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Why Giving Assets to Your Kids Can Backfire · The Legal Exchange

• 0:00
  Speaker 1: This is The Legal Exchange with Todd Lutzke from the
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  Speaker 1: law firm of Cushing & Dolan and Susan Powers of
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  Speaker 1: the Armstrong Advisory Group. Each week, Todd and Susan will
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  Speaker 1: discuss many topics, including estate planning, how to avoid probate,
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  Speaker 1: and protecting your money from a nursing home. If you
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  Speaker 1: need assistance in any of these areas or have a
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  Speaker 1: question about another issue that may affect your future, call
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  Speaker 1: 866-848-5699 to make an appointment. That's 866-848-5699. Operators are standing by. Now,
• 0:31
  Speaker 1: here are your hosts, Todd Lutzke and Susan Powers.
• 0:37
  Speaker 2: Welcome into The Legal Exchange with Todd Lutzke. I'm Susan Powers,
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  Speaker 2: a financial advisor with the Armstrong Advisory, and I'm joined
• 0:44
  Speaker 2: by Todd Lutzke, a partner with the law firm of
• 0:46
  Speaker 2: Cushing & Dolan with a master's in taxation. Welcome, Todd.
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  Speaker 2: How are you today?
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  Speaker 3: I am doing well. And you?
• 0:53
  Speaker 2: You're not never better.
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  Speaker 3: Oh, never better.
• 0:56
  Speaker 2: I'm never better. I mean, the people have expected you
• 0:58
  Speaker 2: to be never better.
• 0:58
  Speaker 3: I'm never better today.
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  Speaker 2: I'm well, thank you.
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  Speaker 3: Okay.
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  Speaker 2: What do you have for us today?
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  Speaker 3: Oh, we got that out of the way.
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  Speaker 2: Yes.
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  Speaker 3: You've got two cases, actually. A Mississippi appellate court case
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  Speaker 3: dealing with a second marriage and a marital agreement that
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  Speaker 3: was put together. So it's interesting when you have a
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  Speaker 3: second marriage, there's a marital agreement put together to hold
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  Speaker 3: everything separate when you have separate property. And then life
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  Speaker 3: goes on. And later on, next thing you know, they
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  Speaker 3: get rid of the marital agreement and they start changing.
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  Speaker 3: They create trust. And the next thing you know, the
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  Speaker 3: second wife is getting a lot more than the kids.
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  Speaker 3: And all these changes happen during life. So and the
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  Speaker 3: kids were never told about it. And then it'll be
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  Speaker 3: interesting to see how there's some deceit when one spouse dies,
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  Speaker 3: where the surviving spouse tells the other kids, oh, yeah,
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  Speaker 3: it's exactly like your dad said. Right. Not really. Suspect.
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  Speaker 3: So always good to learn about that. And again, I
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  Speaker 3: think that's just a whole lot we're going to learn
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  Speaker 3: about second marriages on that one. And another one is
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  Speaker 3: actually kind of a situation where it's the same old
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  Speaker 3: story we've heard over and over. Don't give stuff to
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  Speaker 3: your children. In this case, Molly and Will are married
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  Speaker 3: and Molly's parents give something to the Molly and Will
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  Speaker 3: and then Will's parents give something to Molly and Will.
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  Speaker 3: And of course, the same old story, the relationship starts
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  Speaker 3: to go bad and everybody's not happy with what they
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  Speaker 3: gave away. So we'll explain how all that works and
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  Speaker 3: what actually transpired. And then what we'll learn from this
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  Speaker 3: is what?
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  Speaker 2: Sure.
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  Speaker 3: Don't give away.
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  Speaker 2: Don't give your stuff away. Certainly not to your kids.
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  Speaker 3: Plus, it's not even good just from a divorce standpoint.
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  Speaker 3: There's so many tax issues folks to learn about, but Folks,
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  Speaker 3: before we dive into that, I want to talk to
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  Speaker 3: you about the guide for the month, right? It's naming
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  Speaker 3: the estate, the beneficiary of your IRA. You don't think
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  Speaker 3: about it, but IRAs are usually in everyone's estate plan.
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  Speaker 3: That's an asset they have. And it's the hardest asset
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  Speaker 3: to deal with. You have to think about income taxes
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  Speaker 3: and estate taxes. And if you want to protect it
• 3:01
  Speaker 3: from the nursing home, you got to think about that.
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  Speaker 3: How do we deal with an IRA in your estate?
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  Speaker 3: This guide will help you do all of those. It'll
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  Speaker 3: help you deal with the estate tax side rather than
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  Speaker 3: just pass it to a spouse and waste an exemption.
• 3:15
  Speaker 3: It'll talk to you about how to handle the income
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  Speaker 3: required minimum distributions so you don't hurt yourself on that end.
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  Speaker 3: And if you couple your estate planning with a testamentary trust,
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  Speaker 3: which is a will built into your trust, you can
• 3:28
  Speaker 3: then also shelter the asset for Medicaid purposes. So all
• 3:35
  Speaker 3: three can be built in. Learn how best to fit
• 3:38
  Speaker 3: your IRA into your estate plan. Get this guide, folks.
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  Speaker 3: 866-848-5699 or LegalExchangeShow.com. Again, 866-848-5699 or LegalExchangeShow.com. All right, let's
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  Speaker 3: go to Mississippi. So we have Gene. He marries his
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  Speaker 3: second wife, Mary. And they have a marriage contract they
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  Speaker 3: put in place in 1970, agreeing that they're going to
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  Speaker 3: maintain the separately titled property separately.
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  Speaker 2: Is that like a premarital? Or maybe they create it
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  Speaker 2: during marriage?
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  Speaker 3: I'm not sure if it's premarital or not, but they're
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  Speaker 3: keeping these separate assets separate. Gene then told his kids, okay,
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  Speaker 3: after his death, the business and the property would pass
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  Speaker 3: to them. Oh, so they're happy. That was in 1970.
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  Speaker 3: Then in 1995, Gene's diagnosed with dementia. Two years later
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  Speaker 3: in 97, they removed, renounced rather, the marital agreement. Gene's
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  Speaker 3: kids are unaware of this action. Not that they have
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  Speaker 3: to tell them, they don't. 1998, Gene creates a trust.
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  Speaker 3: naming all his kids, grandkids, great-grandkids as beneficiaries, and they
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  Speaker 3: put about a million dollars worth of stock into the trust.
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  Speaker 2: Mm-hmm.
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  Speaker 3: Gene then creates a will, and his will says, the
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  Speaker 3: balance of my asset goes to Mary. Okay. Folks, the
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  Speaker 3: balance of the assets are $ 17 million.
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  Speaker 1: Wow.
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  Speaker 3: A little different than the million in trust for the kids.
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  Speaker 1: Yeah.
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  Speaker 4: Hmm.
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  Speaker 3: Jean's kids, again, are unaware of this trust or the will,
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  Speaker 3: even though Mary, as trustee of the trust, was required
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  Speaker 3: to tell them about the trust. Well, 2006 rolls along
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  Speaker 3: and Jean dies. Mary probates the will, but no notice
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  Speaker 3: was provided to the kids, and they were under the
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  Speaker 3: impression that Mary had a life estate in the real
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  Speaker 3: estate and that the property would pass to them upon
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  Speaker 3: her death. And Mary continued to tell them that they
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  Speaker 3: would get everything just like their dad said at her death. Well,
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  Speaker 3: that's not entirely true. 2024 rolls along and Mary dies
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  Speaker 3: well then the kids learn of everything they learn about
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  Speaker 3: the renunciation of the marriage contract they learn about the
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  Speaker 3: new trust the new will and much to their surprise
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  Speaker 3: they're not getting what they thought yeah so they file
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  Speaker 3: an action and the trial court ends up agreeing with
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  Speaker 3: Mary's estate saying that the kids claim was just time
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  Speaker 3: barred they waited too long they should have acted in
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  Speaker 3: 2006 not wait.
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  Speaker 5: Till 2024 yeah when Jean died how would they know Well,
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  Speaker 5: they should have known when he dies. Well, they weren't happy,
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  Speaker 5: so they appealed. And the appellate court reversed.
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  Speaker 3: You're happy, I can tell.
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  Speaker 2: I am happy about that.
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  Speaker 3: Yeah, but they reversed because the statute says that when
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  Speaker 3: there's a fraudulent concealment of information, which is exactly what
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  Speaker 3: Mary did, the clock doesn't begin to run on that
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  Speaker 3: statute until the fraud could reasonably be discovered, which really
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  Speaker 3: wasn't until Mary died in this case. So they're going
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  Speaker 3: to remand the case.
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  Speaker 2: So you don't have an answer for me, do you?
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  Speaker 3: They just decided that that made sense, that the summary
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  Speaker 3: judgment is not applicable. They need to remand the case
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  Speaker 3: and look into this.
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  Speaker 2: Before you come back with an update in a couple
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  Speaker 2: of years, if at all, I'm going to need more
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  Speaker 2: details about Mary's bloodline, how many kids she has, who
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  Speaker 2: the money's going to. I need more details. It's a
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  Speaker 2: lot of money.
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  Speaker 3: And so folks, I think about second marriages and what
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  Speaker 3: are some tips and lessons we can learn here, right?
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  Speaker 3: So One, you know, why did the trust only have
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  Speaker 3: a million dollars in it? I mean, I just don't,
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  Speaker 3: I don't get that. You know, you had so much money,
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  Speaker 3: you put all the rest then goes to probate because
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  Speaker 3: it goes through the will. So that's the first problem.
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  Speaker 3: And I actually had a real life story like this
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  Speaker 3: with a second marriage where, you know, the husband had
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  Speaker 3: two kids of his own and one together. And the
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  Speaker 3: one he adopted hers. And similar situation. But he's just
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  Speaker 3: worried that no matter what we do, I just want
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  Speaker 3: to make sure that my spouse... at the end of
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  Speaker 3: the day, if I die first, doesn't ultimately be able
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  Speaker 3: to give everything to just her kid.
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  Speaker 2: To disinherit his kid.
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  Speaker 3: And so, interesting idea. So when this came along, I
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  Speaker 3: would say, look, even like with this case, just put
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  Speaker 3: all the assets into trust, which he did. He said,
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  Speaker 3: I'm going to do two trusts, but he has all
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  Speaker 3: the assets from the marriage, so he puts them all
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  Speaker 3: in his trust. And you allocate a portion of, in
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  Speaker 3: this case, $ 17 million of the trust to a trust
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  Speaker 3: for his kids. And we did this. We recommended just
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  Speaker 3: taking the assets and saying, all right, if you want
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  Speaker 3: a million or two million, three million, stick it in
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  Speaker 3: a trust for the kids. Divorce, proof it, generation skipping,
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  Speaker 3: tax-free language. And this way, the spouse, stepmother, is not involved.
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  Speaker 3: And by the way, it's all three kids, even the
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  Speaker 3: adopted kids. Everyone's included in this. But he said, this way,
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  Speaker 3: you know, The spouse is not involved in this trust
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  Speaker 3: at all. Separate. It's done. Yeah. And we can move
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  Speaker 3: enough not to have an estate tax problem. There's no
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  Speaker 3: state estate tax and we move it over there. And
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  Speaker 3: then it says, you know, the balance of the assets
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  Speaker 3: can be held in trust for the benefit of Mary.
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  Speaker 3: Surviving spouse. Add one of the children from his marriage
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  Speaker 3: as spouse. Co-trustee.
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  Speaker 1: Yeah.
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  Speaker 2: So you have some checks and balances.
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  Speaker 3: They weren't really happy with that. So they said, we're
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  Speaker 3: going to need an independent trustee. So they put me
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  Speaker 3: on as independent trustee. But the nice part about this
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  Speaker 3: is now I've got a state tax of $ 17 million.
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  Speaker 3: You've got to have a state tax savings. So now
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  Speaker 3: you've got the marital share, the remainder share. We have
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  Speaker 3: language built in there to say income to spouse, principal
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  Speaker 3: as needed to maintain your standard of living as independent trustee.
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  Speaker 3: I'm obviously going to, I can't say no if they
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  Speaker 3: meet the standard. But obviously, we don't put a limited
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  Speaker 3: power of appointment in so they can't change the trust
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  Speaker 3: after he dies. And ultimately, at the end, she can't
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  Speaker 3: just decide, I'm going to make withdrawals because I need
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  Speaker 3: it and give it all to my kid. I would
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  Speaker 3: be able to stop that. Right. So it really takes
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  Speaker 3: care of everybody and the spouse and your side of
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  Speaker 3: the family. Yeah. So don't just do your planning, folks.
• 9:55
  Speaker 3: And when you're doing your planning, figure out how to
• 9:57
  Speaker 3: fit your IRA in. into your estate plan. This guide
• 10:03
  Speaker 3: does that for you. Get the guide. Learn how to
• 10:06
  Speaker 3: fit your IRA into your estate plan efficiently. 866-848-5699 or LegalExchangeShow.com. Again, 866-848-5699.
• 10:21
  Speaker 2: You've been listening to Todd Lutzky, a partner with the
• 10:24
  Speaker 2: law firm of Cushing and Dolan. I'm Susan Powers, a
• 10:27
  Speaker 2: financial advisor with the Armstrong Advisory Group. We've got much
• 10:31
  Speaker 2: more to come when we return to The Legal Exchange
• 10:34
  Speaker 2: with Todd Lutzky.
• 10:36
  Speaker 1: Leaving your IRA to your children may seem like the
• 10:38
  Speaker 1: obvious choice, but how they receive that money could have
• 10:41
  Speaker 1: important tax consequences. Cushing and Dolan has a new guide.
• 10:44
  Speaker 1: Why name your estate an IRA beneficiary? Under current rules,
• 10:48
  Speaker 1: most adult children who inherit an IRA must withdraw the
• 10:51
  Speaker 1: money within 10 years. That could mean taking retirement distributions
• 10:55
  Speaker 1: while they're still working and earning income, potentially creating a
• 10:58
  Speaker 1: larger tax bill. That's one reason why your IRA beneficiary
• 11:01
  Speaker 1: should be part of your overall estate plan. Who receives
• 11:04
  Speaker 1: the account, how they receive it, and the tax consequences
• 11:07
  Speaker 1: that may follow all deserve careful consideration. Get Cushing and
• 11:10
  Speaker 1: Dolan's new guide called Why Name Your Estate an IRA
• 11:13
  Speaker 1: Beneficiary by calling 866-848-5699.
• 11:15
  Speaker 4: That's 866-848-5699.
• 11:15
  Speaker 1: Or you can request the guide online at LegalExchangeShow.com. The
• 11:25
  Speaker 1: proceeding was paid for and the views expressed are solely
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  Speaker 1: those of Cushing and Dolan. Cushing and Dolan and or
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  Speaker 1: Armstrong Advisory may contact you offering legal or investment services.
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  Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
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  Speaker 4: Stuck in traffic again? Same road, same commute, same thought.
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• 13:06
  Speaker 1: Leaving your IRA to your children may seem like the
• 13:09
  Speaker 1: obvious choice, but how they receive that money could have
• 13:11
  Speaker 1: important tax consequences. Cushing and Dolan has a new guide.
• 13:15
  Speaker 1: Why name your estate an IRA beneficiary? Under current rules,
• 13:19
  Speaker 1: most adult children who inherit an IRA must withdraw the
• 13:22
  Speaker 1: money within 10 years. That could mean taking retirement distributions
• 13:25
  Speaker 1: while they're still working and earning income, potentially creating a
• 13:28
  Speaker 1: larger tax bill. That's one reason why your IRA beneficiary
• 13:32
  Speaker 1: should be part of your overall estate plan. Who receives
• 13:34
  Speaker 1: the account, how they receive it, and the tax consequences
• 13:37
  Speaker 1: that may follow all deserve careful consideration. Get Cushman Dolan's
• 13:41
  Speaker 1: new guide called Why Name Your Estate an IRA Beneficiary
• 13:45
  Speaker 1: by calling 866-848-5699. That's 866-848-5699. Or you can request the
• 13:52
  Speaker 1: guide online at LegalExchangeShow.com. The proceeding was paid for and
• 13:56
  Speaker 1: the views expressed are solely those of Cushing and Dolan.
• 13:58
  Speaker 1: Cushing and Dolan and or Armstrong Advisory may contact you
• 14:01
  Speaker 1: offering legal or investment services. Cushing and Dolan and Armstrong
• 14:03
  Speaker 1: Advisory do not endorse each other and are not affiliated.
• 14:06
  Speaker 1: You're listening to The Legal Exchange with Todd Lutzke, an
• 14:10
  Speaker 1: expert in elder life planning and taxation. Need help with
• 14:12
  Speaker 1: your estate plan? Call Todd right now and make an appointment. 866-848-5699.
• 14:18
  Speaker 1: That's 866-848-5699.
• 14:23
  Speaker 2: Welcome back into The Legal Exchange with Todd Lutzke. I'm
• 14:26
  Speaker 2: Susan Powers, a financial advisor with the Armstrong Advisory Group.
• 14:30
  Speaker 2: And I'm joined by Todd Lutzky, a partner with the
• 14:33
  Speaker 2: law firm of Cushing and Dolan with a master's in taxation.
• 14:37
  Speaker 2: Where are we headed now, Todd?
• 14:38
  Speaker 3: We're going to head over to the First Circuit, Federal
• 14:41
  Speaker 3: First Circuit. You know where that is?
• 14:43
  Speaker 4: No.
• 14:43
  Speaker 3: Massachusetts.
• 14:44
  Speaker 2: We're the First Circuit.
• 14:45
  Speaker 3: Okay. So this has got the old message that we
• 14:49
  Speaker 3: could probably say in unison, Susan. Don't give your stuff away.
• 14:54
  Speaker 3: In this case, Molly and Will Wentz are married in 2014.
• 14:59
  Speaker 3: Molly's parents decide to give one of their subdivisions to
• 15:05
  Speaker 3: Molly and Will. And they give it to them as
• 15:07
  Speaker 3: joint tenants by the entirety. So it's kind of awkward
• 15:10
  Speaker 3: that one, that Molly's parents are also including the spouse.
• 15:14
  Speaker 3: Joint tenants by the entirety, which is a creditor protection
• 15:17
  Speaker 3: statute that says if one of you get sued for
• 15:21
  Speaker 3: some reason or have a creditor, that creditor can't force
• 15:25
  Speaker 3: the separation of the property because To have at half
• 15:29
  Speaker 3: to recover for the one who is getting sued.
• 15:32
  Speaker 2: And they have a whole subdivision to give them?
• 15:34
  Speaker 3: Yeah, apparently. And it's joint tenants by the entirety.
• 15:37
  Speaker 2: Here's a neighborhood for you.
• 15:39
  Speaker 3: And so that's what that is. And so Molly and
• 15:43
  Speaker 3: Will then end up using a gift from Will's parents
• 15:48
  Speaker 3: of $ 1. 5 million to, you know, renovate the real estate.
• 15:53
  Speaker 3: But in 2019, the marriage gets a little shaky. For
• 15:57
  Speaker 3: Will and Molly. And at that moment, Wences, Will's parents,
• 16:03
  Speaker 3: they decide that they are going to memorialize this $ 1. 5
• 16:06
  Speaker 3: million quote gift, but really as a loan with a
• 16:10
  Speaker 3: promissory note. And Will signs it. But guess who doesn't
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  Speaker 3: sign it?
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  Speaker 6: Yeah.
• 16:15
  Speaker 1: Molly.
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  Speaker 3: So Molly's not signing that. So now we've got a
• 16:19
  Speaker 3: creditor problem. Why would she? 2020, Molly moves out of
• 16:22
  Speaker 3: the property and files for divorce. 2022, Molly moves back
• 16:26
  Speaker 3: in the property. And the Wentzes sue Will to collect
• 16:30
  Speaker 3: on the promissory note Molly didn't sign. And a quiet
• 16:34
  Speaker 3: title action against the property for Will, Molly, and Molly's family. Well,
• 16:40
  Speaker 3: later they dismissed the quiet title action and they were
• 16:45
  Speaker 3: awarded a default judgment against Will to collect on the
• 16:48
  Speaker 3: promissory note.
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  Speaker 2: Their son.
• 16:49
  Speaker 3: Yeah, their son. But remember, there's a strategy here.
• 16:53
  Speaker 2: I'm sure. Right?
• 16:54
  Speaker 3: They're not mad at their son.
• 16:55
  Speaker 6: Right.
• 16:56
  Speaker 3: Molly then is awarded the property, and Will directed the–
• 17:04
  Speaker 3: and was directed to transfer his interest to Molly. Well,
• 17:08
  Speaker 3: the Wences weren't happy with that, so they assigned their
• 17:10
  Speaker 3: judgment to the revocable trust they have, and they issued
• 17:13
  Speaker 3: a sheriff's notice to sell Will's interest in the property
• 17:17
  Speaker 3: on September 2022. Makes sense. They want to collect on
• 17:21
  Speaker 3: their note. Well, Molly files a summary judgment to stop
• 17:24
  Speaker 3: the sale, and the Wences, of course, file a cross-summary
• 17:26
  Speaker 3: judgment saying, no, we're going to force the sale. Well,
• 17:30
  Speaker 3: the district court says Molly was awarded the property, so
• 17:35
  Speaker 3: because Molly was awarded the property, that extinguished the creditor
• 17:38
  Speaker 3: rights of Will. Well, they appealed to the First Circuit,
• 17:45
  Speaker 3: and the First Circuit vacated the judgment and said— What
• 17:49
  Speaker 3: does that mean? Meaning they're, like, reversing. stating that the
• 17:53
  Speaker 3: lien may not just go away like this. You really
• 17:59
  Speaker 3: have to look more closely at what happens to a
• 18:02
  Speaker 3: lien when property owned by joint tenancy by the entirety,
• 18:07
  Speaker 3: which I described earlier as an important creditor protection issue,
• 18:10
  Speaker 3: is transferred to the non-creditor. You have to analyze that.
• 18:14
  Speaker 3: Summary judgment's not the way to go. So they're going
• 18:16
  Speaker 3: to remand this.
• 18:17
  Speaker 2: I need you to translate everything you just said into English.
• 18:21
  Speaker 6: Please.
• 18:22
  Speaker 3: So this is, I will give you the quick rundown
• 18:25
  Speaker 3: on this. It's at the end of the day, you
• 18:27
  Speaker 3: got a promissory note against one person who owns property
• 18:31
  Speaker 3: with another person, joint tenants by the entirety. When you
• 18:36
  Speaker 3: end up having transferred half of that property from Will
• 18:40
  Speaker 3: to Molly by order, what happens to the creditor? Can
• 18:43
  Speaker 3: the creditor still go after that half of the property
• 18:46
  Speaker 3: now that you separated it? Right. Because you can't force
• 18:48
  Speaker 3: the separation because it's tenants by the entirety.
• 18:50
  Speaker 2: But once they do it.
• 18:51
  Speaker 3: But once it's, told to be separated, can't you grab
• 18:54
  Speaker 3: on to that piece or not? We'll have to talk
• 18:58
  Speaker 3: about it.
• 18:59
  Speaker 2: Yeah.
• 19:00
  Speaker 3: They have to talk about it. That's why it was remanded.
• 19:02
  Speaker 2: Thanksgiving's going to be awkward for them.
• 19:03
  Speaker 3: A little awkward, yeah. Again, folks, don't give away stuff.
• 19:07
  Speaker 3: Certainly your IRA is an asset that you can't give
• 19:09
  Speaker 3: away anyway because there's huge income tax if you do.
• 19:11
  Speaker 3: So don't do that. But because you have to deal
• 19:14
  Speaker 3: with income tax issues and estate tax issues and even
• 19:17
  Speaker 3: nursing home issues if you want to, the IRA becomes
• 19:21
  Speaker 3: one of the most complicated assets to fit into your
• 19:23
  Speaker 3: estate plan. Learn how to use a testamentary trust, which
• 19:27
  Speaker 3: is a will built into your trust, and how to
• 19:31
  Speaker 3: name your estate the beneficiary of the IRA. Couple all
• 19:35
  Speaker 3: that together, and you'll figure out the way to get
• 19:38
  Speaker 3: good estate tax savings, not create adverse income taxes on
• 19:44
  Speaker 3: the RMDs that come out of an IRA, and at
• 19:46
  Speaker 3: the same time, protect the asset from the cost of
• 19:49
  Speaker 3: nursing home care. Call and get the guide. Learn how
• 19:52
  Speaker 3: this works, folks. 866-848-5699 or LegalExchangeShow.com. And again, 866-848-5699 or LegalExchangeShow.com.
• 20:07
  Speaker 3: And you can always go to Cushing Dolan PC, our
• 20:09
  Speaker 3: Instagram page for even more information.
• 20:13
  Speaker 2: There's got to be a better way to get your
• 20:14
  Speaker 2: stuff to your kids.
• 20:15
  Speaker 3: You certainly don't give things away. So folks, just let's
• 20:19
  Speaker 3: forget the fact that we gave it away and they
• 20:23
  Speaker 3: got divorced. That's an obvious problem that you're faced with
• 20:27
  Speaker 3: when you give assets away. Think about just the tax
• 20:30
  Speaker 3: issues of what you did, right? The first problem is
• 20:33
  Speaker 3: when you give things away, You give away the assets.
• 20:36
  Speaker 3: You lose all control over it, like here, right? That's
• 20:40
  Speaker 3: not a good deal. It becomes subject to the kids' creditors,
• 20:43
  Speaker 3: like here, the divorce. And also, it's not really good
• 20:48
  Speaker 3: for the kids, right? Now these kids got this subdivision
• 20:52
  Speaker 3: that Molly's parents probably bought years and years ago for
• 20:57
  Speaker 3: little money, and there's probably a huge built-in gain.
• 21:00
  Speaker 6: Yeah.
• 21:01
  Speaker 3: On this property. Maybe Molly's parents doing estate planning and
• 21:05
  Speaker 3: having them inherit it might have been a better way
• 21:07
  Speaker 3: to go. Cause then we could get a step up
• 21:10
  Speaker 3: in basis, eliminating all the built in gain. So not
• 21:14
  Speaker 3: even helpful for the kids to get it in advance.
• 21:17
  Speaker 3: So you need to think about these things when you're
• 21:20
  Speaker 3: doing your plan. And that's where I think the family here,
• 21:23
  Speaker 3: and it would have been a little complicated because both
• 21:25
  Speaker 3: sides of the, family got involved in the giving. So
• 21:29
  Speaker 3: both sides of the family would have to rethink their
• 21:32
  Speaker 3: estate plan. So let's just try to walk through some
• 21:36
  Speaker 3: of the things that you could do. If I'm Molly's
• 21:40
  Speaker 3: parents and I've got this piece of property that I
• 21:42
  Speaker 3: want to go to Molly, I could have it set
• 21:44
  Speaker 3: up in my trust that when I die, the property
• 21:47
  Speaker 3: located at XYZ is to go to Molly or to
• 21:52
  Speaker 3: be offered to Molly with a first right of refusal maybe. Say,
• 21:55
  Speaker 3: you know, Molly, You know, you can have this at
• 21:58
  Speaker 3: a first right of refusal to buy the property out.
• 22:00
  Speaker 3: So the other kids are going to get taken care
• 22:03
  Speaker 3: of in some way.
• 22:04
  Speaker 6: Right.
• 22:05
  Speaker 3: Or and so that would probably be the first step.
• 22:09
  Speaker 3: But then you have the other parent who wants to
• 22:12
  Speaker 3: give money for them to fix up the place.
• 22:15
  Speaker 4: Right.
• 22:15
  Speaker 3: Well, I think if I'm the other parent, I'm saying, well,
• 22:18
  Speaker 3: this is my one point five million. I don't want
• 22:20
  Speaker 3: to necessarily give this money to you. I'll loan it
• 22:24
  Speaker 3: to you, which is an option. And I'll take back
• 22:27
  Speaker 3: a promissory note. And then we'll have stuff in our
• 22:30
  Speaker 3: language that says, as you pay back the note, the
• 22:34
  Speaker 3: value of the outstanding note comes down and the money
• 22:37
  Speaker 3: you're putting towards this property goes towards the purchase price.
• 22:41
  Speaker 2: And you could forgive that when you die, right? It's
• 22:44
  Speaker 2: part like an advance on their inheritance.
• 22:46
  Speaker 3: And I think that's the thing. You could then say, listen,
• 22:48
  Speaker 3: at that moment, you might either say, look, I still
• 22:51
  Speaker 3: want you to buy out the other kids, because remember,
• 22:54
  Speaker 3: the other parents might say they hold the real estate,
• 22:56
  Speaker 3: you got to buy me out. But the price could
• 22:58
  Speaker 3: have been reduced because of the fact that they've already
• 23:00
  Speaker 3: paid into it, you know, on this note. And then
• 23:03
  Speaker 3: by the same token, the Wentz's family could say in
• 23:07
  Speaker 3: their document, okay, I've got this outstanding promissory note that
• 23:11
  Speaker 3: is still due. We could treat that as an advancement,
• 23:15
  Speaker 3: which means we then have to reach into this bucket
• 23:18
  Speaker 3: of money that we have in our trust and give
• 23:20
  Speaker 3: everybody else my other kids a similar amount. So if
• 23:24
  Speaker 3: the outstanding balance was 400,000 on the note, then you'd
• 23:28
  Speaker 3: have to, and you have two other kids, you'd have
• 23:30
  Speaker 3: to find $ 400, 000 for each of the other kids in
• 23:33
  Speaker 3: the bucket before we divide anything else equally.
• 23:36
  Speaker 2: Give that to them and then divide.
• 23:38
  Speaker 3: Treat it as an advancement. So there's, there's many creative
• 23:41
  Speaker 3: formulas you can do to take care of it, but
• 23:44
  Speaker 3: folks don't give away your assets. It just never works.
• 23:49
  Speaker 3: And folks, dealing with your IRA, that's something you can't
• 23:52
  Speaker 3: give away anyway because you got a huge income tax
• 23:55
  Speaker 3: problem by taking it out when you give it away.
• 23:57
  Speaker 3: Learn how to best fit it into your estate plan, 866-848-5699,
• 24:01
  Speaker 3: or go to our website, LegalExchangeShow.com and download it there.
• 24:08
  Speaker 2: You've been listening to Todd Lutzky, a partner with the
• 24:10
  Speaker 2: law firm of Cushing & Dolan. I'm Susan Powers, a
• 24:14
  Speaker 2: financial advisor with the Armstrong Advisory Group. Todd will be
• 24:17
  Speaker 2: answering your listener questions when we return to The Legal
• 24:20
  Speaker 2: Exchange with Todd Lutzke.
• 24:23
  Speaker 1: Leaving your IRA to your children may seem like the
• 24:25
  Speaker 1: obvious choice, but how they receive that money could have
• 24:28
  Speaker 1: important tax consequences. Cushing and Dolan has a new guide.
• 24:32
  Speaker 1: Why name your estate an IRA beneficiary? Under current rules,
• 24:35
  Speaker 1: most adult children who inherit an IRA must withdraw the
• 24:38
  Speaker 1: money within 10 years. That could mean taking retirement distributions
• 24:42
  Speaker 1: while they're still working and earning income, potentially creating a
• 24:45
  Speaker 1: larger tax bill. That's one reason why your IRA beneficiary
• 24:49
  Speaker 1: should be part of your overall estate plan. Who receives
• 24:51
  Speaker 1: the account, how they receive it, and the tax consequences
• 24:54
  Speaker 1: that may follow all deserve careful consideration. Get Cushing and
• 24:58
  Speaker 1: Dolan's new guide called Why Name Your Estate an IRA
• 25:01
  Speaker 1: Beneficiary by calling 866-848-5699.
• 25:02
  Speaker 3: That's 866-848-5699.
• 25:02
  Speaker 1: Or you can request the guide online at LegalExchangeShow.com. The
• 25:12
  Speaker 1: proceeding was paid for and the views expressed are solely
• 25:14
  Speaker 1: those of Cushing and Dolan. Cushing and Dolan and or
• 25:16
  Speaker 1: Armstrong Advisory may contact you offering legal or investment services.
• 25:19
  Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
• 25:21
  Speaker 1: other and are not affiliated.
• 25:26
  Speaker 2: You've been saying one more year for the past five
• 25:29
  Speaker 2: years and now. You're still sitting in the same traffic,
• 25:33
  Speaker 2: taking the same exits, wondering when work finally becomes optional.
• 25:37
  Speaker 2: At the Armstrong Advisory Group, we help people create personalized
• 25:41
  Speaker 2: retirement plans so they can better understand their income, investments, taxes,
• 25:46
  Speaker 2: and Social Security strategy. Don't say one more year again
• 25:49
  Speaker 2: without learning about these issues so you can make the
• 25:51
  Speaker 2: most educated decision for yourself and your family. Let us
• 25:55
  Speaker 2: review your portfolio and offer suggestions that may provide a
• 25:59
  Speaker 2: clearer timeline for your retirement. Schedule your no-obligation meeting today
• 26:03
  Speaker 2: by visiting us at armstrongadvisory.com. That's armstrongadvisory.com. The Armstrong Advisory Group.
• 26:10
  Speaker 2: We answer only to you.
• 26:12
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 26:13
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 26:15
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 26:18
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 26:20
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 26:22
  Speaker 1: advisory services. Who you name as the beneficiary of your
• 26:25
  Speaker 1: IRA can affect more than who gets the money. Cushing
• 26:27
  Speaker 1: and Dolan's guide, Why Name Your Estate an IRA Beneficiary,
• 26:30
  Speaker 1: explains how that decision can affect taxes, asset protection, and
• 26:34
  Speaker 1: what's ultimately left for your family. Get the guide today
• 26:37
  Speaker 1: by calling 866-848-5699 or request it online at LegalExchangeShow.com. The
• 26:43
  Speaker 1: proceedings paid for and the views expressed are solely those
• 26:45
  Speaker 1: of Cushing and Dolan. Cushing and Dolan and or Armstrong
• 26:47
  Speaker 1: Advisory may contact you offering legal or investment services. Cushing
• 26:50
  Speaker 1: and Dolan and Armstrong Advisory do not endorse each other
• 26:52
  Speaker 1: and are not affiliated.
• 26:55
  Speaker 6: Our nation's veterans answered the call to serve today the
• 26:59
  Speaker 6: disabled american veterans department of massachusetts is there to support
• 27:03
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• 27:09
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• 27:12
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• 27:20
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• 27:24
  Speaker 1: You're listening to The Legal Exchange, and it's time for
• 27:27
  Speaker 1: Ask Todd, the segment where Todd will answer your questions
• 27:31
  Speaker 1: about anything and everything that's included in the estate planning process.
• 27:35
  Speaker 1: Once again, here's Todd Lutzke and Susan Powers.
• 27:40
  Speaker 2: Welcome back, Todd. We have a few questions from listeners
• 27:43
  Speaker 2: for you. First question comes from Donna in Millbury, Mass.,
• 27:46
  Speaker 2: and Donna writes, Four years ago, my mother created a
• 27:49
  Speaker 2: life estate and listed myself and my brother on the
• 27:52
  Speaker 2: deed to her home.
• 27:53
  Speaker 3: Ruh-roh.
• 27:54
  Speaker 2: She now wants to sell the home and downsize. She
• 27:57
  Speaker 2: has had a falling out with my brother, and he
• 27:59
  Speaker 2: said he will not sign the P & S because
• 28:01
  Speaker 2: the property is already half his. Does my mother have
• 28:05
  Speaker 2: any legal recourse? This is going in that pilot, don't
• 28:09
  Speaker 2: give your stuff away. It really does.
• 28:10
  Speaker 3: It does go down the road of the don't give
• 28:12
  Speaker 3: your stuff away. This was giving it away in another way.
• 28:15
  Speaker 2: A little teeny bit less bad, but still bad.
• 28:18
  Speaker 3: It's a little teeny bit less bad. Yeah, I mean,
• 28:21
  Speaker 3: the example we had with that case was, I mean,
• 28:23
  Speaker 3: they just, Gave it to us. Gave it right out.
• 28:25
  Speaker 3: It's just bad news, right? This is less bad, but
• 28:28
  Speaker 3: still bad, which is also a great example for why
• 28:32
  Speaker 3: we talk about the fact that we generally don't do
• 28:37
  Speaker 3: life estates. Very rare. And whenever we do do them,
• 28:42
  Speaker 3: we never do them so that the remainder interest, and
• 28:46
  Speaker 3: by the way, folks, the remainder interest in a life
• 28:48
  Speaker 3: estate is the part you give away.
• 28:50
  Speaker 1: Yeah.
• 28:52
  Speaker 3: We never make the remainder interest the kids. Right. You know,
• 28:55
  Speaker 3: you want to make it an irrevocable trust that you
• 28:57
  Speaker 3: put together or something like that, I'm fine. But not
• 29:00
  Speaker 3: the kids.
• 29:01
  Speaker 6: Yeah.
• 29:01
  Speaker 3: So this would be a hard stop in our situation.
• 29:05
  Speaker 2: So because it's a life estate and she's still living,
• 29:09
  Speaker 2: you basically have three owners, right? You have mom, the son,
• 29:14
  Speaker 2: and the daughter.
• 29:14
  Speaker 3: Yes, you do. You have three owners. And so in
• 29:17
  Speaker 3: this case, when you... When you make this, you've made
• 29:21
  Speaker 3: a completed gift of a future interest in the property
• 29:24
  Speaker 3: to the brother and the daughter. Mm-hmm. Or the brother
• 29:26
  Speaker 3: and the— The son and the daughter, yeah. Son and daughter. And,
• 29:30
  Speaker 3: you know, technically a gift tax return would have been due.
• 29:32
  Speaker 3: And now what, you know, Donna kept, or is Donna
• 29:35
  Speaker 3: the daughter? Donna's the daughter. What mom kept is the
• 29:40
  Speaker 3: right to live there, among other things, but she's the
• 29:42
  Speaker 3: current owner. No one can kick her out. She has
• 29:44
  Speaker 3: the right to all the income. If the property is rented,
• 29:48
  Speaker 3: she gets that and she pays the maintenance and upkeep.
• 29:50
  Speaker 3: And it's, she's really the present owner. And that's a
• 29:53
  Speaker 3: good feeling.
• 29:55
  Speaker 2: Lowercase O because she can't do anything without them, right?
• 29:59
  Speaker 3: True. I mean, but let's just play out a few
• 30:01
  Speaker 3: of the good things before I talk about these bad things.
• 30:04
  Speaker 3: That right to live there is important. It did start
• 30:06
  Speaker 3: a five-year waiting period for nursing homes. So if that's
• 30:09
  Speaker 3: what their goal was, that that house will be protected
• 30:12
  Speaker 3: from the cost of long-term care. And it will, if
• 30:18
  Speaker 3: they don't have any problems, it will. When she dies,
• 30:21
  Speaker 3: it would be fully included in the estate for estate
• 30:24
  Speaker 3: tax purposes. So you would get a full step up
• 30:26
  Speaker 3: in basis to the children, which is wonderful. Not like
• 30:29
  Speaker 3: what happened in our case. And so that would eliminate
• 30:33
  Speaker 3: the built in gain for the kids. And that that's
• 30:35
  Speaker 3: a bonus for the kids. And again, it would be
• 30:38
  Speaker 3: protected from the nursing home. So those are some good things.
• 30:41
  Speaker 3: But the bad things are like now, you know, so
• 30:44
  Speaker 3: she said that a falling out and that she wants
• 30:46
  Speaker 3: to sell and downsize and move, which is not uncommon.
• 30:51
  Speaker 3: And to do that, she's going to need three signatures.
• 30:58
  Speaker 3: And if one doesn't want to sign, just a hard
• 31:01
  Speaker 3: and fast answer is no, she really doesn't have any recourse.
• 31:05
  Speaker 2: Wow.
• 31:07
  Speaker 3: I guess she could petition a partition and force the sale,
• 31:10
  Speaker 3: and that means that kid would have to either buy
• 31:12
  Speaker 3: out the others to own it 100%. To keep the house.
• 31:17
  Speaker 3: But still, she would only get a little piece because
• 31:20
  Speaker 3: she's a life tenant, right? So as a life tenant,
• 31:22
  Speaker 3: the older you get, the smaller your percentage ownership is
• 31:26
  Speaker 3: from a money standpoint.
• 31:27
  Speaker 6: Right.
• 31:28
  Speaker 2: And you know the son's not giving back the money.
• 31:30
  Speaker 4: Right.
• 31:31
  Speaker 3: But if he was forced to buy it out, even
• 31:33
  Speaker 3: then she would only get a piece.
• 31:35
  Speaker 2: Right. So let's say they force the sale of it
• 31:39
  Speaker 2: and they sell it.
• 31:41
  Speaker 3: Oh, yeah.
• 31:41
  Speaker 2: He's keeping his portion.
• 31:42
  Speaker 3: He's keeping his portion. The daughter might give back some.
• 31:45
  Speaker 5: Right.
• 31:45
  Speaker 3: So you have this loss of control. You also have
• 31:48
  Speaker 3: adverse tax problems because the kids would have to pay
• 31:51
  Speaker 3: capital gains tax. Mom would get a capital gains exclusion
• 31:54
  Speaker 3: for her primary residence, but the piece she gets would
• 31:57
  Speaker 3: be kind of small. It's just on and on, folks.
• 32:00
  Speaker 3: Nothing good comes from this approach.
• 32:02
  Speaker 2: Sorry, Don, and not good news.
• 32:04
  Speaker 3: And folks, nothing good comes from not knowing how to
• 32:09
  Speaker 3: deal with your IRA in your estate because it has
• 32:12
  Speaker 3: income tax issues and estate tax issues. And of course,
• 32:15
  Speaker 3: if you're thinking about nursing home planning, you've got that
• 32:18
  Speaker 3: added in to the mix. This guide is wonderful in
• 32:21
  Speaker 3: helping you figure out how to fit your IRA into
• 32:24
  Speaker 3: your estate plan. Couple it with a testamentary trust. It
• 32:27
  Speaker 3: teaches you what a testamentary trust is and how to
• 32:30
  Speaker 3: use it. It's a trust built into your will so
• 32:32
  Speaker 3: that you can... Use that to name your estate the beneficiary.
• 32:37
  Speaker 3: Of course, you've got to be over 73 or the
• 32:39
  Speaker 3: required beginning date, whatever that is for you, and have
• 32:42
  Speaker 3: the trust in place and be married. Those are some
• 32:45
  Speaker 3: of the requirements. And then it would be sheltered from
• 32:49
  Speaker 3: estate taxes, and you can ultimately protect it from the
• 32:52
  Speaker 3: cost of nursing home care too, folks. And even without
• 32:55
  Speaker 3: a five-year waiting period. So call and get the guide.
• 32:57
  Speaker 3: So much in it.
• 32:58
  Speaker 2: 866-848-5699.
• 33:02
  Speaker 3: Or legalexchangeshow.com. Again, 866-848-5699 or legalexchangeshow.com. And you can always
• 33:11
  Speaker 3: go to Cushing Dolan PC for more information on our
• 33:14
  Speaker 3: Instagram page.
• 33:15
  Speaker 2: Last question comes from Marilyn in Newport, Rhode Island. And
• 33:18
  Speaker 2: Marilyn writes, I am remarried and together my husband and
• 33:22
  Speaker 2: I have two children, my biological child and his adopted child.
• 33:27
  Speaker 2: We have become estranged with his adopted child. I've been
• 33:31
  Speaker 2: trying to get my husband to do some estate planning,
• 33:34
  Speaker 2: but he keeps putting it off. If something happens to
• 33:37
  Speaker 2: both of us without a trust in place, how will
• 33:40
  Speaker 2: our assets be divided? Will his adopted child be included?
• 33:44
  Speaker 2: What is the best way to handle this from a
• 33:46
  Speaker 2: legal perspective?
• 33:48
  Speaker 1: Yeah, so.
• 33:50
  Speaker 3: At this point, if they've got no estate planning. Nothing.
• 33:53
  Speaker 2: It sounds like they don't even have a will in place.
• 33:55
  Speaker 3: I mean, the only thing you can at least hope
• 33:57
  Speaker 3: for if you're married here is to set up your
• 34:03
  Speaker 3: assets so that they're owned jointly with spouse, at least.
• 34:07
  Speaker 3: That way, at least you know it'll go to each other.
• 34:09
  Speaker 3: Doesn't mean that it's going to be good for the
• 34:12
  Speaker 3: children of each side of the marriage because you're going
• 34:15
  Speaker 3: to lose control over that. But at least you can
• 34:17
  Speaker 3: ensure that it would go to each other by having
• 34:20
  Speaker 3: everything owned jointly. Or put a designated beneficiary on things
• 34:27
  Speaker 3: like an IRA, a 401k, life insurance. If you want
• 34:32
  Speaker 3: to put beneficiaries on that. And by the way, you
• 34:34
  Speaker 3: can put beneficiaries on accounts as well. They don't have
• 34:36
  Speaker 3: to be owned jointly. You can have a named beneficiary
• 34:40
  Speaker 3: on individual accounts. And so you at least take that step.
• 34:47
  Speaker 3: That's not estate planning per se, which is what she
• 34:49
  Speaker 3: wants to do.
• 34:50
  Speaker 1: Right.
• 34:51
  Speaker 3: But it might be better than nothing.
• 34:53
  Speaker 2: But if they do that and she dies first, then
• 34:58
  Speaker 2: everything goes to him. And if he doesn't do any
• 35:00
  Speaker 2: kind of planning.
• 35:01
  Speaker 3: That's a good point. So play that string.
• 35:03
  Speaker 2: Then it all goes to his adopted child, right?
• 35:06
  Speaker 1: Yeah.
• 35:06
  Speaker 3: I mean, if he doesn't do any estate planning, then
• 35:10
  Speaker 3: her biological child is nothing to him legally.
• 35:16
  Speaker 1: Right.
• 35:17
  Speaker 3: To him, her biological child would be a step child.
• 35:22
  Speaker 3: And stepchildren are not children in the legal definition of
• 35:27
  Speaker 3: the word issue.
• 35:29
  Speaker 2: So they're out.
• 35:30
  Speaker 3: Right. So they wouldn't be included.
• 35:31
  Speaker 2: Unless they are included, right?
• 35:33
  Speaker 3: Right, Susan. Unless you do planning and you define the
• 35:37
  Speaker 3: kid as a child, then they're a child.
• 35:41
  Speaker 1: Right.
• 35:42
  Speaker 3: However, on the flip side, His adopted child, so let's
• 35:46
  Speaker 3: say this might have been a child from the first
• 35:48
  Speaker 3: marriage that was a stepchild that he was able to adopt.
• 35:53
  Speaker 3: And if you legally adopt a child, that means the
• 35:57
  Speaker 3: biological parent's parental rights have been terminated. And so if
• 36:03
  Speaker 3: they're terminated and you are now treated as a biological
• 36:07
  Speaker 3: child and you do fit into the word issue, or
• 36:11
  Speaker 3: at least in our trusts, We define adopted children as issue.
• 36:15
  Speaker 3: And so I would say here, if that's his only
• 36:21
  Speaker 3: child and he dies as a surviving spouse, second to die,
• 36:30
  Speaker 3: and no will, I'm going to guess that all the
• 36:34
  Speaker 3: assets would end up to that child. Yeah, they probably would.
• 36:37
  Speaker 3: I mean, you've got to check the intestate succession statute,
• 36:39
  Speaker 3: but I'm pretty sure that with no spouse... They would
• 36:43
  Speaker 3: look to children next. If there's no children, then they'd
• 36:45
  Speaker 3: look to parents and they'd look to siblings. So I
• 36:47
  Speaker 3: think it would get caught at the parent level. Folks,
• 36:51
  Speaker 3: don't let yourself get caught dealing with a certain asset
• 36:54
  Speaker 3: like an IRA. Figure out how best to fit the
• 36:57
  Speaker 3: IRA into your estate plan. Get the guide 866-848-5699 or LegalExchangeShow.com
• 37:06
  Speaker 3: and you can download a guide right there.
• 37:08
  Speaker 2: If you have a question you would like to ask Todd,
• 37:10
  Speaker 2: visit his website, LegalExchangeShow.com, and click on the Ask Todd tab.
• 37:15
  Speaker 2: Maybe I'll be able to read your question on the air,
• 37:17
  Speaker 2: and hopefully his answer will stop you from becoming one
• 37:20
  Speaker 2: of his next real-life stories. You've been listening to Todd Lutzke,
• 37:24
  Speaker 2: a partner with the law firm of Cushing & Dolan.
• 37:28
  Speaker 2: I'm Susan Powers, a financial advisor with the Armstrong Advisory Group.
• 37:32
  Speaker 2: We'll be back with more after this quick break on
• 37:35
  Speaker 2: The Legal Exchange with Todd Lutzke.
• 37:38
  Speaker 1: Leaving your IRA to your children may seem like the
• 37:40
  Speaker 1: obvious choice, but how they receive that money could have
• 37:43
  Speaker 1: important tax consequences. Cushing and Dolan has a new guide.
• 37:47
  Speaker 1: Why name your estate an IRA beneficiary? Under current rules,
• 37:51
  Speaker 1: most adult children who inherit an IRA must withdraw the
• 37:53
  Speaker 1: money within 10 years. That could mean taking retirement distributions
• 37:57
  Speaker 1: while they're still working and earning income, potentially creating a
• 38:00
  Speaker 1: larger tax bill. That's one reason why your IRA beneficiary
• 38:04
  Speaker 1: should be part of your overall estate plan. Who receives
• 38:06
  Speaker 1: the account, how they receive it, and the tax consequences
• 38:09
  Speaker 1: that may follow all deserve careful consideration. Get Cushing and
• 38:13
  Speaker 1: Dolan's new guide called Why Name Your Estate an IRA
• 38:16
  Speaker 1: Beneficiary by calling 866-848-5699.
• 38:17
  Speaker 3: That's 866-848-5699.
• 38:17
  Speaker 1: Or you can request the guide online at LegalExchangeShow.com. The
• 38:27
  Speaker 1: proceeding was paid for and the views expressed are solely
• 38:29
  Speaker 1: those of Cushing and Dolan. Cushing and Dolan and or
• 38:31
  Speaker 1: Armstrong Advisory may contact you offering legal or investment services.
• 38:34
  Speaker 1: Cushing and Dolan and Armstrong Advisory do not endorse each
• 38:36
  Speaker 1: other and are not affiliated.
• 38:39
  Speaker 3: Seeing some high volume out there on those.
• 38:41
  Speaker 6: Roads today, folks.
• 38:43
  Speaker 2: Sound familiar?
• 38:43
  Speaker 1: The Braintree split is backed up.
• 38:45
  Speaker 2: If your commute feels endless, it might be time to
• 38:48
  Speaker 2: ask a bigger question. Are you working because you want
• 38:50
  Speaker 2: to or because you think you have to? At the
• 38:52
  Speaker 2: Armstrong Advisory Group, our financial advisors help individuals and families
• 38:57
  Speaker 2: build retirement income plans designed around their goals, savings, social security, investments,
• 39:02
  Speaker 2: and overall financial picture. Retirement shouldn't be a guessing game.
• 39:06
  Speaker 2: Thank you. Thank you. Thank you. Schedule your meeting today
• 39:21
  Speaker 2: at ArmstrongAdvisory.com. That's ArmstrongAdvisory.com.
• 39:39
  Speaker 1: Who you name as the beneficiary of your IRA can
• 39:41
  Speaker 1: affect more than who gets the money. Cushing and Dolan's guide,
• 39:44
  Speaker 1: Why Name Your Estate an IRA Beneficiary, explains how that
• 39:47
  Speaker 1: decision can affect taxes, asset protection, and what's ultimately left
• 39:51
  Speaker 1: for your family. Get the guide today by calling 866-848-5699
• 39:54
  Speaker 1: or request it online at LegalExchangeShow.com. The proceedings paid for
• 39:59
  Speaker 1: and the views expressed are solely those of Cushing and Dolan.
• 40:01
  Speaker 1: Cushing and Dolan and or Armstrong Advisory may contact you
• 40:04
  Speaker 1: offering legal or investment services. Cushing and Dolan and Armstrong
• 40:07
  Speaker 1: Advisory do not endorse each other and are not affiliated.
• 40:12
  Speaker 6: Our nation's veterans answered the call to serve. Today, the
• 40:16
  Speaker 6: Disabled American Veterans Department of Massachusetts is there to support
• 40:20
  Speaker 6: our veterans through benefits assistance, transportation services, advocacy, and community outreach.
• 40:26
  Speaker 6: Their mission is to ensure no veteran has to face
• 40:29
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• 40:33
  Speaker 6: for the DAV Massachusetts or making a donation. Learn more
• 40:37
  Speaker 6: at DAVMA.org.
• 40:40
  Speaker 1: You're tuned to The Legal Exchange with Todd Lutzke. If
• 40:43
  Speaker 1: you or a loved one needs a nursing home stay,
• 40:45
  Speaker 1: call Todd right now at 866-848-5699 and let him make
• 40:50
  Speaker 1: sure your assets are protected. That's 866-848-5699 or visit him
• 40:55
  Speaker 1: online at LegalExchangeShow.com.
• 40:58
  Speaker 2: Welcome back into The Legal Exchange with Todd Lutzke. I'm
• 41:02
  Speaker 2: Susan Powers, a financial advisor with the Armstrong Advisory Group,
• 41:05
  Speaker 2: and I'm joined, of course, by Todd Lutzke, a partner
• 41:08
  Speaker 2: with the law firm of Cushing & Dolan with a
• 41:11
  Speaker 2: master's in taxation. So Todd, I have my own real
• 41:16
  Speaker 2: life story for you today.
• 41:17
  Speaker 1: I do.
• 41:18
  Speaker 2: We have mutual clients. So they've done their irrevocable trust
• 41:22
  Speaker 2: planning with you. And they were listening to the show
• 41:25
  Speaker 2: last weekend.
• 41:26
  Speaker 3: Okay.
• 41:27
  Speaker 2: And they said, hey, we want to talk about this
• 41:30
  Speaker 2: testamentary trust thing.
• 41:31
  Speaker 3: Oh boy.
• 41:32
  Speaker 4: Yeah.
• 41:32
  Speaker 2: So I'm going to give you their fact pattern and
• 41:35
  Speaker 2: you can discuss that.
• 41:36
  Speaker 1: Okay.
• 41:37
  Speaker 2: Husband's 81. The wife is 74. They created two irrevocable
• 41:42
  Speaker 2: trusts with you back in 2011, so well past the
• 41:45
  Speaker 2: look back period. So in their trust, they have their home.
• 41:51
  Speaker 2: It's worth about $ 625. It's half and half.
• 41:53
  Speaker 3: Got it.
• 41:54
  Speaker 2: They have two irrevocable trust investment accounts, total around $ 3 million.
• 41:59
  Speaker 2: It's about even.
• 42:00
  Speaker 3: So about $ 1. 5 in each.
• 42:01
  Speaker 2: In each, yep. And then outside their trust, They each
• 42:06
  Speaker 2: have an IRA. So the husband's is $ 800, 000 and the
• 42:10
  Speaker 2: wife's is $ 300, 000. Both of their trusts have creditor protection
• 42:18
  Speaker 2: for their only child. So they do the divorce proofing,
• 42:21
  Speaker 2: the creditor protection, all that language is in there. So
• 42:26
  Speaker 2: when they were listening to the show last weekend, they said,
• 42:31
  Speaker 2: should we be updating our beneficiaries... To be our estate
• 42:35
  Speaker 2: so we can protect these IRAs.
• 42:38
  Speaker 3: Yeah. And I think it's interesting. A lot of clients
• 42:40
  Speaker 3: who have done planning... I immediately said.
• 42:41
  Speaker 2: Call Todd. Find out. Yeah.
• 42:43
  Speaker 3: I mean, I think.
• 42:44
  Speaker 2: But I figured we'd talk about it here because a
• 42:46
  Speaker 2: lot of... This is a very similar profile to a
• 42:50
  Speaker 2: lot of our mutual clients.
• 42:52
  Speaker 1: Yeah.
• 42:52
  Speaker 3: I think you're right, Susan. I think at the end
• 42:54
  Speaker 3: of the day, it's also... People need to understand this
• 42:58
  Speaker 3: isn't something, it's new. 2022 is new in my, in
• 43:02
  Speaker 3: a state planning world, that's new. So there's a lot
• 43:05
  Speaker 3: of people who you just couldn't do this before. It
• 43:08
  Speaker 3: wasn't available, right? It wasn't an option. But after the
• 43:13
  Speaker 3: SECURE Act came out, it became available. So let's break
• 43:16
  Speaker 3: this down because there's a lot that you said. I
• 43:18
  Speaker 3: want to make it easier for folks to understand. You
• 43:20
  Speaker 3: got two irrevocable trusts. I just want to make sure
• 43:22
  Speaker 3: I got the numbers right. The $ 3 million is 1.5
• 43:25
  Speaker 3: in each trust. So that's a big number already in
• 43:28
  Speaker 3: those trusts. And let's just call the house $ 300, 000 each,
• 43:31
  Speaker 3: half in each, right? So you got about 1.8. in
• 43:38
  Speaker 3: each trust, which is pretty good, but it's still $ 200, 000
• 43:42
  Speaker 3: short of the estate tax magic number of 2 million.
• 43:47
  Speaker 3: So you really want to be able to shelter 2
• 43:48
  Speaker 3: million if you can. But in this case, if one died,
• 43:51
  Speaker 3: the most they could shelter would be the 1.8. So
• 43:54
  Speaker 3: people understand that. That's all that's in the trust. That's
• 43:56
  Speaker 3: all that can be sheltered for estate taxes. And so
• 44:02
  Speaker 3: that's step one. And so, okay. How can I use
• 44:06
  Speaker 3: this IRA money, 800, 300, husband and wife? Right now,
• 44:12
  Speaker 3: I'm going to just tell you that the surviving spouse
• 44:15
  Speaker 3: is probably the beneficiary.
• 44:16
  Speaker 6: Yes.
• 44:17
  Speaker 3: So if husband died, that 800 would all pass to
• 44:21
  Speaker 3: the spouse. I want them to understand where they are now,
• 44:24
  Speaker 3: and then we'll come back and talk about what we
• 44:27
  Speaker 3: can do. So that $ 800, 000 would pass to the surviving spouse.
• 44:31
  Speaker 3: Let's assume they're close in age, right? Oh, 81 and 74.
• 44:34
  Speaker 2: He's a little older and he is a little bit
• 44:36
  Speaker 2: in failing health.
• 44:37
  Speaker 3: Yeah, but still 81, 74 is not a big enough
• 44:40
  Speaker 3: difference from a required minimum distribution to make a difference.
• 44:43
  Speaker 3: So first, the $ 800, 000 would pass to the spouse. It
• 44:47
  Speaker 3: would be avoiding probate. It would remain subject to estate
• 44:53
  Speaker 3: tax when she dies because she got it all now.
• 44:56
  Speaker 3: So it's in her estate. She would be able to
• 44:59
  Speaker 3: take required minimum distributions over her 74-year-old life expectancy.
• 45:05
  Speaker 1: Yeah.
• 45:05
  Speaker 3: Not horrible. However, because she now owns it, it's subject
• 45:10
  Speaker 3: to the nursing home just like it was before when
• 45:14
  Speaker 3: he was alive. So we really didn't gain any estate
• 45:16
  Speaker 3: tax planning benefits or any nursing home planning benefits from
• 45:21
  Speaker 3: that arrangement. And folks, that's how almost everybody owns IRAs.
• 45:26
  Speaker 3: Just so you know, that's a carte blanche situation. general comment.
• 45:30
  Speaker 3: I don't love that. I'm going to tell you how
• 45:33
  Speaker 3: we can fix that in a minute. And you can
• 45:36
  Speaker 3: also learn how to fix that because that's exactly what's
• 45:40
  Speaker 3: going on in this guide, where it says, how do
• 45:42
  Speaker 3: we name the estate, the beneficiary of your IRA and
• 45:46
  Speaker 3: couple it with a testamentary trust, which I'm going to
• 45:49
  Speaker 3: explain in a minute. This will solve this problem, especially
• 45:54
  Speaker 3: since they are both older than their required beginning date.
• 45:58
  Speaker 3: which is 73 for most people, depending on when you're born.
• 46:03
  Speaker 3: So now this guide will say, oh, we're going to
• 46:06
  Speaker 3: show you a way to use that IRA to not
• 46:09
  Speaker 3: cause the required minimum distributions to be an income tax problem.
• 46:13
  Speaker 3: We're also going to shelter it from estate taxes on
• 46:16
  Speaker 3: the first death. And we are going to protect it
• 46:19
  Speaker 3: for the surviving spouse from the nursing home without a
• 46:23
  Speaker 3: five-year waiting period. There's a lot of balls in the
• 46:27
  Speaker 3: air there, folks, but that can be done. And that's
• 46:29
  Speaker 3: what this guide tells you to do or explains how
• 46:33
  Speaker 3: to do that. Call and get it 866-848-5699 or LegalExchangeShow.com. Again,
• 46:37
  Speaker 3: 866-848-5699 or LegalExchangeShow.com. You can also go to Cushing Dolan PC,
• 46:40
  Speaker 3: our Instagram page for more information. So, What do we do?
• 46:56
  Speaker 3: How do we fix it?
• 46:57
  Speaker 6: Yeah.
• 46:59
  Speaker 3: Well, the first thing that happens is we need to
• 47:03
  Speaker 3: change the designated beneficiary on the IRA to read. And
• 47:08
  Speaker 3: in this case, I don't have names. So I'll just say,
• 47:10
  Speaker 3: you know, John Smith, the estate of John Smith.
• 47:15
  Speaker 6: Okay.
• 47:16
  Speaker 3: Primary, no spouse, primary estate of John Smith. But we're
• 47:22
  Speaker 3: not going to do that unless we change their estate plan.
• 47:25
  Speaker 3: To add a testamentary trust.
• 47:28
  Speaker 2: Okay.
• 47:29
  Speaker 3: We have to add a testamentary trust, which is a
• 47:32
  Speaker 3: will built into the trust.
• 47:35
  Speaker 2: Trust built into the will.
• 47:36
  Speaker 3: I'm sorry, a trust built into the will. I didn't
• 47:38
  Speaker 3: learn all the fancy words in law school, so we'll
• 47:40
  Speaker 3: just call it a will trust.
• 47:43
  Speaker 6: Okay.
• 47:44
  Speaker 3: Now what? Well, now because he's over 73, he's 81,
• 47:50
  Speaker 3: we're not going to have an RMD problem, which I'll
• 47:53
  Speaker 3: explain in a minute. So if we Change the beneficiary
• 47:57
  Speaker 3: and add this testamentary trust. Now what have we done?
• 48:03
  Speaker 3: Now how does that change the whole dynamic, right? So
• 48:07
  Speaker 3: in this case, if he dies first, what will happen
• 48:11
  Speaker 3: is his IRA will no longer pass to the spouse. Instead,
• 48:19
  Speaker 3: and by the way, there has to be a little
• 48:20
  Speaker 3: downside to something that's so good. Sounds too good to
• 48:23
  Speaker 3: be true, but we'll say it is. Well, it still is.
• 48:25
  Speaker 3: It's a minor downside. This one item, the IRA, now
• 48:30
  Speaker 3: will pass through probate. Has to.
• 48:33
  Speaker 2: You're using the P word.
• 48:34
  Speaker 3: Has to. But it's only one item, folks. It's not
• 48:36
  Speaker 3: everything in the trust. It's just one item.
• 48:38
  Speaker 6: Right.
• 48:39
  Speaker 3: Makes it a lot easier. And it ends up in
• 48:43
  Speaker 3: the will trust. And now that it passed through probate
• 48:46
  Speaker 3: and it is in this will trust, this will trust
• 48:48
  Speaker 3: has language that says, it's available now. For the spouse.
• 48:53
  Speaker 3: Take it. Use it as you need it. Sole discretion.
• 48:56
  Speaker 3: So it's still available like it would be if you
• 48:59
  Speaker 3: gave it to her.
• 49:00
  Speaker 1: Yeah.
• 49:01
  Speaker 3: That's good. And because it's sitting in this will trust, this, quote,
• 49:07
  Speaker 3: remainder share type trust, it is going to get required
• 49:11
  Speaker 3: minimum distributions have to continue. Well, how? Well, they don't
• 49:16
  Speaker 3: come out over a 74-year-old life expectancy anymore. They're going
• 49:20
  Speaker 3: to come out over the ghost life expectancy of the decedent.
• 49:24
  Speaker 2: Okay. So still the 81.
• 49:25
  Speaker 3: So in English, the 81-year-old, the rate at which these
• 49:29
  Speaker 3: distributions are going to continue would have been the same.
• 49:32
  Speaker 6: Yes.
• 49:33
  Speaker 3: Okay. So we don't have a problem there. And now
• 49:36
  Speaker 3: when the surviving spouse dies, since we have $ 1. 8 million
• 49:40
  Speaker 3: in the bucket already in the trust, the main trust, $ 200, 000
• 49:44
  Speaker 3: of this $ 800, 000 will go in the remainder share, and
• 49:47
  Speaker 3: the rest will go in the marital share in this
• 49:50
  Speaker 3: testamentary trust. And so that means now we've been able
• 49:53
  Speaker 3: to shelter the entire $ 2 million of exemption. $ 1. 8 million
• 49:57
  Speaker 3: in his trust. and $ 200, 000 in the testamentary trust.
• 50:00
  Speaker 2: And more importantly, you're protecting $ 800, 000 from the nursing home.
• 50:04
  Speaker 3: For her, right? The last piece is those assets are
• 50:07
  Speaker 3: now also fully protected from the nursing home in that
• 50:11
  Speaker 3: testamentary trust, and there's no five-year waiting period. So if
• 50:15
  Speaker 3: the spouse, the surviving spouse, gets sick the next day,
• 50:19
  Speaker 3: it is completely protected. Folks, call and get this guide.
• 50:25
  Speaker 3: I can't nearly explain all of it in a radio show,
• 50:28
  Speaker 3: This guide gives you all the details. 866-848-5699 or LegalExchangeShow.com. Again,
• 50:37
  Speaker 3: 866-848-5699 or LegalExchangeShow.com.
• 50:43
  Speaker 2: Todd Lutzke from the law firm of Cushing and Dolan.
• 50:46
  Speaker 2: Thank you so much.
• 50:47
  Speaker 3: Thank you, Susan. Always a pleasure.
• 50:48
  Speaker 2: I'm Susan Powers, a financial advisor with the Armstrong Advisory Group.
• 50:52
  Speaker 2: We thank you for joining today and we'll be back
• 50:54
  Speaker 2: again next week on The Legal Exchange with Todd Lutzke.
• 50:58
  Speaker 1: Leaving your IRA to your children may seem like the
• 51:01
  Speaker 1: obvious choice, but how they receive that money could have
• 51:04
  Speaker 1: important tax consequences. Cushing and Dolan has a new guide.
• 51:07
  Speaker 1: Why name your estate an IRA beneficiary? Under current rules,
• 51:11
  Speaker 1: most adult children who inherit an IRA must withdraw the
• 51:14
  Speaker 1: money within 10 years. That could mean taking retirement distributions
• 51:17
  Speaker 1: while they're still working and earning income, potentially creating a
• 51:21
  Speaker 1: larger tax bill. That's one reason why your IRA beneficiary
• 51:24
  Speaker 1: should be part of your overall estate plan. Who receives
• 51:27
  Speaker 1: the account, how they receive it, and the tax consequences
• 51:30
  Speaker 1: that may follow all deserve careful consideration. Get Cushing and
• 51:33
  Speaker 1: Dolan's new guide called Why Name Your Estate an IRA
• 51:36
  Speaker 1: Beneficiary by calling 866-848-5699. That's 866-848-5699. Or you can request
• 51:44
  Speaker 1: the guide online at LegalExchangeShow.com. The proceeding was paid for
• 51:48
  Speaker 1: and the views expressed are solely those of Cushing and Dolan.
• 51:50
  Speaker 1: Cushing and Dolan and or Armstrong Advisory may contact you
• 51:53
  Speaker 1: offering legal or investment services. Cushing and Dolan and Armstrong
• 51:56
  Speaker 1: Advisory do not endorse each other and are not affiliated.
• 51:59
  Speaker 4: You spent years preparing for retirement, but there comes a
• 52:02
  Speaker 4: point when building your savings is only part of the plan. Hi,
• 52:05
  Speaker 4: this is Mike Armstrong from the Armstrong Advisory Group. Saving
• 52:08
  Speaker 4: more may provide additional financial security, but it can also
• 52:11
  Speaker 4: mean working longer than you need to. That means waiting
• 52:14
  Speaker 4: longer to enjoy what you've worked for, whether that's traveling,
• 52:17
  Speaker 4: being with family, or simply having more freedom to decide
• 52:20
  Speaker 4: how you spend your time. These are some of the
• 52:22
  Speaker 4: ideas included in our new guide, Five Hidden Costs of
• 52:26
  Speaker 4: Saving Too Much for Retirement. A retirement plan shouldn't just
• 52:29
  Speaker 4: tell you how much money to save. It should help
• 52:31
  Speaker 4: you understand what that money can allow you to do
• 52:34
  Speaker 4: and when you may be in a position to start
• 52:36
  Speaker 4: doing it. Get your free copy today by calling Armstrong
• 52:38
  Speaker 4: Advisory Group at 800-393-4001.
• 52:39
  Speaker 1: That's 800-393-4001.
• 52:40
  Speaker 3: Or you can request the guide at armstrongadvisory.com.
• 52:48
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 52:50
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 52:51
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 52:54
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 52:56
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 52:59
  Speaker 1: advisory services. Who you name as the beneficiary of your
• 53:01
  Speaker 1: IRA can affect more than who gets the money. Christian
• 53:04
  Speaker 1: Dolan's guide, Why Name Your Estate an IRA Beneficiary, explains
• 53:07
  Speaker 1: how that decision can affect taxes, asset protection, and what's
• 53:11
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  Speaker 6: Our nation's veterans answered the call to serve. Today, the
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  Speaker 6: Disabled American Veterans Department of Massachusetts is there to support
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  Speaker 6: our veterans through benefits assistance, transportation services, advocacy, and community outreach.
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  Speaker 6: Their mission is to ensure no veteran has to face
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  Speaker 6: life's challenges alone. You can make a difference by volunteering
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  Speaker 6: at DAVMA.org.