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Ask Todd: What is a nominee realty trust? · The Financial Exchange Show

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  Speaker 1: This is Ask Todd on the Financial Exchange Radio network.
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  Speaker 1: If you have an existing estate plan or in the
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  Speaker 1: market for one, Todd Lutsky is here to answer your
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  Speaker 1: with estate and tax planning, medicaid planning, and probate law.
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  Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
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  Speaker 2: Todd Lotsky from Cushing and Dolan does now join us
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  Speaker 2: planning questions. Phone lines are wide open at eight eight
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  Speaker 2: So if you've got questions about your estate plan, if
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  Speaker 2: live on air again eight eight eight to zero five
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  Speaker 2: two two six three. We can usually get through two
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  Speaker 2: often again. That number is eight eight eight two zero
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  Speaker 2: five two two six three. Mister w Lootsky, how are
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  Speaker 2: you doing today?
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  Speaker 3: I'm doing wonderful. How about yourself? Good?
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  Speaker 2: I was on Instagram the other day, Yeah, and I
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  Speaker 2: saw did you see this thing about the the green
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  Speaker 2: stripe dog that was just invented?
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  Speaker 3: Green stripe dog.
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  Speaker 2: Scientists put this thing together. It's it's part dog, part watermelon.
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  Speaker 2: They calling it a melancholy.
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  Speaker 4: Oh my gosh. Yeah, I'm gonna give you a Collie Todd.
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  Speaker 2: I want to talk to you a little bit about
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  Speaker 2: different types of trust today, specifically nomine realty trust. What
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  Speaker 2: is it and what does it actually do?
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  Speaker 4: You know, this is probably the best trust to ask
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  Speaker 4: about because it's one that is not a trust.
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  Speaker 2: How So, what you're saying is when is a trust
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  Speaker 2: not actually a trust?
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  Speaker 4: I think, and this would be the answer when it's
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  Speaker 4: a nominee realty trust because through so they shouldn't and
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  Speaker 4: it is. It's just that confusing, Chuck, You're right on
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  Speaker 4: the money here. It's it's called a trust, but it's
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  Speaker 4: really not. Remember the word nominee in there is what
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  Speaker 4: changes everything. So a nominee realty trust is often used
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  Speaker 4: too frequently and oftentimes by real estate lawyers that just
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  Speaker 4: want to say, oh, you just bought a house, let's
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  Speaker 4: put your house in a trust and they and they
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  Speaker 4: create this Nominee realty trust for you. They don't mean
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  Speaker 4: to not be doing anything for you, but it really
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  Speaker 4: doesn't do anything for you, but it could cause problems. Example,
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  Speaker 4: a Nominee realty trust is different than what we'll call
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  Speaker 4: a true trust because in a true trust, the trustee
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  Speaker 4: of the trust is the one that controls and does
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  Speaker 4: things for the trust, buy sales, invests, you name it.
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  Speaker 4: A Nominee realty trust is not controlled by the trustee.
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  Speaker 4: In fact, there's language in the trust that says the
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  Speaker 4: trustee can't do anything unless they're to directed to do
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  Speaker 4: so by the beneficiaries. And unlike a true trust, there's
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  Speaker 4: actually a schedule of beneficiaries in a Nominee realty trust
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  Speaker 4: that is generally attached to the Nominee realty trust, which
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  Speaker 4: oftentimes gets lost, so nobody ever knows who really is
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  Speaker 4: the beneficiary.
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  Speaker 3: But set that aside.
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  Speaker 4: If you put this asset into a trust, and you
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  Speaker 4: name let's say mom and dad put the house in
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  Speaker 4: a trust. They just bought it, and they throw it
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  Speaker 4: into a Nominee realty trust and the schedule of beneficiaries
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  Speaker 4: is mom and Dad. Well, they technically still own it
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  Speaker 4: because the beneficiary is really the owner because they're the
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  Speaker 4: ones that control the trust. They're the ones that tell
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  Speaker 4: the trustee what to do. And I guess there's no harm,
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  Speaker 4: no foul there, But you haven't done anything. The worst
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  Speaker 4: part is, or the problem is when they throw it
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  Speaker 4: into a nominee realty trust and they name the kids
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  Speaker 4: as the beneficiaries. Uh uh oh, Now you didn't realize
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  Speaker 4: that you made a completed gift to your children of
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  Speaker 4: what's in that trust. You don't own it anymore, the
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  Speaker 4: kids own it.
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  Speaker 1: Do that? If that?
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  Speaker 2: If that happens, like, is there just a reset button
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  Speaker 2: that you can use?
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  Speaker 5: There?
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  Speaker 4: Can It's called getting along with your children. If you
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  Speaker 4: get along with your children, then the reset button is
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  Speaker 4: we're gonna change the schedule of beneficiaries and put it
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  Speaker 4: back to mom and dad, and then we're gonna take
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  Speaker 4: the house out of this trust and we're gonna do
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  Speaker 4: real estate planning for mom and dad and do true trusts.
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  Speaker 4: So so yeah, But like I was saying, the biggest
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  Speaker 4: problem is when you stick the kids on as trustee,
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  Speaker 4: as beneficiaries. Now you're like, oh, oh, I gave away
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  Speaker 4: my house. I didn't mean to, but you did. And
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  Speaker 4: they might not even know it, but boy, if they
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  Speaker 4: get a divorce, they're gonna know it.
• 4:37
  Speaker 2: Talk with Todd Lotsky from the law firm of Cushing
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  Speaker 2: and Dole. And we've got space on the phone line
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  Speaker 2: still at eight eight Sorry, that's eight eight eight two
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  Speaker 2: We've got a quick break right now, but when we return,
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  Speaker 2: it's gonna be right to your questions with Todd. That
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  Speaker 2: phone number again is eight eight eight two zero five
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  Speaker 2: two two sixty three.
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  Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
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  Speaker 1: only here on the Financial Exchange Radio Network. Don't miss
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  Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
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  Speaker 1: only here on the Financial Exchange Radio Network.
• 5:33
  Speaker 2: All right, let's get right to your calls with Todd Lutsky.
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  Speaker 2: First up, we got Joe in Ellington. Joe, you're on
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  Speaker 2: with Todd.
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  Speaker 1: How you doing good?
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  Speaker 3: What's up?
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  Speaker 5: All right?
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  Speaker 1: Donna?
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  Speaker 2: Much question.
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  Speaker 5: Boy, I'm getting a little older on my fifty seven.
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  Speaker 3: Our house is paid off. We don't really we don't
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  Speaker 3: really have any debt.
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  Speaker 4: Okay, I'm trying to figure out the best way to
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  Speaker 4: protect my property if I get in bad health.
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  Speaker 3: We don't want to lose the property. How old your wife?
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  Speaker 3: My wife is fifty two, okay, so a little on
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  Speaker 3: the even younger side.
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  Speaker 5: Younger side, yeah.
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  Speaker 4: Generally sixty and over. But there's no magic depending on
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  Speaker 4: your family situation. I mean, you're fifty seven. We always
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  Speaker 4: plan for the older person, not that that's old, but
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  Speaker 4: but you know, it does take five years to get started.
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  Speaker 4: So you know, a house that's paid off is a
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  Speaker 4: perfect asset for one of these Medicaid irrevocable trusts. I
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  Speaker 4: think depending on where you are and your whole family kids,
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  Speaker 4: how old they are, and how independent or still on
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  Speaker 4: the you know, payroll they are, it might might make
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  Speaker 4: a difference for you. And of course the size of
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  Speaker 4: your estate might matter. So like if you had to guess,
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  Speaker 4: are you under the four million dollar Massachusetts exemption amount
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  Speaker 4: all in?
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  Speaker 5: Oh yeah, definitely yep.
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  Speaker 3: And I'm actually from Connecticut as well. Oh that's no problem.
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  Speaker 4: So Connecticut even has a much higher exemption, so you're
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  Speaker 4: definitely no tax worries for you. So it's more about protection,
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  Speaker 4: and so yeah, I would say it's very possible. I
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  Speaker 4: would think about the irrevocable medicaid type trust that we
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  Speaker 4: speak a lot about. It's also in the guide we're
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  Speaker 4: giving away this month, so that might be good to get.
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  Speaker 4: But I say, yes, you probably putting your house into
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  Speaker 4: an irrevocable medicaid trust would probably be the way to
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  Speaker 4: go as the best way to protect these assets not
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  Speaker 4: only from just a nursing home and creditors, but probate
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  Speaker 4: and it'll ensure a nice easy flow in a bloodline
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  Speaker 4: plan to your family. So hopefully that helps. I would
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  Speaker 4: definitely get on the horn with an estate planning lawyer
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  Speaker 4: and see if you can't get that going, and your
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  Speaker 4: call is timely, because that's one of the got one
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  Speaker 4: in our guide this month, the top seven estate planning trusts.
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  Speaker 4: That's one of the trusts that are in here, not
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  Speaker 4: only revocable trusts, irrevocable medicaid trusts, irrevocable life insurance trusts.
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  Speaker 4: First to die, second to die. You know, there's a
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  Speaker 4: pool trust if you have a special needs child. There's
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  Speaker 4: a special needs trust in here explained, and of course, Chuck,
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  Speaker 4: they not many realty trust which is the most misunderstood trust.
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  Speaker 4: It sort of leads the pack in this planning guide. So, folks,
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  Speaker 4: if you've never done your planning and you want to
• 8:09
  Speaker 4: figure out what is right for you, how to get
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  Speaker 4: started in your plan this guide is for you. If
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  Speaker 4: you've done your planning and you'd think, me, you know what,
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  Speaker 4: I haven't looked at it in ten years. Maybe I
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  Speaker 4: should see if I need an update or a different
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  Speaker 4: trust might be better for me.
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  Speaker 3: This guide's for you.
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  Speaker 4: Call and get the guide eight six six eight four
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  Speaker 4: eight five six nine nine or Legal Exchange Show dot com.
• 8:31
  Speaker 4: It also gives you all the tax advice that goes
• 8:34
  Speaker 4: with them eight six six eight four eight five six
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  Speaker 4: nine nine or Legal Exchange Show dot com.
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  Speaker 2: Todd, we've got another four hero. Let's go to Chris
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  Speaker 2: in Wittensville. Chris, you are on with Tom Lutsky.
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  Speaker 5: Hey, their guide.
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  Speaker 3: How you doing? What's what's your question?
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  Speaker 5: Sure? Well? My uh, I wish my wife had listened
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  Speaker 5: to the show as much as I do. Unfortunately, her
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  Speaker 5: mom is very, very old and you know, probably very
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  Speaker 5: close to the the nursing home retired. Yeah, nursing home
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  Speaker 5: at this point, and so, uh they what they she
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  Speaker 5: did is she put the kids on the name on
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  Speaker 5: the house, the ownership of the house.
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  Speaker 3: And all the kids.
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  Speaker 4: Yeah, so she she transferred the home too. I'm just
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  Speaker 4: gonna put this to the kids. Did she retain any
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  Speaker 4: kind of an interest like a life estate? Do you
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  Speaker 4: remember that word?
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  Speaker 2: Uh?
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  Speaker 5: No, I don't, And unfortunately I wasn't involved at the time.
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  Speaker 5: I think all that they all that they did is
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  Speaker 5: the husband, excuse me, the mom and the dad were
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  Speaker 5: listed and they listed the kids as owners of the
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  Speaker 5: home as well. And I think that's how they structured
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  Speaker 5: that as best as I can tell from what when
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  Speaker 5: I'm told. And then and then the rest of the assets,
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  Speaker 5: you know, the money that's available, was it they just
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  Speaker 5: she just has you know, they still own it, you know,
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  Speaker 5: the mom because the husband has passed away now, so
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  Speaker 5: the money.
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  Speaker 4: The money, these accounts you think are just in mom's
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  Speaker 4: name alone.
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  Speaker 5: I do, yep, I really believe that. And so I
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  Speaker 5: didn't know if there was any advice at this point
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  Speaker 5: to say, you know what, what is there anything at all?
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  Speaker 4: Well, let me do let me ask you this, how
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  Speaker 4: long ago did she transfer the house to the kids? Completely?
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  Speaker 5: That was that was more than five years. I do
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  Speaker 5: know that that was probably ten years ago.
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  Speaker 3: Okay. So and how much money would you say is
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  Speaker 3: kicking around?
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  Speaker 5: If you had to guess, oh, I don't know, eighty
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  Speaker 5: thousand bucks.
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  Speaker 4: Okay, So the money is not really the issue. It's
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  Speaker 4: this house that's the big prize. I assume that's the
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  Speaker 4: that's the most valuable asset in her estate. So I
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  Speaker 4: say that the problem is it's not in her estate anymore, which,
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  Speaker 4: for your call and your question, is not a problem
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  Speaker 4: because one of the things you're asking about is Todd.
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  Speaker 4: You know she's going to a nursing home, and if
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  Speaker 4: she goes to a nursing home, is the house going
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  Speaker 4: to be protected from the nursing home. The answer is
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  Speaker 4: it will be. I mean, it's done more than five
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  Speaker 4: years ago. She made a transfer of an asset for
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  Speaker 4: less than fair market value in return, so that's considered
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  Speaker 4: a disqualifying transfer, so she doesn't own it. If she
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  Speaker 4: stays out of a nursing home for five years, it
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  Speaker 4: will be protected from the nursing home. Now I don't
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  Speaker 4: love this. I would never offer this as advice to somebody.
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  Speaker 4: But and there's a lot of negatives that go with it,
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  Speaker 4: but I think we've got beyond those at this point.
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  Speaker 4: So the good news is, at least that's not on
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  Speaker 4: the table. You only have eighty thousand dollars to deal with.
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  Speaker 4: So if she needed nursing home care tomorrow, we would
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  Speaker 4: simply apply. We would, you know, we would you know,
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  Speaker 4: prepay a funeral and any other miscellaneous expenses that we
• 12:00
  Speaker 4: needed to get out of the way. We would pay
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  Speaker 4: and then just either buy an annuity for the difference
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  Speaker 4: that's left. Remember we got to get her down to
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  Speaker 4: two thousand bucks, you know, or we simply private pay
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  Speaker 4: the nursing home a few months so you know, spend
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  Speaker 4: what you can get on Medicaid. She would be eligible
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  Speaker 4: for medicaid, you know right away. The downside is you
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  Speaker 4: kids got to carry over basis in that property, and
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  Speaker 4: so there could be a built in gain when you
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  Speaker 4: guys go to sell the property. You follow me on that,
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  Speaker 4: I do, yeah, yeah, so you know it's not horrible
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  Speaker 4: and if you at least it'll be protected from the
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  Speaker 4: nursing home. Now, my question is when she gave it away,
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  Speaker 4: did she continue to live there and sort of pay
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  Speaker 4: all the bills for all these years. Yep, certainly, so
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  Speaker 4: the upside on that score would be And a lot
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  Speaker 4: of people don't know this, but there's something out there
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  Speaker 4: called the Estate of Gwen. It's a case that came
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  Speaker 4: down in the mid seventies that says, if you give
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  Speaker 4: something away like he did, but retain I'm sorry, give
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  Speaker 4: something away and retain nothing legally, which she didn't, but
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  Speaker 4: continue to live there and pay the bills and enjoy
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  Speaker 4: what you gave away. Well, then the government came back
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  Speaker 4: and said, well, that's like giving it away but retaining
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  Speaker 4: the right to live there even though you didn't. Actually
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  Speaker 4: you're going to get an implied life estate. Why because
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  Speaker 4: you actually did live there and you actually did pay
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  Speaker 4: all the bills. So therefore, in that case, the government
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  Speaker 4: said that whole value like retaining a life estate, has
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  Speaker 4: to be included in her estate for estate tax purposes.
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  Speaker 4: What that means is it will be subject to a
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  Speaker 4: state tax. But it got a step up in basis
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  Speaker 4: to eliminate the built in gain. Okay, And so the
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  Speaker 4: good news here is it's protected from the nursing home,
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  Speaker 4: and the bad news until we talk about the estate
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  Speaker 4: of Gwen, was you kids would have a carryover basis
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  Speaker 4: with a large capital gain built in. Now we can
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  Speaker 4: probably claim the estate of Gwen to get a step
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  Speaker 4: up in basis when she dies. And like you said,
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  Speaker 4: if you included that in the nineteen seventy six case
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  Speaker 4: that resulted in an estate tax liability or a win
• 14:20
  Speaker 4: for the irs, well we can turn that around on
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  Speaker 4: them today and have this same rule apply cause the
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  Speaker 4: house to be included get the step up in basis,
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  Speaker 4: So you kids don't have to pay any capital gains
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  Speaker 4: tax when you go to sell it. But the inclusion
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  Speaker 4: of the full value of the house coupled with her
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  Speaker 4: eighty grand is not going to cause an estate tax liability.
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  Speaker 4: So we win on the estate tax front and we
• 14:46
  Speaker 4: win on the capital gains tax front.
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  Speaker 3: So a little bit to think about.
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  Speaker 4: But I think overall you're probably gonna be okay here,
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  Speaker 4: but you're going to need to see a lawyer to
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  Speaker 4: get on Medicaid when the time comes.
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  Speaker 2: Mister Lutsky, thank you, thanks so much for joining us
• 15:01
  Speaker 2: again today.
• 15:02
  Speaker 3: Always a pleasure. Thank you.
• 15:04
  Speaker 1: This has been asked Todd on the Financial Exchange Radio Network.
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  Speaker 1: Ask Todd with Todd Lutsky has been presented by Cushing
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  Speaker 1: and Dolan, serving Massachusetts and New England for more than
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  Speaker 1: Medicaid planning, and probate law. Call eight hundred and three
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  Speaker 1: nine three four thousand and one or visit Cushingdolan dot com.
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  Speaker 1: The views expressed in this segment are solely those of
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  Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
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