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Ask Todd: How to reduce estate taxes · The Financial Exchange Show

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  Speaker 1: This is Ask Todd on the Financial Exchange Radio Network.
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  Speaker 1: If you have an existing estate planner or in the
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  Speaker 1: market for one, Todd Letsky is here to answer your
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  Speaker 1: questions and help you plan for later life. Ask Todd
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  Speaker 1: is presented by Cushing and Dolan, serving Massachusetts and New
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  Speaker 1: England for more than thirty five years, helping families with
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  Speaker 1: the 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: So this is your chance to ask Todd Lutsky your
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  Speaker 2: estate planning questions live on air. Todd's with us here
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  Speaker 2: and we got the phone lines open at eight eight
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  Speaker 2: eight two zero five two two six three. Remember we
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  Speaker 2: don't always get through everyone, so if you want to
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  Speaker 2: make sure we get to your question, call early, call often, well,
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  Speaker 2: really call once s well you know Tucker will pick up.
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  Speaker 3: But that number is.
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  Speaker 2: Eight eight eight two zero five two two six three
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  Speaker 2: in order to speak with Todd Lotsky about any estate
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  Speaker 2: planning questions that you have right now again eight eight
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  Speaker 2: eight two zero five two two six three, get calling
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  Speaker 2: so we can make sure that we get to your questions.
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  Speaker 3: Mister Lutsky. How are you doing today?
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  Speaker 4: I am doing great. How about yourself?
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  Speaker 3: Pretty good? Yeah?
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  Speaker 4: What's going on?
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  Speaker 3: Have you ever thought about buying a telescope? Not?
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  Speaker 4: Not generally?
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  Speaker 3: No, you should look into it, that's right.
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  Speaker 2: So, Todd, I want to talk to you a little
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  Speaker 2: bit about estate taxes and trust work. Okay, how does
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  Speaker 2: creating an estate plan using trusts potentially work to minimize
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  Speaker 2: the state taxes?
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  Speaker 4: And you know what, it's fair, especially when we talk
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  Speaker 4: about you know, federal and state, So remember state. I
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  Speaker 4: will be mentioning more about Massachusetts. Please check your own
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  Speaker 4: state for those laws. But they're the federal and it's
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  Speaker 4: it's strange because when you talk about a federal estate tax,
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  Speaker 4: a lot of people don't think they need it, right
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  Speaker 4: and then, and it's true. I mean, the exemption is
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  Speaker 4: thirteen point nine million come January one, let's just call
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  Speaker 4: it fourteen million for easy numbers.
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  Speaker 5: Right.
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  Speaker 4: Well, if you think you have a large estate, like
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  Speaker 4: oh my gosh, I'm worth twenty million dollars, and again
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  Speaker 4: that's a large estate, you might be thinking, Wow, I've
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  Speaker 4: got all kinds of estate tax planning I have to do.
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  Speaker 4: I bet you it's real sophisticated and I got to
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  Speaker 4: get into all these special techniques and guess what, No,
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  Speaker 4: right now, I would say that that's that's certainly not
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  Speaker 4: the case. We've got a new election or an election
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  Speaker 4: that took place, We've got a new president coming in,
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  Speaker 4: and I think the exemptions could stay high for a while.
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  Speaker 4: So when I say that, if you are a married
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  Speaker 4: couple and you are worth twenty million dollars, and you're thinking, wow,
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  Speaker 4: I got to do all kind of sophisticated planning, basic
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  Speaker 4: revocable trusts, or what I like to call estate planning
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  Speaker 4: one oh one, which is really the foundation of estate planning,
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  Speaker 4: pretty much can eliminate your estate tax. And it's amazing
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  Speaker 4: because if you don't do anything and you're a married
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  Speaker 4: couple and you just I leave everything to my spouse
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  Speaker 4: and I'm worth twenty million, well the surviving spouse will
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  Speaker 4: be worth twenty million, and you could have potentially wasted
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  Speaker 4: your fourteen million dollar exemption. Say you didn't do planning,
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  Speaker 4: and you didn't elect portability, and it's very possible when
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  Speaker 4: you don't plan, none of that happens. And so the
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  Speaker 4: surviving spouse is worth twenty million when they die with
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  Speaker 4: a fourteen million dollar exemption. Yeah, you have six million
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  Speaker 4: dollars subject to tax. You figure federal and state forty
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  Speaker 4: and ten. You're looking at fifty percent or three million
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  Speaker 4: dollars that you're given away. However, to your point, Chuck,
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  Speaker 4: simple revocable trust one for each put ten million dollars
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  Speaker 4: in each trust, and when one dies, you really have
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  Speaker 4: the ability through the marital share and the remainder share
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  Speaker 4: built into this trust, to shelter that ten million dollars.
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  Speaker 4: So it'll be subject to or included in the estate
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  Speaker 4: of the first spouse to die, but not the second
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  Speaker 4: spouse to die. So ten million minus fourteen million no taxes.
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  Speaker 4: Survivor dies, and the surviving spouse's estate's now only ten
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  Speaker 4: million because we're not going to include what was in
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  Speaker 4: the deceased spouse's a state or the seas spouses trust,
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  Speaker 4: I should say, leaving her with ten million, we have
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  Speaker 4: an exemption of fourteen million no tax.
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  Speaker 2: Talking with Todd Lutsky from the law firm of Cushing
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  Speaker 2: and Dolan. If you've got a question for Todd, the
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  Speaker 2: number is eight eight eight to zero five two two
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  Speaker 2: six three. That is the number to call to ask
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  Speaker 2: Todd your question live on air. We still have little
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  Speaker 2: bit of room on the phone lines, so eight eight
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  Speaker 2: eight two zero five two two sixty three that is
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  Speaker 2: the number to call. We are going to take a
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  Speaker 2: quick break right now, but when we come back it's
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  Speaker 2: going to be right to your questions with Todd again.
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  Speaker 2: Still a little bit of room on the phone lines
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  Speaker 2: eight eight eight to zero five two two sixty three.
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  Speaker 2: Quick break, then your questions.
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  Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
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  Speaker 1: only on the Financial Exchange Radio Network. You're listening to
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  Speaker 1: Ask Todd with Todd Lutsky on the Financial Exchange Radio Network.
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  Speaker 2: All right, Todd, we've got some calls for you, so
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  Speaker 2: here we go. Let's kick things off with Daniel from Wooster. Daniel,
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  Speaker 2: you are on with Todd Lutsky.
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  Speaker 5: Hey, how are we going today?
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  Speaker 3: Good?
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  Speaker 5: Good? So my question is, if I wanted to leave
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  Speaker 5: everything to one of my children or my son, how
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  Speaker 5: are things not able to get held up in court
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  Speaker 5: under like probate, say, any debts, pass taxes and any
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  Speaker 5: bills things like that. If I just wanted to leave
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  Speaker 5: him all of my.
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  Speaker 4: Ass's how many children do you have?
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  Speaker 5: Just the one?
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  Speaker 4: Oh, okay, because you made it sound like I wanted
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  Speaker 4: to leave it all to just one child, and that
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  Speaker 4: made it sound like you were going to be disinheriting
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  Speaker 4: other children. Maybe that's just how I heard it, but uh,
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  Speaker 4: and that of course makes it a little more complicated.
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  Speaker 4: You certainly could do that, but then you always got
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  Speaker 4: to worry about making sure there's no fighting after you're
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  Speaker 4: you're you're gone. So yeah, this is a more more
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  Speaker 4: simple I would say, are you married?
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  Speaker 5: No?
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  Speaker 4: No, So you know how old are you at this point?
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  Speaker 5: I am forty five?
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  Speaker 4: Okay, I'll forty five, So no more tough questions. So
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  Speaker 4: the the uh answer is pretty simple. I think for you,
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  Speaker 4: I don't well, I don't know the size of your estate.
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  Speaker 4: I are you under like the Massachusetts two million dollar
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  Speaker 4: level or are you over that?
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  Speaker 5: Yeah? No, I'm under okay.
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  Speaker 4: So good news on that front is is you know,
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  Speaker 4: we're not really worried about taxes. I want to keep
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  Speaker 4: you in control, so you would be the trustee. I
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  Speaker 4: would want you to be the donor or it would
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  Speaker 4: be simply a revocable trust and put your assets into
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  Speaker 4: it so during life your life will not change at all.
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  Speaker 4: You get to do everything you do today. You will
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  Speaker 4: not need to file an income tax return special for
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  Speaker 4: this trust. You will just continue to file your personal
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  Speaker 4: ten forty like you always do, and life will go
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  Speaker 4: on relatively unaffected. The old set it and forget it idea,
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  Speaker 4: And then though, what you're looking to accomplish will happen
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  Speaker 4: when you die. Everything in the trust avoids probate and
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  Speaker 4: it passes, So if it doesn't go to probate, creditors
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  Speaker 4: can only attach assets in your probatea state. This is
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  Speaker 4: outside of your probatea state, so it'll pass directly to
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  Speaker 4: your child, or you could control it, depending on how
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  Speaker 4: you want to leave it to that child. Do you
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  Speaker 4: want to put it in you know, have them get
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  Speaker 4: it at certain ages like twenty five, thirty thirty five?
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  Speaker 4: Do you want to have it controlled and protected from
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  Speaker 4: future creditors? All of those things you will discuss with
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  Speaker 4: your state planning attorney to design how your child gets it.
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  Speaker 4: But that will accomplish your objectives. Folks, speaking of accomplishing objects,
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  Speaker 4: if sometimes avoiding taxes is one of those objectives, there's
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  Speaker 4: a new article this month, a tale of two objectives.
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  Speaker 4: Reduce taxes and protect assets from the nursing home, so
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  Speaker 4: it's really for everybody. It explains probate, it explains the
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  Speaker 4: portability rules, and it explains with an example, how with
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  Speaker 4: a revocable trust, a marital share and a remainder share
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  Speaker 4: can shelter assets for a state taxes like I was
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  Speaker 4: explaining earlier when Chuck asked the question, However, it also
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  Speaker 4: deals with the Massachusetts of State tax, the new Massachusetts
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  Speaker 4: of State tax one year later, of course. And then
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  Speaker 4: for folks who are more concerned about nursing home planning
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  Speaker 4: and taxes, well, then we have a section in there
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  Speaker 4: regarding irrevocable trusts and how those are designed to provide
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  Speaker 4: both of those benefits at the same time. So folks
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  Speaker 4: has a little bit of everything in here. Something for
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  Speaker 4: everyone eight six six eight four eight five six nine
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  Speaker 4: nine or Legal Exchange Show dot Com again eight sixty
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  Speaker 4: six eight four eight five six ninety nine or Legal
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  Speaker 4: Exchange Show dot Com.
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  Speaker 2: Todd, let's keep another one for you here. We've got
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  Speaker 2: Chris in Milton. Chris, what's your question for Todd?
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  Speaker 6: Hi, Todd, thank you for answering these questions. That's nicer
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  Speaker 6: you to do that. My question is on the Massachusetts
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  Speaker 6: of state tax, you know, but quote unquote new with
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  Speaker 6: state tax. Yes, say if somebody has a gross estate
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  Speaker 6: of two million, fifty thousand, okay, okay, but they have
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  Speaker 6: allowable deductions of say seventy five thousand, okay, So that
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  Speaker 6: lowers the net of state to one million, nine hundred
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  Speaker 6: and seventy five thousand.
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  Speaker 4: Got it.
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  Speaker 6: Does somebody even need to file the Massachusetts a state
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  Speaker 6: tax return? I mean, is it based on the grossest
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  Speaker 6: state or the state after these allowable expenses?
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  Speaker 4: Great? Great question. It is based on the gross estate,
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  Speaker 4: so you would need to file even though you're not
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  Speaker 4: gonna pay any tax, it's gonna pull you under the
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  Speaker 4: estate tax exemption. But because the grosser estate is over
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  Speaker 4: the filing threshold, which is in essence what this two
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  Speaker 4: million dollar exemption is in Massachusetts, it's more of a threshold,
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  Speaker 4: you would still need to file the estate tax, but
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  Speaker 4: because you're at a million nine to seventy five, it
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  Speaker 4: would result in zero estate tax too. Versus if your
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  Speaker 4: gross estate was a million, nine ninety nine, then technically
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  Speaker 4: you don't need to file. So hopefully that was helpful.
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  Speaker 3: Todd.
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  Speaker 2: We got another one for you here. Let's go to
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  Speaker 2: fill in Worcester, Phil what's your question for Todd?
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  Speaker 7: Hey, Todd, I thank you for what you're doing. He
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  Speaker 7: just turned fifty five. I have really no family, no kids,
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  Speaker 7: no wife. I have roughly a small meager for one
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  Speaker 7: k that I've rolled over to a roth, and I
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  Speaker 7: just don't know if, if, if I should be looking
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  Speaker 7: at her trust at this point.
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  Speaker 3: How much?
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  Speaker 4: How much are you worth in total? Under under a million?
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  Speaker 4: Under two million?
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  Speaker 7: Well well under.
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  Speaker 4: Okay, so probably not. I mean again, I want you
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  Speaker 4: to do only what you need to do. Not to
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  Speaker 4: sound like a liberty mutual commercial, but I got to
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  Speaker 4: tell you that that for someone in your situation, simply
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  Speaker 4: name a designated beneficiary on your wrath, put a designated
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  Speaker 4: beneficiary on whatever bank accounts you might have, or or
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  Speaker 4: or maybe other investment accounts that you might have, and
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  Speaker 4: then they will go directly to those people listed as
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  Speaker 4: beneficiaries and they can they can take it, and it
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  Speaker 4: will avoid probate. No need to get bogged down in
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  Speaker 4: trusts and wills for you. So but hopefully that's helpful.
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  Speaker 3: Todd.
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  Speaker 2: Let's go do one more here, we'll see if we
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  Speaker 2: can go four for four on this. To Bill An
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  Speaker 2: Austerville Bill. You're on with Todd Lutsky.
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  Speaker 6: Hike Todd. The question is, if there's an irrevocable trust, yep,
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  Speaker 6: can you sell the house? In other words, she has
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  Speaker 6: two houses and she wants to sell one so that
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  Speaker 6: she can be taken care of.
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  Speaker 4: Is this a single person?
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  Speaker 7: Uh?
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  Speaker 4: Widow?
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  Speaker 1: Yeah?
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  Speaker 4: So single at the time. Right, So I don't know.
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  Speaker 4: I didn't draft the trust, but I'm going to tell
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  Speaker 4: you how our irrevocable trusts work. And I'm assuming this
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  Speaker 4: was a Medicaid irrevocable type trust, because remember there's many
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  Speaker 4: kinds of irrevocable trusts. So let's assume that it's a
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  Speaker 4: Medicaid irrevocable trust and she wants to sell it. Our
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  Speaker 4: trust absolutely allow for the sale, super simple. She would
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  Speaker 4: direct the trustee to put it on the market, it
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  Speaker 4: would sell, money would go or the house would go out.
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  Speaker 4: The money would come in. Our trusts are also designed
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  Speaker 4: as grant or trusts, so she would still be entitled
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  Speaker 4: to her capital gains tax exclusion as a single person.
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  Speaker 4: If this is her primary residence of two hundred and
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  Speaker 4: fifty thousand dollars. The first two hundred and fifty thousand
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  Speaker 4: dollars of gain would not be taxed for her, and
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  Speaker 4: then the trust can actually use that money either for
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  Speaker 4: investments for her to live off of, or you could
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  Speaker 4: maybe downsize. Maybe she wants to now buy a condo
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  Speaker 4: and just not have to worry about maintenance and upkeep,
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  Speaker 4: and so money would go out and a new house
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  Speaker 4: would come in or new condo would come in, and
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  Speaker 4: arguably that transaction would not impact the five year waiting
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  Speaker 4: period if she did that for Medicaid eligibility. So you
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  Speaker 4: just need to read the terms of the trust that
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  Speaker 4: will tell you whether she can do it or not.
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  Speaker 4: I hope it's drafted properly. I know in our trusts
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  Speaker 4: that can absolutely be done.
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  Speaker 3: Todd.
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  Speaker 2: One other questions is that I have for you, just
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  Speaker 2: kind of getting back to what we discussed in the
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  Speaker 2: prior segment. Let's say that someone had done estate planning previously,
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  Speaker 2: and maybe now they're concerned about estate taxes. Their estate
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  Speaker 2: may have grown since they did it. Yes, how would
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  Speaker 2: someone know whether or not they need to update previous
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  Speaker 2: estate plans?
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  Speaker 4: You know, I guess the only way to really know
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  Speaker 4: that is to keep an eye on what your assets are. Right.
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  Speaker 4: We try to educate you as to what those exemption
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  Speaker 4: amounts are, and those exemption amounts you know, if you
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  Speaker 4: know your estate has grown, call your accountant, call your
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  Speaker 4: estate planning attorney, check in, right. I always tell people
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  Speaker 4: check in with your estate planning attorney and try to
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  Speaker 4: figure out where you are. And so if the estate
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  Speaker 4: tax has gone up high enough that now it's causing
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  Speaker 4: you to be an estate tax problem, he'll tell you
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  Speaker 4: or she'll tell you, and you will be able to
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  Speaker 4: adjust your plan to maybe do more sophisticated planning as
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  Speaker 4: the case may be.
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  Speaker 3: Mister Lutsky, thank you so much for joining us today.
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  Speaker 4: Always a pleasure.
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  Speaker 1: This has been Asked Odd on the Financial Exchange Radio
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  Speaker 1: network Ask Todd with Todd. Lutsky has been presented by
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  Speaker 1: Cushing and Dolan, serving Massachusetts and New England for more
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  Speaker 1: than thirty years, helping families with the state and tax planning,
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  Speaker 1: medicaid planning, and probate law. Call eight hundred three nine
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  Speaker 1: 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 illegal or tax
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