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Ask Todd: Starting Your Estate Plan and Understanding Trust Income · The Financial Exchange Show

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  Speaker 1: This is Ask Todd on the Financial Exchange Radio network.
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  Speaker 1: If you have an existing estate plan or in the
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  Speaker 1: market for one, Todd Letsky is here to answer your
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  Speaker 1: questions and help you plan for a later life. Ask
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  Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
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  Speaker 1: New England for more than thirty five years, helping families
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  Speaker 1: with a state and tax planning, medicaid planning, and probate law.
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  Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
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  Speaker 2: And we are now joined by Todd Lutsky for Ask Todd.
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  Speaker 2: Get your estate planning questions ready, because this is your
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  Speaker 2: chance to ask them to Todd live on air right now.
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  Speaker 2: Phone lines are open at eight eight eight two zero
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  Speaker 2: five two two six three, So get calling early and
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  Speaker 2: often because we can usually get through two or three questions.
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  Speaker 2: Once we start getting into four or five then and
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  Speaker 2: so boy, I don't know if we can handle that.
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  Speaker 2: So again, the number is eight eight eight to zero
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  Speaker 2: two two six three. You got a state planning questions,
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  Speaker 2: Todd Lutsky is going to try to answer him right now.
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  Speaker 3: Again that phone number.
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  Speaker 2: Is eight eight eight two zero five two two six three.
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  Speaker 3: Mister Lutsky, How are you doing?
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  Speaker 4: I am never better in you?
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  Speaker 3: Uh good? I was at the circus the other day.
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  Speaker 4: Yeah you like that?
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  Speaker 2: Not a great show, The lion Ate the Tightrope Walker.
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  Speaker 2: Oh yeah, it was a well balanced meal. I bet
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  Speaker 2: so not good?
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  Speaker 3: Not good, Todd want to talk to you.
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  Speaker 2: Let's say that someone has not done any estate planning,
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  Speaker 2: They've never met with an attorney.
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  Speaker 3: They're like, no, I didn't need it.
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  Speaker 2: I don't need it, But well I guess I do
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  Speaker 2: need it, because everyone at some point needs an attorney. Yeah,
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  Speaker 2: what should someone expect as they go through the estate
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  Speaker 2: planning process? Like what are the things that the boxes
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  Speaker 2: that you want to see that estate planning attorney check
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  Speaker 2: as they're going through?
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  Speaker 4: Yeah, this is really important. The whole idea I think
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  Speaker 4: behind this question, Chuck, if I may is is you know,
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  Speaker 4: how do I get started? How do I kick off
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  Speaker 4: my estate planning?
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  Speaker 5: Right?
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  Speaker 4: What do I think about? What are the checklists? If
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  Speaker 4: you will?
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  Speaker 5: So?
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  Speaker 4: Couple of things. You first, you know, talk about how
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  Speaker 4: old am I? Because age could impact the type of
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  Speaker 4: plan that we do. Right, So if we're I just
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  Speaker 4: throw out like sixty and over, I might say, well,
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  Speaker 4: you know, I want the basics. Of course, you know, taxes, probate,
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  Speaker 4: bloodline planning, those are always important because you know, everybody dies,
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  Speaker 4: but not everybody goes to a nursing home. But if
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  Speaker 4: I'm sixty and over, I might add that to my
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  Speaker 4: checklist before I get started. So okay, I got to
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  Speaker 4: think about that. Next versus let's say I'm I'm you know,
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  Speaker 4: thirty five with young kids, will probably nursing home planning
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  Speaker 4: is not on the to do list. Now, Next, valuation.
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  Speaker 4: How large is my estate? Right? And when I say valuation,
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  Speaker 4: it's not just valuation, but maybe at the same time
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  Speaker 4: you're thinking of valuation, you think about what's included in
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  Speaker 4: my estate? What do I have to value? So things
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  Speaker 4: like real estate, rental properties, vacation homes, Yes, life insurance
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  Speaker 4: you don't think about that, Yes, iras and roth iras
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  Speaker 4: and four oh one k's and investment accounts, so all
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  Speaker 4: of these things you need to really think about as
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  Speaker 4: what I need to value, then value it. And again,
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  Speaker 4: if I'm you know, way up there, I have that
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  Speaker 4: fifteen million is the federal estate tax exemption or thirty million? Well,
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  Speaker 4: now I know I'm in revocable trust world, and maybe
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  Speaker 4: even gifting trust world, thinking about things like that. If
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  Speaker 4: I'm somewhere between the three and five million dollar range,
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  Speaker 4: you know, where there's a lot more of those people. Well,
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  Speaker 4: now I'm thinking, you know, based on my age, what
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  Speaker 4: kind of planning revocable or irrevocable, but more of a
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  Speaker 4: basic estate planning. You know, do I have minor children?
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  Speaker 4: Do I have children? Do I have a family dynamic problem?
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  Speaker 4: Am I a second marriage? So those are all things
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  Speaker 4: you need to think think about, you know, in terms
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  Speaker 4: of the planning, especially second marriage. Folks, if you're a
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  Speaker 4: second marriage or in a relationship and you're not married,
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  Speaker 4: you know, think about how you want to leave things
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  Speaker 4: and how you want to take care of each other.
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  Speaker 4: So those are all basically items to put on a
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  Speaker 4: checklist when you're getting started.
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  Speaker 2: Talk with Todd Lutsky from the law firm of Cushing
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  Speaker 2: and Dolan Again. We've got space on the phone lines
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  Speaker 2: at eight eight eight to zero five two two six three.
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  Speaker 2: That is the number to called ask Todd your estate
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  Speaker 2: planning questions live on air right now eight eight eight
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  Speaker 2: to zero five two two six three.
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  Speaker 3: We're gonna take a break.
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  Speaker 2: Here, but when we come back, we're gonna get right
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  Speaker 2: to your questions with Todd again. Eight eight eight two
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  Speaker 2: zero five two two six three is the number. Quick
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  Speaker 2: break in your calls when we return Ask.
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  Speaker 1: Todd with Todd Letsky every Wednesday at ten thirty only
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  Speaker 1: here on the Financial Exchange Radio Network. You're listening to
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  Speaker 1: Ask Todd with Todd Lutsky on the Financial Exchange Radio Network.
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  Speaker 3: Talk with Todd Lutsky.
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  Speaker 2: Here still room on the phone lines for your estate
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  Speaker 2: planning questions at eight eight eight two zero five two
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  Speaker 2: two six three. That number again is eight eight eight
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  Speaker 2: to zero five two two sixty three.
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  Speaker 3: Todd. Let's go with first caller here, Steve and East Bridgewater. Steve,
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  Speaker 3: what's your question for Todd Lutsky?
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  Speaker 5: Hi, guys, thanks for taking my question. I was wondering
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  Speaker 5: about the difference between a Social Security number and a
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  Speaker 5: EI in number for a trust. Is there any advantages
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  Speaker 5: to using an ei in number over a social.
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  Speaker 4: So it's not about advantages, it's about need, Okay. So
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  Speaker 4: unfortunately it's a great question because people get confused. Even
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  Speaker 4: accountants can get confused by this. So you're still it
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  Speaker 4: could be a tax difference. But let's start with social Security.
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  Speaker 4: If you're setting up a revocable trust, Okay, revocable trust
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  Speaker 4: that by the very nature of the fact that it's
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  Speaker 4: revocable means that it's a grant to or trust for
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  Speaker 4: income tax purposes, and it means that you do not
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  Speaker 4: need a tax ID number. Okay. You simply would take
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  Speaker 4: your brokerage account, your bank account, and let's say, retitle
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  Speaker 4: it like to what call it the you know, the
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  Speaker 4: Steve Family Trust or whatever you're calling it. That would
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  Speaker 4: be the name on the account, and you would use
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  Speaker 4: your Social Security number, and you would file no tax
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  Speaker 4: return for that trust. Everything is picked up on your
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  Speaker 4: ten forty. If, on the other hand, you're doing like
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  Speaker 4: a medicaid irrevocable trust, or even a gifting type trust,
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  Speaker 4: an irrevocable gifting trust of sorts or espousal lifetime access trust,
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  Speaker 4: which is irrevocable, then generally we try to draft those
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  Speaker 4: or design those as grant or trusts. But because they're
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  Speaker 4: irrevocable and oftentimes the donor and the trustee are different people,
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  Speaker 4: then you need to get a tax ID number and
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  Speaker 4: when you open up the account again might be called
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  Speaker 4: the Steve Family irrevocable trust. Well, you can still retitle
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  Speaker 4: your bank account or your brokerage account into that that trust.
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  Speaker 4: But then you would use an EI in number to
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  Speaker 4: set up that account. Why because now that trust will
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  Speaker 4: have to file its own income tax return under that
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  Speaker 4: EI in number, and that's a form ten forty one,
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  Speaker 4: as you said, is one better than another. Well, in
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  Speaker 4: this case, as long as the irrevocable trust, even though
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  Speaker 4: using the EI in number is a grand or trust,
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  Speaker 4: it means that you, the donor Steve is, are treated
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  Speaker 4: as the owner for income tax purposes, and therefore you're
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  Speaker 4: still going to pick up all of that income, interest, dividends,
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  Speaker 4: rent if you put a rental property in there, you
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  Speaker 4: will pick up that income on your personal ten forty.
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  Speaker 4: The only difference is the trust needs to file at
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  Speaker 4: ten forty one to pick up the numbers, but then
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  Speaker 4: it kicks out a letter to you with all those
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  Speaker 4: numbers on it saying it gets picked up on your
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  Speaker 4: return and the tax basic the tax at the trust
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  Speaker 4: level is zero, so it doesn't necessarily change the amount
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  Speaker 4: of taxes you're paying. It just changes the way you
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  Speaker 4: file it. And you also file it because we want
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  Speaker 4: to respect the entity when it's irrevocable for nursing, home,
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  Speaker 4: purpose and the like. So seemingly a simple question but
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  Speaker 4: definitely long winded answer, but you needed to understand the
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  Speaker 4: difference between the two. Hope that helped folks. That's part
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  Speaker 4: of it. When you're doing your planning. That's what the
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  Speaker 4: guide is about. Back to the basics. One of the
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  Speaker 4: things in the guide is it helps you kick off
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  Speaker 4: your idea of getting an estate plan done. But it
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  Speaker 4: talks about these things. It talks about what to look for,
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  Speaker 4: like we talked earlier, age value, types of assets, family dynamics,
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  Speaker 4: and then it talks about basic documents, will, healthcare, power
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  Speaker 4: of attorney, little things that you need to know about.
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  Speaker 4: Then it talks about how an irrevocable Medicaid trust works,
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  Speaker 4: getting the ID number, setting up the accounts, what happens
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  Speaker 4: when you die, how it works when you're alive. It's
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  Speaker 4: basically an estate planning engagement letter for a client. All
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  Speaker 4: the assets are listed on here. You could just put
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  Speaker 4: your assets in and see if this plan works for you.
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  Speaker 4: If it doesn't, at least it helps you get started
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  Speaker 4: in your estate planning world. Back to the basics eight
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  Speaker 4: six six, eight four eight five six nine nine or
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  Speaker 4: legal exchange show dot com again eight six six eight
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  Speaker 4: four eight five six nine nine or Legal Exchange show
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  Speaker 4: dot com and for more information visit our Instagram page
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  Speaker 4: Cushing Dolan PC.
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  Speaker 2: Todd got another one for you here. Let's go to
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  Speaker 2: Shannon in Belchertown. Shannon, you're on with Todd Lotski.
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  Speaker 4: Hi, Hello, how can we help?
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  Speaker 5: I'm just curious as how much all this would cost to.
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  Speaker 4: Start setting all this up? So again, well, it's kind
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  Speaker 4: of hard to say because I don't know what we're
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  Speaker 4: doing right I I work anyway on a flat fee,
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  Speaker 4: and I hope I can tell you that when you
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  Speaker 4: go to other attorneys, try to make sure that at
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  Speaker 4: least you're going to get a flat fee quoted for you.
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  Speaker 4: And at the end of our initial meeting for everybody listening,
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  Speaker 4: once I know what we're doing, then I can give
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  Speaker 4: you that flat fee number. Like, you know, are we
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  Speaker 4: doing a will, a healthcare proxy, a power of attorney?
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  Speaker 4: Are we doing one revocable trust or two? Are we
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  Speaker 4: doing an irrevocable medicaid trust?
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  Speaker 5: You know?
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  Speaker 4: Are we doing gifting trust? Unfortunately, all of those things
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  Speaker 4: result in a different cost. So I think the best
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  Speaker 4: thing to do is go in get that free consultation
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  Speaker 4: and then get a flat fee, and then you'll have
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  Speaker 4: a good idea of not only what you need, but
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  Speaker 4: how much it costs. So I hope that helps a little,
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  Speaker 4: just a little hard to answer an open ended question
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  Speaker 4: like that.
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  Speaker 2: Todd, I have one more for you here. Let's go
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  Speaker 2: to Rick in Foulmouth. Rick, what is your question for
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  Speaker 2: Todd Lutsky.
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  Speaker 6: Hey, good morning, Todd, good morning. Two years ago you
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  Speaker 6: set up an irrevocable trust for my wife and I,
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  Speaker 6: which is great, Okay, thank you. I have a high
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  Speaker 6: yield savings account that is in the trust, and I
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  Speaker 6: withdraw the interest that it generates and use that as
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  Speaker 6: an income.
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  Speaker 4: So great questions. So these are these irrevocable trusts that
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  Speaker 4: we've talked about a lot on the air. Folks, everyone
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  Speaker 4: that needs to understand how this works in case they
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  Speaker 4: have it. So in this case, the answer is emphatically yes.
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  Speaker 4: So these are actually called irrevocable Medicaid income only trusts.
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  Speaker 4: And so what that means is any interest dividends or
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  Speaker 4: let's just say you happen to have a rental property,
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  Speaker 4: put it in their rent income. Normally, if you read it,
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  Speaker 4: it says income shall be paid to the donor or
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  Speaker 4: the donor spouse that's you, Rick and your spouse if
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  Speaker 4: you're married. So so yes, the income would come out
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  Speaker 4: to you. And I know you don't even have to
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  Speaker 4: deal with the trustees. So if this is something that
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  Speaker 4: you're saying going forward, you know, I've got a high
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  Speaker 4: yield savings or I've got an investment account in there,
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  Speaker 4: and you know what, it's time that I want to
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  Speaker 4: start living on that income to supplement my social security
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  Speaker 4: or my pension or whatever else is coming in. Can
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  Speaker 4: I do that?
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  Speaker 3: Yes?
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  Speaker 4: And the way you can do it is talk with
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  Speaker 4: your bank or talk with your financial brokerage house and say,
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  Speaker 4: please set up the account as an automatic transfer. So
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  Speaker 4: I want every month the income to be automatically distributed
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  Speaker 4: from the trust account to my personal bank account, which
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  Speaker 4: you should have bank accounts outside the trust, generally ones
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  Speaker 4: that receive your social security, your pension, things like that.
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  Speaker 4: Just have it automatically transferred, you know. That way you
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  Speaker 4: don't need to bother the trustee, who likely is not you,
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  Speaker 4: so you would, you know, you just it'll just automatically happen.
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  Speaker 4: So hope that helps. And and folks, just to expand
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  Speaker 4: on that a little bit, right, because we have a
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  Speaker 4: little bit of time left. What if I have a
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  Speaker 4: rental property and I put it in one of these trusts,
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  Speaker 4: because there might be clients that have done that or
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  Speaker 4: individual who have done that. Well, the rent makes sure
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  Speaker 4: that's being deposited into the bank account in the name
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  Speaker 4: of the trust to receive the rent, and then that's income,
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  Speaker 4: right just because it left, just because it came in
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  Speaker 4: as rent, it retains its character as income. And so
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  Speaker 4: then that particular bank account receiving the rent can also
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  Speaker 4: be set up as an automatic transfer, so the rent
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  Speaker 4: comes in and automatically hits your personal bank account. I
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  Speaker 4: say this because a lot of times people say, oh,
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  Speaker 4: it's a lot more complicated when I have my rental
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  Speaker 4: property in the trust. When you back up and think
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  Speaker 4: about it, it's really not. Because you're still making only
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  Speaker 4: one deposit. Right, If you didn't have the trust, you'd
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  Speaker 4: collect the rent put it in your bank account. Now
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  Speaker 4: you collect the rent deposited into a trust bank account,
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  Speaker 4: one deposit, one transaction, and it automatically hits your personal
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  Speaker 4: bank account. So definitely a good idea great question in
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  Speaker 4: a lot of control for you over these irrevocable trusts.
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  Speaker 3: Mister Wutsky, appreciate you joining us today.
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  Speaker 4: Always a pleasure.
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  Speaker 3: Thank you.
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  Speaker 1: This has been Asked Todd on the Financial Exchange Radio
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  Speaker 1: network Ask Todd with Todd. Lutsky has been presented by
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  Speaker 1: Cushing and Dolan, serving Massachusetts and New England for more
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  Speaker 1: than thirty years, helping families with the state and tax planning,
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  Speaker 1: Medicaid planning, and probate law. Call eight hundred and three
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  Speaker 1: nine three four thousand and one or visit Cushingdolan dot com.
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  Speaker 1: The views expressed in this segment are solely those of
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  Speaker 1: Cushing and Dolan Armstrong Advisory. He does not provide any
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  Speaker 1: legal or tax advice. Please consult with your legal or
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  Speaker 1: tax advisor on such matters. Cushing and Armstrong do not
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  Speaker 1: endorse each other and are not affiliated.