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Ask Todd: How does moving to a new state impact your estate taxes · The Financial Exchange Show

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  Speaker 1: This is Ask Todd on the Financial Exchange Radio Network.
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  Speaker 1: If you have an existing estate plan or in the
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  Speaker 1: market for one, Todd Letsky is here to answer your
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  Speaker 1: questions and help you plan for a later life. Ask
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  Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
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  Speaker 1: New England for more than thirty five years, helping families
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  Speaker 1: with a state and tax planning, Medicaid planning, and probate law.
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  Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
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  Speaker 2: And we are now joined by Todd Lutsky from the
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  Speaker 2: law firm of Cushing and Dolan. The segment is Asked Todd,
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  Speaker 2: you get to Ask Todd your state planning questions live
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  Speaker 2: on air. Last week, I think we might have set
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  Speaker 2: a new record, Todd. Did we do four or five?
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  Speaker 2: I can't can't remember.
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  Speaker 3: It was every bit of that I can't tell. I
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  Speaker 3: think we did get to five.
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  Speaker 2: And we still left one on the board just because
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  Speaker 2: again we were a little filled up with callers. So
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  Speaker 2: get calling early in order to make sure we get
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  Speaker 2: to your call. Eight eight eight two zero five two
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  Speaker 2: two six three. More often than not we don't have
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  Speaker 2: a chance to get to five callers but uh again
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  Speaker 2: eight eight eight two zero five two two sixty three.
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  Speaker 2: That is the number to call to speak with Todd
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  Speaker 2: Lutsky right now, live on air about your estate planning
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  Speaker 2: questions one more time. Eight eight eight to zero five
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  Speaker 2: two two six three. Todd, how are you today?
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  Speaker 3: I'm never better. I'm afraid to ask you how you are?
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  Speaker 4: I'm good.
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  Speaker 2: I learned something new over the weekend.
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  Speaker 3: Yeah, well that's good, you're always learning.
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  Speaker 2: Did you know that Sweden puts barcodes on their naval ships.
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  Speaker 3: On their naval ships on their navy. No, I didn't
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  Speaker 3: know that.
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  Speaker 2: It's so they can Scandinavian.
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  Speaker 3: Oh well that's that's that's good. That would work.
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  Speaker 2: It would But I said, there's no way that that happens.
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  Speaker 3: Now, that's very true. There's no way.
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  Speaker 2: And so finally I said, look, let me know when
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  Speaker 2: they finish, denmark them as all completed.
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  Speaker 5: Oh that's that's cute, I thought, So that works, Todd.
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  Speaker 5: Let's talk a little bit about state. Is state taxes
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  Speaker 5: state state tex not federal? Got a state estate taxes.
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  Speaker 2: Let's say that someone has done trust work, they have
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  Speaker 2: irrevocable trust, multiple ones and or irrevocable trusts Okay, if
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  Speaker 2: someone moves from a state that has no state estate
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  Speaker 2: tax into one that does, how do they know if
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  Speaker 2: the trust planning they've done adapts for the fact that
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  Speaker 2: their new state might have an estate tax in it.
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  Speaker 3: So great question. The reason that Chuck is, you know,
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  Speaker 3: directing it to be state because first, I'll just say federally.
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  Speaker 3: Of course, we know federally in every state is the same.
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  Speaker 3: So that's why we're not ignoring federal, but we are,
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  Speaker 3: you know, discussing the state. Federal will be covered state
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  Speaker 3: first and foremost, what do you do when you move?
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  Speaker 3: You check with a local lawyer. Right now, we are
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  Speaker 3: licensed in a lot of states, so a lot of
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  Speaker 3: our clients can just call us when they move because
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  Speaker 3: there are there are a lot of things you need
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  Speaker 3: to do when you move. It doesn't just mean you
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  Speaker 3: move and everything works. So you got to make sure
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  Speaker 3: that that you you know, call that they would call
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  Speaker 3: us and talk to us if we're still licensed in
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  Speaker 3: the state. If not, you find a local lawyer who's
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  Speaker 3: licensed in the state and ask. However, make it a
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  Speaker 3: little easier on some of you. I believe I don't
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  Speaker 3: have the exact number, but I believe there's only about
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  Speaker 3: fifteen states that even have an estate tax. So right
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  Speaker 3: off the bat, the answer might be pretty easy. I
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  Speaker 3: don't have to do anything right. So, like a lot
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  Speaker 3: of clients from here move to Florida, right, well, Florida
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  Speaker 3: has no estate tax, so they don't have to worry.
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  Speaker 3: There's no estate tax. Now, remember when I do planning
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  Speaker 3: for clients, or when we had Cushing and Dolan do
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  Speaker 3: planning for clients, we always make sure, like if they're
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  Speaker 3: already a mass resident, that we've got the shares built
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  Speaker 3: into the trust that are needed to shelter a state
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  Speaker 3: and federal estate tax. So lots of times what I
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  Speaker 3: see as a client will move to Florida, they're all set,
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  Speaker 3: But if they move back to mass they would also
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  Speaker 3: be all set because it got the state language in it.
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  Speaker 3: And that happens a lot. Usually you have one, you know,
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  Speaker 3: the family moves to Florida, one spouse dies, they're alone,
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  Speaker 3: they want to come back to where the kids are
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  Speaker 3: if they're here in mass or and they move back,
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  Speaker 3: so you know, we have to account for that. So
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  Speaker 3: that's the first thing. Check with someone local. Secondly, when
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  Speaker 3: you are moving, if you really want to change your
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  Speaker 3: residency to take effect and make sure that the reason
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  Speaker 3: you're moving is to not be taxed in the state
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  Speaker 3: that you left. There may be some other steps you
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  Speaker 3: need to take, from maybe updating your basic estate planning documents,
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  Speaker 3: not the trust, but the will, the health care proxy,
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  Speaker 3: the power of attorney, the basics so that they are
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  Speaker 3: that state specific. Change your driver's license, voter registration, use
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  Speaker 3: your credit card down there when you're whatever location you're
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  Speaker 3: living in so that you can prove that you're there
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  Speaker 3: six months in a day. So a lot of other
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  Speaker 3: things to think about when you're changing residency. In addition to,
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  Speaker 3: as you said, Chuck, updating your estate plan at least
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  Speaker 3: a basic docs.
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  Speaker 2: Talking with Todd Lutsky from Cushing and Dolan. Still some
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  Speaker 2: room on the phone lines here at eight eight eight
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  Speaker 2: to zero five two two sixty three. Call that number
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  Speaker 2: to speak with Todd live on air about your estate
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  Speaker 2: planning questions. We are going to take a break now,
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  Speaker 2: but when we come back, we're gonna get right to
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  Speaker 2: those questions from you again. That phone number is eight
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  Speaker 2: eight eight to zero five two two six ' three
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  Speaker 2: One more time eight eight eight two zero five two
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  Speaker 2: two six three quick break. Then write to your calls
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  Speaker 2: with Todd.
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  Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
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  Speaker 1: only here on the Financial Exchange Radio Network. You're listening
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  Speaker 1: to Ask Todd with Todd Lutsky on the Financial Exchange
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  Speaker 1: Radio net work.
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  Speaker 2: Still got a little bit of room on the phone line,
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  Speaker 2: So if you do have a question for Todd eight
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  Speaker 2: eight eight two zero five two two six three. He
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  Speaker 2: must be a little slower because of the Christmas holiday
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  Speaker 2: coming up next week again eight eight eight to zero
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  Speaker 2: five two two six three to speak with Todd. We
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  Speaker 2: do have a caller all queued up for you right now. Though,
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  Speaker 2: let's go to Steve in Centerville. Steve, what's your question
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  Speaker 2: for Todd Lutsky?
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  Speaker 4: Yes, I have a question. I had a house put
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  Speaker 4: in a Medicaid non revocable trust done the right way.
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  Speaker 4: There's a mortgage on the property. Say the house is
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  Speaker 4: worth a million and nail about three hundred. At some
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  Speaker 4: point in the future after the trust was set up,
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  Speaker 4: you pay the house off. Does that three hundred start
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  Speaker 4: a clock on that money that you paid the house
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  Speaker 4: off with?
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  Speaker 3: That's great question and the answer is absolutely not right.
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  Speaker 3: But let me explain the way the medicaid clock works
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  Speaker 3: is you transferred the property in. However long ago that happened,
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  Speaker 3: and when the day you transferred the property in is
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  Speaker 3: the day you started that five year medicaid clock. Okay,
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  Speaker 3: so that that's step one. The only time that medicaid
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  Speaker 3: clock resets or starts over would be let's say you
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  Speaker 3: added something to the trust after you put this in,
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  Speaker 3: something new like money or you know, you had to
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  Speaker 3: spare a brokerage account and you wanted to protect more assets,
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  Speaker 3: so you added it to the trust. That would reset
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  Speaker 3: the clock, but only as to the new addition. It
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  Speaker 3: would not at all reset the clock on the house.
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  Speaker 3: Another comment we get all the time is that, and
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  Speaker 3: you might be thinking this down the road, Steve, what
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  Speaker 3: if if you sell your house through the trust and
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  Speaker 3: buy another one inside the trust. Again, no restarting of
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  Speaker 3: the clock as long as out goes the house in
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  Speaker 3: comes all the money from the proceeds, and then you
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  Speaker 3: use those proceeds to buy the new house inside the trust.
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  Speaker 3: You see, nothing new went in. All that happened was
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  Speaker 3: you reinvested the assets that were already in there, so
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  Speaker 3: that didn't restart the clock. And finally, the reason it
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  Speaker 3: doesn't restart the clock for your mortgage. Is that mortgage
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  Speaker 3: was never owned by the trust. That mortgage was in
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  Speaker 3: your name alone, or you and your wife's name alone,
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  Speaker 3: if you're married, and so you are using money, I
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  Speaker 3: assume outside the trust to pay off a mortgage of
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  Speaker 3: your own that is outside the trust, so that transaction
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  Speaker 3: never impacts the trust at all and doesn't reset the clock. Now,
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  Speaker 3: I'm gonna leave one other comment for everybody else out
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  Speaker 3: there who's listening, because Steve, you kind of know this.
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  Speaker 3: But Steve situation, I'm guessing had the mortgage on the
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  Speaker 3: property before it went into the trust. So if that's
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  Speaker 3: the case, always be mindful when you're setting up these
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  Speaker 3: trusts that the transfer to the trust could trigger a
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  Speaker 3: do on sale clause on the mortgage. That's why we
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  Speaker 3: would always reserve a life estate in the deed if
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  Speaker 3: you have an existing mortgage. That's how you could keep
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  Speaker 3: that mortgage, Steve, even though the property was in the trust.
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  Speaker 4: Uh.
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  Speaker 3: But the one issue is you probably couldn't refinance it
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  Speaker 3: without resetting the clock. So anyways, long winded answer, but
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  Speaker 3: as a great question, it's one that comes up and
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  Speaker 3: I'm sure a lot of people have it. So folks,
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  Speaker 3: let me now tell you a little bit about that's medicaid.
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  Speaker 3: That's the irrevocable trust. The guide we're given away this
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  Speaker 3: month has both the revocable trust and the irrevocable trust
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  Speaker 3: addressed in it, I say addressed in it. But how
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  Speaker 3: it's going to explain to you how with a revocable trust,
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  Speaker 3: the marital share, the remainder share, how they work. How
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  Speaker 3: the formula works to shelter estate taxes on the first death,
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  Speaker 3: gives you an example, tells you could put your own
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  Speaker 3: numbers in and run it through and see how you
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  Speaker 3: shelter your taxes. Tells you how to calculate the tax.
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  Speaker 3: It also does the state tax, so it gives you
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  Speaker 3: the new Massachusetts of state tax calculations in there. And finally,
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  Speaker 3: for all of you who want to do tax planning
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  Speaker 3: and nursing home planning, there's another example, but it's with
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  Speaker 3: the irrevocable trust, explaining similar how those things are done.
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  Speaker 3: So something for everybody. It's that time of year, call
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  Speaker 3: and get the guide eight six six eight four eight
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  Speaker 3: five six nine nine, or Legal Exchange Show dot Com
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  Speaker 3: one more time eight six six eight four eight five
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  Speaker 3: six nine nine or Legal Exchange Show dot com todal.
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  Speaker 2: Let's talk a little bit about the the current state
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  Speaker 2: of affairs for the federal state tax. I know that
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  Speaker 2: after next year that is currently set to uh drop
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  Speaker 2: back down to what's the level for twenty six?
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  Speaker 3: So for twenty six, it's supposed to drop back down
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  Speaker 3: to five million, four hundred and ninety thousand dollars. That's
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  Speaker 3: the that's the dropback indexed for inflation. So it's the
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  Speaker 3: indexed for inflation part that we're not aware of. Sure,
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  Speaker 3: I'm guessing we seem to think that other professionals have
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  Speaker 3: been guessing that's gonna move it to about seven million.
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  Speaker 3: But but go ahead, Chuck.
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  Speaker 2: Are you hearing anything through the grapevine in terms of
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  Speaker 2: the likelihood of what ends up happening with the new
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  Speaker 2: administration coming into office and a Republican controlled Congress, as
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  Speaker 2: far as hey, are we likely just to see a
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  Speaker 2: continuation of the current level with its inflation adjustments? Do
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  Speaker 2: you see the federal exemption expanded?
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  Speaker 4: Again?
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  Speaker 2: A what's what's kind of what you're hearing out there
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  Speaker 2: in terms of possibilities at least?
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  Speaker 3: Yeah, No, And that's a great question. That's a fair question,
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  Speaker 3: because that's what we're faced with, right and you know,
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  Speaker 3: so there's a couple of schools of thought. Initially, Initially
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  Speaker 3: when when the election was over, it clearly looked like
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  Speaker 3: a red wave had hit, and so we're like, okay,
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  Speaker 3: we need to, you know, adjust the way we're going
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  Speaker 3: to pursue twenty twenty five and and you know, for
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  Speaker 3: higher net worth clients, for aggressive gifting or not. We
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  Speaker 3: said we might need to tailor that back, slow it
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  Speaker 3: down a little bit because we were thinking that the
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  Speaker 3: likelihood of them changing the or or not acting to
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  Speaker 3: prevent this from happening. Remember, folks, this is gonna happen
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  Speaker 3: unless they act. Okay, so that's a given. So we said, well,
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  Speaker 3: likely maybe they won't do that. Then about a month
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  Speaker 3: into this, now what are we a month and a
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  Speaker 3: half into this thing, We're starting to realize that the
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  Speaker 3: red wave was there, but not so much in the
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  Speaker 3: House of Representatives as we once thought. Fair So that
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  Speaker 3: now is about what is it one maybe two.
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  Speaker 2: Votes Republicans going to afford to lose two two and
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  Speaker 2: still pass something.
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  Speaker 3: So it's about a two vote difference now, which is
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  Speaker 3: very different than I think what we're looking at as
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  Speaker 3: possible in the teams at one point. So with a
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  Speaker 3: two vote different that now makes us rethink this exemption
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  Speaker 3: resetting once again. In other words, now, as far as
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  Speaker 3: I know it, right, the Constitution requires that any tax
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  Speaker 3: legislation or what they call revenue generation legislation, must start
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  Speaker 3: in the House. So it's very possible that it may
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  Speaker 3: never find its way to the Senate if it can't
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  Speaker 3: get out of the House. So now with a tight
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  Speaker 3: situation like that in the House, yeah, I think you
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  Speaker 3: got to keep your eyes open to this possibility of
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  Speaker 3: resetting to seven million. As we all know, the debt
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  Speaker 3: is pretty high. The you know, we we we've got
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  Speaker 3: deficit spending. We've got to be careful, and they need revenue.
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  Speaker 2: So have you heard any chatter about, you know it
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  Speaker 2: the the exemption amount increasing or is it just hey,
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  Speaker 2: you're just not sure and you're just trying to read
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  Speaker 2: the board at this point.
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  Speaker 3: Well, I I when you say increasing, I mean it's
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  Speaker 3: it's obviously scheduled to fall back, not increase.
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  Speaker 2: But I'm asking about the opposite.
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  Speaker 3: Yeah, I know. I think the best you can hope
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  Speaker 3: for would maybe be for the legislation to stay the
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  Speaker 3: same and and maybe you know, maybe then continue whether
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  Speaker 3: it's whether it's indexing for inflation every year like it
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  Speaker 3: has been doing, because it's gonna jump to five, you know,
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  Speaker 3: to thirteen nine or in gen so those little incremental
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  Speaker 3: and I think the best you could hope for is
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  Speaker 3: stay the same. I don't I don't think you're gonna
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  Speaker 3: be able to say all of a sudden, we're gonna
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  Speaker 3: now ramp it up and have a much higher the
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  Speaker 3: state tax.
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  Speaker 2: So that's my thought, mister Lutsky, thank you for joining
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  Speaker 2: us today.
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  Speaker 3: Always a pleasure. Thank you.
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  Speaker 1: This has been asked OD on the Financial Exchange Radio Network.
• 15:23
  Speaker 1: Askedd with Todd Lutsky has been presented by Cushing and Dolan,
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  Speaker 1: serving Massachusetts and New England for more than thirty years,
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  Speaker 1: helping families with the state and tax planning, Medicaid planning,
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  Speaker 1: and probate law. Call eight hundred three nine three four
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  Speaker 1: thousand and one or visit Cushingdolan dot com. The views
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  Speaker 1: expressed in this segment are solely those of Cushing and Dolan.
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  Speaker 1: Armstrong Advisory does not provide any legal or tax advice.
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  Speaker 1: Please consult with your illegal or tax advisor on such matters.
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  Speaker 1: Cushing and Armstrong do not endorse each other and are
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  Speaker 1: not affiliated.