Latest / The Financial Exchange Show / Ask Todd: When it's time to update your estate plan

Transcript

Ask Todd: When it's time to update your estate plan · The Financial Exchange Show

• 0:01
  Speaker 1: This is Ask Todd on the Financial Exchange Radio Network.
• 0:04
  Speaker 1: If you have an existing estate plan or in the
• 0:07
  Speaker 1: market for one, Todd Lutsky is here to answer your
• 0:09
  Speaker 1: questions and help you plan for a later life. Ask
• 0:12
  Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
• 0:15
  Speaker 1: New England for more than thirty five years, helping families
• 0:18
  Speaker 1: with a state and tax planning, Medicaid planning, and probate law.
• 0:22
  Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
• 0:28
  Speaker 2: Todd Lotsky does now join us for Ask Todd. It's
• 0:32
  Speaker 2: your chance to ask Todd your estate planning questions live
• 0:36
  Speaker 2: on air right now. Studio line is open at eight
• 0:40
  Speaker 2: eight eight to zero five two two six three, So
• 0:44
  Speaker 2: get calling so you can get in line to ask
• 0:46
  Speaker 2: Todd your estate planning questions. Usually we can get through
• 0:50
  Speaker 2: two to three of them, so make sure you call
• 0:52
  Speaker 2: early so we can get to you again. That number
• 0:55
  Speaker 2: is eight eight eight to zero five two two six three.
• 0:59
  Speaker 2: And this again is your chance to ask Todd your
• 1:01
  Speaker 2: state planning questions right now, live on air. That number
• 1:06
  Speaker 2: again is eight eight eight two zero five two two
• 1:10
  Speaker 2: six three. Mister Lutsky, how are you doing.
• 1:13
  Speaker 3: I am doing okay, I've been better.
• 1:16
  Speaker 2: You don't sound great.
• 1:17
  Speaker 3: That's the problem.
• 1:18
  Speaker 2: I mean, like you worse than normal.
• 1:20
  Speaker 3: Yeah, well that's thank you. Yeah, somehow a backdoor compliment. Yeah,
• 1:24
  Speaker 3: I'm I'm feeling all right, but just not talking.
• 1:27
  Speaker 2: Well, that's fine, it's just radio.
• 1:29
  Speaker 3: How are you, uh good?
• 1:30
  Speaker 2: I tried a frog flavored beer yesterday.
• 1:33
  Speaker 3: They're coming out with all kinds of stuff these days.
• 1:35
  Speaker 2: Yeah, you could really taste the hops. Yeah, there's good.
• 1:39
  Speaker 2: Todd want to talk to you about the evolution of
• 1:43
  Speaker 2: a state planning In the last you know, five six years,
• 1:45
  Speaker 2: there's been all kinds of tax law changes and all
• 1:48
  Speaker 2: kinds of different things. How does someone who's done in
• 1:52
  Speaker 2: a state plan know when they may need to update it?
• 1:56
  Speaker 3: So, one of the things you should always look at
• 1:59
  Speaker 3: is value of your estate. Right, that's things that change
• 2:03
  Speaker 3: that you know, Folks like us in the estate planning world,
• 2:06
  Speaker 3: we don't know about right. We don't know how well
• 2:10
  Speaker 3: your portfolio is doing and your real estate has grown,
• 2:15
  Speaker 3: and so to the extent you feel your assets have
• 2:18
  Speaker 3: really you know, appreciated in value, might be worth you know,
• 2:22
  Speaker 3: sitting down with your estate planning attorney, assuming you've already
• 2:25
  Speaker 3: done your plan and seeing how you might want to
• 2:30
  Speaker 3: adjust it, or if you've never done your plan. I
• 2:34
  Speaker 3: think looking at value is always one of the first
• 2:37
  Speaker 3: things to think about, right because depending on how much
• 2:41
  Speaker 3: your worth will drive the type of estate plan that
• 2:46
  Speaker 3: you might need. Like, for example, if you're over let's
• 2:50
  Speaker 3: say fifteen million, which is the new federal estate tax
• 2:54
  Speaker 3: exemption come January one, twenty twenty six. Well, obviously, if
• 3:01
  Speaker 3: I'm married and I'm over fifteen million, then I need
• 3:05
  Speaker 3: to think about estate planning because by being married and
• 3:09
  Speaker 3: doing an estate plan, doing a trust, you are going
• 3:13
  Speaker 3: to be able to shelter up to thirty million through
• 3:17
  Speaker 3: the use of these trusts. In fact, I have a
• 3:20
  Speaker 3: real life story if I could share it absolutely, had
• 3:24
  Speaker 3: a client come in sits down. I worked about thirty
• 3:28
  Speaker 3: nine million, not married, been together, I don't know, thirty years.
• 3:36
  Speaker 3: Kids from separate relationships explain to them that if you
• 3:42
  Speaker 3: get married, we can save about twenty million dollars in
• 3:46
  Speaker 3: a state tax. Wow, I think we're going to head
• 3:50
  Speaker 3: to the courthouse right away. Sure, I mean it's that important.
• 3:53
  Speaker 3: Right By being married and using trusts, you're able to
• 3:58
  Speaker 3: you know, shelter up to you know, thirty million dollars
• 4:03
  Speaker 3: from a state taxes. But again basic a state planning
• 4:06
  Speaker 3: would accomplish that. Now the flip side is what if
• 4:11
  Speaker 3: you're worth four million. Well, here in Massachusetts the exemption
• 4:15
  Speaker 3: is two million per person. Again, if you're married and
• 4:21
  Speaker 3: you do basic a state planning through the use of trusts.
• 4:24
  Speaker 3: We talk about them all the time, the marital share
• 4:26
  Speaker 3: and the remainder share, and those are the buckets that
• 4:30
  Speaker 3: provide the shelter on the first death to use up
• 4:35
  Speaker 3: the exemption so that it's not taxed on the second death. Well, again,
• 4:40
  Speaker 3: if you're married, we can eliminate four million dollars from
• 4:44
  Speaker 3: Massachusetts a state tax and eliminate your estate tax. If
• 4:48
  Speaker 3: you are married and you don't do anything, the whole
• 4:52
  Speaker 3: four million likely will pass to the surviving spouse. And
• 4:55
  Speaker 3: if the surviving spouse died with say five million, because
• 4:57
  Speaker 3: they lived a while, they would be o earth. The
• 5:00
  Speaker 3: tax would be about three hundred thousand to mass So
• 5:04
  Speaker 3: you kind of are wasting giving money to the state
• 5:07
  Speaker 3: by not doing some basic estate planning.
• 5:11
  Speaker 2: Talking with Todd Lutsky from Cushingen Dolan, this is your
• 5:14
  Speaker 2: chance to ask Todd your estate planning questions live on
• 5:17
  Speaker 2: air right now, still room at the phone line at
• 5:20
  Speaker 2: eight eight eight to zero five two two six three. Again,
• 5:25
  Speaker 2: that number is eight eight eight to zero five two
• 5:28
  Speaker 2: two sixty three, and it's your chance to ask Todd
• 5:31
  Speaker 2: your estate planning questions. We're going to take a quick
• 5:34
  Speaker 2: break now, but when we come back, we are going
• 5:37
  Speaker 2: to get to your questions. That phone number is eight
• 5:40
  Speaker 2: eight eight to zero five two two sixty three. Again,
• 5:44
  Speaker 2: it is eight eight eight to zero five two two
• 5:48
  Speaker 2: sixty three.
• 5:50
  Speaker 1: Ask Todd with Todd Letsky every Wednesday at ten thirty
• 5:53
  Speaker 1: only here on the Financial Exchange Radio Network. Todd Letsky
• 5:59
  Speaker 1: answers your questions about a state and elder life planning
• 6:02
  Speaker 1: every Wednesday at ten thirty right here on the Financial
• 6:05
  Speaker 1: Exchange Radio.
• 6:06
  Speaker 2: Network, talking with Tom Lotski from Kushing and Dolan. We
• 6:17
  Speaker 2: do still have some room on the phone lines for
• 6:19
  Speaker 2: your questions for Todd at eight eight eight to zero
• 6:23
  Speaker 2: five two two six three. Again, it's your opportunity to
• 6:27
  Speaker 2: ask Todd youre estate planning questions, and that phone number
• 6:30
  Speaker 2: is eight eight eight to zero five two two six three.
• 6:35
  Speaker 2: Let's go to Michael in Boston. Michael, what is your
• 6:38
  Speaker 2: question for Todd Alotsky.
• 6:41
  Speaker 4: Oh, good morning, thank you. I have an irrevocable trust.
• 6:45
  Speaker 4: I'm the grantor. The trust is about eleven years old,
• 6:49
  Speaker 4: and I wondered, uh for the beneficiary taxes? Uh? So,
• 6:57
  Speaker 4: as the grantor of the trust, now I'm taking for
• 7:01
  Speaker 4: myself any dividends and interest or income that of any
• 7:07
  Speaker 4: kind that accumulate on the trust, which I understand I'm
• 7:11
  Speaker 4: entitled to do if I'm not around anymore in the future.
• 7:18
  Speaker 4: My beneficiary will get a certain amount of money every month.
• 7:24
  Speaker 4: What is taxable to him he'll have to do I
• 7:29
  Speaker 4: imagine a ten forty one in addition to his ten
• 7:33
  Speaker 4: forty for the trust income. But if he takes out,
• 7:38
  Speaker 4: let's say, twenty five hundred dollars a month, if that's
• 7:42
  Speaker 4: designated by my trust, that he is able to take
• 7:45
  Speaker 4: out up to that amount, what is actually taxable on
• 7:50
  Speaker 4: his ten forty?
• 7:52
  Speaker 3: So let me ask you a couple of follow up questions. So, first,
• 7:57
  Speaker 3: you're the grandeur of the trust. Who's the trustee?
• 8:03
  Speaker 4: I have two, one of which is a beneficiary, So for.
• 8:09
  Speaker 3: Right now it's not you, and that's important.
• 8:12
  Speaker 4: Good.
• 8:13
  Speaker 3: So, so well you're living, You're saying the trust allows
• 8:18
  Speaker 3: you to pay income to yourself, right, interest and dividends, right,
• 8:22
  Speaker 3: so the trustee can give you the income. That's what
• 8:24
  Speaker 3: the trust says. Well, you're alive, correct.
• 8:28
  Speaker 4: I understand that I have understood that as grantor of
• 8:31
  Speaker 4: the trust, I do take out interest and dividends when
• 8:33
  Speaker 4: I need them.
• 8:34
  Speaker 3: Okay, so you don't. The trustee gives it to you
• 8:37
  Speaker 3: or it comes out from the trust. But yeah, we're
• 8:40
  Speaker 3: saying the same thing. So if you're getting the income,
• 8:45
  Speaker 3: and let's say the trust says just for other people's education.
• 8:48
  Speaker 3: If the trust says that the income shall be paid
• 8:51
  Speaker 3: to you, which is not uncommon, we draft our medicaid
• 8:54
  Speaker 3: irrevocable trust like this all the time. You know, then
• 8:59
  Speaker 3: it likely is a grand or trust and you will
• 9:02
  Speaker 3: be able to pick up the income on your personal return.
• 9:05
  Speaker 3: No problem. But the trust should still be filing a
• 9:09
  Speaker 3: ten forty one grant to or trust tax return. It
• 9:13
  Speaker 3: will end up showing zero on it, and it will
• 9:16
  Speaker 3: kick out a letter to you saying whether you took
• 9:19
  Speaker 3: the income or not, physically, it still gets picked up
• 9:23
  Speaker 3: on your tax return. So no problem, you're paying the
• 9:26
  Speaker 3: tax at your rate. Now fast forward to you dying
• 9:31
  Speaker 3: when you die, the trust is no longer a grand
• 9:33
  Speaker 3: tor trust because you died, so therefore it's going to
• 9:38
  Speaker 3: be a non grant tor trust and a new tax
• 9:41
  Speaker 3: ID number will be obtained, likely by the trustee. At
• 9:45
  Speaker 3: that point the trust will pay the income taxes on
• 9:50
  Speaker 3: the income, depending on how it's drafted, but likely if
• 9:53
  Speaker 3: it says hold stuff in trust for my beneficiaries and
• 9:57
  Speaker 3: they can get you know, income in the try trustees discretion,
• 10:01
  Speaker 3: or they can get you know, twenty five hundred a
• 10:03
  Speaker 3: month or whatever the rule is. Then to the extent
• 10:07
  Speaker 3: the income comes out of the trust physically to the kids,
• 10:15
  Speaker 3: then the trust would take an income distribution deduction and
• 10:19
  Speaker 3: not pay tax on it, and the kids would pick
• 10:22
  Speaker 3: it up on their personal return. So it's just a
• 10:25
  Speaker 3: function of how much comes out at that time. So
• 10:28
  Speaker 3: that's a little bit about how taxes work with these
• 10:31
  Speaker 3: irrevocable trusts. Folks, speaking of taxes, our guide this month,
• 10:37
  Speaker 3: balancing asset protection and avoiding estate taxes at the same time,
• 10:42
  Speaker 3: explains to you what we were talking about earlier, portability,
• 10:46
  Speaker 3: the pros and cons. It explains to you this marital share,
• 10:49
  Speaker 3: this remainder share, and actually walks you through how they
• 10:54
  Speaker 3: are designed to shelter the assets from estate taxes. And
• 10:59
  Speaker 3: it does the same thing for an irrevocable trust in
• 11:01
  Speaker 3: case you don't need the revocable trust and you're more
• 11:05
  Speaker 3: concerned about protecting assets from the nursing home as well.
• 11:09
  Speaker 3: And so it also gives you all the tables as
• 11:11
  Speaker 3: to how to calculate the estate tax so you can
• 11:14
  Speaker 3: put your own numbers in. It's really a great idea
• 11:17
  Speaker 3: to help you figure out which path is right for
• 11:19
  Speaker 3: you in estate planning. Call and get the guide. Uh
• 11:22
  Speaker 3: eight sixty six eight four eight five six nine nine
• 11:27
  Speaker 3: or Legal Exchange Show dot com again eight sixty six
• 11:31
  Speaker 3: eight four eight five six nine nine or Legal Exchange
• 11:36
  Speaker 3: Show dot com.
• 11:37
  Speaker 2: Todd, I got another one here for you. Let's go
• 11:39
  Speaker 2: to Tom in Charlestown. Tom, what is your question for Todd?
• 11:43
  Speaker 5: Good morning. My question has to do is I've heard
• 11:46
  Speaker 5: you mentioned Merriton's deduction that capped for example, if you know,
• 11:55
  Speaker 5: for federal tax purposes, you talked about fifteen million for
• 11:58
  Speaker 5: each persons and wife. So if your state is thirty
• 12:02
  Speaker 5: nine for example, like let's say when the husband dies, yeah,
• 12:05
  Speaker 5: that nine million become taxable because only the thirty million
• 12:09
  Speaker 5: is entitled to the metal deduction.
• 12:11
  Speaker 3: No, no, no no. So it's a great, great question.
• 12:15
  Speaker 3: So the fifteen million is the cap right per person
• 12:19
  Speaker 3: that you can leave to someone other than a spouse,
• 12:24
  Speaker 3: but doesn't matter this person. And I'll make up an example.
• 12:28
  Speaker 3: The person can be worth one hundred million. When you die,
• 12:32
  Speaker 3: you can leave one hundred million to your spouse and
• 12:35
  Speaker 3: there is zero tax to And remember while that sounds great,
• 12:41
  Speaker 3: it's not really great. Why because the survivor has one
• 12:45
  Speaker 3: hundred million, and the government's just waiting until the survivor
• 12:49
  Speaker 3: dies to get way more taxes than they would get
• 12:53
  Speaker 3: if you did planning. So under the forty million dollar example, right,
• 12:57
  Speaker 3: you know, I don't want to leave forty million have
• 13:00
  Speaker 3: and pay forty percent on the amount over fifteen million,
• 13:05
  Speaker 3: which is what would happen when the survivor dies. So
• 13:08
  Speaker 3: does that help out?
• 13:10
  Speaker 5: It does very much, Thank you very much.
• 13:11
  Speaker 3: Oh you're welcome. So I think a lot of people
• 13:14
  Speaker 3: are confused by these exemptions sometimes, Chuck, and I think
• 13:20
  Speaker 3: it's important for them to understand that this exemption, although
• 13:24
  Speaker 3: we speak about it today, not only works the way
• 13:26
  Speaker 3: I said that's the cap, it also goes up and down,
• 13:30
  Speaker 3: so we have laws that change, Like since twenty eleven,
• 13:34
  Speaker 3: this exemption has been all over the map, and that's
• 13:37
  Speaker 3: why it's so important for people to do their planning
• 13:40
  Speaker 3: to grab whatever exemption is in place when you die.
• 13:45
  Speaker 2: Has there been any indication of kind of where that
• 13:48
  Speaker 2: exemption is going in future years, like what is the
• 13:53
  Speaker 2: tax bill from this year? What does that specify things
• 13:55
  Speaker 2: look like over the next decade or so?
• 13:58
  Speaker 3: You know, it basically gives us the idea that the
• 14:01
  Speaker 3: fifteen million is still indexed for inflation, so it's tied
• 14:04
  Speaker 3: to some tables every year. So I think for the
• 14:07
  Speaker 3: next three years anyway, we can kind of envision this,
• 14:12
  Speaker 3: you know, going up. I don't know exactly how high
• 14:16
  Speaker 3: it will go up, but I envision it going up
• 14:18
  Speaker 3: over the next three years. Now, the bill itself says, oh, well,
• 14:24
  Speaker 3: you know, it's permanent. But folks, you know, we don't
• 14:27
  Speaker 3: want to be lulled into a sense of security. It's
• 14:29
  Speaker 3: not permanent. It's not permanent any more than any other
• 14:32
  Speaker 3: bill that came out in the past that says it's permanent.
• 14:37
  Speaker 3: It's permanent until you have a new administration. And when
• 14:40
  Speaker 3: you have a new administration, they're allowed to change things.
• 14:43
  Speaker 3: As you see from this one right, you can change
• 14:47
  Speaker 3: other rules, pass new tax laws, past new initiatives, et cetera.
• 14:52
  Speaker 3: So I expect I just can't see it staying so high.
• 14:56
  Speaker 3: I think the government needs money, and I think ultimately,
• 15:00
  Speaker 3: you know, after we get to the next administration that
• 15:04
  Speaker 3: will probably see some downward pressure on these exemptions.
• 15:10
  Speaker 2: Goa a couple seconds left. Any movement at the state
• 15:14
  Speaker 2: level for either new state level of state taxes or
• 15:18
  Speaker 2: change is happening to them.
• 15:19
  Speaker 3: Interestingly enough, we know it went recently from one million
• 15:22
  Speaker 3: to two million and twenty twenty three, and that was
• 15:24
  Speaker 3: in Massachusetts, and Massachusetts took a long time, and I've
• 15:27
  Speaker 3: actually seen some new legislation on that that maybe they'll
• 15:30
  Speaker 3: change again.
• 15:31
  Speaker 2: Mister Wotski, thanks for joining us.
• 15:32
  Speaker 3: Always a pleasure.
• 15:34
  Speaker 1: This has been Asked Odd on the Financial Exchange Radio Network,
• 15:37
  Speaker 1: Asked Todd with Todd. Lutsky has been presented by Cushing
• 15:40
  Speaker 1: and Dolan, serving Massachusetts and New England for more than
• 15:43
  Speaker 1: thirty years, helping families with the state and tax planning,
• 15:46
  Speaker 1: Medicaid planning and probate law. Call eight hundred three nine
• 15:49
  Speaker 1: three four thousand and one or visit Cushingdolan dot com.
• 15:52
  Speaker 1: The views expressed in this segment are solely those of
• 15:54
  Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
• 15:57
  Speaker 1: or tax advice. Please consult with your illegal or tax
• 15:59
  Speaker 1: advisor much matters. Cushing and Armstrong do not endorse each
• 16:02
  Speaker 1: other and are not affiliated