07
Speaker 3: So stay tuned for that. But folks, you can only
2:09
Speaker 3: imagine the more planning you do, the better off you're
2:12
Speaker 3: gonna be, But I can tell you taking shortcuts doesn't
2:15
Speaker 3: always work in this case. I'm talking about our guide,
2:18
Speaker 3: which is calculating the consequences of a life estate. Interesting
2:22
Speaker 3: that this both of these cases today deal with real estate.
2:26
Speaker 3: Life estates deal with real estate, right. People tend to
2:29
Speaker 3: give away their house and retain the right to live there.
2:32
Speaker 3: That's what a life estate is. There's two ways to
2:34
Speaker 3: create it, but there's plenty of problems with it, and
2:37
Speaker 3: there's some pros with it as well. Learn if you've
2:40
Speaker 3: got one, Learn what you have, what you've given up,
2:44
Speaker 3: what the gifts and the state tax consequences are. If
2:47
Speaker 3: you're thinking about doing one, get the guide before you
2:51
Speaker 3: do it, because you might not want to do it.
2:53
Speaker 3: There might be a better way to go. Eight six
2:55
Speaker 3: six eight four eight five six nine to nine or
2:59
Speaker 3: legally exchange show dot com. Calculating the Consequences of a
3:03
Speaker 3: Life Estate eight six six eight four eight five six
3:07
Speaker 3: nine nine or legal exchange show dot com. You can
3:11
Speaker 3: download it right there. Okay, folks, let's head over to Maine.
3:16
Speaker 3: So in Maine, we've got this this unpaid real estate
3:21
Speaker 3: tax situation. So Brian and Lisa owned property jointly. Doesn't
3:26
Speaker 3: say whether they're married or not. Okay, we'll just go on.
3:28
Speaker 3: They own property jointly, and by the way, you don't
3:30
Speaker 3: have to be married to own property jointly. They were
3:34
Speaker 3: delinquent in paying their real estate taxes in two thousand
3:37
Speaker 3: and two and again in two thousand and nine, but
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Speaker 3: the town placed leans on the property. Not surprising. However,
3:44
Speaker 3: both times they managed to pay the real estate taxes
3:47
Speaker 3: in full within this eighteen month grace period that the
3:52
Speaker 3: town gives you, so each state might be different, and
3:56
Speaker 3: so they paid the taxes in full. Town filed quick
4:01
Speaker 3: claim deeds releasing the leans makes sense. Well. In twenty
4:05
Speaker 3: twenty one, Brian died lo and behold he died intestate
4:11
Speaker 3: without a will. Yeah, that's what that means. So he
4:14
Speaker 3: dies with no will, survived by Lisa. And here's the
4:17
Speaker 3: kicker and his two kids, Lisa and Ryan, just to
4:22
Speaker 3: make it more confusing for us. So this leads me
4:26
Speaker 3: to believe that these are his kids. So this is
4:29
Speaker 3: either a second marriage.
4:31
Speaker 2: Yeah you're not going to name your daughter the same
4:33
Speaker 2: thing as.
4:33
Speaker 3: You, right, or they're not married, right yep, one of
4:37
Speaker 3: the two. And so Lisa then files a deed to
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Speaker 3: say this should be reform, a reformation of the deed
4:45
Speaker 3: because it should not be part of Brian's estate. When
4:48
Speaker 3: we say a state here, I think they mean probate estate. Okay,
4:51
Speaker 3: so I'll come back to clearing that up. For you
4:54
Speaker 3: should not be part of the probated state. So if
4:57
Speaker 3: it's not part of the probatea state, how is it governed? Right?
5:00
Speaker 3: Because he died without a will. Well, the probate court
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Speaker 3: denied the petition, said there was no clear evidence of
5:06
Speaker 3: a transfer, and therefore it's it's you know, it's going
5:10
Speaker 3: to be part of the probata state. And Lisa didn't
5:14
Speaker 3: like that, so she appealed. They reversed. Now let me
5:18
Speaker 3: explain this. Right. You have to understand this is very
5:21
Speaker 3: confusing with the to lisas. So they said here, if
5:24
Speaker 3: the taxes were not paid, then the tax lien would
5:29
Speaker 3: serve as a foreclosure, which makes sense because you didn't
5:33
Speaker 3: pay the taxes. And if the property was held jointly,
5:36
Speaker 3: then that would sever the joint tenancy. And if you
5:40
Speaker 3: sever the joint tenancy, now it's tenants in common right
5:45
Speaker 3: now it's part of the probata state. Okay, yep, that
5:48
Speaker 3: very important. But because the taxes were in fact paid,
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Speaker 3: remember within the redemption period, within that grace period, that
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Speaker 3: the tax liens were not foreclosures, they were you know,
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Speaker 3: they were. The joint tendancy continued in effect, and so
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Speaker 3: the municipality filing the deeds was simply discharging the tax
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Speaker 3: lean no effect on the joint tendancy. So that's why
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Speaker 3: they reversed the probate court and said no, it is
6:17
Speaker 3: not part of the probate estate.
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Speaker 2: So they owned a joint with rights of survivor.
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Speaker 3: They owned it jointly. So now that makes a big difference.
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Speaker 3: So I think Lisa the Brian and Lisa Lisa, not
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Speaker 3: the kid, gets the property. Yeah, the kid was the
6:33
Speaker 3: one who probably wanted an opportunity to say this.
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Speaker 2: Is half yeah, half my dad's yeah half.
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Speaker 3: My dad want it and I wanted it and she
6:44
Speaker 3: didn't get it. Yeah, So I think the decision, I mean,
6:48
Speaker 3: I think that the decisions correct. I mean that's how
6:51
Speaker 3: it is. If you don't break the joint tendancy, it's
6:53
Speaker 3: it's a joint tendancy. Well, let's talk about what does
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Speaker 3: this all this mean? So what do we learn? So remember,
6:58
Speaker 3: jointly owned property. If you die owning it jointly, then
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Speaker 3: the asset itself avoids the probata state, which is what
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Speaker 3: I was saying, and it would automatically pass to the
7:09
Speaker 3: surviving joint owner yep. And and so that way, it
7:13
Speaker 3: would never be governed by the will.
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Speaker 2: Now, so that's if you own it joint would rights
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Speaker 2: of survivorship right right.
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Speaker 3: Right, I'm going to assume that's what this is. And
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Speaker 3: and so it would never be governed by the will.
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Speaker 3: But in this case, there was no will, so it
7:28
Speaker 3: would still never be governed by the probatea state, which
7:31
Speaker 3: would be the intestate succession statute. Okay, so here Brian
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Speaker 3: died without a will. But because of this, the joint
7:38
Speaker 3: tenancy passes outside of probate and it's not governed by
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Speaker 3: the intestate succession statute either. Therefore Lisa gets it. That's
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Speaker 3: at the end of the day. Now, if the joint
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Speaker 3: tenancy was indeed severed, which I think is what Lisa
7:54
Speaker 3: the daughter wanted, If it was already severed, then it
7:58
Speaker 3: would be tenants in common. Then it would become part
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Speaker 3: of the probata state. If it becomes part of the
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Speaker 3: probata state, it would be governed either by the will
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Speaker 3: or in this case, the intestate succession statue. Why that matters. Well,
8:12
Speaker 3: now we've got to go back assuming Brian is not
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Speaker 3: married to Lisa. Remember we didn't know if they were married,
8:18
Speaker 3: and we think they probably weren't, or at best it's
8:20
Speaker 3: a second marriage. Assuming Brian's not married to Lisa, then
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Speaker 3: likely Brian's two kids would probably be the next closest
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Speaker 3: next of kin, unless Brian's parents were a lot. No,
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Speaker 3: actually I think they would be the next closest next
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Speaker 3: of kin, and so they would get that half.
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Speaker 2: Because it would go to spouse first, right.
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Speaker 3: Right, Well, let's play out the string. You're right to
8:43
Speaker 3: bring that up. If they were married, it doesn't mean
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Speaker 3: that would all go to the spouse. In some states,
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Speaker 3: state by state, it could go half to the spouse,
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Speaker 3: half to the kids.
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Speaker 2: Right, So they'd in a quarter and she'd end up
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Speaker 2: with seventy five percent. How messy.
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Speaker 3: So but in this case Lee, so the Lisa with
9:01
Speaker 3: Brian gets it all. Yeah, because it's jointly owned. Now,
9:05
Speaker 3: remember people get confused gross of state versus probata state.
9:08
Speaker 3: Remember you could have zero assets in your probata state,
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Speaker 3: but your grosser state could be millions of dollars, so ideally, yeah,
9:17
Speaker 3: that's the way you want it, right, So people get
9:19
Speaker 3: confused between grosser state and probata state, and so that's
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Speaker 3: the distinction that you need to know. But now remember
9:26
Speaker 3: from an inclusion standpoint, in this case, because it was
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Speaker 3: jointly owned, it's going to be fully included in the
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Speaker 3: estate of Brian unless the personal representative can show one
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Speaker 3: paid more than the other or they either had it
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Speaker 3: gifted to them or they inherited it, then it would
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Speaker 3: be fifty to fifty. Otherwise it's fully included. Full step
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Speaker 3: up in basis. This is a great situation for Lisa, right,
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Speaker 3: So it's not just going to be one half. Now,
9:54
Speaker 3: remember if it's joint with kids, you have problems, you
9:56
Speaker 3: have creditors. So I'm not saying this is the way
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Speaker 3: to go, but just think about it, folks, and if
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Speaker 3: you're going to do anything, I don't know about sticking
10:05
Speaker 3: joint names on accounts or joint names on these pieces
10:09
Speaker 3: of property. I also don't love life estates, but it's
10:13
Speaker 3: up to you learn the pros and cons. Get the
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Speaker 3: guide eight sixty six eight four eight five six nine
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Speaker 3: nine or Legal Exchange show dot com.
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Speaker 2: You've been listening to Todd Lutsky, a partner with the
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Speaker 2: law firm of Cushing and Dolan. I'm Susan Power as
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Speaker 2: a financial advisor with the Armstrong Advisory Group. We've got
10:31
Speaker 2: much more to come when we return to the Legal
10:33
Speaker 2: Exchange with Todd Lutsky.
10:35
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Speaker 2: Welcome back into the Legal Exchange with Todd Latsky. I'm
14:27
Speaker 2: Susan Powers, a financial advisor with the Armstrong Advisory Group,
14:30
Speaker 2: and I'm joined by Todd Lutsky, a partner with the
14:32
Speaker 2: law firm of Cushing and Dolan with a master's in taxation.
14:37
Speaker 2: Where are we headed now, Todd?
14:38
Speaker 3: We are going to go over to Connecticut. Okay. So
14:41
Speaker 3: in Connecticut we've got an appellate court case dealing with
14:44
Speaker 3: a joint revocable trust. And I actually love joint revocable trust.
14:48
Speaker 3: I like them better than husband and wife trust. So
14:51
Speaker 3: it's just good that they have one of these. Sherry
14:54
Speaker 3: and Sebastian married September nineteen seventy five. Marital home was
15:00
Speaker 3: transferred to their joint revocable trust. Makes perfect sense. November
15:06
Speaker 3: twenty nineteen. It is a long time later. Cherry filed
15:09
Speaker 3: for divorce. Now. During life, the property was taken in
15:14
Speaker 3: and out of this trust several times, they refinanced it
15:17
Speaker 3: several times. The trust identified both of them as set
15:22
Speaker 3: low beneficiaries and trustees, which is exactly how it should
15:27
Speaker 3: be in a joint revocable trust. They could also revoke
15:32
Speaker 3: the trust any time they want during their lifetimes, and
15:35
Speaker 3: Connecticut law states that the assets held in a revocable
15:39
Speaker 3: trust are part of the marital estate and subject to
15:42
Speaker 3: equitable distribution. Makes sense, Which makes sense, So Connecticut ordered
15:48
Speaker 3: that the property be sold. Apparently they couldn't figure out
15:51
Speaker 3: how to agree on it, so they sold the property
15:53
Speaker 3: and that the proceeds would be be distributed sixty percent
15:56
Speaker 3: to Sherry and forty percent to Sebastian. Well, as you
16:01
Speaker 3: might imagine, Sebastian appealed that didn't like that decision. The
16:06
Speaker 3: appellate court affirmed the trial court, stating that the trust
16:11
Speaker 3: clearly is revocable by either Sherry or Sebastian during life,
16:16
Speaker 3: that they had the equivalent of full ownership of the
16:20
Speaker 3: marital residents and properly includable in the couple's marital assets,
16:25
Speaker 3: and therefore subject to whatever equitable distributions they come up with.
16:30
Speaker 3: So I think that's you know, the right result. But
16:34
Speaker 3: I think I want to spend some time helping you understand.
16:38
Speaker 3: You know, what do we learned from this?
16:40
Speaker 5: You know?
16:41
Speaker 3: I think the main message is that doing your estate
16:45
Speaker 3: planning revocable or not is not divorce planning, right right? Well,
16:52
Speaker 3: yes and no, there's ways you can do this with
16:54
Speaker 3: divorce planning. So I want to talk to you about
16:56
Speaker 3: estate planning versus divorce planning, give you some tips on
17:00
Speaker 3: how to do that. But before I do that, folks,
17:02
Speaker 3: I just want to give you the guide that we're
17:04
Speaker 3: given away this month.
17:06
Speaker 5: Right.
17:06
Speaker 3: It's it's dealing with real estate. It's a life estate.
17:10
Speaker 3: You might have one, you might think you want one.
17:14
Speaker 3: It'll teach you the two ways to create them. I
17:17
Speaker 3: like to think the right and the wrong way. But
17:19
Speaker 3: giving it to a kid or giving it to a
17:21
Speaker 3: trust with a reserved life estate. But most importantly, it's
17:24
Speaker 3: going to explain to you the gift tax, income tax,
17:28
Speaker 3: estate tax consequences of doing it, and the loss of
17:31
Speaker 3: control ability to sell, not sell buy new houses. Folks,
17:36
Speaker 3: there's so much to understanding a life estate when so
17:39
Speaker 3: many people think it's a quick cheap, easy, fixed way
17:42
Speaker 3: to do estate planning. It may not be call and
17:46
Speaker 3: Get the Guide eight six y six eight four eight
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Speaker 3: five six nine nine or Legal Exchange show dot com
17:54
Speaker 3: again eight six six eight four eight five six nine
17:57
Speaker 3: nine or Legal Exchange Show dot Let's try to regroup here, Todd.
18:04
Speaker 3: This was a seemingly not an estate planning situation. It's
18:07
Speaker 3: a divorce situation. But I don't think you can ignore
18:11
Speaker 3: the two. So let's dive into this. Estate planning, as
18:16
Speaker 3: I said earlier, is not divorce planning. Remember, folks, when
18:19
Speaker 3: you establish a revocable trust or even some of the
18:22
Speaker 3: medicaid irrevocable trusts that we talk about, right, they're great,
18:27
Speaker 3: you know for a state planning, they're great for tax savings,
18:30
Speaker 3: they're great for asset protection planning. But they're not generally
18:35
Speaker 3: designed for divorce protection for the donors, right, for the
18:40
Speaker 3: mom and dads of the world, the people creating the trust.
18:43
Speaker 3: That's not what we're doing. Like, for example, just because
18:47
Speaker 3: you have a husband and wife situation with a revocable trust,
18:50
Speaker 3: and let's say you have a husband trust and a
18:51
Speaker 3: wife trust, because a lot of people do that, I
18:53
Speaker 3: know this was a joint trust. Right, But I want
18:55
Speaker 3: to make an example, and you end up putting more
18:58
Speaker 3: assets in one spouse's trust, you know, for some reason
19:02
Speaker 3: or another creditor protection.
19:03
Speaker 2: They came with more assets in the beginning.
19:06
Speaker 3: Or or let's say it's a first marriage. You bring
19:08
Speaker 3: up a good point Susan with second marriages. But let's
19:11
Speaker 3: just say it's a first marriage and you overload one
19:15
Speaker 3: spouse's trust. Let's say one spouse is a doctor h
19:19
Speaker 3: and one spouse is not. One spouse's job is not
19:23
Speaker 3: credit or driven, but one spouse doctor gets sued all
19:27
Speaker 3: the time. Right, So you put all the assets in
19:29
Speaker 3: one spouse's trust so that when the other spouse gets sued,
19:33
Speaker 3: the asset aren't owned by him. Not a bad idea,
19:37
Speaker 3: It certainly works, right, So it's an easier way to
19:41
Speaker 3: provide some creditor protection. But that doesn't mean that when you,
19:47
Speaker 3: or if you in this couple's situation, get a divorce,
19:51
Speaker 3: that just because all the assets are in one spouse's trust,
19:53
Speaker 3: that you all of a sudden, the divorcing spouse, who
19:57
Speaker 3: doesn't have any assets in their trust, get nothing.
20:00
Speaker 1: Right.
20:02
Speaker 2: Prenup would be for right, try to keep things.
20:05
Speaker 3: Yeah, not your regular maritals got married, you didn't have
20:08
Speaker 3: a prenup. They are, as this case says, they are
20:14
Speaker 3: assets of the marriage subject to equitable distribution. It doesn't
20:18
Speaker 3: matter whose names on it. And think about that, even
20:21
Speaker 3: if you didn't do trusts right, think about maybe back
20:24
Speaker 3: in the older days where maybe more stuff was in
20:27
Speaker 3: a husband's name. Well, that doesn't mean when you get
20:31
Speaker 3: divorced that the spouse doesn't get any assets. They certainly do, right,
20:36
Speaker 3: it's an asset of the marriage. But you're right, a
20:38
Speaker 3: prenup will do it. Now having said that, I don't
20:42
Speaker 3: when I said you don't, you can't separate the two.
20:45
Speaker 3: There is ways to do irrevocable trust to provide divorce protections.
20:50
Speaker 3: So let's say before you get married, you want to
20:54
Speaker 3: set up an asset protection trust like many states, you know, Nevada, Alaska, Delaware,
20:59
Speaker 3: New Hampshire. Certain states have asset protection statutes that are
21:05
Speaker 3: very helpful, and so you can actually go to New Hampshire,
21:09
Speaker 3: which we do, and put assets in a New Hampshire
21:11
Speaker 3: domestic asset protection trust. Still retain a lot of control
21:16
Speaker 3: and even enjoy benefit be a beneficiary of that trust.
21:22
Speaker 3: Yet it's protected from creditors. And depending on how you
21:25
Speaker 3: draft it, it could be treated as out of your
21:29
Speaker 3: estate for state tax purposes or an incomplete gift for
21:33
Speaker 3: gift tax purposes. So it's included in your state to
21:36
Speaker 3: get a step up. But what you care about is
21:40
Speaker 3: not so much the tax issue, but creditor protection. And
21:43
Speaker 3: so even cases like that, now after you get married, yep,
21:48
Speaker 3: if that was set up before you got married, it
21:51
Speaker 3: would be protected from the divorce.
21:52
Speaker 2: So if one of you, say, had a business, and
21:54
Speaker 2: they wanted to protect that from possible future.
21:57
Speaker 3: Divorce or any of your assets. Now, I mean there's
22:01
Speaker 3: issues in there about child support. I don't think you
22:03
Speaker 3: can ignore child support and things like that, but mostly
22:06
Speaker 3: for divorces, it's just a great way of doing it
22:08
Speaker 3: for them. Now, now, remember there's other ways of protecting
22:12
Speaker 3: assets from divorces with the state planning. And let's say
22:16
Speaker 3: in this case, this couple never got divorced, they set
22:18
Speaker 3: up their nice joint revocable trust and they died. What
22:22
Speaker 3: they are worried about, though, is not their divorce, but
22:26
Speaker 3: maybe the kids divorce, right, maybe the kid's future divorces.
22:30
Speaker 3: So we can set up these trusts so that when
22:32
Speaker 3: they die. Now it does provide divorce protection for the
22:36
Speaker 3: children's future. Yeah, correct, and so we can do that.
22:41
Speaker 3: And similarly, even though we might we protected it from
22:46
Speaker 3: future divorces for the kids, we can also design it
22:51
Speaker 3: so that it skips taxation in the estate of the kids.
22:57
Speaker 3: Love that and can get down to grandkids or even
22:59
Speaker 3: great grandkids. So you need to think about when you're
23:03
Speaker 3: doing your planning, how if divorce is a part part
23:07
Speaker 3: of it, how to draft it so we don't have
23:10
Speaker 3: that problem.
23:12
Speaker 2: And you could also if you do that, you know
23:16
Speaker 2: the the inheritors trust part of your own plan. Your
23:19
Speaker 2: kids don't have much assets, they don't need to worry
23:22
Speaker 2: about a prenup.
23:23
Speaker 3: That's right.
23:24
Speaker 2: If their money is going to come from inheritance.
23:26
Speaker 3: That's right. So they can say, we don't need to
23:29
Speaker 3: go get a prenup to protect future inheritance. Is what
23:32
Speaker 3: prenups do do You can design them to protect future inheritance.
23:36
Speaker 3: In this case, it would be simply up to them.
23:38
Speaker 3: If they want to get a prenup for their own assets,
23:41
Speaker 3: that would be on them. So great way of designing
23:44
Speaker 3: these trust folks, But divorce can fit into it. Just
23:48
Speaker 3: make sure you explain what your goals are to that
23:51
Speaker 3: state planning attorney. Meanwhile, if you're thinking of doing a
23:55
Speaker 3: life estate, maybe you need to understand what your goals
23:58
Speaker 3: are and whether or not the life the state is
24:00
Speaker 3: right for you. Call and get the guide eight six
24:03
Speaker 3: six eight four eight five six ninety nine or Legal
24:07
Speaker 3: Exchange show dot com.
24:08
Speaker 2: You've been listening to Todd Lutski, a partner with the
24:11
Speaker 2: law firm of Cushing and Dolan. I'm Susan Powers, a
24:14
Speaker 2: financial advisor with the Armstrong Advisory Group. We've got much
24:18
Speaker 2: more to come when we return to the Legal Exchange
24:21
Speaker 2: with Todd Lutsky.
24:22
Speaker 1: Life estates carry a higher risk of income tax penalties
24:25
Speaker 1: and hidden gift issues, and while they can be beneficial
24:28
Speaker 1: in some cases if you use one, you need to
24:30
Speaker 1: be aware of the pitfalls they make use. Cushing and
24:33
Speaker 1: Dolan are experts in elder law and have nearly forty
24:35
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24:38
Speaker 1: new guide, called Calculating the Consequences of Life Estates, can
24:42
Speaker 1: help you make the right decisions about how to protect
24:44
Speaker 1: your assets from probate and the nursing home. Life estates
24:47
Speaker 1: are not simple documents and can create the potential for
24:49
Speaker 1: you to lose control of your estate. So if you
24:52
Speaker 1: haven't done your planning yet, now's the time to learn
24:54
Speaker 1: about the effects that life estates can have when it
24:56
Speaker 1: comes to protecting your assets. Call Cushing and Dolan today
25:00
Speaker 1: eight four, eight five, six ninety nine and request their
25:03
Speaker 1: new guide called Calculating the Consequences of Life Estates. That's
25:06
Speaker 1: eight sixty six eight four eight five six nine nine,
25:09
Speaker 1: or request the guide online at Legal exchange show dot com.
25:12
Speaker 1: The proceeding was paid for and the views expressed are
25:14
Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
25:16
Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
25:19
Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
25:21
Speaker 1: other and are not affiliated.
25:23
Speaker 6: Developing the right financial strategy can be complicated, especially in
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27:24
Speaker 1: You're listening to the Legal Exchange and it's time for
27:28
Speaker 1: Ask Todd, the segment where Todd will answer your questions
27:31
Speaker 1: about anything and everything that's included in the estate planning process.
27:35
Speaker 1: Once again, here's Todd Lutsky and Susan Powers Welcome.
27:40
Speaker 2: Back, Todd. Have a few questions from listeners for you.
27:43
Speaker 2: First question comes from Erica and Holliston, mass And. Erica writes,
27:47
Speaker 2: is there any way for me to gift my vacation
27:49
Speaker 2: home to my kids without sticking them with a big
27:52
Speaker 2: tax bill? My lake house is worth around six hundred
27:55
Speaker 2: thousand and they cannot afford to buy it from me.
27:58
Speaker 2: My cost basis is one hundred fifty thou I'm a
28:01
Speaker 2: widow now and I just don't have the desire to
28:03
Speaker 2: use the property anymore and don't want the headache of
28:06
Speaker 2: maintaining it and paying all the bills.
28:10
Speaker 3: Well, I you know, the answer is can you gift? Yeah,
28:12
Speaker 3: you certainly are allowed to gift away anything you want
28:15
Speaker 3: a gift, and we can explore what the gift tax
28:19
Speaker 3: ramifications are and the income tax ramifications. So that's the
28:23
Speaker 3: quick answer. My next question is, you know, do the
28:27
Speaker 3: kids want it? I mean, is this something that they
28:29
Speaker 3: that they desire?
28:30
Speaker 5: Right?
28:31
Speaker 3: Always ask yourself that if you're listening and you think
28:34
Speaker 3: that there's something that you feel is important to you,
28:38
Speaker 3: it may not be to them, right, So find out
28:41
Speaker 3: if they are interested and they want it. Well, one
28:43
Speaker 3: of the things you can do is say, you know what,
28:45
Speaker 3: I don't want to gift it away now because there's
28:47
Speaker 3: negative tax implications, which I'm going to discuss in a minute.
28:51
Speaker 3: But if they want it, maybe you kids ought to
28:53
Speaker 3: start paying the bills. Maybe you kids ought to feel
28:55
Speaker 3: like you're taking ownership of it. Right now, I can't
28:59
Speaker 3: afford to keep it for you, But if you want it,
29:01
Speaker 3: all you need to do is start pretending like yours.
29:04
Speaker 2: Right.
29:05
Speaker 3: If it's yours, at some point, you're gonna have to
29:07
Speaker 3: pay all these bills. So let's see if while I'm alive,
29:10
Speaker 3: if you can actually afford it right and do that. So,
29:13
Speaker 3: to me, that's a good lesson learned in terms of
29:17
Speaker 3: seeing how to pay for those bills and to see
29:19
Speaker 3: if they really like it and it actually is beneficial
29:23
Speaker 3: to them. But if you're going to have them do that,
29:27
Speaker 3: don't leave it like this, Take it and make sure
29:30
Speaker 3: you protect it for them. Right, So if they're going
29:33
Speaker 3: to start paying, you should at least put it into
29:36
Speaker 3: an irrevocable medicaid trust so that it's going to avoid probate,
29:41
Speaker 3: it's going to be protected from the nursing home, so
29:44
Speaker 3: they're not paying bills on property that is subject to
29:46
Speaker 3: being taken if you get sick. Right, Yeah, exactly right, Susan.
29:53
Speaker 3: So you know, I think you have to sort of
29:55
Speaker 3: a give and take here. Yes, they'll pay, but you
29:58
Speaker 3: need to step up to the place, Erica, and you know,
30:02
Speaker 3: protect it for them and do some estate planning. Okay,
30:06
Speaker 3: So let's say they can strike that deal. Why would
30:09
Speaker 3: they write Why would the kids say, yeah, this is
30:11
Speaker 3: a great deal for me. You protect it, ma, and
30:14
Speaker 3: we'll pay, maintain it, and be responsible for it starting
30:20
Speaker 3: right now. Well, because if mom instead decided to give
30:26
Speaker 3: it away, which is what she wanted to do. Again,
30:29
Speaker 3: the quick, easy fix, Right, everybody says, yeah, this is quick, cheap.
30:34
Speaker 3: It's not cheap because there's a four hundred and fifty
30:37
Speaker 3: thousand dollars built in gain. Yeah, six hundred minus what
30:41
Speaker 3: she paid the one fifty. So there's a four hundred
30:45
Speaker 3: and fifty thousand dollars built in gain. Right, that's approximately
30:50
Speaker 3: one hundred and twenty thousand dollars in capital gains tax
30:55
Speaker 3: that the kids would have to pay later per divided.
31:00
Speaker 3: It doesn't grow a penny when they go to sell it, right,
31:04
Speaker 3: When they go to sell it you're trapping them with
31:08
Speaker 3: this gain, and.
31:09
Speaker 2: That's because that's mom's gain right now. And when you
31:12
Speaker 2: gift away property, you're also gift away your cost basis.
31:15
Speaker 3: You give them the game, yep, and you give them
31:17
Speaker 3: the tax bill. Whereas if we decide to say, you
31:21
Speaker 3: know what, I'm going to protect it for you. I'm
31:23
Speaker 3: going to put it in this medicaida revocable trust and
31:25
Speaker 3: you're going to take responsibility as an ownership responsibility, and
31:31
Speaker 3: then you're going to inherit it when I die. Oh
31:33
Speaker 3: why is that different? Oh, because if you do it
31:36
Speaker 3: that way, now it's included in the estate. But again,
31:40
Speaker 3: it looks like she's under the estate tax exemption amounts,
31:43
Speaker 3: so there's no estate tax due from the inclusion of
31:48
Speaker 3: the asset. But the kids inherit it with a brand
31:53
Speaker 3: new basis equal to fair market value date of death. So,
31:59
Speaker 3: for example, if it was eight hundred thousand when she died,
32:03
Speaker 3: their basis is eight hundred thousand. They could sell it
32:05
Speaker 3: for no gain. So they're saving hundreds of thousands of
32:09
Speaker 3: dollars in capital gains tax by doing the planning. Folks
32:14
Speaker 3: don't just jump at the chance of saying, oh, just
32:17
Speaker 3: give away my house, or I'll give away my property
32:20
Speaker 3: and reserve a life estate not always the way to go.
32:22
Speaker 3: That's why I want you to get the guide calculating
32:25
Speaker 3: the consequences of a life estate, because, like here, there
32:28
Speaker 3: are gift tax consequences, income tax consequences, estate tax consequences
32:34
Speaker 3: that exist. Never mind the fact that you've lost control
32:38
Speaker 3: over the asset when you'd set up a life estate,
32:40
Speaker 3: and your ability to sell and buy new property is
32:43
Speaker 3: also impacted. Call and figure out if a life estate's
32:47
Speaker 3: right for you eight six six eight four eight five
32:51
Speaker 3: six nine nine or Legal Exchange Show dot com again
32:55
Speaker 3: eight six six eight four eight five six nine nine
32:59
Speaker 3: or Legal Exchange Show dot Com.
33:02
Speaker 2: Our last question comes from Bob in North Attleboro, mass
33:05
Speaker 2: and Bob Wrights. My grandfather had a personal care contract
33:09
Speaker 2: with my cousin to take care of him. He recently passed,
33:12
Speaker 2: and we discovered that my cousin never got paid for
33:15
Speaker 2: the hours he spent with him. I am the personal
33:18
Speaker 2: representative for my grandfather's estate. Can I pay my cousin
33:22
Speaker 2: now for what he is owed or is it too late?
33:27
Speaker 3: This is an interesting situation because when I think of
33:30
Speaker 3: personal care contracts, I think of it in terms of,
33:33
Speaker 3: you know, making sure we not only get paid for
33:36
Speaker 3: our services, but do it in a way that doesn't
33:39
Speaker 3: disqualify us from the cost from being eligible for Medicaid. YEP,
33:43
Speaker 3: two very different things. I don't hear anything in this
33:46
Speaker 3: fact pattern that deals with applying for Medicaid. So the
33:50
Speaker 3: Medicaid aspect of this question isn't really here, but I
33:55
Speaker 3: want to address it. Sure, So from a medicaid standpoint,
34:01
Speaker 3: if you're thinking someone might be going into the nursing
34:04
Speaker 3: home and doesn't have the five year rule, or even
34:07
Speaker 3: if you're not even thinking about the five year rule,
34:09
Speaker 3: but you happen to move into your parents' house or
34:12
Speaker 3: you're the one providing care to your parent and they
34:16
Speaker 3: want to pay you, they need to make sure that
34:19
Speaker 3: you create one of these personal care contracts that's described here,
34:23
Speaker 3: and that in creating the contract it has hours work,
34:28
Speaker 3: type of services to be rendered, duration of the contract,
34:32
Speaker 3: and how I'm going to get paid and how much
34:36
Speaker 3: and how frequently, and by having that contract in place,
34:42
Speaker 3: so let's say you get five thousand a month, not
34:45
Speaker 3: unreasonable for how much time you're putting out hours and
34:51
Speaker 3: you know two years later you go they go to
34:55
Speaker 3: the nursing home. Right, and let's say you received that's
34:58
Speaker 3: sixty thousand a year saved, one hundred and twenty thousand dollars. Sure,
35:02
Speaker 3: that is not a gift. It is not a disqualifying transfer.
35:06
Speaker 3: If you have the contract in place and you've been
35:09
Speaker 3: reporting it on your income tax return as income earned.
35:13
Speaker 3: All of that together makes these transfers not disqualifying transfers
35:20
Speaker 3: for the nursing home. What that means is that one
35:23
Speaker 3: hundred and twenty thousand dollars you earned, you get to keep,
35:27
Speaker 3: and it doesn't prevent Ma from going into the nursing
35:31
Speaker 3: home for eligibility purposes. Yeah, that's the medicaid piece answer
35:38
Speaker 3: to this question.
35:39
Speaker 2: Maybe the grandson taking care of him stopped him from
35:43
Speaker 2: having to go into a nursing home. Maybe they were
35:45
Speaker 2: kind of gearing up for that.
35:46
Speaker 3: Could be, Yeah, could have been. But for whatever reason,
35:49
Speaker 3: you do it, make sure you have that, which again
35:52
Speaker 3: I know wasn't the question. Now we got to say, well,
35:54
Speaker 3: what's the contractual question here?
35:57
Speaker 2: Right? Because Grandpa passed right, so.
36:00
Speaker 3: To me, this is an obligation of the estate. That
36:04
Speaker 3: obligation still goes with the estate to pay that contract.
36:09
Speaker 3: In other words, this is a contract that was in place,
36:12
Speaker 3: services were rendered, just not paid. It's almost like you
36:16
Speaker 3: got to be careful of some you know. It could
36:18
Speaker 3: be oid income, which is you know, ordinary income in
36:22
Speaker 3: the sense that you earned it, right, but it wasn't paid.
36:27
Speaker 3: So I think the estate is going to have an
36:30
Speaker 3: obligation here to pay it. It's not too late.
36:33
Speaker 2: Would you typically recommend they get paid as they go along,
36:36
Speaker 2: because most people do this setup because someone may have
36:41
Speaker 2: to go into a nursing home.
36:42
Speaker 3: Right, great point, and I'll leave it with this. That
36:45
Speaker 3: back to the medicaid side of things. If you were
36:48
Speaker 3: to do it that way, you can't go back and
36:51
Speaker 3: get paid later. God, they want you to pay right along. Folks,
36:55
Speaker 3: learn what's right what's wrong about life estates? Please call
36:59
Speaker 3: and get the guide. It's not always for everybody eight
37:02
Speaker 3: six six eight four eight five six ninety nine or
37:05
Speaker 3: Legal Exchange Show dot com.
37:08
Speaker 2: If you have a question you would like to ask Todd,
37:11
Speaker 2: visit his website Legal Exchange Show dot com and click
37:14
Speaker 2: on the ask Tod tab. Maybe I'll be able to
37:17
Speaker 2: read your question on the air, and hopefully his answer
37:20
Speaker 2: will stop you from becoming one of his next real
37:22
Speaker 2: life stories you've been listening to Todd Lutsky, a partner
37:26
Speaker 2: with the law firm of Cushing and Dolan. I'm Susan Powers,
37:30
Speaker 2: a financial advisor with the Armstrong Advisory Group. We'll be
37:33
Speaker 2: back with more after this quick break on the legal
37:36
Speaker 2: exchange with Todd Lutsky.
37:38
Speaker 1: Life estates carry a higher risk of income tax penalties
37:41
Speaker 1: and hidden gift issues, and while they can be beneficial
37:44
Speaker 1: in some cases, if you use one, you need to
37:46
Speaker 1: be aware of the pitfalls they make us. Cushing and
37:49
Speaker 1: Dolan are experts in older law and have nearly forty
37:51
Speaker 1: years of experience helping families with their estate planning. Their
37:54
Speaker 1: new guide, called Calculating the Consequences of Life Estates can
37:58
Speaker 1: help you make the right decisions about how to protect
38:00
Speaker 1: your assets from probate and the nursing home. Life estates
38:03
Speaker 1: are not simple documents and can create the potential for
38:05
Speaker 1: you to lose control of your estate. So if you
38:08
Speaker 1: haven't done your planning yet, now's the time to learn
38:10
Speaker 1: about the effects that life estates can have when it
38:12
Speaker 1: comes to protecting your assets. Call Cushing and Dolan today
38:15
Speaker 1: at eight sixty six, eight four, eight five, six ninety
38:18
Speaker 1: nine and request their new guide called Calculating the Consequences
38:21
Speaker 1: of Life estates that's eight sixty six eight four eight
38:23
Speaker 1: five six nine nine, or request the guide online at
38:26
Speaker 1: Legal exchange show dot com. The proceeding was paid for
38:29
Speaker 1: and the views expressed are solely those of Cushing and Dolan.
38:31
Speaker 1: Cushing and Dolan and or Armstrong Advisory may contact you
38:33
Speaker 1: offering legal or investment services. Cushing and Dolan and Armstrong
38:36
Speaker 1: Advisory do not endorse each other and are not affiliated.
38:39
Speaker 1: If you're looking for the perfect place for your next vacation,
38:41
Speaker 1: look no further than the US Virgin Islands. Act fast
38:45
Speaker 1: and take advantage of a special promotion to Saint Croix.
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40:41
Speaker 1: Your tune to the Legal Exchange with Todd Lutsky. If
40:44
Speaker 1: you are a loved one needs a nursing homestay, call
40:46
Speaker 1: Todd right now at eight six six eight four eight
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40:57
Speaker 1: Exchange show dot com.
40:59
Speaker 2: Welcome back to the Legal Exchange with Todd Lutsky. I'm
41:02
Speaker 2: Susan Powers, a financial advisor with the Armstrong Advisory Group,
41:06
Speaker 2: and I'm joined of course by Todd Lutsky, partner with
41:09
Speaker 2: the law firm of Pushing in Dolan, with a master's
41:11
Speaker 2: in taxation. So, Todd life estates. You've talked about there's
41:18
Speaker 2: a wrong way and a right way to create these.
41:21
Speaker 2: So I want to focus on ditching the wrong way
41:24
Speaker 2: and talking about the right way, which is creating that
41:27
Speaker 2: life estate with the remainderman as your irrevocable trust.
41:31
Speaker 3: Now, what's the wrong way? Just so they know, to
41:33
Speaker 3: the kids put the remainder in them.
41:36
Speaker 2: So you reserve that life estate for yourself and the
41:40
Speaker 2: remainder interest goes to the kids. Nothing good comes from that.
41:43
Speaker 3: That's bad.
41:43
Speaker 2: That's the very bad way. Let's talk about not so
41:48
Speaker 2: bad way, less bad, the less bad way, the less
41:52
Speaker 2: bad way. So there have got to be benefits to
41:56
Speaker 2: doing this, otherwise no one would ever do them right.
41:59
Speaker 3: That's up right.
42:00
Speaker 2: So would you consider this if you're doing, you know,
42:04
Speaker 2: nursing home planning, would you consider using this for that purpose.
42:09
Speaker 3: One of the benefits of doing this, and maybe maybe
42:13
Speaker 3: even the most important benefit from doing this, is it
42:17
Speaker 3: will protect the asset from the nursing home your home,
42:21
Speaker 3: not a rental, your home right transfer the home to
42:28
Speaker 3: the irrevocable trust reserve a life estate yep. At the
42:32
Speaker 3: end of five years, the whole home is protected from
42:37
Speaker 3: the nursing home. And quite frankly, that works either way.
42:40
Speaker 2: You do it just so, no, just to refresh people's
42:43
Speaker 2: memories if they haven't been or if they haven't listened
42:46
Speaker 2: to the show in this when we were talking about this,
42:50
Speaker 2: why would you even consider doing a life estate if
42:52
Speaker 2: you're doing your irrevocable trust plan?
42:55
Speaker 3: And I'm glad you ask, because that's exactly right. I'm
42:57
Speaker 3: sitting here as I'm saying it. I'm saying, well, if
42:59
Speaker 3: I just put my whole house and the irrevocable trust,
43:02
Speaker 3: won't it also be protected from the nursing home? And
43:04
Speaker 3: you're absolutely rights, Susan gun wash your hands, walk away,
43:07
Speaker 3: no worries about anything. And I absolutely would do that.
43:10
Speaker 2: So why would you do the estate the life estate?
43:13
Speaker 3: I only do it three times one. If you have
43:16
Speaker 3: a mortgage, you got a reserve the life estate so
43:20
Speaker 3: they don't call your note to do on sale clubs. Okay,
43:25
Speaker 3: that's important today because you probably have a low rate
43:27
Speaker 3: and rates are higher and you know they will call
43:29
Speaker 3: it two some places, at least in Massachusetts. I don't
43:35
Speaker 3: know about your state, but some states give you real
43:38
Speaker 3: estate tax abatements, and that's town level town level, town
43:43
Speaker 3: level real estate tax abatements. If you are an owner occupant.
43:48
Speaker 3: Sometimes if you are over sixty five, for veterans veterans
43:54
Speaker 3: benefit or something, you need to keep that to keep
43:58
Speaker 3: that reserve of delight state that nugget of ownership will
44:02
Speaker 3: retain that benefit. That's two three up to the client
44:09
Speaker 3: on this one. This one isn't even across the board.
44:12
Speaker 3: This is up to the client. You're putting a two
44:14
Speaker 3: family property into the irrevocable trust. You live in one unit,
44:21
Speaker 3: and you rent the unit if that's the only item
44:25
Speaker 3: in the trust, no money, no other income producing assets
44:29
Speaker 3: in the trust. If you don't want to be bothered
44:32
Speaker 3: filing an income tax return for the trust, then you
44:37
Speaker 3: reserve a life estate with the two family and you
44:41
Speaker 3: can continue to collect the income directly as the life tenant.
44:45
Speaker 3: And that way it doesn't run through the trust and
44:48
Speaker 3: back to you, and it prevents you from having to
44:51
Speaker 3: file an income tax return for the trust. So it's
44:53
Speaker 3: an efficient idea.
44:55
Speaker 2: And that is only if you live in that two
44:58
Speaker 2: family not if you just happen to own a rental property.
45:01
Speaker 3: Only if you live in it. It's a two family
45:03
Speaker 3: and again the case by case for clients. Some say, no,
45:06
Speaker 3: I don't like the negatives that go with the life estate,
45:09
Speaker 3: so let just put the whole darn thing and I'll
45:10
Speaker 3: file the tax return. I'm okay with that, and I
45:13
Speaker 3: agree with that, So there you go, perfect, folks, This
45:17
Speaker 3: is just all that from one question Susan asked that
45:21
Speaker 3: gives you an idea of how much is involved in
45:24
Speaker 3: understanding a life estate. You think it's easy, but it's
45:27
Speaker 3: not always so easy. Income tax benefit or problems, estate tax,
45:33
Speaker 3: gift tax selling. You just talked about control. Can I sell?
45:37
Speaker 3: What are the tax ramifications of selling and buying? Folks?
45:41
Speaker 3: Think about your life estate. Get the guide, learn if
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46:02
Speaker 2: So you described this life estate a minute ago todd
46:05
Speaker 2: as a nugget of ownership. Does that mean when you
46:09
Speaker 2: die that little nugget that life estate ownership, is that
46:12
Speaker 2: going to go through go to probate?
46:14
Speaker 3: Yeah, and this is another benefit of life estates. And
46:19
Speaker 3: so when you die, that nugget of ownership just vanishes, right. Yeah,
46:25
Speaker 3: it's just literally it's a life estate that ends at death.
46:30
Speaker 3: And so because it ends at death, the remaindermen now
46:35
Speaker 3: become the one hundred percent owner overnight.
46:40
Speaker 2: Mm hm.
46:41
Speaker 3: And it does not pass to probate.
46:43
Speaker 2: Okay, so good.
46:45
Speaker 3: It avoids probate.
46:46
Speaker 2: So if you have someone who has ended up going
46:49
Speaker 2: into the nursing home after they've done all this, they've
46:51
Speaker 2: gone through the five year and then go into the
46:53
Speaker 2: nursing home. Yes, what happens in terms of a state recovery?
47:00
Speaker 2: Is there anything that they can kind of grab at?
47:02
Speaker 3: So I think you need to look at your state
47:06
Speaker 3: first of all, a state recovery is very state specific.
47:13
Speaker 3: So in Massachusetts I can tell you that they only
47:16
Speaker 3: can recover against the probate estate.
47:22
Speaker 2: Yep.
47:23
Speaker 3: So what that means is assets that you die owning
47:26
Speaker 3: in your own name with no beneficiary would be governed
47:31
Speaker 3: by the probatea state and would be subject to a
47:33
Speaker 3: state recovery. As we just mentioned, it doesn't exist anymore.
47:38
Speaker 3: In mass You're absolutely right. So, as we had mentioned,
47:41
Speaker 3: in Massachusetts, when you die, the life estate just ends.
47:45
Speaker 3: It does not become part of your pro beta state
47:48
Speaker 3: and is therefore not subject to a state recovery, unlike
47:52
Speaker 3: New Hampshire that has expanded a state recovery. And in
47:57
Speaker 3: New Hampshire that nugget of owner that you have, they
48:01
Speaker 3: say we can recover against what you owned right before
48:05
Speaker 3: you died. Okay, So right before you died you did
48:08
Speaker 3: have a life estate. Now remember, depending on how old
48:10
Speaker 3: you are, the value of that life estate can be
48:13
Speaker 3: very small. So I'm not overly worried about it. But
48:17
Speaker 3: just know that there's a difference in New Hampshire versus mass.
48:20
Speaker 2: So they can grab a little of that. Okay. So
48:24
Speaker 2: we had talked about earlier in the show, the woman
48:27
Speaker 2: who wanted to give away her lake house. Yeah, what
48:30
Speaker 2: happens from a tax perspective, Let's say she was living
48:33
Speaker 2: there and she reserved the life estate and put the
48:36
Speaker 2: rest in her irrevocable trust. What happens to that step
48:39
Speaker 2: up you were talking about if she had just given
48:42
Speaker 2: it to the kids instead.
48:44
Speaker 3: Right, So the good news again, another benefit right of
48:49
Speaker 3: doing this life estate arrangement is even though you died,
48:53
Speaker 3: owning only this nugget of ownership that we talk about, right,
48:57
Speaker 3: So the kind of X is the life estate? Why
49:00
Speaker 3: the remainder interest and the two together equal one hundred
49:03
Speaker 3: percent of the property. So X plus Y equals one
49:07
Speaker 3: hundred percent. So this in her case, it was a
49:10
Speaker 3: six hundred thousand dollars property. How much of that six
49:13
Speaker 3: hundred thousand dollars represents X the life estate? So it's small.
49:20
Speaker 3: Depending on how old you are, it goes up and down,
49:23
Speaker 3: but we know it's not one hundred percent of the property.
49:26
Speaker 3: So when you die, your argument or your question, Susan
49:30
Speaker 3: is do I get a full step up in basis
49:35
Speaker 3: on the whole six hundred thousand dollars property? Or do
49:38
Speaker 3: I only get a step up in basis equal to
49:41
Speaker 3: the life estate value that I actually own? The nugget
49:46
Speaker 3: good news, full step up in basis, folks, because the
49:51
Speaker 3: Code twenty thirty six tells us that if you give
49:54
Speaker 3: away an asset and retain the right to live there,
49:59
Speaker 3: enjoy it, right to the income, then you didn't give
50:03
Speaker 3: it away, and the whole asset gets pulled back into.
50:07
Speaker 2: The estate, which is good because you're not paying those
50:10
Speaker 2: capital gains taxes.
50:12
Speaker 3: Right, So in our example with that four hundred and
50:14
Speaker 3: fifty thousand dollars gain, with the example earlier in the program,
50:18
Speaker 3: that whole gain, not just a piece completely wiped out. Okay,
50:23
Speaker 3: so that's good for the time.
50:24
Speaker 2: I like that.
50:25
Speaker 3: So, folks, this is so now we've spent I'm glad
50:28
Speaker 3: we spent some time talking about the benefits of life
50:30
Speaker 3: estates because you might have one, and you might think
50:32
Speaker 3: it's great for you, but there's also plenty of negatives.
50:35
Speaker 3: Get the guide, Learn the pros and cons eight sixty
50:38
Speaker 3: six eight four eight five six nine nine or Legal
50:43
Speaker 3: Exchange show dot com.
50:44
Speaker 2: Todd Lutsky from the law firm of Cushing and Dylan,
50:47
Speaker 2: thank you so much.
50:48
Speaker 3: Thank you, Susan. Always a pleasure.
50:49
Speaker 2: I'm Susan Power as a financial advisor with the Armstrong
50:52
Speaker 2: Advisory Group. We thank you for joining us today and
50:55
Speaker 2: we'll be back again next week on the Legal Exchange
50:58
Speaker 2: with Todd Lutsky.
51:00
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51:50
Speaker 1: and the views expressed are solely those of Cushing and Dolan.
51:52
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51:54
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