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Ask Todd: How to start estate planning · 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 Lutsky 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: As promised, We're now joined by Todd Lutsky from the
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  Speaker 2: law firm of Cushing and Dolan. The segment is Asked Todd,
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  Speaker 2: and it is your opportunity to ask Todd your estate
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  Speaker 2: planning questions. Phone lines wide open right now at eight
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  Speaker 2: eight eight to zero five two two six three. We
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  Speaker 2: can normally get through about two to three calls, so
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  Speaker 2: if you got a call, make sure you get in
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  Speaker 2: early so that we can get to you. Eight eight
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  Speaker 2: eight to zero five two two sixty three. Again, this
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  Speaker 2: is your opportunity to ask Todd Lutsky your state planning questions,
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  Speaker 2: live on air eight eight eight two zero five two
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  Speaker 2: two six three.
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  Speaker 3: One more time.
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  Speaker 2: That number is eight eight eight two zero five two
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  Speaker 2: two six three. Mister Lutsky, how are you doing today?
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  Speaker 3: Never better? How are you? Uh pretty good?
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  Speaker 1: Uh?
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  Speaker 2: Oh, I got a question for you. Yeah, what do
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  Speaker 2: you call a monk who walks everywhere in bare feet?
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  Speaker 2: Has poor bone density and really bad breath.
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  Speaker 3: That's a lot of things. I can't even think of
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  Speaker 3: all those. I can't even follow this, So I'm just
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  Speaker 3: gonna say, I don't know a super callous, fragile mystic
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  Speaker 3: hex by halitosis. Wow, I know, it's it's wild, that wild.
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  Speaker 3: I can't even remember that.
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  Speaker 2: Let's talk a little bit about estate planning. When we
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  Speaker 2: talk about someone who's maybe at the beginning of the
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  Speaker 2: estate planning process, yeah, probably a little bit intimidated. How
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  Speaker 2: do they decide which estate planning tools are actually the
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  Speaker 2: right ones for their specific situation.
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  Speaker 3: So a couple of things when we talk about it,
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  Speaker 3: I always like to this is why we call it
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  Speaker 3: the guide is back to the basics, right, it's thinking
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  Speaker 3: about how do we get started? I would say the
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  Speaker 3: very first thing you should do is take a look
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  Speaker 3: at your assets and value them. Figure out what it
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  Speaker 3: is you own and what you roughly think it's worth.
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  Speaker 3: Because it's the value of the estate that really drives
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  Speaker 3: the type of a state plan that you're going to do. Okay,
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  Speaker 3: so let me try to expand on that a little.
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  Speaker 3: You know, when I say how you own it? Right,
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  Speaker 3: If you own it, it's it's an asset. It doesn't
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  Speaker 3: mean it's a probate asset. It just means that it's
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  Speaker 3: a gross of state asset. Very different. You could have
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  Speaker 3: zero probate assets, but all are still part of your
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  Speaker 3: gross estate. I think the bigger question is when I
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  Speaker 3: say value it intuitively, what am I valuing? Right? What
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  Speaker 3: is included? Not everybody thinks about this, right, but obviously
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  Speaker 3: your your bank accounts and your brokerage accounts. That comes
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  Speaker 3: to mind, right, because it's money, and you say, yeah,
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  Speaker 3: I feel it, I see it. You know what they
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  Speaker 3: don't think about real estate. They say, oh, yeah, I
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  Speaker 3: got a million dollar home. Oh, but I don't feel
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  Speaker 3: like I'm worth a million dollars because it's it's real estate.
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  Speaker 3: You know, I don't. I don't count that, Oh, but
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  Speaker 3: the government does. So you got to count that as
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  Speaker 3: an asset of the estate. Another thing people don't think
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  Speaker 3: about roth iras they say, oh, you know, roths are
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  Speaker 3: income tax free. Well, yeah they are, but they're estate
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  Speaker 3: taxable when you die, so please count them, you know,
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  Speaker 3: even regular iras. They are you know es state taxable
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  Speaker 3: when you die, so please count them as part of
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  Speaker 3: your estate. And you know one of the other things
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  Speaker 3: that that almost everybody forgets life insurance, right, Oh, life insurance.
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  Speaker 3: Isn't that income tax free? Well it is, yeah, when
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  Speaker 3: when you die, if your spouse gets it, it's income
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  Speaker 3: tax free. Never mind a spouse whoever gets it, it's
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  Speaker 3: income tax free to the person who gets it. But
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  Speaker 3: the government values everything right when you die. The moment
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  Speaker 3: you die, that's when they value it. Because you might say, well,
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  Speaker 3: you know, I got this term insurance policy and it
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  Speaker 3: has zero cash surrender value today because I'm living. The
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  Speaker 3: next day I die, well, it's worth a million dollars
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  Speaker 3: if that's the face value. That's when the government values it.
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  Speaker 3: So now one item, right, you could be sitting here saying, well, jeez,
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  Speaker 3: I'm not worth a million dollars. Oh wait to have
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  Speaker 3: a million dollar life insurance policy. You're all of a
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  Speaker 3: sudden worth a million dollars and you haven't talked about
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  Speaker 3: any other assets yet. That one asset could put you
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  Speaker 3: at a million dollars.
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  Speaker 2: Talking with Todd Lutski from the law firm of Cushing
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  Speaker 2: and Dolan again. The segment is called Ask Todd because
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  Speaker 2: it's your opportunity to ask Todd your estate planning questions.
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  Speaker 2: We do have space on the phone line still at
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  Speaker 2: eight eight eight two zero five two two six th
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  Speaker 2: That is the number to call to ask Todd your
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  Speaker 2: estate planning question live on air again. That number is
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  Speaker 2: eight eight eight to zero five two two six three.
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  Speaker 2: We're gonna take a quick break right now, but when
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  Speaker 2: we come back, it's gonna be right to your calls
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  Speaker 2: with Todd. That phone number is eight eight eight to
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  Speaker 2: zero five two two six three One. Last time, eight
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  Speaker 2: eight eight to zero five two two sixty three your
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  Speaker 2: calls with Todd when we return.
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  Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
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  Speaker 1: only here on the Financial Exchange Radio Network. You're listening
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  Speaker 1: to Ask Todd with Todd Lutsky on the Financial Exchange
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  Speaker 1: Radio Network.
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  Speaker 3: All right, all right, all.
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  Speaker 2: Right, let's get right to your calls with Todd Lutsky.
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  Speaker 2: First in the queue, we've got Mike from Drake at
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  Speaker 2: Mike what's your question for Todd?
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  Speaker 4: My I have a grandfather who passed away. He left
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  Speaker 4: everything in his will. Basically, come is coming to me
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  Speaker 4: and my wife. Okay, there's only one thing. One thing.
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  Speaker 4: There was a bank account that was left in a
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  Speaker 4: trust to my father in law. My father in law
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  Speaker 4: has now had had passed before my my grandfather had
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  Speaker 4: passed away. My grandfather had dementia. My question is where
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  Speaker 4: will that money go now that was in that trust
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  Speaker 4: from the Bank of America. Will that go back into
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  Speaker 4: my grandfather's estate or does that go to my my
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  Speaker 4: father in law who remarried another woman.
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  Speaker 3: Okay, so you just added a third factor that really
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  Speaker 3: that really threw me off. So let's let me just
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  Speaker 3: try to recap and please please try to help me
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  Speaker 3: when I ask you these questions. So the first the
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  Speaker 3: first one is there's you're the grandchild of the grandfather
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  Speaker 3: who died and left a will leaving assets to you
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  Speaker 3: and your wife. So that that piece is clear, right,
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  Speaker 3: we understand that that to you, right, Yeah, Okay, that's
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  Speaker 3: not an issue. In addition to that, you said that
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  Speaker 3: your stepfather or no, your your father in law, my
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  Speaker 3: father in law, your father in law had a trust
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  Speaker 3: in place a bank account in a trust or was
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  Speaker 3: or did the account say in trust.
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  Speaker 4: For in trust for?
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  Speaker 3: So there was no actual establishment of a of an
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  Speaker 3: actual trust. It just simply is more of a designated
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  Speaker 3: beneficiary on the account, correct, I believe?
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  Speaker 1: So?
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  Speaker 3: Okay. So it said in trust for.
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  Speaker 4: Who, it would be his name Harry.
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  Speaker 3: No, no, no, So who's Who's Harry is not the
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  Speaker 3: father in law? Right?
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  Speaker 4: Yes he is.
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  Speaker 3: So the father in law had an account and the
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  Speaker 3: account said when I die, when father in law dies,
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  Speaker 3: the assets in the tru goes to who.
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  Speaker 4: No, when Graham father passed away, it would go too.
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  Speaker 4: It was the trust was in the grandfathers and when
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  Speaker 4: he passed away it went to my father in law,
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  Speaker 4: which my father in law had passed away before my grandfather.
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  Speaker 3: Okay. So let's now, I'm just trying to get to
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  Speaker 3: the bottom of this, right, this is this is what's
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  Speaker 3: complicated about a lot of these questions. So grandfather again
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  Speaker 3: had one bank account that had in trust for father
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  Speaker 3: in law correct, correct?
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  Speaker 4: Correct?
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  Speaker 3: And father in law died before grandfather correct. Okay, And
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  Speaker 3: that account still existed when grandfather died.
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  Speaker 4: Correct.
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  Speaker 3: And so if it said in trust for someone who's
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  Speaker 3: deceased and there was no alternate beneficiary listed, then what
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  Speaker 3: happens is that would been end up in the probate
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  Speaker 3: estate of the father in law. So I'm sorry, not
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  Speaker 3: of the father in law. It would lapse as to
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  Speaker 3: the father and law. It would end up in the
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  Speaker 3: probated state of the grandfather. So then the grandfather would
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  Speaker 3: die owning an asset with no beneficiary but in his name.
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  Speaker 3: So his will should direct where that goes. So then
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  Speaker 3: that would end up going to you, because his will
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  Speaker 3: said everything that's a probate asset goes to you. Remember
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  Speaker 3: that item initially would not have been a probate asset
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  Speaker 3: because of the designated beneficiary listed. That's what keeps it
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  Speaker 3: out of probate. But if that beneficiary does not exist,
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  Speaker 3: then it's as if there is no designated beneficiary, So
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  Speaker 3: then it would end up a probate asset. Now his
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  Speaker 3: will says where it goes, so I think it goes
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  Speaker 3: to you if his you and your wife. If his
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  Speaker 3: will says, I leave all my probate assets to my
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  Speaker 3: grandson and his wife, so there you go. That's my answer,
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  Speaker 3: and I think I think that's where it's going to go,
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  Speaker 3: but you might have to do some probate work for
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  Speaker 3: your grandfather's estate. Folks, lots of stuff going on in
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  Speaker 3: a question like that, and again I think it's partly
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  Speaker 3: because of the lack of planning that was done right.
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  Speaker 3: If you don't do your planning, you run into these
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  Speaker 3: kinds of problems. Learn how to do your planning. Get
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  Speaker 3: the guide back to the basics. It's basically a recommendation.
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  Speaker 3: It's my engagement letter to a made up family with
• 10:26
  Speaker 3: a bunch of assets, and it talks about the will,
• 10:29
  Speaker 3: the healthcare, the power of attorney. The hippa really explains
• 10:33
  Speaker 3: documents that we always cursory, give a cursory example of
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  Speaker 3: what they are. And it also you can put your
• 10:39
  Speaker 3: fact pattern with this and learn it. In this one,
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  Speaker 3: it recommends an irrevocable trust or two for this family.
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  Speaker 3: See if this recommendation works for you. If not, learn
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  Speaker 3: by getting the guide it will at least teach you
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  Speaker 3: how to begin thinking about getting your estate plan in order.
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  Speaker 3: One of my favorite guides Folks eight sixty six eight
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  Speaker 3: four eight five six nine nine or Legal Exchange show
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  Speaker 3: dot Com. Back to the Basics eight sixty six eight
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  Speaker 3: four eight five six nine nine or Legal Exchange Show
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  Speaker 3: dot Com. Todd, I've got another caller for you here.
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  Speaker 2: We've got Steve in Bridgewater. Steve, you are.
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  Speaker 3: On with Todd Lutsky.
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  Speaker 5: Hi, guys, how are you doing great?
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  Speaker 3: You all right?
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  Speaker 5: Doing good? A life of state? My mother had a
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  Speaker 5: life of state. I was the remain demn Okay, she
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  Speaker 5: passed away in twenty twenty four. For for a cost basis?
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  Speaker 5: Would I do a cost basis? When the life of
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  Speaker 5: state was first created or when she passed away?
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  Speaker 3: Do you still own the house or did you sell it?
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  Speaker 5: Sold it already?
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  Speaker 3: So you sold it? When? Did you sell it.
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  Speaker 5: In December of twenty twenty four? She passed away in
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  Speaker 5: April of twenty twenty four.
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  Speaker 3: Okay, So that's why I needed to know those specifics.
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  Speaker 3: So here's here's the answer. One the house. I'm going
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  Speaker 3: to expand, so people understand, first of all, what is
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  Speaker 3: a life estate.
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  Speaker 5: Right.
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  Speaker 3: A life estate is when you give something away like
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  Speaker 3: a house your primary residents. Please don't do it with
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  Speaker 3: any asset, and retain the right to live there. Right.
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  Speaker 3: So by doing that, retaining the right to live there,
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  Speaker 3: you avoid probate when she dies and you've protected it
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  Speaker 3: from the cost of long term care. I don't love
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  Speaker 3: the arrangement because there's a lot of negatives that go
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  Speaker 3: with it. But in this case, we don't need to
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  Speaker 3: go down that road because Mom has passed already, so
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  Speaker 3: none of the negatives happened. So we now though, by
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  Speaker 3: keeping that retained interest, that right to live there, that
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  Speaker 3: causes that asset to be included in Mom's estate on
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  Speaker 3: the date of death. So in April of twenty twenty four,
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  Speaker 3: the full value, not just the value of the life estate,
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  Speaker 3: but the full value of the property needs to be
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  Speaker 3: included in her gross estate, not her probate estate. So
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  Speaker 3: it's not a probate issue to determine whether or not
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  Speaker 3: an estate tax return is due. So on the date
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  Speaker 3: of death April, what do you think that house was worth?
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  Speaker 5: Steveh four fifty.
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  Speaker 3: Okay, So if we've got a four hundred and fifty
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  Speaker 3: thousand dollars value on the house, that means that the
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  Speaker 3: cost basis to Steve is four hundred and fifty thousand dollars. Now,
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  Speaker 3: between April and December, this may have increased in value.
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  Speaker 3: How much should you sell it for? AH four forty
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  Speaker 3: oh even better? So in this case, you cannot generate
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  Speaker 3: a loss. I know, as much as you might be
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  Speaker 3: thinking that's great, No, you can't generate a loss. But
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  Speaker 3: in this case you will have zero game to report
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  Speaker 3: on your income tax return, right because when you report it,
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  Speaker 3: you'll show the sale four forty or for four to forty,
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  Speaker 3: you'll show the cost basis of four forty. And by
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  Speaker 3: the way, when you say you thought it was worth
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  Speaker 3: four point fifty, if you sell it within nine months
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  Speaker 3: of the date of death roughly where you are, even
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  Speaker 3: within a year of date of death, it's the sale
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  Speaker 3: price that is the cost basis. So in this case
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  Speaker 3: you've got to step up in basis. Your cost is
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  Speaker 3: four forty, your proceeds are four to forty, your gain
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  Speaker 3: you report as zero, and you keep all the money.
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  Speaker 3: No federal, no state death tax. So that's how you
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  Speaker 3: calculate cost basis in a situation like this, And that's
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  Speaker 3: a great thing to have, folks. Whenever you're dealing with
• 14:44
  Speaker 3: real estate, you always want to think about not giving
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  Speaker 3: away an asset like that and keeping it so that
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  Speaker 3: when the beneficiaries get it, in fact, if they don't
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  Speaker 3: want it, they can sell it and not have the
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  Speaker 3: capital gains tax to pay. And if it happens to
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  Speaker 3: be a mental property and you get a step up
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  Speaker 3: in basis and you keep the property, then you have
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  Speaker 3: the ability to offset the rent through depreciation over the
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  Speaker 3: next twenty seven and a half years. So wonderful things
• 15:13
  Speaker 3: step up in basis folks learn learn about step up
• 15:16
  Speaker 3: in basis also in the guide, mister Lutsky, thank you
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  Speaker 3: for joining us today. Always a pleasure.
• 15:23
  Speaker 1: This has been asked Odd on the Financial Exchange Radio network.
• 15:27
  Speaker 1: Ask Todd with Todd. Lutsky has been presented by Cushing
• 15:29
  Speaker 1: and Dolan, serving Massachusetts and New England for more than
• 15:32
  Speaker 1: thirty years, helping families with the state and tax planning,
• 15:35
  Speaker 1: Medicaid planning, and probate law. Call eight hundred and three
• 15:38
  Speaker 1: nine three four thousand and one or visit Cushingdolan dot com.
• 15:41
  Speaker 1: The views expressed in this segment are solely those of
• 15:43
  Speaker 1: Cushing and Dolan Armstrong Advisor. He does not provide any
• 15:46
  Speaker 1: legal or tax advice. Please consult with your legal or
• 15:48
  Speaker 1: tax advisor on such matters. Cushing and Armstrong do not
• 15:50
  Speaker 1: endorse each other and are not affiliated