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Ask Todd: Navigating Estate Tax Thresholds · 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: Todd Lutsky from the law firm of Cushing and Dolan
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  Speaker 2: joins us now in studio and he's here to answer
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  Speaker 2: your questions about your state plans. We got the phone
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  Speaker 2: line open at eight eight eight to zero five two
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  Speaker 2: two six three. The last couple of weeks we have
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  Speaker 2: not been able to get through all of your questions,
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  Speaker 2: so if you do want to have your question answered
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  Speaker 2: by Todd, get.
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  Speaker 3: Calling early and often again. Eight eight eight to zero
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  Speaker 3: five two two sixty three is the number one more time,
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  Speaker 3: that is eight eight eight two zero five two two
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  Speaker 3: six three. The segment is Asked Todd, so you can
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  Speaker 3: ask Todd your questions. Mister Lutsky, how are you doing today?
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  Speaker 4: I am never better? How you doing?
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  Speaker 1: Pretty good?
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  Speaker 4: Uh?
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  Speaker 1: Uh?
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  Speaker 4: Pretty good? Yeah? Only pretty good? I Uh.
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  Speaker 3: I went on a date with a matador the other day,
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  Speaker 3: a matador. Yeah it didn't work out. No, too many
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  Speaker 3: red flags, yeah, definitely. Yeah, real problem, Todd, want to
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  Speaker 3: talk to you a little bit about is state tax
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  Speaker 3: thresholds today? Okay, federal limit right now is currently just
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  Speaker 3: under fourteen million?
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  Speaker 4: Is that right? Yeah? Thirteen nine to nine.
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  Speaker 3: What's it go do next year?
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  Speaker 4: So January one, twenty twenty six, it's gonna jump up
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  Speaker 4: to fifteen million. Even even that makes the math easy.
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  Speaker 4: It does so for a spouse, you could shelter thirty.
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  Speaker 3: So what I what I want to hone in on
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  Speaker 3: today the number of states that have a state estate tax.
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  Speaker 3: It's it's not part clearly high, right, it's like high
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  Speaker 3: single digits, low double digits, like somewhere around ten states
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  Speaker 3: have them.
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  Speaker 4: Yeah, it's a little higher, it is double digits, but
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  Speaker 4: I think it. I think it's.
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  Speaker 3: Fifteen And most of those thresholds are significantly lower than
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  Speaker 3: the federal limit. Correct.
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  Speaker 4: Yes, I don't know if I could say most, but
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  Speaker 4: we can a number of them, Yeah, number of them
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  Speaker 4: could be lower, like Massachusetts is the worst.
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  Speaker 3: So I guess here's here's the question that I have.
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  Speaker 3: People that fall above the fifteen million. We talk about,
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  Speaker 3: you know, what you can do in those situations quite
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  Speaker 3: a bit. People that might be, you know, on the
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  Speaker 3: borderline of a state, a state tax threshold, you know,
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  Speaker 3: a two million dollars state three million. We talk about
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  Speaker 3: those a lot. Yeah, how does someone who kind of
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  Speaker 3: falls like right in the middle, like again high levels
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  Speaker 3: of wealth, you know, eight to twelve million dollars estate,
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  Speaker 3: so no federal issue, but they might have a sizable
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  Speaker 3: state issue that they need to deal with. What kind
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  Speaker 3: of tools are out there to help mitigate those and
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  Speaker 3: work through those situations?
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  Speaker 4: Yeah, that's that's perfect. I mean the answer you have
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  Speaker 4: there is, first and foremost, you still need your trust.
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  Speaker 4: You still need your at that level, you're looking at
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  Speaker 4: a revocable trust, probably a joint revocable trust. Probably don't
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  Speaker 4: need two. And you need it? Why not? And I'm assuming, Chuck,
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  Speaker 4: that we're in a state with a state state tax, right,
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  Speaker 4: not just federal Yes, state a state test. So I'll
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  Speaker 4: just use mass as an example with the two million
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  Speaker 4: dollar exemption. And so first, you need the joint revocable
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  Speaker 4: trust simply to obviously avoid the probate. And I say,
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  Speaker 4: take care of federal estate tax, and I know you're saying, chuck,
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  Speaker 4: the exemption is going to third fifteen million. This client
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  Speaker 4: is maybe worth ten million somewhere in between there. Why
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  Speaker 4: do they need to worry about the FED? Well, there's
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  Speaker 4: nothing you need to worry about it. But when you
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  Speaker 4: do the trust planning, you're going to shelter whatever the
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  Speaker 4: estate tax exemption is in effect. When you die again,
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  Speaker 4: come a new president right down the road and new
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  Speaker 4: regimes in office, that exemption could drop. We can't necessarily
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  Speaker 4: assume it's going to a fifteen. It could fall to seven.
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  Speaker 4: So you need to be mindful of that. So you
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  Speaker 4: need to do a planning just to take sure make
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  Speaker 4: sure that you grab whatever the estate tax exemption is,
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  Speaker 4: and plus reportability reasons. If you die when it's high
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  Speaker 4: and you leave a spouse, you want to make sure
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  Speaker 4: you capture the unused exemption for the surviving spouse so
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  Speaker 4: that in case they really lower the exemption for the
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  Speaker 4: surviving when the surviving spouse dies, she will have that
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  Speaker 4: unused exemption as a coupon in her pocket. To take
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  Speaker 4: care of that for Massachusetts or other states that have
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  Speaker 4: a state exemption. Yeah, we want to make sure we
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  Speaker 4: double the two million to four million. At least do that.
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  Speaker 4: So if I'm at ten million, I'm sheltering four million.
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  Speaker 4: But to your point, we still owe six million. Is
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  Speaker 4: there something we can do for that? Yes, gifting. Gifting
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  Speaker 4: is an option. Perhaps moving, of course is always an option.
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  Speaker 4: But gifting is an option. But then you need to
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  Speaker 4: really analyze the gifting. Am I going to gift high
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  Speaker 4: basis low basis assets? The big deal here is that
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  Speaker 4: you got to make sure that you're not just when
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  Speaker 4: you make a gift. Now in this situation, you're not
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  Speaker 4: saving the forty percent piece, You're only saving the mass piece.
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  Speaker 4: And if mass is at ten percent, I don't want
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  Speaker 4: to give away something that traps capital gain at twenty
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  Speaker 4: eight point eight percent. So think about what you're gonna gift.
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  Speaker 4: But at least that's a little guidelines for you.
• 5:21
  Speaker 3: Talking with Todd Lutsky from the law firm of Cushing
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  Speaker 3: and Dolan, phone lines still have room on them at
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  Speaker 3: eight eight eight to zero five two two sixty three.
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  Speaker 3: That is the number to call to ask Todd your
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  Speaker 3: estate planning questions live on air right now again, room
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  Speaker 3: on the phone lines at eight eight eight to zero
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  Speaker 3: five two two sixty three. This is your chance to
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  Speaker 3: ask Todd your estate planning questions. We're going to take
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  Speaker 3: a quick break, but when we come back we'll have
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  Speaker 3: more Todd and your questions right after this. That phone
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  Speaker 3: number is eight eight eight to zero five two two
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  Speaker 3: sixty three. Again it is eight eight eight two zero
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  Speaker 3: five two two six three.
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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 3: Todd Letski's you to answer your questions about your estate
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  Speaker 3: plan Again. Phone number is eight eight eight to zero
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  Speaker 3: five two two sixty three. That is the number to
• 6:34
  Speaker 3: call so that Todd can answer your estate planning questions
• 6:37
  Speaker 3: live on air again eight eight eight to zero five
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  Speaker 3: two two six three. Let's go to Steve in New Hampshire. Steve,
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  Speaker 3: what is your question for mister Lutsky?
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  Speaker 5: Well, my question is is that I have three firement.
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  Speaker 5: I have a step that's got a value of a
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  Speaker 5: little over three million dollars forridge account. Also that a
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  Speaker 5: little over two million dollars. I'm sixty eight years old,
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  Speaker 5: and I've been going back and forth thinking or considering
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  Speaker 5: switching some money over. It's a raw and I'm not
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  Speaker 5: convinced that that's the way I should go at this point,
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  Speaker 5: being that I don't know that I can really convert
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  Speaker 5: over enough funds that's going to make the difference when
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  Speaker 5: it comes down to my required minimum distribution. Okay, And
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  Speaker 5: I am also still working.
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  Speaker 4: Are you married? I am kids, I have two yet grandkids?
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  Speaker 5: Yeah, just one?
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  Speaker 4: That was just one, okay, And so you're looking at
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  Speaker 4: maybe five million dollars. I think that the whether you
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  Speaker 4: flip it to a roth or don't flip it to
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  Speaker 4: a wroth and so forth, I really think is more
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  Speaker 4: of a financial plan question. You might want to sit
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  Speaker 4: with your advisor and and sort of, you know, play
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  Speaker 4: out whether or not it makes sense to do that,
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  Speaker 4: and what are the taxes I'm going to pay now
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  Speaker 4: when I do that? But so is the but do
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  Speaker 4: you have like an estate planning question in here somewhere?
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  Speaker 4: Like I notice you've got a step and a brokerage account.
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  Speaker 4: So I've got five million. You also need your house
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  Speaker 4: and any other assets to determine whether or not a
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  Speaker 4: state planning is important or is that not an issue?
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  Speaker 5: No, the estate planning. I'm trying to figure out how
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  Speaker 5: this is going to work best for my estate and
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  Speaker 5: for my children down the road.
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  Speaker 4: I know.
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  Speaker 5: If the money is in a step that helps them
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  Speaker 5: in a raws, it helps them. But that's again secondary question.
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  Speaker 4: Do you how much? How much are you worth altogether?
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  Speaker 4: House money, everything?
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  Speaker 5: About seven millions.
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  Speaker 4: So it's seven million dollars again, some being qualified money,
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  Speaker 4: some being not qualified money. I get it. You know,
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  Speaker 4: it's important to think from an income tax perspective and
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  Speaker 4: how it fits into your state plan as well. So
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  Speaker 4: but just in general, for someone sixty eight seven million dollars,
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  Speaker 4: we're probably looking at a joint revocable trust for you.
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  Speaker 4: How we draft the joint trust to accommodate the sepira,
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  Speaker 4: which is a three million dollar asset, is important, and
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  Speaker 4: that's why I'm recommending a joint trust, because with a
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  Speaker 4: joint revocable trust, the three million can't go in there
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  Speaker 4: while you're alive because there's a big income tax hit.
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  Speaker 4: I get that, but it can get there when the
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  Speaker 4: death of the survivor occurs, but on the first death,
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  Speaker 4: I want to be able to cram down as much
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  Speaker 4: as I can for a state planning purposes. So if
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  Speaker 4: I back out three million from year seven, I only
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  Speaker 4: have four to deal with. Well, I want that whole
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  Speaker 4: four to be crammed down on the first death for
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  Speaker 4: a state taxes, and not divide it between a husband
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  Speaker 4: trust and a wife trust. So I think we're talking
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  Speaker 4: about the same thing here in terms of taxes, estate taxes,
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  Speaker 4: income taxes. But I think the joint trust would work
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  Speaker 4: best for you because it will accommodate both the large
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  Speaker 4: IRA asset, the large set and your estate planning. And
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  Speaker 4: I don't think you're probably in a situation where you
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  Speaker 4: need to worry about nursing home care. You're probably self
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  Speaker 4: insured with the you know, the interests and the and
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  Speaker 4: the money you can generate, the income that you can
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  Speaker 4: generate with your with your assets, and then you just
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  Speaker 4: need to decide how you want to leave these assets
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  Speaker 4: to your children, you know, over time from a generation
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  Speaker 4: skipping tax perspective, et cetera, divorce proofing, et cetera. So
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  Speaker 4: hope that helps folks. That's a great estate planning question.
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  Speaker 4: Let's just turn a minute for the guide though, And
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  Speaker 4: one thing I didn't mention here to this caller Steve,
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  Speaker 4: was that gifting was right. And the guide we're given
• 10:48
  Speaker 4: away is making the most of gifting assets right? It is.
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  Speaker 4: It is a guide that explains really whether you should
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  Speaker 4: gift or not. And again, gifting didn't seem like a
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  Speaker 4: huge deal for this past. It's not appropriate. However for
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  Speaker 4: you it might be, but then you need to know
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  Speaker 4: how to do it. Do I give it a way
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  Speaker 4: outright to kids? Probably not? Maybe a gifting trust. If
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  Speaker 4: I want to make big gifts, do I put it
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  Speaker 4: in a trust that I can keep control over after
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  Speaker 4: I give it? Well, I would want that. So espousal
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  Speaker 4: lifetime Access trust comes up. There's a state tax and
• 11:19
  Speaker 4: income tax issues to consider, and whether to gift at
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  Speaker 4: all or not. Folks, get the guide eight six six
• 11:27
  Speaker 4: eight four eight five six nine nine or Legal Exchange
• 11:30
  Speaker 4: Show dot com and learn how to make the most
• 11:33
  Speaker 4: of gifting assets eight six six eight four eight five
• 11:37
  Speaker 4: six nine nine or Legal Exchange Show dot com.
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  Speaker 3: Todd in the last segment, we were talking about, you know,
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  Speaker 3: kind of things to do to potentially mitigate state level
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  Speaker 3: estate taxes. Yes, is the assumption if you are if
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  Speaker 3: you do have a large enough of state where you
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  Speaker 3: have a federal estate tax liability, are you using the
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  Speaker 3: same tools or they're different ones that come into play
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  Speaker 3: based on the size and scale of an estate.
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  Speaker 4: Yeah. And I think after the you know, the obb
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  Speaker 4: BA if I said enough bs in there, the new
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  Speaker 4: act that passed, I think it's it's really important to
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  Speaker 4: talk about those things because they left a lot of
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  Speaker 4: the old rules in play. And so for larger estates,
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  Speaker 4: and maybe a lot of times we don't speak enough
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  Speaker 4: about them, but you know, for a larger estate, you're
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  Speaker 4: pushing close to thirty million. When you're talking about larger
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  Speaker 4: you know, these folks are going to be making much
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  Speaker 4: bigger gifts, and gifts will matter. Then remember before we
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  Speaker 4: were talking about this, you know, ten million dollar estate,
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  Speaker 4: and I'm saying, well, wow, if you make a gift,
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  Speaker 4: you're really not helping to save the forty percent estate
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  Speaker 4: tax rate. You're really only talking about the state estate
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  Speaker 4: tax savings, which is closer to ten twelve percent. Well,
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  Speaker 4: that's not a huge savings. But as you bring up, Chuck,
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  Speaker 4: if we're talking about larger estates now I'm not so
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  Speaker 4: worried about the carryover basis or the trapping of the
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  Speaker 4: capital gain on the assets that I give away, because now,
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  Speaker 4: if I'm making a gift at this larger level, I
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  Speaker 4: am saving you know, the state and the federal estate tax.
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  Speaker 4: So that could be fifty two percent. So let's just
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  Speaker 4: reraizon numbers, let's say fifty percent. Well, if I give
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  Speaker 4: away something that saves me at the fifty percent level
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  Speaker 4: and trap something at the twenty eight percent level, I
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  Speaker 4: guess I'm okay with that. Sure. And another reason I'd
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  Speaker 4: be okay with that when you're dealing with those big
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  Speaker 4: numbers is that tax when you die is due nine
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  Speaker 4: months after you die. It's a hard stop you gotta pay.
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  Speaker 4: I mean, you could be faced with a down market,
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  Speaker 4: you could be faced with a fire sale on real
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  Speaker 4: estate to come up with the money you need to
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  Speaker 4: pay the tax. Whereas if I've made the gift and
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  Speaker 4: I've built in the capital gain, I get it, it's there,
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  Speaker 4: but the kids don't have to sell it nine months
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  Speaker 4: after I'm dead. They can play around with that capital gain, right.
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  Speaker 4: They could say, well, you know what, I'll just hang
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  Speaker 4: on to this. You know, as you know from a
• 14:23
  Speaker 4: financial planning standpoint, giving up selling all the time isn't
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  Speaker 4: the right thing to do in a down market. Maybe
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  Speaker 4: I know there's gain there, but if I've got some
• 14:32
  Speaker 4: losses built in, I can wait till I have losses,
• 14:35
  Speaker 4: sell the lost items, then sell the gain items, and
• 14:39
  Speaker 4: offset the capital gain with the capital loss. So you
• 14:41
  Speaker 4: have a little more play with that capital gain than
• 14:45
  Speaker 4: you do with the death tax. That's a hard and
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  Speaker 4: fast Hey nine months you gotta pay, so I think
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  Speaker 4: that's a little bit food for thought.
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  Speaker 3: Mister Lutsky, I appreciate you joining us today. Thank you
• 14:56
  Speaker 3: so much for the time.
• 14:57
  Speaker 4: Thank you always a pleasure.
• 15:00
  Speaker 1: This has been Asked Odd on the Financial Exchange Radio
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  Speaker 1: Cushing and Dolan, serving Massachusetts and New England for more
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