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Ask Todd: Estate planning when you don't have kids · The Financial Exchange Show

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Speaker 1: This is Ask Todd on the Financial Exchange Radio Network.
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If you have an existing estate plan or in the
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market for one, Todd Lutsky is here to answer your
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questions and help you plan for a later life. Ask
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Todd is presented by Cushing and Dolan, serving Massachusetts and
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New England for more than thirty five years, helping families
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with a state and tax planning, Medicaid planning, and probate law.
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Visit Cushingdolan dot com. Now here's Todd Lutsky.
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Speaker 2: It is now time for our weekly segment with Todd
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Lutsky from Cushion Dolan. If you have any type of
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a state planning question, question about taxes, gifting, anything of
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that nature, give our off our studio line a call
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at eight eight eight to zero five two two sixty three. Again,
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any of your estate planning questions, Todd is here to
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answer them. That phone number eighty eight to zero five
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two two six ' three. Todd. How we doing today?
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Speaker 3: I'm never better on you doing well, Todd.
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Speaker 2: We're coming up on year end here and what's coming soon,
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particularly around my house is the holidays and the gifting season,
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and decorations are already going up. This weekend for Christmas
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at my home. My question to you, Todd is what
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are some considerations that folks should have out there in
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regards to gifting assets. Perhaps they're feeling generous around the holidays.
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What are some considerations that folks should have head into
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your end here.
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Speaker 4: Yeah, people don't think much about gifting, and it happens
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sometimes easily, sometimes without much thought. But it can have
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a lot of tax consequences associated with it. And we
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want to encourage gifting, but it's not always needed. So
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some people say, well, I got a gift to get
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assets out of my estate to reduce my estate taxes.
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Speaker 3: Maybe check is it.
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Speaker 4: Over the federal Am I going to be getting it
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out or save federal estate taxes? Or am I getting
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it out of my estate only to save state estate taxes?
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Speaker 3: Big difference.
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Speaker 4: Why if I'm going to move assets out of my
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estate to save a forty percent federal estate tax haircut,
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well that that might be worth it. If I'm moving
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assets out of my estate only because I want to
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reduce my state death tax, Well, in Massachusetts anyway, I
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can't speak to the other states, but in Massachusetts anyway,
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you're saving about ten percent. M Well, that that may
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not be enough to do it. And why I say
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that is especially the next thing you need to think
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about what kind of assets might I gift if I'm
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going to gift, right, Well, if I'm going to gift,
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you know, cash is always king why because it's high basis.
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And why am I talking about basis? Well, because when
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I make gifts, I can consider saving on the estate
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tax front. But if I give away assets that have
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a very low basis, then I've got to remember I
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could be creating capital gains tax problems even though I
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might be saving on the estate tax front.
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Speaker 3: Let's do an example.
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Speaker 4: Perhaps, Let's say you know you've got a house that
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you want, a vacation home that you've had in the family,
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and you say, you know what, I'm going to give
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that away, get that out of my estate. It's worth
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a million dollars, but you know we only paid two
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hundred thousand for it long ago. Well, now there's an
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eight hundred thousand dollars gain built into that property. So
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I might be moving a million dollar asset out of
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my estate. And of course how we do that as
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a whole conversation we still have to have. But I
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might be moving that out of my estate. So now
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my estate is a million dollars lower in value. But
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that gain that I gave to the kids, right, I
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gave them the vacation home, I gave them my cost basis,
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and I gave them that gain. So if they, after
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my death decide to sell the property because they don't
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want to maintain it or deal with it anymore, they're
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going to be paying, you know, pretty twenty eight point
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eight percent, call it thirty percent. That's two hundred and
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forty thousand dollars in tax. I just gave them a
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two hundred and forty thousand dollars tax pill. Well, instead,
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maybe I should keep that asset and consider other assets
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that I would give away, because giving away a million
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dollars if I'm only saving on the estate tax front
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in this at the state level, I saved maybe one
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hundred grand, but I incurred two hundred and forty thousand
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in capital gains tax.
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Speaker 2: Yeah, that's the kids. I'm not gonna love that.
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Speaker 3: You gotta think it through.
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Speaker 2: We're talking here with Todd Lusky from Christian Dolan going
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over everything in the estate planning realm. If you have
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any questions for Todd, give our studio line a call
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at eighty eight to zero five, two to sixty three. Again.
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That number for any of your estate planning questions is
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eighty eight eight to zero five, two to sixty three.
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We're gonna take a quick break here, but when we
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come back, your questions next with Todd Lusky.
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Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
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only here on the Financial Exchange Radio Network. You're listening
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to Ask Todd with Todd Lutsky on the Financial Exchange
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Radio Network.
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Speaker 2: We are back here with Todd Lutsky from Cushion Dolan.
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If you have any questions in the estate planning world,
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whether it be on taxes, gifting, trusts, wills, anything of
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that nature, give our studio line a call at eight
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eight eight to zero five two to two sixty three. Again.
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That phone number here eight eight eight to zero five
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two two six three for any questions that you have
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for Attorney Todd Lutsky. Here, Todd, I have a question
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for you. There was a piece yesterday in the Wall
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Street Journal that was titled estate Planning Priorities for people
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without children. Certainly, the majority of the focus on the
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estate planning side is for those who do have kids,
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you want to make sure that your kids inherit the
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assets that you've worked hard for. But what considerations would
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someone have that maybe is not in as much of
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a rush to do because they do not have children.
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What would be some of the considerations that they'd want
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to have in building on an estate plan or maybe
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some of their basic planning documents like living will, power, attorneys,
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and things of that nature.
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Speaker 4: Well, I think there's more to consider than just that,
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even just and I think the fair question might be,
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just because I don't have children, does that mean I
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don't do estate planning? That's kind of what I'm hearing
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right from this question, And a lot of people might
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think that they might say, well, just because I don't
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have children, therefore I don't need to do a state planning.
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Speaker 3: Well maybe not.
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Speaker 4: Maybe you know, it does change the dynamic, right when
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I meet clients that are even if they're married, I
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meet clients that are married and don't have kids, right,
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I go. That immediately changes the dynamic a little, but
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doesn't mean we don't do planning because they still want
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to take care of each other. So it could be
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a single situation or a married couple with no kids.
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So on a married couple with no kids, I still
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want to make sure that you know, when one dies,
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we make it easy for the other one. So we
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still would want to avoid probate at a bare minimum,
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So I'd want to set up my trust simply to
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do that. Now, I think if you're a married couple
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with no kids, you're probably not as worried.
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Speaker 3: About the nursing home.
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Speaker 4: Why because there's just so many things we can do
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last minute to protect assets for a spouse, different than
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when you're single. But for a spouse, there's things I
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can do last minute and make sure things get over
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to a spouse. Now, remember, if you had kids, just
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getting things to a spouse is not helpful because then
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if the spouse gets sick, the kids aren't going to.
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Speaker 3: Get it right.
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Speaker 4: But if we're not talking about trying to preserve assets
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for children, then I'm thinking the kind of trust they
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would do would be, you know, probably a revocable trust,
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so that would avoid the probate, and that would also
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allow them to stay in complete control of everything, which
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of course they would want. And then you still have
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to ask them. Just because you have no kids doesn't
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necessarily mean that you don't have loved ones that you
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want to leave assets to. And so maybe there are
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nieces and nephews right that if you don't have kids,
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they feel like your kids, and so I'd want to.
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Speaker 3: Provide for them. Or maybe you have siblings, or maybe
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you have cousins. I don't know.
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Speaker 4: So even if you don't and you want to leave
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things to charity, well then you might want to think
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about how to do that. And the trust will allow
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you to do all of those things. So how you
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leave the assets to people can still be governed by
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the trust. And again, lastly, and again, all these things
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become either less important or depending on where they're where
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the client's head's at. But you know, depending on how
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much you're worth. Why give the state even or the
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federal government money tax money? If you don't have to,
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You might say, well, why bother. We're taking care of
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each other. We're not going to pay any taxes, and
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so what if the government gets it? Well, if that's
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how you feel, that's absolutely right. I can't defend. I
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can't try to, you know, tell you that's a bad idea,
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But I can tell you, but it's up to you
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whether it is or it isn't. But if you say,
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you know what, I'd rather have more get to a
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charity or I have to have more get to a
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family member, well then you need to do the trust planning.
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So that's the way to think about that. And you know,
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gifting is something we can come back to. We can
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talk about that in a minute, but that's exactly what
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this guide is about.
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Speaker 3: How would we gift assets? If you're single, or if
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you're married, or if.
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Speaker 4: You have kids, you need to really think about how
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you might want to gift assets. If you're going to gift,
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we already gave you the example of the type of
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asset to gift, high basis assets better than low basis assets,
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But then you need to think about how I might
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gift it. So, if I'm going to be moving a
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decent amount of money out of my estate, I probably
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don't want to dump it in a kid's hand. I
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probably want to put it into an irrevocable gifting trust
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of some kind, right, And so maybe consider using a
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gifting trust when you give it to your kids. And
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please don't make the mistake of just running around putting
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names on joint bank accounts or and you also need
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to think about nursing homes. If you make a gift,
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it's a five year waiting period for Medicaid eligibility, even
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though you might not be thinking about that when you
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want to make this gift. So get this guide folks
10:23
this month making the most of gifting assets because there
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are pros and cons and maybe most importantly do I
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gift at all? Maybe I don't even gift, And there's
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examples in here with showing you how the gifting works
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from a tax perspective, et cetera. Get the guide eight
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six six eight four eight five six nine nine or
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Legal Exchange Show dot com again eight six six eight
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four eight five six nine nine or Legal Exchange Show
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dot com.
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Speaker 2: We're here with Todd Lusky from Cushion Dolan. If you
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have any questions for Todd regarding anything in the estate planning,
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realm taxes, gifting, as we come up on your end here,
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feel free to give our studio one to call it
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eighty eight two zero five two two six three. Todd,
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you mentioned on the gifting front. You know high basis
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assets is the best thing to target, but there could
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be scenarios where and we deal with this in planning
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a little bit. If you're gifting to let's say, a
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grandchild who may not be earning a substantial wage and
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finds themselves in a low income tax bracket where you
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could have highly appreciated securities that it actually may be
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to their benefit to take on that low basis asset
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just because they find themselves in such a low income bracket.
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Do you guys run into that at all from a
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gifting perspective.
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Speaker 3: Well, it could. I see what you're saying.
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Speaker 4: That's more of an income tax play right right where
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you're saying, Listen, if I'm going to get something out
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of my estate, but I'm giving it to a grandchild. Again,
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do I is a grandchild old enough to even have
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an account? Number one got to be over eighteen? Yeah, yeah,
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So let's make sure they are. And then do I
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want to put it, you know, in their hands, or
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do I want to put it in a trust for
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the benefit where I can kind of control it a little?
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All those things need to be considered. But yeah, I
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mean to an extent, I guess what you're what you're
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driving at is if they're if they end up liquidating
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that account maybe to pay for college. Let's say if
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you give it to them and they liquidate it, they
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might be taxed on an income tax front. I guess
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it's like zero to ten percent when you're in a
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low bracket, and then it creeps up to fifteen percent
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and then twenty percent exactly. So on the capital gains
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tax front, then then there is an income tax play
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to come into effect when you make those kind of gifts.
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Speaker 3: So yeah, that could work.
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Speaker 2: Have you guys after the results of the election. I
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know it's unclear what the estate tax is going to
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look like going forward federally. That's still all to be determined,
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but any changes are things that you have been monitoring
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as a firm as we got the results from the
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election last week. On the estate planning side, of course.
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Speaker 4: Yeah, I mean I think we're all going to have
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to keep an eye on this a little closer than before.
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I think what we're what we're talking about here is
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the state tax exemption. Yes, right, So that is state
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tax exemption is sitting at thirteen point six million and
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is going to go to thirteen point nine million in change,
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I believe on January one, which is just because it's
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tied to an index and so it indexes for inflation
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each each year, and so you know it'll be about
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thirteen point nine call it fourteen million. I mean, that's
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twenty eight million dollars with basic estate planning. And so
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that's very helpful in terms of saying, well, do I
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gift to save federal estate tax Well not as many
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people might need to gift to save federal estate taxes
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at that level. Think about state, but again got to
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balance it with capital gains issues. But yeah, you got
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to keep an eye on that because that may not
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come down as it's scheduled to come down. It's still
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schedules come down January one, twenty twenty six, but we're
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not sure now if it will. So maybe we'll keep
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an eye on that and think about how we're going
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to be gifts going forward. But for higher net worth people,
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getting things out of your estate will always be better.
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Speaker 3: So hope that helps a little.
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Speaker 2: That is very helpful. Again. Talking with Todd Lusky from
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Christian Dolan, go over all your state planning questions, Tod,
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I'll throw one last question your way. Anything ahead of
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year end that you would encourage your clients to consider
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prior to, you know, year end, just to make sure
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they have their ducks in a row.
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Speaker 3: Yeah, I mean, gifting obviously is important. So look at
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it again.
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Speaker 4: If you've not done any of your gift and you
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always have that ability to gift your present interest exclusion,
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you might as well use it. It's per year, so
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you can give a way up to eighteen thousand per
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year per person without ever having to file a gift
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tax return report anything to the US government.
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Speaker 1: Nothing.
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Speaker 4: So that's always a helpful thing to think about. But
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at the end of the year, when it come up
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to year end, do that and no just other than that,
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basically you just get your estate plan in order because
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at the end of the day and everybody passes away
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and you need to make s sure yet you have
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your assets going where you want them to go.
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Speaker 2: A lot of great information from Todd Lutsky from Cushion Dolan. Todd,
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thanks so much for taking the time to speak with
15:09
this week. Really appreciate it.
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Speaker 3: Always a pleasure.
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Speaker 1: This has been asked Todd on the Financial Exchange Radio network.
15:17
Ask Todd with Todd Lutsky has been presented by Cushing
15:19
and Dolan, serving Massachusetts and New England for more than
15:22
thirty years, helping families with the State and tax planning,
15:25
Medicaid planning, and Probate law call eight hundred and three
15:28
nine three four thousand and one or visit Cushingdolan dot com.
15:32
The views expressed in this segment are solely those of
15:34
Cushing and Dolan Armstrong advisor. He does not provide any
15:36
legal or tax advice. Please consult with your legal or
15:38
tax advisor on such matters. Cushing and Armstrong do not
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endorse each other and are not affiliated