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The best way to leave assets to the next generation · The Legal Exchange

• 0:01
  Speaker 1: This is the Legal Exchange with Todd Lutsky from the
• 0:04
  Speaker 1: law firm of Cushing and Dolan and Susan Powers of
• 0:07
  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,
• 0:13
  Speaker 1: and protecting your money from a nursing home. If you
• 0:16
  Speaker 1: need assistance in any of these areas, or have a
• 0:18
  Speaker 1: question about another issue that may affect your future, call
• 0:21
  Speaker 1: eight six six eight four eight five six ninety nine
• 0:24
  Speaker 1: to make an appointment. That's eight sixty six eight four
• 0:27
  Speaker 1: eight five six ninety nine. Operators are standing by. Now
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  Speaker 1: Here are your hosts, Todd Lutsky and Susan Powers.
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  Speaker 2: Welcome into the Legal Exchange with Todd Lutsky. I'm Susan Powers,
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  Speaker 2: a financial advisor with the Armstrong Advisory Group, and I'm
• 0:43
  Speaker 2: joined by Todd Lutsky, a partner with the law firm
• 0:45
  Speaker 2: of Cushing and Dolan with a master's in taxation. Welcome Todd.
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  Speaker 2: How are you today?
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  Speaker 3: I'm never better in you?
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  Speaker 2: I am great? Thank you. What to have for us
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  Speaker 2: this week?
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  Speaker 3: A couple of things.
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  Speaker 4: We got a Massachusetts Supreme Court case. Oh, super Bowl
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  Speaker 4: set's Super Bowl stuff. And another one actually in Idaho
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  Speaker 4: Supreme Court case as well. So folks here in mass
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  Speaker 4: there was a case that came down. It's regarding the
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  Speaker 4: uniform Principle and Income Act. Now, what the heck is
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  Speaker 4: that and why do we care about it? Well, that's
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  Speaker 4: what we're going to learn about, right, It's about allocating
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  Speaker 4: gain to income to make sure beneficiaries are taken care of,
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  Speaker 4: whether you're an income beneficiary, remainder beneficiary. And then we're
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  Speaker 4: going to explain why it's so important to deal with
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  Speaker 4: that in drafting a medicaid trust. Stuff you don't hear
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  Speaker 4: a lot about. But it's a great case and we'll
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  Speaker 4: talk about it. So stay tuned. And then we're going
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  Speaker 4: to go to Idaho. We have a Supreme Court case
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  Speaker 4: they are dealing with how do you say this, but
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  Speaker 4: does gender matter as to who gets assets? Yeah, think
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  Speaker 4: about that for a minute. Why would you draft a
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  Speaker 4: trust for you know, men only perhaps? Why would the
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  Speaker 4: sons be the only one to get something? So we'll
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  Speaker 4: see we're going to talk about drafting and we're going
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  Speaker 4: to explain why and how you draft for afterborn grandchildren,
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  Speaker 4: et cetera, and why that's important from an estate planning
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  Speaker 4: standpoint and how to get assets to the next generation.
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  Speaker 4: In folks speaking of getting assets to the next generation,
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  Speaker 4: making gifts is one way to do it. Gifting seems
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  Speaker 4: like an easy thing to do, but it has a
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  Speaker 4: lot of ramification, sometimes unknown ramifications. Adding a name to
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  Speaker 4: a joint account, is that a completed gift? Well? What
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  Speaker 4: if I throw a name on a on a piece
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  Speaker 4: of property, is that a completed gift? And then how
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  Speaker 4: does that affect if it's a rental property the income
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  Speaker 4: that flows? What type of assets should I gift?
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  Speaker 3: You know, income?
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  Speaker 4: Should I gift assets with high basis or low basis?
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  Speaker 4: You got to be concerned about capital gains tax as
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  Speaker 4: well as the state taxes, both federal and state. Folks
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  Speaker 4: think about how to gift, When to gift, what to gift,
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  Speaker 4: or most importantly should you gift? Call and get the
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  Speaker 4: guide making the most of gifting assets eight six six
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  Speaker 4: eight four eight five six nine or Legal Exchange Show
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  Speaker 4: dot Com again eight six six eight four eight five
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  Speaker 4: six ninety nine or Legal Exchange Show dot Com spoiler alert.
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  Speaker 2: Just keep your stuff? Yeah, could be, could be not always,
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  Speaker 2: not always, but could be.
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  Speaker 3: Uh So, let's take a peek. So here's what happened.
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  Speaker 4: So Helene died in nineteen eighty eight, this is the
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  Speaker 4: mass case, and her and her will created a trust.
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  Speaker 4: So she had a testamentary trust. Why I shouldn't do
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  Speaker 4: a regular trust I don't know. To benefit her daughter, Denise,
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  Speaker 4: and the trust was specific. It provided that income goes
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  Speaker 4: to her for life and principle could be paid to her,
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  Speaker 4: but only in the most extraordinary circumstances whatever that means. Well,
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  Speaker 4: the trust was silent about this rule regarding the allocation
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  Speaker 4: of principal and income. It's called the Uniform Principle on
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  Speaker 4: Income Act. It was silent. It didn't address this particular rule. Well,
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  Speaker 4: Denise was Denise's kids. It was held for Denise. Denise's kids,
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  Speaker 4: So these are the grandkids of Helene are the remainder beneficiaries. Okay,
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  Speaker 4: it sounds like a nice trust so far. Peter the
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  Speaker 4: son alleged that around twenty twenty that the trustee was
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  Speaker 4: distributing way too much principal to Denise.
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  Speaker 3: I E.
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  Speaker 2: Mom, Peter's Okay, I E to Mom. So this is
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  Speaker 2: not good.
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  Speaker 4: Trustee objected, stating that the trust has grown over the years,
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  Speaker 4: which makes sense. Principal but not income, so they were
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  Speaker 4: investing more in growth stock rather than in income producing stock,
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  Speaker 4: and the income did not keep pace. So the trustee
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  Speaker 4: used this Uniform Principle and Income Act to allow the
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  Speaker 4: allocation of principle to income and if it's done reasonably,
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  Speaker 4: that's good as long as it's fair to all the beneficiaries.
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  Speaker 4: That way, you can treat the income beneficiaries better and
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  Speaker 4: still invest as a reasonable prudent investor. And they ended
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  Speaker 4: up allocating a small one point one percent of the
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  Speaker 4: total principle to income to allow the income beneficiaries to
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  Speaker 4: get a little more, which.
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  Speaker 2: Is a low amount.
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  Speaker 3: It's a lower amount. YEP.
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  Speaker 4: The court granted the trustee summary judgment and agreed this
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  Speaker 4: is absolutely permissible. Peter the son, apparently doesn't like his mother.
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  Speaker 4: He decided to appeal and said, no, you're not allowed
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  Speaker 4: to do this between principal and income because it's you know,
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  Speaker 4: the MUTC. By the way, what's the definition. He appealed
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  Speaker 4: and said, no, you can't do this. This This Uniform
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  Speaker 4: Principle and Income Act is designed to allow a trustee
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  Speaker 4: to allocate gain to income as long as it's done
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  Speaker 4: and can be done to benefit all the beneficiaries fairly,
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  Speaker 4: and also make sure the trust is invested as a
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  Speaker 4: prudent investor would invest. Obviously, sometimes investing in growth stock
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  Speaker 4: is better, but it's better for remainder beneficiaries, but it
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  Speaker 4: doesn't produce any income for income beneficiaries. But buying all
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  Speaker 4: bonds also isn't helpful. And they said, well, no, you
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  Speaker 4: are allowed to do that. And since the trust was
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  Speaker 4: silent as to whether or not you could do this
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  Speaker 4: under the Uniform Trust Code, when it's silent, you can
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  Speaker 4: do it.
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  Speaker 3: So court agreed.
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  Speaker 4: Supreme Court said, you're absolutely allowed to allocate between principal
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  Speaker 4: and income.
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  Speaker 3: Okay, why do we care about this?
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  Speaker 2: I just have to say one thing. I have to
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  Speaker 2: assume that mom has other assets other than what was
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  Speaker 2: in Graham's trust. And Peter, what did you thinking, I
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  Speaker 2: know we're coming out now.
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  Speaker 4: Well we're coming to that. This is why drafting is
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  Speaker 4: so important. So let's talk about drafting.
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  Speaker 3: Right.
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  Speaker 4: So I just explained what the Uniform Principal and Income
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  Speaker 4: Act is. Right, it's important to invest one way or
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  Speaker 4: another to help you know. If it's overweighted in growth,
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  Speaker 4: then you got to allocate some of the gain to
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  Speaker 4: income so that the income beneficiaries can benefit, so you
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  Speaker 4: don't have to invest all in bonds to benefit only
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  Speaker 4: the income beneficiaries and not the remainder beneficiaries as much. Now,
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  Speaker 4: when you're drafting this, and this is important, Susan, it's
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  Speaker 4: great to have this, but as you said, this trust
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  Speaker 4: is seemingly designed to take an account for many generations.
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  Speaker 3: It could be for Denise and then Denise.
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  Speaker 4: It sounds like it's drafted in a way that's protecting
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  Speaker 4: it from Denise's creditors, is probably not going to be
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  Speaker 4: included in Denise's estate, and is probably ultimately going to
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  Speaker 4: get to Denise's kids tax free.
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  Speaker 2: And more will get to them because it's tax free
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  Speaker 2: and protected from denise's'lo mom using some.
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  Speaker 4: You're right, she could have went to the nursing home anything.
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  Speaker 4: So I'm like, this is great, but remember, as you said,
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  Speaker 4: when we do this kind of drafting for children and grandchildren,
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  Speaker 4: we give the child a limited power of appointment so
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  Speaker 4: that if her kids have things that happen during life,
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  Speaker 4: like one might be struggling, or one might be needing.
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  Speaker 2: The issues or whatever it is, whatever.
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  Speaker 4: Comes up, you can then as Denise, in this case,
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  Speaker 4: could allocate by exercising her power of appointment to change
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  Speaker 4: the percentages amongst those kids.
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  Speaker 3: So I'm thinking, as.
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  Speaker 4: You were thinking language, that this particular trust had this
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  Speaker 4: limited power of appointment granted to Denise, because then Denise
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  Speaker 4: can change the trust and cut Peter out altogether. Huh So, folks,
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  Speaker 4: how many times have I said drafting is so important?
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  Speaker 4: Draft to keep control during your life. It's it's just
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  Speaker 4: a wonderful way to go. Now, what about Medicaid?
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  Speaker 2: Yeah, I was just gonna say, because we're very careful,
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  Speaker 2: those dividends come in. The moms and dads of the
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  Speaker 2: world entitled to that, but we say no, go on
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  Speaker 2: capital gains. So it's different.
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  Speaker 3: Yeah, So let's play out the string.
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  Speaker 4: Capital gain is considered principle for trust accounting purposes. So
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  Speaker 4: when our Medicaid trusts say income to mom and dad,
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  Speaker 4: income is interest and dividends, right, not gain.
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  Speaker 3: Okay.
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  Speaker 4: And so when we draft our Medicaid trust, and we
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  Speaker 4: did this way back in two thousand and three when
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  Speaker 4: it came out, But this brings it back to the forefront, right,
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  Speaker 4: we actually in our trustee power section have a language
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  Speaker 4: that says, notwithstanding the uniform Principle and Income Act. The
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  Speaker 4: trustees here are not allowed to allocate gain to income.
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  Speaker 4: We prohibit it. Why because for Medicaid income only trusts.
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  Speaker 4: Can you imagine, if there's any access to any portion
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  Speaker 4: of the Principle, then it's countable. So if you sell
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  Speaker 4: a house and there's a bunch of gain and you
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  Speaker 4: want to allocate gain to income, now that gain is
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  Speaker 4: countable for Medicaid eligibility. Don't have that language in the trust.
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  Speaker 4: I love having it everywhere else, but not in Medicaid trust.
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  Speaker 4: Drafting is so important, and gifting is so important. Please
• 9:57
  Speaker 4: understand the best ways to make a gift or not
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  Speaker 4: make a gift by getting this month's guide Making the
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  Speaker 4: most of gifting assets. Call eight six six eight four
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  Speaker 4: not gifting is right for you.
• 10:18
  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 Powers, a
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  Speaker 2: financial advisor with the Armstrong Advisory Group. We've got much
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  Speaker 2: on the Legal Exchange with Todd Lutsky.
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  Speaker 2: Welcome back into the Legal Exchange with Toddltsky. I'm Susan Powers,
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  Speaker 2: a financial advisor with the Armstrong Advisory Group, and I'm
• 14:00
  Speaker 2: joined by Todd Lutsky, a partner with the law firm
• 14:03
  Speaker 2: of Cushing and Dolan with a master's in taxation. Where
• 14:06
  Speaker 2: we headed? Now, more Super Bowl Supreme Court things going on?
• 14:10
  Speaker 4: Yeah, yeah, that was one Supreme Court. We go from
• 14:12
  Speaker 4: one to another. We go to Idaho and we check
• 14:15
  Speaker 4: out a case here about gender how ad gender come
• 14:19
  Speaker 4: into drafting estate planning documents. But let's see, so back
• 14:22
  Speaker 4: in nineteen seventy Well that tells us a lot right there.
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  Speaker 4: So back in nineteen seventy Joe and his wife Carolyn,
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  Speaker 4: along with Nixon, Angela Kendall, and their Turtling and Sons
• 14:36
  Speaker 4: Trust Company, created an irrevocable trust. I'm guessing those other
• 14:41
  Speaker 4: people are children, created an irrevocable trust to benefit their errors.
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  Speaker 3: Okay, so far, so good.
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  Speaker 2: Sure.
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  Speaker 4: Article three of the trust contains language restricting the class
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  Speaker 4: of beneficiaries to male children only named Turtling.
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  Speaker 2: Male children only. Turtling is the name.
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  Speaker 4: Is the name, that's their last name. Turtling is their
• 15:05
  Speaker 4: last name. Joe and Caroline Turtling, got it. And Turtling
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  Speaker 4: and Sons, Inc. Is the company.
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  Speaker 3: Yeah, so last name Turtling. Okay, so they're trying to
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  Speaker 3: be very clear.
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  Speaker 4: Well, it makes sense because at the time Joe had
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  Speaker 4: four grown young sons for four young sons, and they
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  Speaker 4: did not discuss the language that the attorney used.
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  Speaker 2: So they didn't have any daughters yet.
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  Speaker 4: No, and they didn't know that that. It sounds like
• 15:29
  Speaker 4: they didn't even know that the attorney put that language.
• 15:31
  Speaker 4: In nineteen seventy eight, they dissolved the company, they remove
• 15:37
  Speaker 4: a couple of trustees. Something happened, and Bank of America
• 15:40
  Speaker 4: becomes a trustee. Well, at that time Joe and Caroline said,
• 15:43
  Speaker 4: let's reinstate our intentions of the trust to benefit successor
• 15:49
  Speaker 4: generations of the family.
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  Speaker 3: Okay, So they.
• 15:51
  Speaker 4: Do that, and that means all, well, we don't know
• 15:54
  Speaker 4: successive generations of the family. Late nineteen ninety three granddaughters
• 16:00
  Speaker 4: are born.
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  Speaker 3: Oh, okay.
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  Speaker 4: Joe wanted to fix the trust language, but he was
• 16:05
  Speaker 4: told he could not.
• 16:06
  Speaker 1: Well.
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  Speaker 4: In twenty thirteen, they entered into a non judicial settlement agreement,
• 16:10
  Speaker 4: which is something that came about as trust laws change.
• 16:13
  Speaker 4: These are wonderful things that you can change trust. So
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  Speaker 4: they enter into this non judicial settlement agreement to change
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  Speaker 4: the trust to reflect the intentions to benefit all successor
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  Speaker 4: generations of the family.
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  Speaker 3: Okay, so they do that.
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  Speaker 4: In February twenty twenty two, life keeps going, Joe and
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  Speaker 4: Caroline and the granddaughters filed a petition to be very specific,
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  Speaker 4: to remove the language male only language from Article three
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  Speaker 4: and name and name of the all the current beneficiaries.
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  Speaker 4: None of the current beneficiaries objected, but a contingent beneficiary, Tom,
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  Speaker 4: the brother of the granddaughters that were born, interestingly enough,
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  Speaker 4: decided to object. The court ruled that clearly a mistake
• 17:06
  Speaker 4: was made on the intent and the language to reform
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  Speaker 4: the trust should be allowed.
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  Speaker 3: They went to the Supreme Court.
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  Speaker 2: Well, Supreme Court given to be awkward.
• 17:17
  Speaker 4: I would think, so the Supreme Court affirm saying, yeah,
• 17:20
  Speaker 4: there's clear evidence all the way. You saw how many
• 17:23
  Speaker 4: times that Joe and Caroline tried to make it clear
• 17:27
  Speaker 4: that they wanted to go to all all generations all
• 17:30
  Speaker 4: you get rid of this male only stuff. And so
• 17:33
  Speaker 4: obviously they won, and the granddaughters are in and I'm
• 17:37
  Speaker 4: not sure how the grandson is even welcome in the
• 17:42
  Speaker 4: house anymore. So anyways, I don't know where people get
• 17:44
  Speaker 4: these ideas. But folks, this is clearly a drafting problem,
• 17:47
  Speaker 4: and we want to spend some time talking to you
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  Speaker 4: about drafting trust so you don't run into these weird situations.
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  Speaker 4: But we also want to spend a few minutes telling
• 17:57
  Speaker 4: you about how to make gifts or not to make gifts.
• 18:00
  Speaker 4: Please understand making gifts have both income tax and gift
• 18:05
  Speaker 4: tax and estate tax ramifications associated with them. Not to
• 18:11
  Speaker 4: mention how you give it could result in a loss
• 18:15
  Speaker 4: of control or exposure to kids creditors. So is it
• 18:20
  Speaker 4: simple to write a check?
• 18:21
  Speaker 3: Yeah?
• 18:22
  Speaker 4: Is it the best way? Don't know, folks, there's lots
• 18:25
  Speaker 4: to think about in terms of how to make gifts.
• 18:27
  Speaker 4: They can be helpful, they also can cause problems. So
• 18:32
  Speaker 4: learn the best way to make the most of your
• 18:34
  Speaker 4: gifting of assets this year by getting this guide eight
• 18:37
  Speaker 4: six six eight four eight five six nine to nine
• 18:42
  Speaker 4: or Legal Exchange Show dot com. It's got lots of
• 18:44
  Speaker 4: examples in it for you eight six six eight four
• 18:48
  Speaker 4: eight five six nine nine or Legal Exchange Show dot com.
• 18:53
  Speaker 2: I don't think I would ever want to create a
• 18:55
  Speaker 2: trust where I can't change my mind. It sounds like
• 18:58
  Speaker 2: it was so difficult for mom and dad to say, wait,
• 19:02
  Speaker 2: we've rethought this and we want to change our minds.
• 19:05
  Speaker 4: And I mean a lot of irrevocable trusts, you know,
• 19:08
  Speaker 4: there are plenty that when you set up and remember
• 19:10
  Speaker 4: this was irrevocable from the get go, so when you
• 19:13
  Speaker 4: set up irrevocable trust there are many kinds. The medicaid
• 19:15
  Speaker 4: trusts we're so used to talking about more frequently than
• 19:18
  Speaker 4: the gifting trusts, which more are listed in our guide.
• 19:23
  Speaker 4: You know, there's different restrictions. There's certain the gifting trusts
• 19:27
  Speaker 4: have less control. But let's talk a minute about this.
• 19:31
  Speaker 4: By the way, the non judicial settlement agreements have come
• 19:34
  Speaker 4: out lately, and they do allow you to pretty much
• 19:38
  Speaker 4: change an irrevocable trust almost six ways to Sunday. However,
• 19:42
  Speaker 4: one of the restrictions are you can't change the purpose
• 19:46
  Speaker 4: of the trust and oftentimes you can't add beneficiaries. Now
• 19:51
  Speaker 4: I'm not sure this one was actually adding beneficiaries. Maybe
• 19:55
  Speaker 4: it was because they meant to expand the class, but
• 19:59
  Speaker 4: I think this was more of a drafting concern. I
• 20:01
  Speaker 4: think the intent was wrong. But be mindful. But non
• 20:06
  Speaker 4: judicial settlement agreements do allow you, and of course there's
• 20:09
  Speaker 4: judicial settlement agreements where you can actually go to court,
• 20:12
  Speaker 4: So there's ways to change them, but just be careful.
• 20:15
  Speaker 4: But let's just play out the string. Why did these
• 20:17
  Speaker 4: people do this? First of all, I think it's a
• 20:19
  Speaker 4: great idea. They did an irrevocable trust. It seemed to
• 20:22
  Speaker 4: be getting assets out of their estate for a state.
• 20:25
  Speaker 2: Text practice purposes.
• 20:26
  Speaker 3: Okay, that's wonderful.
• 20:29
  Speaker 4: At least their intent was to make it generational, meaning
• 20:33
  Speaker 4: we've got generational planning here. I know the granddaughters needed
• 20:37
  Speaker 4: to get factored in, but it was designed to go
• 20:40
  Speaker 4: to generations below, which is a great idea. Because now
• 20:44
  Speaker 4: not only will these assets, if they're drafted right, would
• 20:47
  Speaker 4: not be included in the estate of the four sons.
• 20:51
  Speaker 4: Now it didn't sell that they had any more children,
• 20:53
  Speaker 4: they just had grandchildren, so you know it would not
• 20:57
  Speaker 4: be included in the four sons estate. So for estate
• 21:01
  Speaker 4: tax purposes, it passes estate tax free, potentially generation skipping
• 21:07
  Speaker 4: tax free down to the grandchildren.
• 21:10
  Speaker 2: And this is presumably a sizeable estate, so.
• 21:15
  Speaker 3: I think so I had a company in it, and when.
• 21:17
  Speaker 2: Dad die, it's not subject to their estate taxes, and
• 21:20
  Speaker 2: then when the suns die it's not subject to theirs,
• 21:23
  Speaker 2: so they you can't even imagine what you're saving in
• 21:25
  Speaker 2: taxes for two levels of generation.
• 21:28
  Speaker 4: That's right, So those sons can cannot have it included.
• 21:30
  Speaker 4: And by the way, if it's drafted right, well the
• 21:32
  Speaker 4: sons are living, it may be protected from their divorces.
• 21:36
  Speaker 4: It may have creditor protection language in there as well. Oftentimes,
• 21:39
  Speaker 4: when we do these irrevocable gifting or generational skipping trusts,
• 21:45
  Speaker 4: we put divorce proof language in there so that you
• 21:49
  Speaker 4: know the kids creditors aren't going to get it. And
• 21:52
  Speaker 4: then to the extent the kids haven't actually taken the money.
• 21:56
  Speaker 4: It's not going to be included in their estate for
• 21:58
  Speaker 4: a state tax purposes.
• 22:00
  Speaker 2: Is in your bloodline.
• 22:01
  Speaker 4: And then even if they're married, when they die, it passes,
• 22:04
  Speaker 4: as you said, Susan, down to the grandchildren, which are
• 22:07
  Speaker 4: what this litigation was all about, to make sure they're included,
• 22:10
  Speaker 4: right down to the grandchildren. Gender neutral doesn't matter and
• 22:15
  Speaker 4: again gets their estate tax free. Point being here, folks,
• 22:21
  Speaker 4: not only is there great estate planning going on here,
• 22:25
  Speaker 4: think about drafting, right, We draft our documents specifically by
• 22:29
  Speaker 4: using child children issue descendants. These are terms of art.
• 22:35
  Speaker 4: These are legal words that have legal.
• 22:39
  Speaker 2: Meaning, and they're all encompassing unless you want to exclude
• 22:42
  Speaker 2: someone specifically.
• 22:43
  Speaker 4: Right, Exactly, when you say descendants, you mean anyone who's
• 22:47
  Speaker 4: born afterborn's after borns all the way down, great grandchildren,
• 22:51
  Speaker 4: great great grandchildren. So and it doesn't matter about gender.
• 22:54
  Speaker 4: I mean. I had a client recently who came back
• 22:57
  Speaker 4: because they had done things to say percentages to kikids
• 23:00
  Speaker 4: and then balance to kids and grandkids. That was done
• 23:04
  Speaker 4: years ago. They never and they wanted me to specifically
• 23:07
  Speaker 4: list the names. I warned them against it. They came
• 23:10
  Speaker 4: back in they said, wow, we never thought Billy was
• 23:12
  Speaker 4: going to have another kid. Well, because you named them,
• 23:15
  Speaker 4: we got to add them back in. So be careful
• 23:17
  Speaker 4: how you draft, folks, make it draft user friendly. Also,
• 23:21
  Speaker 4: be careful how you gift. It's not easy. Learn the
• 23:25
  Speaker 4: dos and don'ts of gift and get the guide eight
• 23:28
  Speaker 4: six six eight four eight five six nine nine or
• 23:33
  Speaker 4: Legal Exchange show dot com.
• 23:35
  Speaker 2: You've been listening to Todd Lutsky, a partner with the
• 23:38
  Speaker 2: law firm of Cushing A. Dolan. I'm Susan Power as
• 23:41
  Speaker 2: a financial advisor with the Armstrong Advisory Group, and Todd
• 23:44
  Speaker 2: will be answering your listener questions when we return to
• 23:48
  Speaker 2: the Legal Exchange with Todd Lutsky.
• 23:52
  Speaker 1: Legacy planning is incredibly important, but if it isn't done properly,
• 23:55
  Speaker 1: you can create significant problems for your estate. Cushing and
• 23:58
  Speaker 1: Dolan are expert to know their law, and their new
• 24:01
  Speaker 1: guide out this month is called making the Most of
• 24:03
  Speaker 1: Gifting Assets. In it, you'll learn that while some gifts
• 24:06
  Speaker 1: to your children can be beneficial, others may not be,
• 24:09
  Speaker 1: especially if their financial difficulties or a divorce proceeding. Learn
• 24:12
  Speaker 1: how to protect yourself and your family by calling Cushing
• 24:15
  Speaker 1: and Dolan right now at eight sixty six eight four
• 24:17
  Speaker 1: eight five six nine nine ask for their brand new
• 24:20
  Speaker 1: guide called Making the Most of Gifting Assets. It contains
• 24:23
  Speaker 1: a wealth of information about the gifting process, including important
• 24:26
  Speaker 1: details about what tax issues may arise from a major
• 24:29
  Speaker 1: gift like a home or a vacation property, and what
• 24:32
  Speaker 1: happens to the asset up the child has creditor issues,
• 24:34
  Speaker 1: call eight sixty six eight four eight five six nine
• 24:37
  Speaker 1: nine or request it online from their website legal exchange
• 24:40
  Speaker 1: show dot com. The proceeding was paid for in the
• 24:42
  Speaker 1: music Express are sole lya those of Cushing and Dolan.
• 24:44
  Speaker 1: Cushing and Dolan and or Armstrong Advisory may contact you
• 24:47
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• 24:49
  Speaker 1: Advisory do not endorse each other and are not affiliated.
• 24:52
  Speaker 6: The end of the year is coming soon, which makes
• 24:54
  Speaker 6: it a perfect time to address any year end financial needs.
• 24:58
  Speaker 3: HI.
• 24:58
  Speaker 6: This is Chuck Zada from the Armstrong Advisory Group. We've
• 25:01
  Speaker 6: written a new guide this month called the Top Year
• 25:03
  Speaker 6: end Financial Tips, and in it we provide some insight
• 25:06
  Speaker 6: into important topics such as ways to maximize your charitable donations,
• 25:10
  Speaker 6: gifting assets to family members, harvesting losses, getting your beneficiary
• 25:14
  Speaker 6: designations and estate plans in order, and lowering your taxable income.
• 25:18
  Speaker 6: All these issues may have an effect on your overall planning.
• 25:20
  Speaker 6: So give us a call at eight hundred three nine
• 25:23
  Speaker 6: three for zero zero one and ask for our new
• 25:26
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  Speaker 6: zero one.
• 25:37
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 25:40
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 25:42
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• 25:45
  Speaker 1: your own financial, tax, and estate planning advisors before making
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• 27:24
  Speaker 1: You're listening to the Legal Exchange, and it's time for
• 27:27
  Speaker 1: Ask Todd, the segment where Tod will answer your questions
• 27:30
  Speaker 1: about anything and everything that's included in the estate planning process.
• 27:34
  Speaker 1: Once again, here's Tod Lutsky and Susan Powers.
• 27:40
  Speaker 2: Welcome Pact Todd. I have a few questions from listeners
• 27:43
  Speaker 2: for you. First question comes from Jennifer in Northampton, New Hampshire,
• 27:47
  Speaker 2: and Jennifer Rights, I am the trustee and beneficiary of
• 27:51
  Speaker 2: a home my mother had in her trust. She died
• 27:54
  Speaker 2: in twenty twelve and I moved into the home in
• 27:56
  Speaker 2: twenty fourteen. I am considering selling it to downsize. What
• 28:01
  Speaker 2: tax implications should I expect so I can plan for
• 28:04
  Speaker 2: the expense. Now, she didn't give us dollar figures on here,
• 28:08
  Speaker 2: so I think it's more conceptually so.
• 28:10
  Speaker 3: We can make up yeah numbers.
• 28:13
  Speaker 4: And I think this is really interesting because I got
• 28:15
  Speaker 4: an email recently that I'm just going to tie it
• 28:18
  Speaker 4: into this for you. So I got an email recently
• 28:20
  Speaker 4: from another attorney who just was checking in because I
• 28:24
  Speaker 4: get that from a lot of lawyers, and he says,
• 28:27
  Speaker 4: I'm just wondering. In this case, there was this trust
• 28:29
  Speaker 4: that was created, the house went in, and then the
• 28:33
  Speaker 4: father died, the husband died, and now it's been like
• 28:38
  Speaker 4: ten years, and now the wife wants to sell the property,
• 28:42
  Speaker 4: and do we get somehow is there a step up
• 28:44
  Speaker 4: in basis somehow?
• 28:45
  Speaker 3: And what happened?
• 28:47
  Speaker 4: And you know, I'm just curious about you know, normally
• 28:49
  Speaker 4: I do this after the person's dead, not when they're living, right, Well,
• 28:54
  Speaker 4: you can do it when you're alive. And I said, well,
• 28:56
  Speaker 4: you kind of lucked out a little bit. You got
• 28:58
  Speaker 4: a half step up in basis, Like so when the
• 29:01
  Speaker 4: husband died, depending on the type of trust it was,
• 29:04
  Speaker 4: you would have gotten a half step up in basis,
• 29:07
  Speaker 4: which is better than nothing. And then of course half
• 29:09
  Speaker 4: of what you paid for it and improvements, so a
• 29:12
  Speaker 4: little help on the gain. I say that because that
• 29:15
  Speaker 4: leads me into this question that Jennifer's asking same idea,
• 29:19
  Speaker 4: except in this case mom had died. Yes, so the
• 29:23
  Speaker 4: one I told you about, only one of the spouses
• 29:25
  Speaker 4: had died. So let's play out the string I'm going
• 29:29
  Speaker 4: to assume that that mom did the planning on her own.
• 29:33
  Speaker 4: The spouse might have already died. So let's assume Mom
• 29:36
  Speaker 4: owned one hundred percent of the house when Mom set
• 29:39
  Speaker 4: up this trust. Now, to me, at this point, it
• 29:42
  Speaker 4: doesn't matter whether this trust was revocable. Whether this trust
• 29:46
  Speaker 4: was irrevocable when it was set up doesn't matter. Well,
• 29:51
  Speaker 4: it does in this sense that if she had given
• 29:53
  Speaker 4: away the house before she died, then I guess it
• 29:56
  Speaker 4: would not be included in the estate.
• 29:58
  Speaker 2: In this case, it was in her try.
• 30:00
  Speaker 4: It was in her trust that was included in the estate.
• 30:03
  Speaker 4: So as long as this trust was this house was
• 30:05
  Speaker 4: included in her estate when she died, not her probate estate,
• 30:09
  Speaker 4: but her gross estate, meaning it was subject to estate tax.
• 30:14
  Speaker 4: As long as it was subject to estate tax, then
• 30:17
  Speaker 4: it would have received a step up in basis. And
• 30:20
  Speaker 4: this is where the benefit comes, Jennifer. It would have
• 30:23
  Speaker 4: received a basis equal to fair market value on the date.
• 30:26
  Speaker 2: Of death, so back in twenty twelve, so that value was.
• 30:30
  Speaker 3: Right, So on the date of death in twenty twelve.
• 30:32
  Speaker 3: Good point.
• 30:34
  Speaker 4: If the house was worth half a million and you
• 30:38
  Speaker 4: sold it the next day for half a million.
• 30:41
  Speaker 3: Your gain would be zero, no tax.
• 30:43
  Speaker 4: But if you had a half a million dollar basis
• 30:46
  Speaker 4: in twenty twelve and it doubled to today, if you're
• 30:51
  Speaker 4: selling it today, then you would have to pay the
• 30:54
  Speaker 4: difference from the five hundred thousand to the million.
• 30:58
  Speaker 2: And in this case, she's living in house, so that
• 31:00
  Speaker 2: would be her primary residence as well, so she'd get
• 31:03
  Speaker 2: a benefit from that. Correct.
• 31:04
  Speaker 4: Yeah, so says she moved in in twenty fourteen, and
• 31:07
  Speaker 4: so if she's been living in there ever since, then
• 31:10
  Speaker 4: she's converted it to her primary residence.
• 31:13
  Speaker 3: So you're right.
• 31:13
  Speaker 4: Same example, twenty five hundred thousand dollars basis in twenty twelve,
• 31:18
  Speaker 4: because she inherited it, she lives there, it's worth a million.
• 31:21
  Speaker 4: Today she sells it, the gain is five hundred thousand.
• 31:24
  Speaker 4: But if she's single minus two fifty capital gains exclusion,
• 31:29
  Speaker 4: she's only paying tax on the two fifty.
• 31:31
  Speaker 2: But if she's married, if she's.
• 31:33
  Speaker 4: Married with her, then bang, you wipe out the whole
• 31:36
  Speaker 4: half a million dollars because you get a half a
• 31:38
  Speaker 4: million dollar capital gains exclusion two fifty each, two fifty
• 31:42
  Speaker 4: each for husband and wife. When you sell your primary
• 31:46
  Speaker 4: residence as long as you've owned and used it as
• 31:49
  Speaker 4: your primary residence for two of the last five years,
• 31:52
  Speaker 4: you get that step up great or that not step up,
• 31:54
  Speaker 4: but that capital gains exclusion. So really big win on
• 31:59
  Speaker 4: the tack front. Well, folks, there can be really big
• 32:02
  Speaker 4: problems on the tax front when you gift without knowing
• 32:06
  Speaker 4: what you're doing. Example, I feel really good and I think,
• 32:10
  Speaker 4: instead of Jennifer waiting to get my house, I'm just
• 32:12
  Speaker 4: going to give her my house today because I trust her,
• 32:15
  Speaker 4: I love her, and I know everything's fine, and I
• 32:18
  Speaker 4: feel good about it. Folks, if you give away a
• 32:21
  Speaker 4: house right that you paid let's say, depending on when
• 32:24
  Speaker 4: you bought it for Let's say we'll just use a
• 32:26
  Speaker 4: new example. Let's say I bought a house for two
• 32:30
  Speaker 4: hundred thousand dollars, but I've been living there my whole life.
• 32:34
  Speaker 3: I'm old.
• 32:34
  Speaker 4: I give it to my child. It's now worth a million. Folks,
• 32:38
  Speaker 4: that gain is going to be subject to tax when
• 32:41
  Speaker 4: you when you give it away, you built in that
• 32:44
  Speaker 4: gain to the child. Don't give away those assets. Learn
• 32:47
  Speaker 4: the best way to do it eight six six eight
• 32:50
  Speaker 4: four eight five six nine nine or legal Exchange show
• 32:54
  Speaker 4: dot Com again eight six six eight four eight five
• 32:58
  Speaker 4: six nine nine or Legal Exchange show dot com todd.
• 33:02
  Speaker 2: Our last question comes from Andrew in Dartmouth, Mass. And
• 33:05
  Speaker 2: Andrew writes, our only son put on an edition on
• 33:08
  Speaker 2: our home and spent around one hundred and fifty thousand
• 33:11
  Speaker 2: of his own money to do so. A year ago,
• 33:14
  Speaker 2: my wife and I added him to the deeds, so
• 33:17
  Speaker 2: it is jointly. It is owned joint with rights of
• 33:19
  Speaker 2: survivorship between the three of us. Would it make sense
• 33:23
  Speaker 2: to transfer the home outright now so that we start
• 33:26
  Speaker 2: the five year look back and protect from nursing home expenses?
• 33:30
  Speaker 2: Seem he must be living with that. He must have
• 33:32
  Speaker 2: built a let's say he built like an apartment or
• 33:34
  Speaker 2: an inlar or something.
• 33:35
  Speaker 4: So the son is living with mom and dad with
• 33:38
  Speaker 4: mom and dad, but the house, as you said, owned,
• 33:41
  Speaker 4: so it.
• 33:42
  Speaker 2: Was mom and Dad's house. He built an edition and
• 33:44
  Speaker 2: they put his name on. All three of them are
• 33:46
  Speaker 2: on it now because he used his own money one
• 33:48
  Speaker 2: hundred and fifty thousand to build that edition.
• 33:50
  Speaker 4: So lots of things going on here, folks. One, when
• 33:53
  Speaker 4: they used they used his money to buy he basically
• 33:56
  Speaker 4: bought an interest in the house. Yeah, by putting his
• 33:59
  Speaker 4: money into it, and so there would have been some
• 34:02
  Speaker 4: transaction there that would have been like he's kind of
• 34:05
  Speaker 4: buying an interest in the house. But let's just assume
• 34:08
  Speaker 4: that gift is all resolved. The problem is he now
• 34:12
  Speaker 4: is a one third owner on a piece of property.
• 34:15
  Speaker 4: If they get sick and go to the nursing home, right,
• 34:18
  Speaker 4: then there is this well, if he's living there and
• 34:22
  Speaker 4: caring for them, you might satisfy this caretaker child exception,
• 34:26
  Speaker 4: and then you could transfer the house right to him
• 34:29
  Speaker 4: last minute and save it from a five year waiting period.
• 34:33
  Speaker 2: Gin you that in advance, right, you should.
• 34:36
  Speaker 4: Probably save it, you know, for if you go into
• 34:39
  Speaker 4: a nursing home, and if you do transfer the whole house,
• 34:41
  Speaker 4: you better reserve a life estate so that when you
• 34:44
  Speaker 4: die you can preserve that step up in basis that
• 34:47
  Speaker 4: we were talking about on the last segment. Right, you
• 34:50
  Speaker 4: want to make sure you get that step up in basis.
• 34:53
  Speaker 4: So one thing is the way it sits.
• 34:56
  Speaker 3: It's at risk.
• 34:58
  Speaker 4: If he provides care for two years and then they
• 35:01
  Speaker 4: get sick and go to the nursing home and he
• 35:03
  Speaker 4: satisfies the caretaker child rule, it's possible they could transfer
• 35:08
  Speaker 4: his their remaining interest to him and save it from
• 35:13
  Speaker 4: the nursing home with no five year waiting period.
• 35:15
  Speaker 2: So what about what they're proposing now, which is just
• 35:18
  Speaker 2: to give the entire house to the sun.
• 35:20
  Speaker 4: Right now, Yeah, I definitely don't like that idea at all,
• 35:23
  Speaker 4: because if you give the entire sun to the entire
• 35:27
  Speaker 4: property to the sun, you could end up trapping all
• 35:30
  Speaker 4: that capital gain that we just talked about a minute ago. Now,
• 35:33
  Speaker 4: the sun will have some basis because he paid.
• 35:37
  Speaker 2: So their cost basis. If they gift the rest of
• 35:39
  Speaker 2: the house, they give their cost base.
• 35:42
  Speaker 4: They gift their cost basis to him, and therefore they
• 35:45
  Speaker 4: trap the built in game.
• 35:47
  Speaker 2: Right So I know, like my parents they paid thirteen
• 35:49
  Speaker 2: thousand dollars for their house, a little improvements along the way,
• 35:53
  Speaker 2: but not the near what the value is?
• 35:55
  Speaker 4: I get it, And that's what the problem is here.
• 35:58
  Speaker 4: This isn't so much about medicaid. Didn't mean to turn
• 36:00
  Speaker 4: it into that, but that always comes to my mind.
• 36:03
  Speaker 4: But yes, there's also a problem here. Plus if you
• 36:05
  Speaker 4: give it away, well you don't have any control over
• 36:08
  Speaker 4: it anymore.
• 36:08
  Speaker 2: Right, what if he wants to move, What if he
• 36:10
  Speaker 2: moves for a new job, or he.
• 36:12
  Speaker 4: Gets married and you don't know what I mean. I
• 36:16
  Speaker 4: think that's a problem. I think also, what if you
• 36:18
  Speaker 4: just want to sell, Yeah, you know you want to downsize. Well,
• 36:21
  Speaker 4: now maybe you say, well I need the money, so
• 36:23
  Speaker 4: make him buy out the other two thirds.
• 36:25
  Speaker 3: But now you need his permission. And what if he
• 36:29
  Speaker 3: doesn't want to.
• 36:29
  Speaker 2: Now you were in a he's married already and he
• 36:32
  Speaker 2: gives a divorce.
• 36:33
  Speaker 4: It's a sticky miss, sticky mess. Rather, you don't want to,
• 36:36
  Speaker 4: you know, be in that situation. Quite frankly, they should
• 36:39
  Speaker 4: have just put put the house into an era of
• 36:42
  Speaker 4: trust and protected it for him. Yeah, but tell him
• 36:45
  Speaker 4: to put his half in his third in there too.
• 36:47
  Speaker 4: We'll protect it for you, but put it in there. Folks,
• 36:50
  Speaker 4: learn how best to make gifts, and you saw the
• 36:52
  Speaker 4: biggest problem here, as giving away low basis assets is
• 36:56
  Speaker 4: not necessarily a good idea. Get the guide eight six
• 37:00
  Speaker 4: six eight four eight five six nine nine or Legal
• 37:04
  Speaker 4: Exchange Show dot com and learn how to make the
• 37:07
  Speaker 4: most of your gifting.
• 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 ass Tod tab. Maybe I'll be able to
• 37:17
  Speaker 2: read your question on the air, and hopefully his answer
• 37:19
  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
• 37:29
  Speaker 2: Power as a financial advisor with the Armstrong Advisory Group.
• 37:33
  Speaker 2: We'll be back with more after this quick break on
• 37:35
  Speaker 2: the legal exchange with Todd Lutsky.
• 37:38
  Speaker 1: Legacy planning is incredibly important, but if it isn't done properly,
• 37:42
  Speaker 1: you can create significant problems for your estate. Cushing and
• 37:45
  Speaker 1: Dolan are expert to know their law, and their new
• 37:47
  Speaker 1: guide out this month is called Making the Most of
• 37:50
  Speaker 1: Gifting Assets. In it, you'll learn that while some gifts
• 37:52
  Speaker 1: to your children can be beneficial, others may not be,
• 37:55
  Speaker 1: especially if they're financial difficulties or a divorce proceeding. Learn
• 37:59
  Speaker 1: how to protect yourself and your family by calling Cushing
• 38:02
  Speaker 1: and Dolan right now at eight six, six, eight four, eight, five,
• 38:05
  Speaker 1: six nine nine ask for their brand new guide called
• 38:07
  Speaker 1: Making the Most of Gifting Assets. It contains a wealth
• 38:10
  Speaker 1: of information about the gifting process, including important details about
• 38:14
  Speaker 1: what tax issues may arise from a major gift like
• 38:16
  Speaker 1: a home or a vacation property and what happens to
• 38:19
  Speaker 1: the asset that the child has creditor issues Call eight
• 38:22
  Speaker 1: sixty six eight four eight five six ninety nine or
• 38:24
  Speaker 1: request it online from their website Legal exchange show dot com.
• 38:28
  Speaker 1: The proceeding was paid for in the music expressed just
• 38:30
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 38:32
  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 38:35
  Speaker 1: Cushing and Dolan at Armstrong Advisory do not endorse each
• 38:37
  Speaker 1: other and are not affiliated HI.
• 38:39
  Speaker 5: This is Mike Armstrong from the Armstrong Advisory Group. Fine
• 38:42
  Speaker 5: Tuning your financial strategy as the year comes to a
• 38:45
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• 38:48
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• 38:51
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• 38:55
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• 38:57
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• 39:09
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• 39:11
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• 39:21
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• 39:25
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 39:28
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• 39:30
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• 39:33
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• 39:45
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• 39:58
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• 40:01
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• 40:05
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• 40:08
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• 40:11
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• 40:36
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• 40:41
  Speaker 1: Exchange with Todd Lutsky. If you are a loved one
• 40:44
  Speaker 1: needs a nursing homestay, call Todd right now at eight
• 40:47
  Speaker 1: six six eight four eight five six ninet nine and
• 40:49
  Speaker 1: let him make sure your assets are protected. That's eight
• 40:52
  Speaker 1: six six eight for eight five six nine nine, or
• 40:55
  Speaker 1: visit him online at Legal Exchange show dot com.
• 41:00
  Speaker 2: Welcome back into the Legal Exchange with Todd Lutsky. I'm
• 41:03
  Speaker 2: Susan Parris, a financial advice with the Armstrong Advisory Group,
• 41:07
  Speaker 2: and I'm joined, of course by Todd Lutsky, a partner
• 41:09
  Speaker 2: with the law firm of Cushing and Dolan with a
• 41:12
  Speaker 2: master's in taxation. So, Todd, your guide is all about gifting.
• 41:18
  Speaker 2: And I think when we think of gifting, a lot
• 41:21
  Speaker 2: of people they think, oh, I'm going to write a
• 41:24
  Speaker 2: check to someone, or I'm going to gift them whatever.
• 41:28
  Speaker 2: They don't realize that if they decide to put one
• 41:33
  Speaker 2: of their kids' names on their bank account or their
• 41:37
  Speaker 2: investment account as a joint owner, they do it at
• 41:41
  Speaker 2: a convenience so that someone can help them out writing
• 41:44
  Speaker 2: checks or whatever. But they don't realize that they've actually
• 41:48
  Speaker 2: made a gift of these assets to their children. So
• 41:51
  Speaker 2: I just want to walk through. Probably the most common
• 41:54
  Speaker 2: thing is the bank accounts. What do people need to
• 41:56
  Speaker 2: consider if they have added a child's name onto their
• 42:02
  Speaker 2: bank accounts? In what would be a better alternative?
• 42:05
  Speaker 3: So a couple of things that happen when you do that.
• 42:08
  Speaker 3: It's it's you.
• 42:09
  Speaker 4: Mentioned gifts, but there's there's a lot that happens. So
• 42:12
  Speaker 4: if you add a joint name to a bank account,
• 42:15
  Speaker 4: So let's say me Todd and my daughter. Okay, I
• 42:19
  Speaker 4: assume not a spouse. We're talking about a child. I
• 42:22
  Speaker 4: name my daughter. Is that actually a completed gift at
• 42:26
  Speaker 4: that moment. No, but the moment she my daughter goes
• 42:32
  Speaker 4: in and takes the money, which she's allowed to do
• 42:35
  Speaker 4: because it's a joint account.
• 42:37
  Speaker 3: Yes, right, completed gift.
• 42:39
  Speaker 4: But more importantly, as you said, what if it's on
• 42:42
  Speaker 4: for convenience and they never take it? Okay, Well then
• 42:45
  Speaker 4: I die. It goes to that daughter and no one else.
• 42:50
  Speaker 4: So now maybe I've disinherited. So again not thinking about it.
• 42:54
  Speaker 4: Another implication. So was it a completed gift? Not right away,
• 42:57
  Speaker 4: could become one, but definitely could be a disinheritance. What
• 43:02
  Speaker 4: about if my child has a creditor problem. Well there's
• 43:06
  Speaker 4: another implication. So now that child has fifty percent of
• 43:11
  Speaker 4: that account is at risk.
• 43:13
  Speaker 2: For her creditors, which could include a divorce.
• 43:15
  Speaker 4: Certainly could, so you want to be mindful of that. Yeah,
• 43:21
  Speaker 4: and then you know what about medicaid? I mean, think
• 43:24
  Speaker 4: about all these implications. Right, we didn't actually even make
• 43:27
  Speaker 4: the gift, although we were thinking we were, but all
• 43:30
  Speaker 4: these other things are now looming and finally I get
• 43:35
  Speaker 4: sick and go to a nursing home. Is that joint
• 43:38
  Speaker 4: bank account somehow half protected? It was half at risk
• 43:40
  Speaker 4: for the creditors? You just told me that a minute ago, Todd,
• 43:43
  Speaker 4: isn't it half protected from the nursing home.
• 43:45
  Speaker 3: No, no, you don't get the same benefit.
• 43:48
  Speaker 2: You get only the bad benefits, not the good benefit.
• 43:51
  Speaker 4: In fact, the law says that if it's a joint
• 43:53
  Speaker 4: account bank account with a spouse, I mean with a child,
• 43:57
  Speaker 4: it's deemed one hundred percent the person who's going in
• 44:00
  Speaker 4: the nursing home's account unless they can prove contribution.
• 44:05
  Speaker 3: Well, we know the kid didn't contribute, you said to yourself, Susan.
• 44:09
  Speaker 4: They just put their name on it for convenience. Generally,
• 44:12
  Speaker 4: the social Security checks are going in there of the applicant.
• 44:15
  Speaker 4: The account is set up under the social Security number
• 44:19
  Speaker 4: of the applicant.
• 44:20
  Speaker 3: It's clearly the applicant's money. So lots to think about
• 44:24
  Speaker 3: with one little transaction.
• 44:26
  Speaker 2: Yeah, and you know what's interesting, Todd is I went
• 44:29
  Speaker 2: after my mom passed away, I went to the bank
• 44:31
  Speaker 2: with my dad to make sure that his beneficiaries were updated.
• 44:35
  Speaker 2: And when we went in there, I had my power
• 44:38
  Speaker 2: attorney YEP to give to the banker, and they said, well,
• 44:42
  Speaker 2: why don't we just add you on in this joint
• 44:44
  Speaker 2: account so that you can sign checks for your dad,
• 44:46
  Speaker 2: and my dad said, oh, yeah, that sounds good. Sure
• 44:49
  Speaker 2: I trust you, right, And I go no, no, I'm
• 44:52
  Speaker 2: one of three. So I said, I have a power
• 44:55
  Speaker 2: of attorney, so you can use the power of attorney.
• 44:58
  Speaker 2: I can do everything I need to do by giving
• 45:00
  Speaker 2: you this prob of attorney. And he's like, well, it
• 45:02
  Speaker 2: might be easier if it's more convenient if you're a jointing.
• 45:04
  Speaker 2: I'm like, no, no, And that's the advice. I happen
• 45:08
  Speaker 2: to know the right thing to do here, but so
• 45:10
  Speaker 2: many people would just rely on the recommendation and the
• 45:14
  Speaker 2: commentary of the bankers.
• 45:16
  Speaker 4: I totally agree. I mean, you got to really pay attention.
• 45:19
  Speaker 4: Just please know, you know, get some guidance, know what
• 45:21
  Speaker 4: you're doing. Same idea here with gifting, folks, this was
• 45:24
  Speaker 4: just one concept. These are the kinds of things that
• 45:26
  Speaker 4: are listed in the guide. These joint ownership ideas of
• 45:29
  Speaker 4: bank accounts versus jointly owned investment accounts versus jointly owned
• 45:33
  Speaker 4: real estate. Please look into that. There's examples in here
• 45:36
  Speaker 4: on how to gift, what to gift, and even gifting
• 45:40
  Speaker 4: trust folks. Learn how to gift your assets or not.
• 45:46
  Speaker 4: Get the guide eight six six eight four eight five
• 45:50
  Speaker 4: six nine nine or legal exchange show dot com again
• 45:54
  Speaker 4: eight six six eight four eight five six nine nine
• 45:58
  Speaker 4: or legal exchange.
• 46:01
  Speaker 3: I mean there's medicaid rules you don't think about.
• 46:03
  Speaker 2: So the bank you kind of dodge a bull it
• 46:06
  Speaker 2: a little bit if you know there's no divorces or whatever.
• 46:09
  Speaker 2: Cash is king it's it's worth what it is the
• 46:11
  Speaker 2: day you gave it away to the day that they
• 46:13
  Speaker 2: got it, to the day that you died. Right, let's
• 46:16
  Speaker 2: talk about investments, sure, and a brokerage account and the
• 46:20
  Speaker 2: implications of adding a child to that investment account as
• 46:26
  Speaker 2: a joint owner.
• 46:27
  Speaker 4: So I think from a gift standpoint, you're kind of
• 46:30
  Speaker 4: in the same place. It's really still not a completed
• 46:34
  Speaker 4: gift until you the other person takes it, so that
• 46:39
  Speaker 4: would complete the gift. And I think you have a
• 46:43
  Speaker 4: similar problem with creditors. Right, it's still at risk for
• 46:48
  Speaker 4: creditors at least fifty percent they get divorced or they
• 46:52
  Speaker 4: they have a creditor chase to them. You have, you
• 46:54
  Speaker 4: have that problem. So I think the gift and the
• 46:57
  Speaker 4: creditor problem is the same. However, from a nursing home perspective,
• 47:02
  Speaker 4: you actually get a benefit not that I'm telling you
• 47:05
  Speaker 4: to do this. The benefit would be if it's been
• 47:09
  Speaker 4: set up a while, then they say, and you get
• 47:13
  Speaker 4: sick and go to a nursing home. Then you say, oh, well,
• 47:17
  Speaker 4: the ownership of a brokerage account is deemed proportionate unless
• 47:22
  Speaker 4: proven otherwise. So in other words, it's automatically assumed that
• 47:26
  Speaker 4: if it's owned fifty to fifty, that fifty percent belongs
• 47:30
  Speaker 4: to that child.
• 47:31
  Speaker 2: In an investment account.
• 47:32
  Speaker 3: So now an investment account.
• 47:33
  Speaker 2: Put you on the spot. Yeah, you said a while.
• 47:36
  Speaker 2: If it's been set up is a while? Five years?
• 47:39
  Speaker 4: Yeah, so it's it's not clear, not defined. Well, there's
• 47:44
  Speaker 4: two rules. One rule says that any action taken to
• 47:48
  Speaker 4: make a formally available asset no longer available as a
• 47:51
  Speaker 4: five year waiting period, it's a disqualifying transfer. Well, clearly,
• 47:55
  Speaker 4: taking an account that's in my name alone and adding
• 47:57
  Speaker 4: my daughter's name to it is an action, yep, that
• 48:00
  Speaker 4: made a formally available asset no longer available. Because there's
• 48:04
  Speaker 4: another regulation that says jointly owned brokerage accounts are deemed
• 48:08
  Speaker 4: proportionately owned. So those two regulations are in conflict. One
• 48:14
  Speaker 4: does not reference a five year waiting period. One does,
• 48:18
  Speaker 4: and so we don't really know. I've done different examples
• 48:23
  Speaker 4: to try it out, but I think the rule of
• 48:25
  Speaker 4: thumb would be clearly, if you took it and set
• 48:28
  Speaker 4: it up jointly today and got sick tomorrow, you got issues.
• 48:32
  Speaker 3: You got issues.
• 48:33
  Speaker 4: You But if it was if it's always been that
• 48:36
  Speaker 4: way for at least five years, I think you're very safe.
• 48:40
  Speaker 3: It's gray in between a year and five years.
• 48:43
  Speaker 2: Right, right, So not something you should hang your hat on, right,
• 48:46
  Speaker 2: but you do know for sure that if it's five years,
• 48:48
  Speaker 2: you're fine. Let's talk about the tax implications of putting
• 48:51
  Speaker 2: someone else's name on your brokerage account, because now you
• 48:55
  Speaker 2: have two owners of that account, and the IRS says
• 48:59
  Speaker 2: you have two owners of that account. How do you
• 49:01
  Speaker 2: handle all that? Because whatever transactions are done in your
• 49:05
  Speaker 2: brokerage account, they're going to be taxed. But whether it's
• 49:07
  Speaker 2: selling something and realizing a gain or loss and those
• 49:10
  Speaker 2: dividend incomes, and you know, I think.
• 49:13
  Speaker 3: You got to be careful when you set it up. Right.
• 49:15
  Speaker 4: So from a setup standpoint, I think you're you say, well,
• 49:20
  Speaker 4: who's Social Security number is on there? And I think
• 49:24
  Speaker 4: that's what's going to govern I think if it's the
• 49:27
  Speaker 4: social Security number of the parent, and clearly as we know,
• 49:31
  Speaker 4: it's the parents' money anyway, right, just it was just
• 49:33
  Speaker 4: set up for convenience purposes. So it's probably the right
• 49:36
  Speaker 4: person to get the tax. Yeah, but if so, if
• 49:39
  Speaker 4: it's under that social security number, I don't believe that
• 49:42
  Speaker 4: the brokerage house is going to issue more than one
• 49:46
  Speaker 4: ten ninety nine. Yeah, they're going to issue one ten
• 49:48
  Speaker 4: ninety nine right to that number. So that person's going
• 49:52
  Speaker 4: to get it all and when mom dies. So this
• 49:56
  Speaker 4: is the This is the same idea with the bank account.
• 49:58
  Speaker 4: The other problem you have with it is now this
• 50:00
  Speaker 4: will automatically go to the surviving joint owner unless you
• 50:05
  Speaker 4: have specific language in your will governing otherwise, which we
• 50:09
  Speaker 4: do but most people don't. It will automatically go to
• 50:13
  Speaker 4: that one child, potentially disinheriting other children.
• 50:17
  Speaker 2: It don'll likely only a half step up in basis.
• 50:20
  Speaker 4: Yes, it'll depend on how that's at. It depends on
• 50:23
  Speaker 4: how that's included. I think with the joining the bad yeah,
• 50:26
  Speaker 4: you might get you might get full inclusion. But folks
• 50:29
  Speaker 4: lots to think about when it comes to gifting. Folks
• 50:33
  Speaker 4: get the guide making the most of Gifting your Assets
• 50:36
  Speaker 4: eight six six eight four eight five six nine nine
• 50:40
  Speaker 4: or Legal Exchange show dot Com.
• 50:42
  Speaker 2: Todd Lutsky from the law firm of Cushing and Jolan,
• 50:45
  Speaker 2: thank you so much.
• 50:46
  Speaker 3: Thank you. Susan's always a pleasure.
• 50:48
  Speaker 2: I'm Susan Power as a financial advisor with the Armstrong
• 50:51
  Speaker 2: Advisory Group. We thank you for joining us today and
• 50:54
  Speaker 2: we'll be back again next week on the Legal Exchange
• 50:57
  Speaker 2: with Todd Lutsky.
• 50:59
  Speaker 1: Legacy plan is incredibly important, but if it isn't done properly,
• 51:03
  Speaker 1: you can create significant problems for your estate. Cushing and
• 51:06
  Speaker 1: Dolan are expert to know their law, and their new
• 51:08
  Speaker 1: guide out this month is called Making the Most of
• 51:10
  Speaker 1: Gifting Assets. In it, you'll learn that while some gifts
• 51:13
  Speaker 1: to your children can be beneficial, others may not be,
• 51:16
  Speaker 1: especially if they're financial difficulties or a divorce proceeding. Learn
• 51:19
  Speaker 1: how to protect yourself and your family by calling Cushing
• 51:22
  Speaker 1: and Dolan right now at eight sixty six, eight four,
• 51:25
  Speaker 1: eight five six, ninet nine ask for their brand new
• 51:27
  Speaker 1: guide called Making the Most of Gifting Assets. It contains
• 51:30
  Speaker 1: a wealth of information about the gifting process, including important
• 51:34
  Speaker 1: details about what tax issues may arise from a major
• 51:36
  Speaker 1: gift like a home or a vacation property, and what
• 51:39
  Speaker 1: happens to the asset up the child has creditor issues,
• 51:42
  Speaker 1: call eight sixty six eight four eight five six nine
• 51:44
  Speaker 1: nine or request it online from their website Legal exchange
• 51:48
  Speaker 1: show dot com. The proceeding was paid for in the
• 51:50
  Speaker 1: music expressed to solely those of Cushing and Dolan. Cushing
• 51:52
  Speaker 1: and Dolan and or Armstrong Advisory may contact you offering
• 51:54
  Speaker 1: legal or investment services. Cushing and Dolan at Armstrong Advisory
• 51:57
  Speaker 1: do not endorse each other and are not affiliated. Isn't
• 52:00
  Speaker 1: it time for you to fall naturally in rhythm with
• 52:02
  Speaker 1: America's Caribbean paradise. The US Virgin Islands are Saint Croix,
• 52:06
  Speaker 1: Saint Thomas, and Saint John, and they're the perfect spot
• 52:09
  Speaker 1: for your next incredible vacation. Whether it's the rich history
• 52:13
  Speaker 1: of Saint Croix, the pristine beaches of Saint Thomas, or
• 52:16
  Speaker 1: the peace and tranquility of Saint John, the US Virgin
• 52:19
  Speaker 1: Islands has everything you need to enjoy a spectacular holiday.
• 52:23
  Speaker 1: Go to visit USVII dot com and check out the
• 52:25
  Speaker 1: American Caribbean, where you'll find all the information you'll need
• 52:28
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  Speaker 6: The end of the year is coming soon, which makes
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  Speaker 6: it a perfect time to address any year end financial needs. Hi,
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  Speaker 6: this is Chuck Zada from the Armstrong Advisory Group. We've
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  Speaker 6: written a new guide this month called the Top Year
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  Speaker 6: End Financial Tips, and in it we provide some insight
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  Speaker 6: into important topics such as ways to maximize your charitable donations,
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  Speaker 6: All these issues may have an effect on your overall planning,
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  Speaker 6: so give us a call at eight hundred three nine
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  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
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  Speaker 1: registered investment advisor. Nothing in the ad or in any
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  Speaker 1: Armstrong Guide a specific financial, legal, or tax advice. Consult
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  Speaker 1: your own financial, tax, and estate planning advisors before making
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  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
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  Speaker 1: advisory services