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Second Marriages, Trusts and IRAs: Estate Planning Mistakes to Avoid · The Legal Exchange

• 0:00
  Speaker 1: This is The Legal Exchange with Todd Lutzke from the
• 0:04
  Speaker 1: law firm of Cushing & Dolan and Susan Powers of
• 0:07
  Speaker 1: the Armstrong Advisory Group. Each week, Todd and Susan will
• 0:10
  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
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  Speaker 1: 866-848-5699 to make an appointment. That's 866-848-5699. Operators are standing by. Now,
• 0:31
  Speaker 1: here are your hosts, Todd Lutzke and Susan Powers.
• 0:37
  Speaker 2: Welcome into The Legal Exchange with Todd Lutzke. I'm Susan Powers,
• 0:41
  Speaker 2: a financial advisor with the Armstrong Advisory Group, and I'm
• 0:44
  Speaker 2: joined by Todd Lutzke, a partner with the law firm
• 0:47
  Speaker 2: of Cushing and Dolan with a master's in taxation. Todd, welcome.
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  Speaker 2: How are you today?
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  Speaker 3: I'm never better, and you?
• 0:53
  Speaker 2: I'm great, thank you. What do you have for us
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  Speaker 2: this week?
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  Speaker 3: A couple things. We've got two cases up. a Wisconsin
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  Speaker 3: appellate court case. And then we go to North Carolina
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  Speaker 3: Supreme court, Superbowl. I know they're both almost in a
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  Speaker 3: similar way, dealing with second marriages and planning and how
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  Speaker 3: important that is. Like in this first one, you know,
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  Speaker 3: they had a second marriage, no will. And there were
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  Speaker 3: three kids together in the first marriage, but there was
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  Speaker 3: one kid from the second marriage. And when they are
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  Speaker 3: getting divorced, you know, when you die without, I'm sorry,
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  Speaker 3: when you die without a will and you have a
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  Speaker 3: second marriage, this wasn't a divorce case, how does it go?
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  Speaker 3: First marriage versus second marriage, very different intestate succession statute.
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  Speaker 3: And is the kid from the prior marriage included, excluded?
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  Speaker 3: And how does having a kid from a second marriage
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  Speaker 3: impact how much the spouse gets? Very big difference. And folks,
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  Speaker 3: that's exactly what we're going to go through. And help
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  Speaker 3: you understand why it's so important to plan when you're
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  Speaker 3: doing it. And that wasn't even a divorce case. That
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  Speaker 3: was a second marriage case. It's the North Carolina one
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  Speaker 3: where it's a divorce case where they get married in 07,
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  Speaker 3: separated in 2014, divorced in 2015, but they put a
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  Speaker 3: lot of property into a revocable trust beforehand and they
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  Speaker 3: went through this whole separation agreement. And the whole issue
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  Speaker 3: here is whether or not the trust had to be
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  Speaker 3: named as an additional party. But folks, that's not what
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  Speaker 3: we're going to learn from this case. We're going to
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  Speaker 3: learn what to do and why it's so important to
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  Speaker 3: plan because how divorces can impact your estate plan. So folks,
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  Speaker 3: lots to learn about in this radio show today. But
• 2:46
  Speaker 3: you know what? This guide we're giving away, while we
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  Speaker 3: do our planning, the guide we're giving away deals with
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  Speaker 3: one particular asset of a plan, of an estate plan.
• 2:56
  Speaker 3: And that is IRAs. How do you fit an IRA,
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  Speaker 3: a non-taxable or a deferred taxable item into your estate plan?
• 3:06
  Speaker 3: Because you've got to deal with estate taxes and income
• 3:08
  Speaker 3: taxes at the same time. And if you want to
• 3:11
  Speaker 3: protect it from a nursing home, now we finally have
• 3:14
  Speaker 3: a way to do that. Learn how naming your estate
• 3:17
  Speaker 3: the beneficiary of an IRA coupled with a testamentary trust
• 3:21
  Speaker 3: can accomplish estate tax savings, Nursing home protection all without
• 3:28
  Speaker 3: impacting required minimum distribution income tax problems. A lot of
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  Speaker 3: balls in the air in this one, folks. But if
• 3:35
  Speaker 3: you call and get the guide, you will learn how
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  Speaker 3: this can become a very important part of your estate
• 3:40
  Speaker 3: plan because almost everybody has an IRA. A lot of people, yep.
• 3:44
  Speaker 3: Call and get it, folks. 866-848-5699 or LegalExchangeShow.com. Again, 866-848-5699
• 3:56
  Speaker 3: or LegalExchangeShow.com. You can always go to Cushing Dolan PC's
• 4:00
  Speaker 3: Instagram page for more. Let's go to Wisconsin.
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  Speaker 2: Messy marriage.
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  Speaker 3: No planning. So Earl married a second wife, Denise, in 05.
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  Speaker 3: They had three kids, Anna, Emma, and Samantha. Note, Earl...
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  Speaker 3: did have another child from a prior marriage, Caleb. So
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  Speaker 3: August 2022, Earl died in a car accident. So you
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  Speaker 3: never know. Survived by Denise and all four kids. He
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  Speaker 3: did not even have a will. He died intestate. Caleb,
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  Speaker 3: the son from a prior marriage, files for an initial
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  Speaker 3: probate and it becomes an informal probate. And later they
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  Speaker 3: convert it to a formal probate and they end up
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  Speaker 3: naming Denise personal representative, which makes sense. She's the surviving spouse,
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  Speaker 3: but she's got limited powers. Caleb then argues that he
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  Speaker 3: is entitled to one half of the marital property. He's
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  Speaker 3: the child from the other marriage. One half of the
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  Speaker 3: marital property and remaining non-marital property that did not pass
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  Speaker 3: to the spouse, Denise, should go to him alone and
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  Speaker 3: not all the siblings. Well, Denise said the property not
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  Speaker 3: passing to her should at least pass to all the
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  Speaker 3: kids equally. Remember, they're all her kids.
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  Speaker 4: Right.
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  Speaker 3: The circuit court agreed with Caleb. Well, Denise wasn't happy
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  Speaker 3: about that, so Denise appealed. The appellate court reversed, stating
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  Speaker 3: that the statute is interpreted to say that the portion
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  Speaker 3: of the assets that do not pass to the surviving
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  Speaker 3: spouse should go equally to all kids. That makes sense.
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  Speaker 3: Makes sense.
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  Speaker 2: They were all his kids.
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  Speaker 3: Well, yeah, they're all his kids. Yeah, they're all his kids,
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  Speaker 3: but not all her kids. You're right. I made a
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  Speaker 3: mistake on that. Also, they entered an order saying that
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  Speaker 3: Denise did not have to pay one half the value
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  Speaker 3: of the property, and Caleb could not order Denise to
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  Speaker 3: grant an easement on the real estate. Well, that makes sense.
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  Speaker 3: She could live there. Bottom line is, You might be
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  Speaker 3: confused by this decision. I think it's the right decision,
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  Speaker 3: but let's break it down and figure out what lessons
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  Speaker 3: can we take away from this when you have second marriages?
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  Speaker 3: And there's plenty of them out there. So first I
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  Speaker 3: tell people, you got a plan, right? Look, this guy
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  Speaker 3: died suddenly in a car accident. You just never know.
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  Speaker 2: You have a second marriage, different parents, children from different marriage.
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  Speaker 3: He died without a will because he didn't do planning
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  Speaker 3: and he had a car accident and died, even though
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  Speaker 3: you didn't think you were going to have one. Folks,
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  Speaker 3: second marriage, you really have to plan or the results
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  Speaker 3: you may get may not be what you thought they
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  Speaker 3: might be because of the intestate succession statute. Now, let's
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  Speaker 3: talk about it. If you die without a will, the
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  Speaker 3: intestate succession statute decides where your assets go. And let's
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  Speaker 3: compare a first marriage with a second marriage. Makes all
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  Speaker 3: the difference, folks. Here in Massachusetts, the entire estate goes
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  Speaker 3: to the surviving spouse as long as all the kids
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  Speaker 3: of the decedent are also the kids of the surviving spouse.
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  Speaker 3: Makes sense. That's a first marriage.
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  Speaker 2: Your turn, children.
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  Speaker 3: That's a first marriage. Again, doesn't mean you don't plan, folks.
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  Speaker 3: Still a horrible estate planning result at the end of
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  Speaker 3: the day from taxes and probate and whatnot. But at
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  Speaker 3: least you had a little flavor for where the assets go.
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  Speaker 3: Second marriage, surviving spouse gets $ 100, 000 plus 50% of the
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  Speaker 3: balance of the assets.
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  Speaker 2: This is in Massachusetts?
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  Speaker 1: Yeah.
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  Speaker 2: A hundred grand.
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  Speaker 3: Plus 50% of the balance.
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  Speaker 1: Huh.
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  Speaker 3: So she gets a little.
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  Speaker 2: More than half.
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  Speaker 3: Kind of random, yeah. A little more than half. Be
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  Speaker 3: careful though, because you may not want to disinherit your spouse, right?
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  Speaker 3: So in this case, before you even get to that far,
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  Speaker 3: Understand that on second marriages, if you think you're taking
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  Speaker 3: care of your spouse, you might not be because she
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  Speaker 3: ain't getting, you know, she's getting a little, little more
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  Speaker 3: than half.
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  Speaker 2: Is that just assets that don't have beneficiaries on them
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  Speaker 2: or is that in total?
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  Speaker 3: Well, when it's intestate, you probably are dealing with what's
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  Speaker 3: ever in the probate. I mean, if you've got, yeah,
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  Speaker 3: if there's joint that's going to pass outside of the
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  Speaker 3: probate court.
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  Speaker 1: Right.
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  Speaker 3: So yes, you got to be careful. I mean, that's
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  Speaker 3: a good point. I mean, you could have that. But folks,
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  Speaker 3: be careful. You don't want to disinherit your spouse. That's
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  Speaker 3: still your spouse. So you might want to say, listen,
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  Speaker 3: I want to take care of my spouse. Well, enter planning.
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  Speaker 2: Yeah.
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  Speaker 3: That's what happened here, right? This was a car accident, right?
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  Speaker 3: Enter planning. Enter planning. Get married. Set up a trust. Yeah.
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  Speaker 5: Why?
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  Speaker 3: Because with the trust you can put in there, you know,
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  Speaker 3: I'm going to put all my assets in the trust
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  Speaker 3: and it's going to say breaks down when I die
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  Speaker 3: into the marital share and the remainder share. I can
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  Speaker 3: now shelter assets for estate tax purposes, which is good
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  Speaker 3: for everybody, the whole family. And I can also have
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  Speaker 3: the language set up where it provides income to my
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  Speaker 3: spouse and principal as needed to maintain standard of living.
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  Speaker 3: Mm hmm. health education. You can even make distributions discretionary
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  Speaker 3: to the kids. But meanwhile, you've got the assets held
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  Speaker 3: in trust for the benefit of your spouse. So you've
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  Speaker 3: really taken care of your spouse, avoided probate and sheltered
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  Speaker 3: assets for estate taxes. And then when you die, what's
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  Speaker 3: left can go either to your side of the family,
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  Speaker 3: if that's what you really wanted, or if you want
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  Speaker 3: to take care of some of her kids from her
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  Speaker 3: side of the family, you could do that. But you
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  Speaker 3: can really control that distribution of assets for And take
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  Speaker 3: care of your spouse.
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  Speaker 2: Get rid of the infighting.
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  Speaker 3: Folks, don't just not plan and rely on that intestate
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  Speaker 3: succession statute. It might surprise you. And when you are planning,
• 10:00
  Speaker 3: learn how to deal with your IRA. It's the most
• 10:03
  Speaker 3: complicated asset in the estate planning world. And this guide
• 10:06
  Speaker 3: not only helps you take care of the IRA, it
• 10:09
  Speaker 3: might even protect it from the nursing home. 866-848-5699 or LegalExchangeShow.com. Again,
• 10:14
  Speaker 3: 866- 848-5699.
• 10:23
  Speaker 2: You've been listening to Todd Lutzky, a partner with the
• 10:25
  Speaker 2: law firm of Cushing and Dolan. I'm Susan Powers, a
• 10:28
  Speaker 2: financial advisor with the Armstrong Advisory Group. We've got much
• 10:32
  Speaker 2: more to come when we return to The Legal Exchange
• 10:35
  Speaker 2: with Todd Lutzky.
• 10:37
  Speaker 1: Leaving your IRA to your children may seem like the
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  Speaker 1: obvious choice, but how they receive that money could have
• 10:42
  Speaker 1: important tax consequences. Cushing and Dolan has a new guide.
• 10:46
  Speaker 1: Why name your estate an IRA beneficiary? Under current rules,
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  Speaker 1: larger tax bill. That's one reason why your IRA beneficiary
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  Speaker 2: Welcome back into The Legal Exchange with Todd Lutzke. I'm
• 13:58
  Speaker 2: Susan Powers, a financial advisor with the Armstrong Advisory Group,
• 14:01
  Speaker 2: and I'm joined by Todd Lutzke, a partner with the
• 14:04
  Speaker 2: law firm of Cushing & Dolan, with a master's in taxation.
• 14:08
  Speaker 2: Where are we headed now, Todd?
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  Speaker 3: North Carolina, Supreme Court action. This is a divorce situation.
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  Speaker 3: We go from a second marriage case, which was perhaps
• 14:20
  Speaker 3: a happily second marriage case, to a divorce case. So
• 14:24
  Speaker 3: in this case, we have Kathy and Alan. They get
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  Speaker 3: married in May of 07, separated in July of 2014,
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  Speaker 3: and divorced by November of 2015. They had established a
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  Speaker 3: revocable trust while they were married. Kudos to them. And
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  Speaker 3: they transferred three pieces of real estate to it. During
• 14:44
  Speaker 3: the separation, two of the properties were sold and one
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  Speaker 3: remained in the trust. Both of them asserted claims of
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  Speaker 3: equitable distribution and stipulated that all the real estate was
• 14:57
  Speaker 3: marital property. Okay. Makes sense. The equitable distribution directed... The
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  Speaker 3: sale proceeds from the properties that were previously sold are
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  Speaker 3: to be split equally between the parties. And the remaining
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  Speaker 3: property that was still in the revocable trust would just
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  Speaker 3: go to Kathy. Well, that's what they agreed on. That's
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  Speaker 3: what they agreed on. Well, Alan, he appealed that saying,
• 15:26
  Speaker 3: wait a minute. I'm going to appeal that order because
• 15:29
  Speaker 3: the court failed to join the revocable trust as a
• 15:33
  Speaker 3: necessary party to the litigation because the trust owned the
• 15:38
  Speaker 3: real estate. The appellate court affirmed the equitable distribution order
• 15:45
  Speaker 3: because Kathy and Alan agreed the real estate was marital property.
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  Speaker 3: When they divorced, the trust was effectively revoked and not
• 15:53
  Speaker 3: needed to be a part of the litigation. Keep that
• 15:56
  Speaker 3: in mind, revoking versus party to litigation. Well, Allen didn't
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  Speaker 3: like that, so he appealed to the North Carolina Supreme Court.
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  Speaker 3: And the Supreme Court affirmed, but for a different reason.
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  Speaker 3: Affirmed because since the set laws of a revocable trust
• 16:15
  Speaker 3: are already named parties to the litigation, a revocable trust
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  Speaker 3: is not a necessary party and does not need to
• 16:24
  Speaker 3: be named. Which I like that better because just because
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  Speaker 3: you get divorced may not necessarily revoke the trust. In
• 16:31
  Speaker 3: our documents, when you get divorced, you can be removed
• 16:35
  Speaker 3: as a trustee. You don't want to be serving as
• 16:37
  Speaker 3: a trustee if you're divorced. But it doesn't revoke the
• 16:40
  Speaker 3: trust necessarily. You've got to revoke the trust. And there's
• 16:44
  Speaker 3: still parties to the trust. It's revocable, but it's revocable
• 16:47
  Speaker 3: so it's like it's theirs. Right. So why does the
• 16:50
  Speaker 3: trust need to serve? I get it. Folks, this is
• 16:53
  Speaker 3: a technical issue, but that's not what we're going to
• 16:55
  Speaker 3: learn from this. Yeah. We have a lot of other
• 16:57
  Speaker 3: lessons to learn from this case, but I'm going to
• 17:01
  Speaker 3: explain to you how trusts work when we're doing our
• 17:05
  Speaker 3: planning and some common... concerns that people have that are
• 17:11
  Speaker 3: really not justified. They shouldn't be concerned about it. And
• 17:14
  Speaker 3: I'll explain that. But folks, they did their planning. I'm
• 17:17
  Speaker 3: happy about that, at least. And in this case, we
• 17:20
  Speaker 3: have this new guide saying, look, you can do your
• 17:23
  Speaker 3: revocable trust planning, but how am I going to make
• 17:25
  Speaker 3: my IRA a part of that trust? Or am I? Folks,
• 17:29
  Speaker 3: IRAs are complicated. This guide is naming your estate an
• 17:32
  Speaker 3: IRA beneficiary. This technique has only been around since 2022.
• 17:35
  Speaker 3: And Not everybody even understands it, but it's a way
• 17:41
  Speaker 3: of naming the estate coupled with a testamentary trust. You
• 17:45
  Speaker 3: got to get the guide to learn this. You can't
• 17:46
  Speaker 3: just do it without a testamentary trust. Probably only married
• 17:50
  Speaker 3: people would be doing this, and it's a way of
• 17:53
  Speaker 3: reducing your estate taxes and providing for protection from the
• 17:58
  Speaker 3: nursing home while not causing an income tax problem with
• 18:02
  Speaker 3: the required minimum distributions. A lot going on, folks. Get
• 18:06
  Speaker 3: the guide 866-848-5699 or LegalExchangeShow.com. Again, 866-848-5699 or LegalExchangeShow.com and
• 18:19
  Speaker 3: learn how your IRA can best fit into your estate plan.
• 18:25
  Speaker 3: What are we going to learn here?
• 18:27
  Speaker 1: Yeah.
• 18:28
  Speaker 3: Well, There's some, so many misunderstandings when people come in
• 18:32
  Speaker 3: to do estate planning about divorce. What if we get divorced?
• 18:35
  Speaker 3: What if we get divorced? So with a revocable or
• 18:38
  Speaker 3: an irrevocable trust, I meet clients and they wonder, well,
• 18:41
  Speaker 3: what if I put some assets in my husband's trust
• 18:46
  Speaker 3: revocable and some assets in my wife's trust, which are revocable?
• 18:51
  Speaker 3: Does that mean if we get divorced, the assets in
• 18:53
  Speaker 3: his trust are his and her trust are hers and
• 18:58
  Speaker 3: That's how it works. So then they worry. What if
• 19:00
  Speaker 3: it's not equal?
• 19:01
  Speaker 5: Right.
• 19:02
  Speaker 3: No, folks, they are assets of the marriage. It doesn't matter.
• 19:07
  Speaker 3: Regardless of how they're owned. Doesn't matter what trust they're in.
• 19:11
  Speaker 2: Even if it was irrevocable, right? If a husband and
• 19:13
  Speaker 2: wife create them.
• 19:14
  Speaker 3: Even if it's irrevocable. So the next question we had
• 19:17
  Speaker 3: there is even if it's irrevocable, yes, you can put
• 19:19
  Speaker 3: them in. We do these Medicaid trusts all the time.
• 19:22
  Speaker 3: And oftentimes we will put some assets in each trust
• 19:25
  Speaker 3: and they may or may not be equal. That doesn't matter.
• 19:29
  Speaker 3: The judge is going to say these are marital assets.
• 19:31
  Speaker 3: We have to divide them.
• 19:33
  Speaker 1: Right.
• 19:33
  Speaker 3: So for your divorce, not your kid's divorce, your divorce,
• 19:38
  Speaker 3: it really don't don't get hung up on that. I mean,
• 19:41
  Speaker 3: and if this isn't helping you to lose that hang
• 19:45
  Speaker 3: up or that nervousness about funding trusts, your assets that
• 19:50
  Speaker 3: were always yours, that you're putting them in your husband's
• 19:52
  Speaker 3: trust and somehow that's bad. No, think about it if
• 19:56
  Speaker 3: you were married and for whatever reason, everything was in
• 20:00
  Speaker 3: the wife's name. The house was in the wife's name,
• 20:03
  Speaker 3: the vacation home and a lot of the investment accounts.
• 20:07
  Speaker 3: And you get divorced. You think the husband gets nothing?
• 20:10
  Speaker 1: Right. No.
• 20:12
  Speaker 3: It doesn't matter that it was in her name.
• 20:13
  Speaker 2: It's all on the table.
• 20:15
  Speaker 3: Same as if it was in her trust, right? It's
• 20:17
  Speaker 3: a revocable trust. It's her trust. It doesn't matter. Okay.
• 20:20
  Speaker 3: So just trying to alleviate that concern a little bit
• 20:24
  Speaker 3: for you folks when you're funding it. Now, that all said,
• 20:29
  Speaker 3: there is a time you do need to be concerned
• 20:31
  Speaker 3: about it. When is that? So if it's a marriage...
• 20:36
  Speaker 3: Whether it's second or first doesn't matter. Okay. But if
• 20:40
  Speaker 3: it involves a prenup.
• 20:43
  Speaker 2: Okay, sure.
• 20:44
  Speaker 3: So if you come into my office and say, you know,
• 20:47
  Speaker 3: we're happily married, it's our first marriage and we've got
• 20:50
  Speaker 3: these kids and some grandkids, but you know, when we
• 20:52
  Speaker 3: got married, we put together a prenup and it's still there. Well,
• 20:59
  Speaker 3: in the prenup, you would have identified separate assets that
• 21:04
  Speaker 3: And joint assets or assets of the marriage and assets
• 21:07
  Speaker 3: not of the marriage. And they're in your name. If
• 21:13
  Speaker 3: you were to create a joint revocable trust and take
• 21:18
  Speaker 3: the separate assets that are listed in your prenup and
• 21:22
  Speaker 3: put them into the joint revocable trust, you have arguably
• 21:26
  Speaker 3: commingled joint assets and lost money. the protection of the prenup. Oh, interesting.
• 21:33
  Speaker 3: So you don't want to do that. So again, for
• 21:37
  Speaker 3: moderate estates, estates under 15 million, I'm likely going to
• 21:41
  Speaker 3: do a joint revocable trust for folks. It's cheaper. It's
• 21:44
  Speaker 3: more efficient. It's simpler. It's easier for everybody to understand.
• 21:48
  Speaker 3: It's certainly easier to fund. You don't have to divide everything,
• 21:53
  Speaker 3: but you can't. If you've got that prenup.
• 21:56
  Speaker 1: Right.
• 21:57
  Speaker 3: So in those cases, folks, we would do two separate trusts.
• 22:03
  Speaker 3: And we would say, look, if these are your separate
• 22:06
  Speaker 3: marital assets that you've owned in your name, then they're
• 22:12
  Speaker 3: only going to go in your trust. And then there
• 22:16
  Speaker 3: are assets that like maybe we've had the house was
• 22:18
  Speaker 3: a joint asset. Well, maybe you just have to leave
• 22:20
  Speaker 3: that joint or you take half and put it in
• 22:22
  Speaker 3: one trust and half and put it in the other trust.
• 22:24
  Speaker 2: Usually you do half and half when you don't have
• 22:26
  Speaker 2: these kind of one-off cases. If you have two separate trusts,
• 22:31
  Speaker 2: you usually do half and half into each spouse, right?
• 22:33
  Speaker 4: I do, yeah.
• 22:34
  Speaker 3: Sometimes the house I might put in one trust and
• 22:37
  Speaker 3: more money in another trust so I don't have to
• 22:39
  Speaker 3: get a double homestead. I can get better protection without
• 22:42
  Speaker 3: splitting the homestead protection. But mostly, it doesn't matter mostly
• 22:46
  Speaker 3: for joint, but folks, just wanted to keep in mind
• 22:49
  Speaker 3: that idea about, you know, a prenup.
• 22:52
  Speaker 2: But have a plan.
• 22:53
  Speaker 3: Yeah. Either way, have your planning, especially if you went
• 22:57
  Speaker 3: out of your way to do a prenup, you certainly
• 22:59
  Speaker 3: want to make sure that when you die, your assets
• 23:01
  Speaker 3: go the way you want them to go and that
• 23:02
  Speaker 3: you don't blow your prenup along the way. Folks, that's
• 23:07
  Speaker 3: part of the planning, but this guide is to help
• 23:10
  Speaker 3: you figure out how to incorporate your IRA into your
• 23:14
  Speaker 3: estate plan. It is such a complicated item because it's
• 23:17
  Speaker 3: got income tax issues built in and estate tax issues
• 23:20
  Speaker 3: built in. And if you also want to balance that
• 23:23
  Speaker 3: with protecting it from the nursing home, you get this
• 23:26
  Speaker 3: guide and learn how to set up a testamentary trust.
• 23:28
  Speaker 3: Name your estate the IRA beneficiary. 866-848-5699 or LegalExchangeShow.com and
• 23:37
  Speaker 3: you can download it right there.
• 23:39
  Speaker 2: You've been listening to Todd Lutzky, a partner with the
• 23:41
  Speaker 2: law firm of Cushing & Dolan. I'm Susan Powers, a
• 23:44
  Speaker 2: financial advisor with the Armstrong Advisory Group. Todd will be
• 23:48
  Speaker 2: answering your listener questions when we return to The Legal
• 23:51
  Speaker 2: Exchange with Todd Lutzky.
• 23:54
  Speaker 1: Leaving your IRA to your children may seem like the
• 23:56
  Speaker 1: obvious choice, but how they receive that money could have
• 23:59
  Speaker 1: important tax consequences. Cushing and Dolan has a new guide.
• 24:02
  Speaker 1: Why name your estate an IRA beneficiary? Under current rules,
• 24:06
  Speaker 1: most adult children who inherit an IRA must withdraw the
• 24:09
  Speaker 1: money within 10 years. That could mean taking retirement distributions
• 24:12
  Speaker 1: while they're still working and earning income, potentially creating a
• 24:16
  Speaker 1: larger tax bill. That's one reason why your IRA beneficiary
• 24:19
  Speaker 1: should be part of your overall estate plan. Who receives
• 24:22
  Speaker 1: the account, how they receive it, and the tax consequences
• 24:25
  Speaker 1: that may follow all deserve careful consideration. Get Cushing and
• 24:28
  Speaker 1: Dolan's new guide called Why Name Your Estate an IRA
• 24:31
  Speaker 1: Beneficiary by calling 866-848-5699. That's 866-848-5699. Or you can request
• 24:39
  Speaker 1: the guide online at LegalExchangeShow.com. The proceeding was paid for
• 24:43
  Speaker 1: and the views expressed are solely those of Cushing and Dolan.
• 24:45
  Speaker 1: Cushing and Dolan and or Armstrong Advisory may contact you
• 24:48
  Speaker 1: offering legal or investment services. Cushing and Dolan and Armstrong
• 24:51
  Speaker 1: Advisory do not endorse each other and are not affiliated.
• 24:54
  Speaker 5: You spent years preparing for retirement, but there comes a
• 24:56
  Speaker 5: point when building your savings is only part of the plan. Hi,
• 25:00
  Speaker 5: this is Mike Armstrong from the Armstrong Advisory Group. Saving
• 25:03
  Speaker 5: more may provide additional financial security, but it can also
• 25:06
  Speaker 5: mean working longer than you need to. That means waiting
• 25:08
  Speaker 5: longer to enjoy what you've worked for, whether that's traveling,
• 25:11
  Speaker 5: being with family, or simply having more freedom to decide
• 25:14
  Speaker 5: how you spend your time. These are some of the
• 25:17
  Speaker 5: ideas included in our new guide, Five Hidden Costs of
• 25:20
  Speaker 5: Saving Too Much for Retirement. A retirement plan shouldn't just
• 25:23
  Speaker 5: tell you how much money to save. It should help
• 25:25
  Speaker 5: you understand what that money can allow you to do
• 25:28
  Speaker 5: and when you may be in a position to start
• 25:30
  Speaker 5: doing it. Get your free copy today by calling Armstrong
• 25:33
  Speaker 5: Advisory Group at 800-393-4001.
• 25:34
  Speaker 3: That's 800-393-4001. Or you can request the guide at armstrongadvisory.com.
• 25:42
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 25:44
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 25:46
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 25:48
  Speaker 1: your own financial tax and estate planning advisors before making
• 25:51
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 25:53
  Speaker 1: advisory services.
• 25:56
  Speaker 4: Our nation's veterans answered the call to serve. Today, the
• 26:00
  Speaker 4: Disabled American Veterans Department of Massachusetts is there to support
• 26:04
  Speaker 4: our veterans through benefits assistance, transportation services, advocacy, and community outreach.
• 26:11
  Speaker 4: Their mission is to ensure no veteran has to face
• 26:14
  Speaker 4: life's challenges alone. You can make a difference by volunteering
• 26:17
  Speaker 4: for the DAV Massachusetts or making a donation.
• 26:21
  Speaker 3: Learn more at DAVMA.org.
• 26:25
  Speaker 1: Who gets your IRA when you pass may seem like
• 26:27
  Speaker 1: a simple decision, but the name on that beneficiary form
• 26:30
  Speaker 1: can have a big impact on what happens to those assets.
• 26:33
  Speaker 1: Cushing and Dolan has a new guide, Why Name Your
• 26:35
  Speaker 1: Estate an IRA Beneficiary. Naming your spouse directly may provide
• 26:39
  Speaker 1: certain tax advantages and give them full access to the account,
• 26:42
  Speaker 1: but it could also leave those assets exposed if your
• 26:45
  Speaker 1: spouse needs nursing home care in the future. Another option
• 26:48
  Speaker 1: is to have your IRA pass through your estate. With
• 26:51
  Speaker 1: the right planning in place, that could provide additional asset
• 26:53
  Speaker 1: protection and help address estate taxes. The right choice depends
• 26:57
  Speaker 1: on your circumstances, and understanding the differences is important. Get
• 27:01
  Speaker 1: your free guide today by calling Cushing and Dolan at 866-848-5699.
• 27:03
  Speaker 1: That's 866-848-5699. Or you can request the guide online at LegalExchangeShow.com.
• 27:13
  Speaker 1: The proceeding was paid for and the views expressed are
• 27:15
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 27:17
  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 27:20
  Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
• 27:23
  Speaker 1: other and are not affiliated. You're listening to The Legal Exchange,
• 27:28
  Speaker 1: and it's time for Ask Todd, the segment where Todd
• 27:31
  Speaker 1: will answer your questions about anything and everything that's included
• 27:34
  Speaker 1: in the estate planning process. Once again, here's Todd Lutzke
• 27:39
  Speaker 1: and Susan Powers.
• 27:40
  Speaker 2: Welcome back, Todd. I have a few questions from listeners
• 27:43
  Speaker 2: for you. First question comes from Sonia in Boylston, Mass.,
• 27:47
  Speaker 2: and Sonia writes, My husband and I have a revocable
• 27:50
  Speaker 2: trust that we created this year. We transferred our home
• 27:53
  Speaker 2: and our investments into the trust, but I'm unaware what
• 27:56
  Speaker 2: to do with the life insurance. It is paid up
• 27:59
  Speaker 2: whole life insurance policy on my husband's life. Should we
• 28:02
  Speaker 2: change the ownership to the trust or the beneficiary or
• 28:06
  Speaker 2: leave it as myself? If we name the trust, will
• 28:08
  Speaker 2: I still have access to those funds when he passes
• 28:11
  Speaker 2: or do they need to stay in the trust? What
• 28:13
  Speaker 2: do you do? I mean, insurance is a confusing asset.
• 28:16
  Speaker 3: There's like 10 questions here.
• 28:18
  Speaker 2: Well, give her some answers then.
• 28:19
  Speaker 3: My goodness.
• 28:20
  Speaker 2: I'm You're here for me to give away free legal
• 28:23
  Speaker 2: advice from.
• 28:24
  Speaker 3: This is not just one. I thought it was one
• 28:26
  Speaker 3: question per caller.
• 28:28
  Speaker 2: Inquiring minds want to know.
• 28:29
  Speaker 3: All right, here we go.
• 28:30
  Speaker 2: What do you do with it? It's a revocable trust.
• 28:33
  Speaker 3: Revocable trusts, you would not really need to change the owner.
• 28:39
  Speaker 3: There's no reason to change the owner. But you do
• 28:43
  Speaker 3: need to change the beneficiary, I would say. Again, assuming
• 28:47
  Speaker 3: it's a decent-sized policy. Let's call it a million-dollar policy.
• 28:51
  Speaker 3: Why do we want to change the designated beneficiary? If
• 28:56
  Speaker 3: it's a million dollars and husband died and the beneficiary
• 29:03
  Speaker 3: was wife.
• 29:04
  Speaker 4: Yes.
• 29:04
  Speaker 3: It would avoid probate. Good. Good. It would automatically pass
• 29:10
  Speaker 3: to the spouse. She would get a check for a
• 29:12
  Speaker 3: million dollars. Full access. Income tax free, deposit in her
• 29:15
  Speaker 3: bank account. And she can do what she wants with it.
• 29:18
  Speaker 5: Mm-hmm.
• 29:19
  Speaker 3: But now her estate just got bumped up by a
• 29:21
  Speaker 3: million dollars.
• 29:22
  Speaker 1: Okay.
• 29:23
  Speaker 3: So it's going to be subject to death tax. Assuming.
• 29:26
  Speaker 2: When she dies.
• 29:27
  Speaker 3: When she dies. Assuming there's other assets. Right. Involved here,
• 29:31
  Speaker 3: not just this one. It's pushing her. She's now with
• 29:34
  Speaker 3: one asset halfway to her exemption.
• 29:38
  Speaker 2: Okay.
• 29:38
  Speaker 3: Just one asset.
• 29:39
  Speaker 5: Yep.
• 29:39
  Speaker 3: Million dollars. So I don't love that. All right. I
• 29:44
  Speaker 3: would much rather name the trust the beneficiary.
• 29:50
  Speaker 2: And it sounds like it was probably a joint trust
• 29:52
  Speaker 2: because she said we created a trust.
• 29:55
  Speaker 3: A revocable trust.
• 29:56
  Speaker 5: Right.
• 29:56
  Speaker 3: So it looks like one. So good. Joint trust is fine.
• 29:59
  Speaker 3: Name the joint trust the beneficiary. So now when you die,
• 30:04
  Speaker 3: avoid probate.
• 30:05
  Speaker 1: Yep.
• 30:06
  Speaker 3: Same. All the money goes into this trust. And then
• 30:09
  Speaker 3: this trust, although becomes irrevocable, the survivor is the trustee.
• 30:14
  Speaker 3: So that's the wife in this example. And the survivor's
• 30:18
  Speaker 3: in charge of that trust. Even though it's irrevocable, they
• 30:22
  Speaker 3: are able to access what's in there. So we'll have
• 30:24
  Speaker 3: that marital share and remainder share. So these assets, this
• 30:28
  Speaker 3: million dollars, will find its way to either the remainder
• 30:31
  Speaker 3: share or the Q-tip share, thereby sheltering it from future
• 30:39
  Speaker 3: federal estate tax. And if it makes it into the
• 30:43
  Speaker 3: remainder share, it's also sheltered from future MAS. death tax
• 30:49
  Speaker 3: when she dies.
• 30:49
  Speaker 2: So definite tax benefits from that perspective.
• 30:51
  Speaker 3: So that's a huge benefit. That means that her estate
• 30:54
  Speaker 3: is going to be a million dollars lower when she
• 30:58
  Speaker 3: dies just from this one asset being tucked away for
• 31:01
  Speaker 3: estate taxes.
• 31:02
  Speaker 2: So you said even though the trust is irrevocable... Yeah,
• 31:06
  Speaker 2: it becomes irrevocable. So he died, it becomes irrevocable, and
• 31:09
  Speaker 2: she still has access to those funds?
• 31:10
  Speaker 3: Right. So the language in these trusts are designed where
• 31:13
  Speaker 3: she's in charge, she can manage, invest, she can take
• 31:15
  Speaker 3: out all the income, the income goes right to her
• 31:18
  Speaker 3: from both buckets, and she can even take the principal.
• 31:21
  Speaker 3: She's just supposed to take it as she needs it
• 31:22
  Speaker 3: to maintain her lifestyle.
• 31:24
  Speaker 2: Oh, what if her lifestyle needs to kick up a notch?
• 31:27
  Speaker 3: Kick it up a little bit. Who's going to complain?
• 31:29
  Speaker 3: I suppose the kids, but then you disinherit them.
• 31:31
  Speaker 2: Disinherit them, right? You don't have any heirs until you're dead.
• 31:33
  Speaker 3: Yeah, it's really yours, folks.
• 31:35
  Speaker 2: So you get your cake and eat it too.
• 31:36
  Speaker 3: You really do, Susan.
• 31:37
  Speaker 2: Okay, I enjoy that.
• 31:39
  Speaker 3: I enjoy that. I think that's the way to go.
• 31:41
  Speaker 3: And again, so you're doing probate planning, you're doing estate
• 31:44
  Speaker 3: tax planning, you're taking care of your spouse. Way better
• 31:47
  Speaker 3: than naming your spouse as the beneficiary. But no need
• 31:51
  Speaker 3: to change the owner. Unlike folks, and by the way,
• 31:55
  Speaker 3: life insurance is also a complicated part of your estate plan,
• 31:58
  Speaker 3: so I think it was a great question. But an IRA, folks,
• 32:01
  Speaker 3: is really complicated and it's hard to fit into your
• 32:04
  Speaker 3: estate plan. What do you do with that? Do you
• 32:05
  Speaker 3: name the spouse? Generally, yes. That's a good thing to do.
• 32:10
  Speaker 3: Do you name kids? Do you name the trust a beneficiary?
• 32:13
  Speaker 3: Or do you name your estate the beneficiary on some occasions?
• 32:19
  Speaker 3: Those occasions exist as long as you are– The goal
• 32:22
  Speaker 3: of your planning is to reduce death taxes. This will
• 32:25
  Speaker 3: help even with an IRA. It'll take care of your spouse.
• 32:29
  Speaker 3: It will not cause adverse income tax consequences. And it
• 32:33
  Speaker 3: can ultimately shelter an asset like an IRA from the
• 32:37
  Speaker 3: nursing home. But you need to couple it with a
• 32:40
  Speaker 3: testamentary trust. You need to be 73 years of age
• 32:42
  Speaker 3: before you change that beneficiary. There's some other rules that
• 32:46
  Speaker 3: Call and get the guide and learn how to fit
• 32:47
  Speaker 3: your IRA best into your estate plan. 866-848-5699 or LegalExchangeShow.com. Again,
• 32:55
  Speaker 3: 866-848-5699 or LegalExchangeShow.com. You can always go to Cushing, Dolan,
• 32:59
  Speaker 3: PC for more on our Instagram page.
• 33:09
  Speaker 2: Last question comes from Rita in Newburyport, Mass., and Rita writes,
• 33:13
  Speaker 2: my mom is 84 and needs to go into a
• 33:16
  Speaker 2: nursing home. She has mobility issues, but other than that,
• 33:20
  Speaker 2: she's relatively healthy. She has around $ 400, 000 in the bank,
• 33:24
  Speaker 2: and we are wondering if anything can be done now
• 33:26
  Speaker 2: to try and protect this money. Are we too late?
• 33:31
  Speaker 3: Well, you're never too late, I would say, of course.
• 33:36
  Speaker 3: For almost everybody. There's always at least you should take
• 33:39
  Speaker 3: a look at what you have, what the situation is
• 33:44
  Speaker 3: before you write a check to the nursing home.
• 33:45
  Speaker 2: See what your options are.
• 33:46
  Speaker 1: Yeah.
• 33:47
  Speaker 3: So I'm going to put that out as a carte blanche.
• 33:48
  Speaker 3: Maybe nobody is ever too late. You're alive. You're going
• 33:52
  Speaker 3: in a nursing home. Take a peek. Now, in this case,
• 33:55
  Speaker 3: I'm going to say with $ 400, 000 and 84, would it
• 34:00
  Speaker 3: have been better had you done irrevocable trust planning in advance?
• 34:04
  Speaker 4: Yes.
• 34:05
  Speaker 3: Sure. Are you too late to at least slow the
• 34:08
  Speaker 3: bleeding even though you can't fully protect it? Yes. So
• 34:13
  Speaker 3: better to do that than nothing. So now in this case,
• 34:20
  Speaker 3: I would say for her at 84, I probably with $ 400, 000
• 34:24
  Speaker 3: would forego the idea of a pooled trust. Okay. I
• 34:30
  Speaker 3: just think she's young enough and the number is small enough, $ 400, 000,
• 34:33
  Speaker 3: that if I did an annuity... Okay. over her life expectancy,
• 34:39
  Speaker 3: which probably is going to be nine years, I'm guessing,
• 34:42
  Speaker 3: something like that, maybe eight, whatever, I would take that
• 34:48
  Speaker 3: money and buy a Medicaid annuity instead of moving it
• 34:52
  Speaker 3: into a pooled trust, only because with the pooled trust,
• 34:57
  Speaker 3: there's not only a payback, which by the way, there
• 35:00
  Speaker 3: is on the annuity as well, but there's also a
• 35:05
  Speaker 3: charitable piece that you have to pay. So it's kind
• 35:08
  Speaker 3: of a double reduction before you get what's left for
• 35:11
  Speaker 3: the parents. In this case, I might run the numbers
• 35:13
  Speaker 3: and just see, but a $ 400, 000 annuity will now pay
• 35:18
  Speaker 3: her out X number of dollars a month.
• 35:21
  Speaker 2: So yeah, let's say it's 50 grand a year if
• 35:24
  Speaker 2: it's 400 over eight years.
• 35:26
  Speaker 3: So let's say it's paying out, would that be 2,000?
• 35:29
  Speaker 1: No.
• 35:30
  Speaker 3: About four a month. 4,000 a month?
• 35:33
  Speaker 1: Yeah, thereabouts.
• 35:34
  Speaker 3: So if it's paying out $ 4, 000 a month and her
• 35:38
  Speaker 3: Social Security is two, now she has $ 6, 000 a month
• 35:42
  Speaker 3: to put towards the nursing home. And by the way,
• 35:44
  Speaker 3: converting this to an annuity converts it from an asset
• 35:48
  Speaker 3: to an income stream, making her eligible for Medicaid, just
• 35:51
  Speaker 3: so we understand what's going on. And now she's got $ 6, 000
• 35:55
  Speaker 3: a month to pay the nursing home, but the nursing
• 35:57
  Speaker 3: home costs $ 17, 000 a month. What do we do? Oh,
• 36:01
  Speaker 3: but we're on Medicaid, so the Medicaid rate is only $ 6, 500
• 36:05
  Speaker 3: a month, maybe $ 7, 000 a month. Oh, so the state
• 36:10
  Speaker 3: only has to pay $ 1, 000 a month? Yes.
• 36:12
  Speaker 1: Okay.
• 36:13
  Speaker 3: So the lien against the annuity is only $ 1, 000 a month.
• 36:17
  Speaker 3: And now you're on Medicaid, and if you live in
• 36:19
  Speaker 3: there for two years, you're still going to have a
• 36:22
  Speaker 3: significant amount of money left in that annuity. Right. Even
• 36:26
  Speaker 3: though you might have to pay back the state $ 24, 000
• 36:29
  Speaker 3: if I was in there for two years at $ 1, 000
• 36:30
  Speaker 3: a month.
• 36:30
  Speaker 1: Yep.
• 36:31
  Speaker 3: Who cares? Right. There's still a lot left for the family.
• 36:35
  Speaker 5: Right.
• 36:35
  Speaker 3: It's the slowing of the bleeding that's done last minute
• 36:39
  Speaker 3: on Medicaid, not necessarily the outright protection.
• 36:42
  Speaker 5: Right.
• 36:43
  Speaker 3: So you're still providing for that individual, but trying to
• 36:46
  Speaker 3: save a little something for the family. Folks, IRAs are
• 36:51
  Speaker 3: also complicated. Trying to save these from the nursing home
• 36:54
  Speaker 3: are even more complicated. But if you get the guide,
• 36:56
  Speaker 3: you'll learn how you might be able to do that.
• 36:58
  Speaker 2: 866-848- If you have a question you would like to
• 37:12
  Speaker 2: ask Todd, visit his website, LegalExchangeShow.com, and click on the
• 37:17
  Speaker 2: Ask Todd tab. Maybe I'll be able to read your
• 37:19
  Speaker 2: question on the air, and hopefully his answer will stop
• 37:22
  Speaker 2: you from becoming one of his next real-life stories. You've
• 37:25
  Speaker 2: been listening to Todd Lutzky, a partner with the law
• 37:28
  Speaker 2: firm of Cushing and Dolan. I'm Susan Powers, a financial
• 37:31
  Speaker 2: advisor with the Armstrong Advisory Group. We'll be back with
• 37:35
  Speaker 2: more after this quick break on The Legal Exchange with
• 37:38
  Speaker 2: Todd Lutzky.
• 37:39
  Speaker 1: Leaving your IRA to your children may seem like the
• 37:42
  Speaker 1: obvious choice, but how they receive that money could have
• 37:45
  Speaker 1: important tax consequences. Cushing and Dolan has a new guide.
• 37:48
  Speaker 1: Why name your estate an IRA beneficiary? Under current rules,
• 37:52
  Speaker 1: most adult children who inherit an IRA must withdraw the
• 37:55
  Speaker 1: money within 10 years. That could mean taking retirement distributions
• 37:58
  Speaker 1: while they're still working and earning income, potentially creating a
• 38:01
  Speaker 1: larger tax bill. That's one reason why your IRA beneficiary
• 38:05
  Speaker 1: should be part of your overall estate plan. Who receives
• 38:08
  Speaker 1: the account, how they receive it, and the tax consequences
• 38:11
  Speaker 1: that may follow all deserve careful consideration. Get Cushing and
• 38:14
  Speaker 1: Dolan's new guide called Why Name Your Estate an IRA
• 38:17
  Speaker 1: Beneficiary by calling 866-848-5699.
• 38:18
  Speaker 3: That's 866-848-5699.
• 38:19
  Speaker 1: Or you can request the guide online at LegalExchangeShow.com. The
• 38:28
  Speaker 1: proceeding was paid for and the views expressed are solely
• 38:30
  Speaker 1: those of Cushing and Dolan. Cushing and Dolan and or
• 38:32
  Speaker 1: Armstrong Advisory may contact you offering legal or investment services.
• 38:35
  Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
• 38:38
  Speaker 1: other and are not affiliated.
• 38:40
  Speaker 5: Stuck in traffic again? Same road, same commute, same thought.
• 38:46
  Speaker 5: How many more years am I doing this?
• 38:49
  Speaker 3: One, two, five?
• 38:51
  Speaker 5: At the Armstrong Advisory Group, our financial advisors help people
• 38:54
  Speaker 5: answer one of the biggest retirement questions. could I be
• 38:58
  Speaker 5: retired right now? Many factors may affect your decision, including
• 39:02
  Speaker 5: what your income might look like and whether your retirement
• 39:05
  Speaker 5: plan is built for the life you actually want. We
• 39:08
  Speaker 5: can provide you with some strategies to help you see
• 39:11
  Speaker 5: where you stand. So before you assume you have to
• 39:14
  Speaker 5: keep working, Get a clearer picture. Visit our website at armstrongadvisory.com
• 39:19
  Speaker 5: and schedule a no-obligation meeting. The Armstrong Advisory Group. We
• 39:23
  Speaker 5: answer only to you.
• 39:25
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 39:27
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 39:30
  Speaker 1: armstrong guide is specific financial legal or tax advice consult
• 39:33
  Speaker 1: your own financial tax and estate planning advisors before making
• 39:36
  Speaker 1: any investment decisions armstrong may contact you to offer investment
• 39:39
  Speaker 1: advisory services Who you name as the beneficiary of your
• 39:41
  Speaker 1: IRA can affect more than who gets the money. Cushing
• 39:44
  Speaker 1: and Dolan's guide, Why Name Your Estate an IRA Beneficiary,
• 39:47
  Speaker 1: explains how that decision can affect taxes, asset protection, and
• 39:51
  Speaker 1: what's ultimately left for your family. Get the guide today
• 39:53
  Speaker 1: by calling 866-848-5699 or request it online at LegalExchangeShow.com. The
• 39:59
  Speaker 1: proceedings paid for and the views expressed are solely those
• 40:01
  Speaker 1: of Cushing and Dolan. Cushing and Dolan and or Armstrong
• 40:04
  Speaker 1: Advisory may contact you offering legal or investment services. Cushing
• 40:07
  Speaker 1: and Dolan and Armstrong Advisory do not endorse each other
• 40:09
  Speaker 1: and are not affiliated.
• 40:12
  Speaker 3: Our nation's veterans answered the call to serve.
• 40:15
  Speaker 4: Today, the Disabled American Veterans Department of Massachusetts is there
• 40:19
  Speaker 4: to support our veterans through benefits assistance, transportation services, advocacy,
• 40:25
  Speaker 4: and community outreach. Their mission is to ensure no veteran
• 40:29
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• 40:31
  Speaker 4: difference by volunteering for the DAV Massachusetts or making a donation.
• 40:37
  Speaker 3: Learn more at davma.org.
• 40:41
  Speaker 1: You're tuned to The Legal Exchange with Todd Lutzke. If
• 40:44
  Speaker 1: you or a loved one needs a nursing home stay,
• 40:46
  Speaker 1: call Todd right now at 866-848-5699 and let him make
• 40:51
  Speaker 1: sure your assets are protected. That's 866-848-5699 or visit him
• 40:56
  Speaker 1: online at LegalExchangeShow.com.
• 41:00
  Speaker 2: Welcome back into The Legal Exchange with Todd Lutzke. I'm
• 41:03
  Speaker 2: Susan Powers, a financial advisor with the Armstrong Advisory Group.
• 41:07
  Speaker 2: And I'm joined by Todd Lutzky, a partner with the
• 41:09
  Speaker 2: law firm of Cushing & Dolan with a master's in taxation. Todd,
• 41:14
  Speaker 2: we're talking about the ability to use these testamentary trusts
• 41:20
  Speaker 2: when you're wanting to have the option of protecting IRA assets,
• 41:25
  Speaker 2: for example.
• 41:26
  Speaker 3: Mm-hmm.
• 41:28
  Speaker 2: Let's go through an example. We have, say, a married
• 41:30
  Speaker 2: couple and the husband passes away. You've done this update
• 41:35
  Speaker 2: to their documents so that we have the language in
• 41:38
  Speaker 2: there to create the testamentary trust.
• 41:40
  Speaker 3: Yeah.
• 41:41
  Speaker 2: And that process has happened. Now we have basically an
• 41:46
  Speaker 2: IRA that's owned by the testamentary trust.
• 41:49
  Speaker 3: Yeah. Yeah.
• 41:51
  Speaker 2: So how... would we calculate the required distribution? So I
• 41:56
  Speaker 2: have a woman, a surviving spouse. Is it based on
• 42:00
  Speaker 2: her life? Is it based on his life? How do
• 42:03
  Speaker 2: we actually go about calculating the RMDs?
• 42:05
  Speaker 3: So let's help everybody understand what that is, first of all.
• 42:10
  Speaker 3: I mean, folks, once you reach something called the required
• 42:14
  Speaker 3: beginning date or the RBD, then you get RMDs, which
• 42:20
  Speaker 3: is required minimum distributions that have to come out.
• 42:23
  Speaker 2: Of your IRAs.
• 42:25
  Speaker 3: And that's when we change the DB, which is the
• 42:27
  Speaker 3: designated beneficiary on the IRA.
• 42:30
  Speaker 2: I'm going to need a chart. I think the people
• 42:33
  Speaker 2: need a chart.
• 42:35
  Speaker 3: You've got to be at that age, first of all,
• 42:37
  Speaker 3: to make the designated beneficiary the estate of.
• 42:41
  Speaker 2: And so now, as you said- And you need the
• 42:43
  Speaker 2: specific language in your legal documents that accounts for this,
• 42:46
  Speaker 2: in your will.
• 42:47
  Speaker 3: You need the trust built into the will, which is
• 42:49
  Speaker 3: that testamentary trust, or what I like to call a
• 42:51
  Speaker 3: will trust, trust built into your will. You need that.
• 42:54
  Speaker 2: So do not do this if you have not done
• 42:57
  Speaker 2: that first.
• 42:57
  Speaker 3: That's right. This is something that definitely, this cannot be
• 43:00
  Speaker 3: done on your own, folks. It's impossible. You need to
• 43:02
  Speaker 3: make sure you have all these pieces of your estate
• 43:04
  Speaker 3: plan together.
• 43:05
  Speaker 2: So we've got our ducks in a row. Testamentary trust
• 43:08
  Speaker 2: language is in the wills. Husband dies. The IRA.
• 43:12
  Speaker 3: Husband's IRA is what we're dealing with.
• 43:14
  Speaker 2: Yeah, husband's IRA. He was RMD age. Let's say he's,
• 43:17
  Speaker 2: you know, 76 or something.
• 43:19
  Speaker 1: Okay.
• 43:19
  Speaker 3: How old is she?
• 43:20
  Speaker 2: She is 75 maybe.
• 43:23
  Speaker 3: Oh, fine.
• 43:24
  Speaker 2: So similar ages.
• 43:25
  Speaker 1: Normal.
• 43:26
  Speaker 2: So how are we calculating?
• 43:29
  Speaker 3: So, What happens now is the RMDs were already coming
• 43:34
  Speaker 3: out for husband while he was alive because he had
• 43:36
  Speaker 3: reached the RMDs age of 73. So he was already collecting.
• 43:41
  Speaker 4: Yes.
• 43:42
  Speaker 3: That distribution has to continue. But as Susan's asking, at
• 43:46
  Speaker 3: what rate does it continue? Well, had you named the
• 43:52
  Speaker 3: 75-year-old spouse the beneficiary? Mm-hmm. the distributions would come out
• 43:57
  Speaker 3: over a 75-year-old's life expectancy.
• 44:01
  Speaker 2: Which is what most people do.
• 44:02
  Speaker 3: That's right.
• 44:03
  Speaker 2: They haven't gone through this process of making the testimony
• 44:05
  Speaker 2: of trust. They have their spouse listed as the primary beneficiary.
• 44:08
  Speaker 2: When the husband dies, his IRA would have gotten poured
• 44:12
  Speaker 2: into her IRA. It becomes like it's hers.
• 44:14
  Speaker 3: It becomes like it's hers. She inherits it, and then
• 44:17
  Speaker 3: she takes it out over her life expectancy. She goes
• 44:20
  Speaker 3: to this little IRS chart. That's got her age and
• 44:23
  Speaker 3: a percentage and minus one, minus one. You'll see these
• 44:26
  Speaker 3: percentages go down as you get older. Yeah. Well, if
• 44:30
  Speaker 3: you're over 73 and you've named the estate, the beneficiary,
• 44:34
  Speaker 3: the fear for most practitioners is, oh my God, it's
• 44:37
  Speaker 3: going to come out over five years.
• 44:39
  Speaker 2: Right.
• 44:39
  Speaker 3: Which would be a huge income tax problem. If there's
• 44:42
  Speaker 3: a lot of money in that IRA, it's coming. I mean,
• 44:44
  Speaker 3: imagine a million dollars coming out over five years. That's
• 44:47
  Speaker 3: a big income tax hit.
• 44:49
  Speaker 1: Right. Right. Wrong.
• 44:50
  Speaker 3: Wrong. because if you're 73 and you've named the estate
• 44:54
  Speaker 3: the beneficiary, now it comes out over the ghost life
• 44:58
  Speaker 3: expectancy of the decedent.
• 45:00
  Speaker 2: So as if he were still living, what the age
• 45:03
  Speaker 2: he would have been.
• 45:03
  Speaker 3: So he was 76, you said, when he died.
• 45:06
  Speaker 1: Yep.
• 45:06
  Speaker 3: If he's 76 when he dies, he will then take
• 45:09
  Speaker 3: the wife, the distributions will come out to this testamentary
• 45:13
  Speaker 3: trust over a 76-year-old's life expectancy, goes to the same chart,
• 45:19
  Speaker 3: pulls down the numbers... And follows it.
• 45:21
  Speaker 2: And then the following year, a 77-year-old.
• 45:24
  Speaker 5: 77, 78.
• 45:24
  Speaker 2: So however old he would have been had he been living.
• 45:27
  Speaker 3: Same result except as the spouse, except there's a one-year difference. Okay.
• 45:31
  Speaker 3: Who cares?
• 45:32
  Speaker 1: Right.
• 45:33
  Speaker 3: In the grand scheme of things, that's not going to matter.
• 45:36
  Speaker 3: from an income tax perspective. And that's what we want.
• 45:39
  Speaker 3: We want to make sure that one of the things
• 45:41
  Speaker 3: we do when we do this planning is not cause
• 45:45
  Speaker 3: an adverse income tax. But folks, this guide also tells
• 45:49
  Speaker 3: us how to protect it from the nursing home, which
• 45:52
  Speaker 3: by the way, that's this testamentary trust component that we
• 45:56
  Speaker 3: just talked about. And in the testamentary trust, it also
• 45:59
  Speaker 3: has the marital share and the remainder share, which help
• 46:02
  Speaker 3: us shelter it from estate taxes. Now, when the surviving
• 46:06
  Speaker 3: spouse dies, it's not included in her estate. We saw
• 46:10
  Speaker 3: how it's coming out. And most importantly, there's no five-year
• 46:13
  Speaker 3: waiting period to collect this money. If she got sick
• 46:17
  Speaker 3: and went to the nursing home, it would be all protected. Folks,
• 46:21
  Speaker 3: learn how to deal with your IRA as part of
• 46:23
  Speaker 3: your estate plan. Get this guide, 866-848-5699 or LegalExchangeShow.com. Again, 866-848-5699.
• 46:35
  Speaker 3: 5-6-9-9 or LegalExchangeShow.com. You can download it right there.
• 46:41
  Speaker 2: Todd, does it matter if there were a big age
• 46:44
  Speaker 2: difference between the spouses? Like if she was substantially younger
• 46:47
  Speaker 2: than him?
• 46:48
  Speaker 3: So, you know, I've got a client right now with
• 46:51
  Speaker 3: a 10-year age difference.
• 46:52
  Speaker 2: Okay.
• 46:53
  Speaker 3: And I'm torn.
• 46:54
  Speaker 4: Yeah.
• 46:54
  Speaker 3: It's literally 65 and 75. And I'm like, hmm. They
• 47:01
  Speaker 3: want to do nursing home planning, which we're doing.
• 47:03
  Speaker 4: Sure.
• 47:03
  Speaker 3: I mean, obviously you want to plan for the older spouse,
• 47:05
  Speaker 3: but hey, even 65 is a great age to do
• 47:08
  Speaker 3: your Medicaid planning. So I'm like, okay, you know, should
• 47:13
  Speaker 3: we do this? Yeah, you know, you just got to
• 47:16
  Speaker 3: run the numbers and say, you know, if I've got
• 47:19
  Speaker 3: a million dollar IRA that will be automatically protected from
• 47:23
  Speaker 3: the nursing home when the spouse, first spouse dies, if
• 47:28
  Speaker 3: the healthy spouse were to get sick, without a five-year
• 47:31
  Speaker 3: waiting period, and I can save $ 17, 000 a month because
• 47:36
  Speaker 3: of this, maybe having it come out a little quicker
• 47:41
  Speaker 3: and paying that income tax isn't a problem.
• 47:45
  Speaker 2: Which you can't do if it all just gets dumped
• 47:48
  Speaker 2: into the spouse's IRA. It's always going to be.
• 47:50
  Speaker 3: At risk, right? That's the downside, right? The downside would be, okay, well,
• 47:55
  Speaker 3: I give it all to my spouse.
• 47:58
  Speaker 1: Well.
• 47:59
  Speaker 3: Now she owns the entire thing. She can take it
• 48:01
  Speaker 3: out over her 65-year-old life expectancy in my example. But
• 48:06
  Speaker 3: if she gets sick, it's all at risk for the
• 48:08
  Speaker 3: nursing home.
• 48:08
  Speaker 1: Right.
• 48:09
  Speaker 3: Just like it was when he was alive. Because I
• 48:11
  Speaker 3: can't move IRAs to these trusts in advance without causing
• 48:17
  Speaker 3: this huge income tax problem. It's the income tax problem
• 48:20
  Speaker 3: that's driving this entire planning technique, which I said is
• 48:25
  Speaker 3: relatively new and not a lot of people know.
• 48:26
  Speaker 1: Right.
• 48:27
  Speaker 3: In the estate planning world that's been around a couple
• 48:29
  Speaker 3: hundred years, 2022 is still relatively new. For sure. In planning.
• 48:35
  Speaker 2: So that's how you do it. Yeah. I think that
• 48:38
  Speaker 2: as we age, Todd, we look at, like it's a
• 48:41
  Speaker 2: goal for you and I to save as much as
• 48:44
  Speaker 2: we possibly can in taxes. We hate taxes as much
• 48:47
  Speaker 2: as the next guy, right? Maybe more because we do
• 48:49
  Speaker 2: it all the time. But as we age... We kind
• 48:52
  Speaker 2: of start weighing what's more important. Is the tax situation
• 48:56
  Speaker 2: more important or does protection become important as we age
• 49:01
  Speaker 2: and we see what's happening to our friends and family
• 49:03
  Speaker 2: members and people be in the nursing home and want
• 49:05
  Speaker 2: to preserve assets not only for our spouse but for
• 49:08
  Speaker 2: our kids as well. So I think that that really
• 49:11
  Speaker 2: weighs into the decision factor.
• 49:14
  Speaker 3: I think it does. I think you really got to
• 49:16
  Speaker 3: run those numbers and think about what becomes more important
• 49:21
  Speaker 3: at that time. But this is a great way to
• 49:24
  Speaker 3: do it. So in that age, I think we're probably
• 49:25
  Speaker 3: going to end up doing the testamentary trust and just
• 49:28
  Speaker 3: have it there so they can always pull that trigger
• 49:31
  Speaker 3: when the time comes. Because again, when the time comes,
• 49:33
  Speaker 3: he might be 85 and now she's 75. Well, now
• 49:38
  Speaker 3: it's getting, you know, the time gets, it's still 10 years,
• 49:41
  Speaker 3: but it's different.
• 49:42
  Speaker 2: So I like to keep my options open personally. So
• 49:44
  Speaker 2: when I look at, you know, having to start taking
• 49:47
  Speaker 2: out my required distributions at some time, I can take
• 49:51
  Speaker 2: out more than the required distribution if I want to
• 49:54
  Speaker 2: each year. There's a minimum, but I can take out more.
• 49:57
  Speaker 2: Do you have that flexibility when you're doing a testamentary
• 50:00
  Speaker 2: trust as well and that trust owns your IRA? Can
• 50:03
  Speaker 2: I take out more?
• 50:04
  Speaker 3: Yes.
• 50:05
  Speaker 2: As the surviving spouse.
• 50:06
  Speaker 3: Yeah, I think it wouldn't matter. I mean, the trustee,
• 50:09
  Speaker 3: you can always say, you know, we want to take,
• 50:11
  Speaker 3: we want a distribution to come out more. The trustee,
• 50:13
  Speaker 3: the owner of, whoever's controlling that investment account, right? Whoever's
• 50:18
  Speaker 3: in charge of it then can just request more.
• 50:21
  Speaker 2: Sky's the limit.
• 50:22
  Speaker 3: Folks, IRAs, naming your estate the beneficiary is the name
• 50:26
  Speaker 3: of the guide. Learn how to make your IRA fit
• 50:30
  Speaker 3: into your estate plan. It's a complicated asset. and maybe
• 50:34
  Speaker 3: even also protect it from the nursing home at the
• 50:36
  Speaker 3: same time, 866-848-5699 or LegalExchangeShow.com and download it there.
• 50:44
  Speaker 2: Todd Lutzke from the law firm of Cushing and Dolan,
• 50:47
  Speaker 2: thank you so much.
• 50:48
  Speaker 3: Thank you, Susan. Always a pleasure.
• 50:50
  Speaker 2: I'm Susan Powers, a financial advisor with the Armstrong Advisory Group.
• 50:53
  Speaker 2: We thank you for joining us today, and we'll be
• 50:55
  Speaker 2: back again next week on The Legal Exchange with Todd Lutzke.
• 51:00
  Speaker 1: Leaving your IRA to your children may seem like the
• 51:02
  Speaker 1: obvious choice, but how they receive that money could have
• 51:05
  Speaker 1: important tax consequences. Cushing and Dolan has a new guide.
• 51:09
  Speaker 1: Why name your estate an IRA beneficiary? Under current rules,
• 51:12
  Speaker 1: most adult children who inherit an IRA must withdraw the
• 51:15
  Speaker 1: money within 10 years. That could mean taking retirement distributions
• 51:19
  Speaker 1: while they're still working and earning income, potentially creating a
• 51:22
  Speaker 1: larger tax bill. That's one reason why your IRA beneficiary
• 51:26
  Speaker 1: should be part of your overall estate plan. Who receives
• 51:28
  Speaker 1: the account, how they receive it, and the tax consequences
• 51:31
  Speaker 1: that may follow all deserve careful consideration. Get Cushing and
• 51:35
  Speaker 1: Dolan's new guide called Why Name Your Estate an IRA
• 51:38
  Speaker 1: Beneficiary by calling 866-848-5699.
• 51:39
  Speaker 3: That's 866-848-5699.
• 51:39
  Speaker 1: Or you can request the guide online at LegalExchangeShow.com. The
• 51:49
  Speaker 1: proceeding was paid for and the views expressed are solely
• 51:51
  Speaker 1: those of Cushing and Dolan. Cushing and Dolan and or
• 51:53
  Speaker 1: Armstrong Advisory may contact you offering legal or investment services.
• 51:56
  Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
• 51:58
  Speaker 1: other and are not affiliated.
• 52:00
  Speaker 4: Seeing some high volume out there on those roads today, folks.
• 52:04
  Speaker 2: Sound familiar?
• 52:05
  Speaker 1: The Braintree split is backed up.
• 52:07
  Speaker 2: If your commute feels endless, it might be time to
• 52:09
  Speaker 2: ask a bigger question. Are you working because you want
• 52:12
  Speaker 2: to or because you think you have to? At the
• 52:14
  Speaker 2: Armstrong Advisory Group, our financial advisors help individuals and families
• 52:18
  Speaker 2: build retirement income plans designed around their goals, savings, Social Security, investments,
• 52:24
  Speaker 2: and overall financial picture. Retirement shouldn't be a guessing game.
• 52:28
  Speaker 2: If you're concerned about what path you're on or have
• 52:30
  Speaker 2: questions about your financial plan, we may be able to help.
• 52:33
  Speaker 2: Visit armstrongadvisory.com and schedule a no-obligation meeting. The Armstrong Advisory Group.
• 52:39
  Speaker 2: We answer only to you. Schedule your meeting today at armstrongadvisory.com.
• 52:44
  Speaker 2: That's armstrongadvisory.com.
• 52:46
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 52:49
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 52:51
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 52:54
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 52:56
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 52:59
  Speaker 1: advisory services. Who you name as the beneficiary of your
• 53:01
  Speaker 1: IRA can affect more than who gets the money. Christian
• 53:04
  Speaker 1: Dolan's guide, Why Name Your Estate an IRA Beneficiary, explains
• 53:07
  Speaker 1: how that decision can affect taxes, asset protection, and what's
• 53:11
  Speaker 1: ultimately left for your family. Get the guide today by
• 53:13
  Speaker 1: calling 866-848-5699 or request it online at LegalExchangeShow.com. The proceedings
• 53:20
  Speaker 1: paid for and the views expressed are solely those of
• 53:21
  Speaker 1: Cushing and Dolan. Cushing and Dolan and or Armstrong Advisory
• 53:24
  Speaker 1: may contact you offering legal or investment services. Cushing and
• 53:27
  Speaker 1: Dolan and Armstrong Advisory do not endorse each other and
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  Speaker 1: are not affiliated.
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  Speaker 4: Our nation's veterans answered the call to serve. Today, the
• 53:36
  Speaker 4: Disabled American Veterans Department of Massachusetts is there to support
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  Speaker 4: our veterans through benefits assistance, transportation services, advocacy, and community outreach.
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  Speaker 4: Their mission is to ensure no veteran has to face
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  Speaker 4: life's challenges alone. You can make a difference by volunteering
• 53:53
  Speaker 4: for the DAV Massachusetts or making a donation. Learn more
• 53:57
  Speaker 4: at davma.org.