Latest / The Financial Exchange Show / Ask Todd: How much control does an irrevocable trust take from you?

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Ask Todd: How much control does an irrevocable trust take from you? · 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 Lutsky 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: Ayes promise for now, joined by the one and only
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  Speaker 2: Todd Lotsky from the law firm of Cushing and Dolan
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  Speaker 2: for Ask Todd. The segment is appropriately named because this
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  Speaker 2: is your chance to ask Todd your questions about your
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  Speaker 2: estate plan. Phone lines are wide open right now at
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  Speaker 2: eight eight eight to zero five two two sixty three.
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  Speaker 2: That is the number to call to speak with mister
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  Speaker 2: Lotsky live on air again eight eight eight two zero
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  Speaker 2: five two two six three. Last week I believe, actually
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  Speaker 2: it was two weeks ago. We set a record. We
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  Speaker 2: got through four calls. Usually we only get to two
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  Speaker 2: or three because of time limitation, So get calling early
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  Speaker 2: call again. That number is eight eight eight to zero
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  Speaker 2: five two two six three. One more time eight eight
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  Speaker 2: eight to zero five two two six three. Mister Lutsky,
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  Speaker 2: how are you doing today?
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  Speaker 3: I'm never better? How are you?
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  Speaker 2: Uh good? I was actually I was thinking the other
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  Speaker 2: day about buying a coffin.
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  Speaker 3: A coffin, you're not feeling well?
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  Speaker 2: Well? Then I realized that's actually the last thing I need.
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  Speaker 3: Yeah, it probably is.
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  Speaker 2: Yeah, so I decided not to Todd, I want to talk
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  Speaker 2: to you about these medicaid irrevocable trusts. Yes, what do
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  Speaker 2: they actually do? What estate planning goals do they accomplish?
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  Speaker 3: So I think there's so much to learn about irrevocable trust.
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  Speaker 3: But to try to answer that question, what sort of
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  Speaker 3: point on point would be?
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  Speaker 4: Uh?
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  Speaker 3: You know, they avoid probate, So lots of trust do that,
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  Speaker 3: and I want people to know revocable and irrevocable do that.
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  Speaker 3: By putting assets in it, you're not going to have
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  Speaker 3: to go to probate. Secondly, they are designed you know
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  Speaker 3: many people don't think this, but they're designed also to
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  Speaker 3: shelter for a state tax purposes on the first death
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  Speaker 3: if you're married, Remember revocable trust. That's only the big
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  Speaker 3: big deal. For a revocable trust, they say, you know what,
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  Speaker 3: we're going to help you shelter state taxes. So on
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  Speaker 3: the first death there's none due and on the second
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  Speaker 3: death there'll be less due or none do depending on
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  Speaker 3: the size of your estate and how much we can
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  Speaker 3: shelter on the first death. Well, irrevocable medicaid trusts do
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  Speaker 3: that as well. They have the same kind of language
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  Speaker 3: there when one spouse dies, with that remainder share and
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  Speaker 3: marital share language. So secondly and thirdly, rather they both
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  Speaker 3: will provide a bloodline plan, you know, to your family,
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  Speaker 3: and I think you know, the family behind the estate
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  Speaker 3: plan is always really more important sometimes than the cold
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  Speaker 3: irs and probate analysis or parts of the equation. So
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  Speaker 3: they both can you know sort of direct how these
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  Speaker 3: assets get to your family, when they get there, why
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  Speaker 3: they get there, are they protected from divorces et cetera.
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  Speaker 3: And finally the difference, the irrevocable will provide protection from
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  Speaker 3: the cost of long term care nursing home. Again, it
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  Speaker 3: takes five years, but get it in there. The revocable
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  Speaker 3: trust never will. So all of you folks listening don't,
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  Speaker 3: and I've seen it happen. They come in, you know, Chuck,
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  Speaker 3: and they say, I've had my trust in place for
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  Speaker 3: five years and mom's going in the nursing home. So
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  Speaker 3: but we're all said, because I know all about that
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  Speaker 3: five year rule, and then they show me the trust
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  Speaker 3: and it's revocable. I gotta tell you, folks, the revocable
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  Speaker 3: trust will never start the clock running. So people go
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  Speaker 3: into the lawyers all the time. They think they want
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  Speaker 3: to get nursing home planning done, and they end up
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  Speaker 3: leaving with a revocable trust. It's not doing it.
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  Speaker 2: Talking with Tom Lutsky from Kushingan Dolan still Room on
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  Speaker 2: the phone lines at eight eight eight to zero five
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  Speaker 2: two two sixty three. That is the number to call
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  Speaker 2: to ask Todd your estate planning questions. Eight eight eight
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  Speaker 2: to zero five two two sixty three. Todd, when you
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  Speaker 2: talk about an irrevocable trust, people hear that word irrevocable
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  Speaker 2: and immediately they kind of they cringe. They clam up, Yeah,
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  Speaker 2: what are what kind of control does someone have to
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  Speaker 2: give up in order to use one of these irrevocable
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  Speaker 2: trusts in their estate plan?
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  Speaker 3: So I'm gonna say and again, in the interest of
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  Speaker 3: time and radio, it would take a lot longer to
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  Speaker 3: explain the whole trust, but I just want people to
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  Speaker 3: at least conceptually understand that it's if I had to
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  Speaker 3: quantify it for people, I think you keep probably ninety
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  Speaker 3: five to ninety eight percent control, And sometimes that's that's
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  Speaker 3: the easiest way to help people at least get off
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  Speaker 3: that that dime and say, oh, well, if I'm going
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  Speaker 3: to keep that kind of control over the assets and
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  Speaker 3: the trust, maybe it's worth exploring this irrevocable trust further
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  Speaker 3: to learn exactly how they work, you know, and get
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  Speaker 3: into the details of how they work. So I'm going
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  Speaker 3: to tell you really do keep a lot of control
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  Speaker 3: over this kind of irrevocable trust. But remember there are
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  Speaker 3: other irrevocable trusts out there that you might have had
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  Speaker 3: that idea of sort of cringing and saying I lose control,
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  Speaker 3: because there are some that are designed for you to
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  Speaker 3: give up a lot of control, but not this one.
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  Speaker 2: Talking with Tod Lutsky again, if you've got questions to
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  Speaker 2: ask Todd about your estate plan, room on the phone
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  Speaker 2: lines at eight eight eight two zero five two two
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  Speaker 2: six three. We're going to take a quick break here,
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  Speaker 2: but when we come back right to your questions with Todd.
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  Speaker 2: That phone number is eight eight eight to zero five
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  Speaker 2: Talking with Todd Lotsky from the Law from A Cushing
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  Speaker 2: and Dolan. Again, if you've got a question for Todd,
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  Speaker 2: eight eight eight two zero five two two sixty three
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  Speaker 2: is the number. That number one more time is eight
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  Speaker 2: eight eight to zero five two two six three. Let's
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  Speaker 2: go to Lisa in Worcester. Lisa, what is your question
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  Speaker 2: for Todd?
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  Speaker 4: Letski Hi Todd two parts question okay. One is if
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  Speaker 4: my income from social security and pension is so high
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  Speaker 4: that I'm never going to qualify for medicaid. Is the
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  Speaker 4: irrevocable trust to save my house worthwhile? And secondly, I've
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  Speaker 4: had a couple of lawyers in Massachusetts tell me that
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  Speaker 4: the irrevocable trust to save my house from the nursing
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  Speaker 4: home has been getting challenged by the state of Massachusetts.
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  Speaker 4: So they have refused to make me one because they're
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  Speaker 4: not trial lawyers. Wow litigators.
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  Speaker 3: Wow Wow. So two very two, very wold questions there.
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  Speaker 3: So first and foremost, let's let's take the second one first,
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  Speaker 3: the litigation one, and then I'll take the the income one.
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  Speaker 3: So hang on, I might have a follow up for you. So,
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  Speaker 3: first of all, folks, do these trusts get challenged? So
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  Speaker 3: I've been at it about thirty years, and the first
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  Speaker 3: fifteen twenty years, for sure, they've been like all over them. Now,
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  Speaker 3: in all fairness, doesn't matter that they're all over them,
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  Speaker 3: knock on wood. Every one of our trusts have succeeded
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  Speaker 3: and have been drafted properly. And as long as they're
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  Speaker 3: drafted properly, they win, and they protect assets from the
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  Speaker 3: nursing home. It's not a win, it's there following the
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  Speaker 3: rules that are put out by the state and the
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  Speaker 3: federal government, and they are designed to protect the asset
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  Speaker 3: from the nursing home. So whether they're needing to be
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  Speaker 3: challenged at a fair hearing, not so much go into
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  Speaker 3: court so much, but fair hearings, Yeah, it's happened. I've
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  Speaker 3: been to a lot of them, and again it works.
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  Speaker 3: So they were even back then, there would have been
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  Speaker 3: no reason not to do this because remember, if you
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  Speaker 3: don't do it, you lose for sure. So that's sort
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  Speaker 3: of the way I look at it. And the other
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  Speaker 3: reason is now, and I think it was twenty twenty one.
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  Speaker 3: I want to say, maybe a little earlier, there was
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  Speaker 3: a Supreme Court case here in Massachusetts where they finally
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  Speaker 3: took one of these trusts all the way to the SJC,
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  Speaker 3: and the SJC confirmed what we always knew that these trusts,
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  Speaker 3: when drafted properly, do work, and the SJAC was somewhat
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  Speaker 3: adamant about it when their decision to say to mass Health,
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  Speaker 3: we don't want to see you back here. Stop coming
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  Speaker 3: back with the same argument over and over again because
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  Speaker 3: it doesn't work. And so that was extremely helpful. And
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  Speaker 3: I would say since then twenty twenty ish. I've been
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  Speaker 3: to zero fair hearings, so I'm going to say that
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  Speaker 3: that issue is probably very inaccurate for him, and so
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  Speaker 3: anyone who wants these should not do them just because
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  Speaker 3: someone tells you they need to be litigated. Finally, income,
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  Speaker 3: question to you, what is your monthly income between you
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  Speaker 3: said social Security and pension. I guess.
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  Speaker 4: Yes, it's it's over five thousand.
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  Speaker 3: Okay, So that's why I wanted to ask you, because
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  Speaker 3: over five thousand is nowhere near enough to cover the
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  Speaker 3: cost of a nursing home. Nursing homes on average in Massachusetts,
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  Speaker 3: certainly inside of four ninety five, probably fifteen to sixteen
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  Speaker 3: thousand dollars a month, and you have five thousand a month,
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  Speaker 3: so you are way short of the ability to private
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  Speaker 3: pay a nursing home. So please do your planning. Don't
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  Speaker 3: not do it. It works. Litigation is not an issue,
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  Speaker 3: or has been way less of an issue, really not
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  Speaker 3: an issue anyway, and you're way under for income. But
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  Speaker 3: I can also tell you the benefit of having such
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  Speaker 3: a large income, by the way, that is a great
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  Speaker 3: retirement income. Don't feel it, it's not. It is. But
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  Speaker 3: more importantly, when you get on Medicaid, there's a Medicaid
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  Speaker 3: rate and a private pay rate. So the private pay
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  Speaker 3: rate is about fifteen sixteen thousand a month, but the
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  Speaker 3: Medicaid rate is about sixty five hundred a month, give
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  Speaker 3: or take maybe a little more.
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  Speaker 1: Wow.
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  Speaker 3: So even if you went on Medicaid and you had
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  Speaker 3: to pay, and Medicaid would only be paying the difference
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  Speaker 3: between five and sixty five hundred home run. So even
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  Speaker 3: if there was never any planning done, you're the lean
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  Speaker 3: like on a house or something, would be smaller. This
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  Speaker 3: is for other people who maybe haven't done planning in
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  Speaker 3: ter face with last minute nursing home care. But to you,
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  Speaker 3: rather than worry about any leans, I'd do the planning litigation,
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  Speaker 3: notwithstanding income not an issue. Hopefully that was helpful folks
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  Speaker 3: that said. The actual kind of planning I would propose
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  Speaker 3: would be an irrevocable Medicaid trust. That's exactly what the
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  Speaker 3: guide is, new guide for the month of June, Unlocking
• 12:04
  Speaker 3: the power of Irrevocable Medicaid Trust. What it does in
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  Speaker 3: a question and answer format is explain how they work.
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  Speaker 3: I mean, can I live there? Can I sell my house?
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  Speaker 3: Can I buy another house? Is there a gift tax
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  Speaker 3: when I transfer my assets in? Is there an income
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  Speaker 3: tax problem? If I put rental property in? Can I
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  Speaker 3: continue to collect my income off the rent? I mean,
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  Speaker 3: every question you can think of, or we thought of anyway,
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  Speaker 3: we've put in the guide. And if you've never done one,
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  Speaker 3: like perhaps the caller didn't do one, uh, and you've
• 12:39
  Speaker 3: been afraid of them, I think after you read this
• 12:42
  Speaker 3: guide you will know a whether you love them or
• 12:44
  Speaker 3: be whether you hate them, and we'll never do them.
• 12:46
  Speaker 3: So call and get the guide eight six six eight
• 12:49
  Speaker 3: four eight five six nine nine or Legal Exchange Show
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  Speaker 3: dot com again eight six six eight four eight five
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  Speaker 3: six nine or Legal Exchange Show dot com Todd.
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  Speaker 2: When we talk about these irrevocable trusts, let's say that
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  Speaker 2: someone is through that five year look back period, okay,
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  Speaker 2: and they unfortunately have a long term care situation that
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  Speaker 2: is hitting them at that point. Okay, how do they
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  Speaker 2: actually use that trust then to go about qualifying for medicaid?
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  Speaker 2: Like what actually happens?
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  Speaker 1: Then?
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  Speaker 3: Yeah, that's a fair question. I mean, because people always say, well,
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  Speaker 3: it's still my sounds like it's still my asset, right,
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  Speaker 3: but it's in a trust. So here's here's how it happens.
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  Speaker 3: First and foremost, now you've done your planning and you're
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  Speaker 3: crossing that threshold of going into the nursing home. So
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  Speaker 3: now you should go back to the lawyer that probably
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  Speaker 3: did the estate plan for you and apply for medicaid.
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  Speaker 3: So that's a whole other process called a Medicaid application process.
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  Speaker 3: But during that Medicaid application process is where they start
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  Speaker 3: using these documents. Right, they're gonna ask you for everything
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  Speaker 3: you could imagine financially. You know, three years of tax returns.
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  Speaker 3: They're gonna ask you for five years worth of bank
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  Speaker 3: statements and IRA statements and brokerage account statements. And they're
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  Speaker 3: gonna want your Social Security card and Medicare card and
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  Speaker 3: I mean birth certificate. They don't believe you're a citizen
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  Speaker 3: unless you show them. So this is that the process
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  Speaker 3: that really drills down to find out what you own.
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  Speaker 3: And yes, they will ask you, are you a beneficiary
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  Speaker 3: of a trust? Are you a trustee of a trust
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  Speaker 3: of any kind?
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  Speaker 1: Yes?
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  Speaker 3: If yes, submit the document, but you don't have to
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  Speaker 3: list the assets in it as countable. You can show
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  Speaker 3: them that you have it. You can show them that
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  Speaker 3: it's beyond five years. You can show them that you're
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  Speaker 3: probably going to be getting the income from the trust,
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  Speaker 3: and they're allowed to look into the trust and see
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  Speaker 3: what's in it, see how it works. But at the
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  Speaker 3: end of the day, again, coupled with this, and this
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  Speaker 3: goes back to the caller, coupled with this SJC ruling
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  Speaker 3: that we had back in twenty twenty one ish, the
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  Speaker 3: assets in the trust will not be countable. But you
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  Speaker 3: got to show it so folks, it does work. You
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  Speaker 3: just have to set it up, get the assets in,
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  Speaker 3: and then when you go to that application process, it
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  Speaker 3: will be protected.
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  Speaker 2: Mister Lutsky, I appreciate you taking the time to join
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  Speaker 2: us today.
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  Speaker 3: It's always a pleasure.
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  Speaker 2: Thank you.
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  Speaker 1: This has been Asked Odd on the Financial Exchange Radio Network.
• 15:38
  Speaker 1: Asked Todd with Todd. Lutsky has been presented by Cushing
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  Speaker 1: and Dolan, serving Massachusetts and New England for more than
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  Speaker 1: thirty years, helping families with the state and tax planning,
• 15:46
  Speaker 1: Medicaid planning, and probate law. Call eight hundred and three
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  Speaker 1: nine three four thousand and one or visit Cushingdolan dot com.
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  Speaker 1: The views expressed in this segment are solely those of
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  Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
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  Speaker 1: or tax advice. Please consult with your legal or tax
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  Speaker 1: endorse each other and are not affiliated.