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Ask Todd: Avoid These Estate Planning Mistakes · The Financial Exchange Show

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  Speaker 1: This is Ask Todd on the Financial Exchange Radio network.
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  Speaker 1: If you have an existing estate plan or in the
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  Speaker 1: market for one, Todd Lutsky is here to answer your
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  Speaker 1: questions and help you plan for a later life. Ask
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  Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
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  Speaker 1: New England for more than thirty five years, helping families
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  Speaker 1: with a state and tax planning, Medicaid planning, and probate law.
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  Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
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  Speaker 2: We are now joined by Todd Lutsky from the law
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  Speaker 2: firm of Cushing and Dolan, and the second is Asked Todd,
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  Speaker 2: Which is your chance to ask Todd your state planning questions.
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  Speaker 2: Phone lines are wide open at eight eight eight to
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  Speaker 2: zero five two two sixty three. That is the number
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  Speaker 2: to call to chat with Todd live on air right
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  Speaker 2: now about your state planning questions. Again. Eight eight eight
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  Speaker 2: two zero five two two sixty three is the number
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  Speaker 2: we can usually get through a couple of these, so
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  Speaker 2: make sure you get calling early so that you don't
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  Speaker 2: not get to ask Todd your question. That would be
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  Speaker 2: a shame. Again, that phone number is eight eight eight
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  Speaker 2: to zero five two two six three, mister Lutsky, how
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  Speaker 2: are you doing today?
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  Speaker 3: I am never better? Now? How are you doing?
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  Speaker 4: Uh?
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  Speaker 2: I'm okay, a little bit hurt. I dropped my cactus
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  Speaker 2: the other day.
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  Speaker 3: It's always something with you.
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  Speaker 2: Well, the worst part it was I caught it. Yeah, yeah,
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  Speaker 2: you never want to catch your cactus.
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  Speaker 1: Todd.
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  Speaker 2: Let's talk a little bit about uh, beneficiaries. So most people,
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  Speaker 2: I'm guessing you have some semblance of an idea as
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  Speaker 2: to who they want to name or who they want
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  Speaker 2: to have inherit their assets when they pass away. When
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  Speaker 2: we're talking about naming beneficiaries on a bank account or
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  Speaker 2: an investment account, what are some of the considerations for
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  Speaker 2: making sure that that's meshing with the estate planning that
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  Speaker 2: has been done in a day to what's tight? What
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  Speaker 2: the beneficiary designations say?
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  Speaker 3: Yeah, I think it's it's very important because remember, if
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  Speaker 3: you just think you're going to avoid probate, if you
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  Speaker 3: don't have an estate plan you just name kids as beneficiaries,
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  Speaker 3: you could accidentally disinherit one. So we don't want that.
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  Speaker 3: But if we want to put like a trust in place,
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  Speaker 3: and let's start with a brokerage account and bank accounts,
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  Speaker 3: you simply don't. You're asking a question about beneficiaries. I
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  Speaker 3: get it, but I'm gonna I'm sort of gonna take
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  Speaker 3: it one step further and say, Okay, maybe I don't
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  Speaker 3: even need the beneficiary because if I have a trust,
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  Speaker 3: a revocable or irrevocable for that matter, if I have
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  Speaker 3: a trust in place, I might instead take that brokerage
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  Speaker 3: account or those bank accounts and retitle the owner to
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  Speaker 3: be the trust. If I retitle the owner to be
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  Speaker 3: the trust, then I don't need beneficiary designations. Don't even
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  Speaker 3: need them. Why because the trust owns it, and the
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  Speaker 3: trust has language that says where all the assets of
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  Speaker 3: the trust go when you die, so it'll take care
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  Speaker 3: of all the people children, grandchildren. However, you have it
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  Speaker 3: laid out, and that's money, real estate, et cetera. So
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  Speaker 3: that's one distinction. However, iras four oh one k's those
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  Speaker 3: kinds of things they can't go in that you can't
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  Speaker 3: retitle those to the trust. So you do need designated beneficiaries.
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  Speaker 3: And now here's where the meshing comes in that you
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  Speaker 3: talked about. Yeah, Chuck, please read the beneficiary, read the
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  Speaker 3: language of the trust in making this decision. So if
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  Speaker 3: the language of my trust says all the assets that
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  Speaker 3: are in there upon my death go equally to my kids,
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  Speaker 3: pay it out, take it and go okay. Well, if
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  Speaker 3: it says that, then my beneficiary designation on my IRA
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  Speaker 3: contingent it's always first. The spouse contingent should not be
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  Speaker 3: the trust. Why because I don't need to run it
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  Speaker 3: through the trust. If it's gonna just pay out to
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  Speaker 3: the kids, I'll just list the kids and let them
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  Speaker 3: get it over ten years sun. But if you've got
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  Speaker 3: a trust in place where you're saying, geez, you know,
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  Speaker 3: I want to protect these assets from future creditors and
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  Speaker 3: divorces of my kids. And if I can have generational
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  Speaker 3: building wealth tax free and skip a generation when they
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  Speaker 3: die and have it get to my grandkids and all
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  Speaker 3: this fancy stuff in my trust, well then I would
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  Speaker 3: want my IRA assets to be treated the same way.
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  Speaker 3: So if that's the case, then the meshing comes in
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  Speaker 3: where I would want my IRA beneficiary contingent beneficiary to
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  Speaker 3: be the trust. So you can't get it there while
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  Speaker 3: you're alive, but you can when you're dead, and then
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  Speaker 3: it's going to be taken care of the same way
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  Speaker 3: your trust assets are.
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  Speaker 2: Talk with Todd Lutsky from the law firm of Cushing
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  Speaker 2: and Dolan. Remember this is your chance to ask Todd
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  Speaker 2: your specific estate planning questions live on air right now.
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  Speaker 2: Still got room with the phone lines at eight eight
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  Speaker 2: eight two zero five two two sixty three. That phone
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  Speaker 2: number is eight eight eight two zero five two two
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  Speaker 2: six three. We're going to take a quick break now,
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  Speaker 2: but when we come back, we're gonna continue digging in.
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  Speaker 2: We'll get to your questions with Todd. That phone number
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  Speaker 2: one more time is eight eight eight to zero five
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  Speaker 2: two two sixty three.
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  Speaker 1: Ask Todd with Todd Letsky every Wednesday at ten thirty
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  Speaker 1: only here on the Financial Exchange Radio Network. Todd Letsky
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  Speaker 1: answers your questions about a state and elder life planning
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  Speaker 1: every Wednesday at ten thirty. Right here on the Financial
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  Speaker 1: Exchange Radio Network.
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  Speaker 2: We've got Todd Lutsky from Cushing and Dolin with us
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  Speaker 2: UH for asking Todd here to help answer your estate
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  Speaker 2: planning questions. Still room on the phone lines at eight
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  Speaker 2: eight eight to zero five to two three. Again, that
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  Speaker 2: is the number to call to ask your state planning
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  Speaker 2: questions to Todd eight eight eight two zero five two
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  Speaker 2: two six three. Let's go to Lisa in Massachusetts. Lisa,
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  Speaker 2: what is your question for Todd Lotski?
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  Speaker 4: Hi, good morning, good morning. My question is, is the
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  Speaker 4: rental property or primarily listed in the EVOPO trust able
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  Speaker 4: to get the market while you step up upon the
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  Speaker 4: time the.
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  Speaker 3: Step up and basis you're asking about right when they die?
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  Speaker 1: Yeah?
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  Speaker 3: Okay, So the question, just so I can repeat it
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  Speaker 3: for everybody and make sure I'm understanding it, is you
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  Speaker 3: might want to put either rental property or and or
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  Speaker 3: your primary residence into an irrevocable I'm thinking the kind
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  Speaker 3: of irrevocable medicaid trust where you can protect it from
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  Speaker 3: the nursing home. Is that correct?
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  Speaker 1: That's correct?
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  Speaker 3: Okay? So are you married?
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  Speaker 4: Yes?
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  Speaker 3: Okay, So we would depending on you know, if you
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  Speaker 3: have that many properties, likely we would be talking about
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  Speaker 3: two trusts. And the one thing I might add prior
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  Speaker 3: to this is your rental property. You might want to
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  Speaker 3: put that into an LLC prior to putting the shares
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  Speaker 3: of the LLC into the trust. Okay, just because in
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  Speaker 3: case somebody gets hurt on the rental property, they slip,
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  Speaker 3: they fall, you know, the drill, they're going to sue you,
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  Speaker 3: and if you're the owner, they're going to go after
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  Speaker 3: everything you and your husband owned, not just that rental property.
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  Speaker 3: Whereas if we place the rental property into an LLC first,
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  Speaker 3: which is a limited liability company h then the lawsuit
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  Speaker 3: would be against the LLC and not against you, the shareholder.
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  Speaker 3: So all your other assets, whether it's other real estate
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  Speaker 3: or money, would not be at risk for the nursing home,
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  Speaker 3: I mean, would not be at risk for the creditor.
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  Speaker 3: So that's one reason to do it. And then you
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  Speaker 3: put the shares of the LLC into the irrevocable trust,
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  Speaker 3: and that's what protects the building from the cost of
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  Speaker 3: nursing home care, so you get kind of a double
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  Speaker 3: protection with rental property. Now back to your question, can
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  Speaker 3: the rental property and the primary residents go into this LLC? Yes,
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  Speaker 3: I mean into the irrevocable trust. Yes they can. And
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  Speaker 3: once they're in there, your home's pretty easy, right, What
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  Speaker 3: can you do with it? While you can still live there?
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  Speaker 3: You can pay all your bills, you can you know,
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  Speaker 3: you can rent it if you want to rent it,
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  Speaker 3: and you can even sell your home and buy another
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  Speaker 3: home right inside the trust. So you keep a lot
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  Speaker 3: of control over your home and you get all the
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  Speaker 3: benefits of debate avoidance, and in your case probably two
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  Speaker 3: separate or a vocable trusts. So I might put you know,
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  Speaker 3: the home in one trust, let's say husband's trust, and
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  Speaker 3: maybe the rental property in wife's trust right, and that
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  Speaker 3: way you don't have to worry about splitting the two
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  Speaker 3: properties up. The reason I would do that is because
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  Speaker 3: if the rent is coming in, I'd like the rent
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  Speaker 3: to come into just one trust rather than split it
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  Speaker 3: between the two. And so that takes care of the home.
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  Speaker 3: What about the rental property, Well, the rental property can
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  Speaker 3: go in as well. Let's say it does go in
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  Speaker 3: through the LLC and the shares are owned by let's
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  Speaker 3: just say, you know, maybe maybe your trust. Lisa, Okay,
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  Speaker 3: what can you do? Well? By the shares being owned
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  Speaker 3: in the LLC, it's protected from probate, it's avoiding probated,
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  Speaker 3: it's protected from the nursing home in five years. And
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  Speaker 3: of course creditors suing because they got hurt, they're suing
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  Speaker 3: the LLC and not you, So again we have individual
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  Speaker 3: creditor protection as well. How do you deal with the rent? Well,
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  Speaker 3: the rent is going to be collected in a bank
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  Speaker 3: account in the name of the LLC. Who would be
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  Speaker 3: the manager. How about Lisa, Lisa, you could be in
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  Speaker 3: charge of that LLC. You could be collecting the rent
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  Speaker 3: into that LLC bank account, paying the bills, et cetera
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  Speaker 3: right out of that bank account. And then when there's
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  Speaker 3: excess rent left over, meaning you've paid all your bills,
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  Speaker 3: but now you want the money in your pocket. Well,
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  Speaker 3: how do you get it. Well, you're the manager. You
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  Speaker 3: make a distribution from that bank account. In other words,
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  Speaker 3: just cut a check to the shareholder, which is this
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  Speaker 3: irrevocable trust, and now you deposit it into a bank
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  Speaker 3: account in the name of the irrevocable trust. And since
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  Speaker 3: that's rental income, remember it retains its character when it
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  Speaker 3: comes out of the LLC into the trust, it's still income.
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  Speaker 3: And the trust is designed to say all income belongs
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  Speaker 3: to Lisa. Remember their income ownly trusts. So that income
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  Speaker 3: comes into the bank account and the trust and automatically
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  Speaker 3: comes out to Lisa. You have it now in your pocket, Lisa,
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  Speaker 3: and you can go, you know, grocery shopping, put gas
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  Speaker 3: in the car, or whatever you want to do. It's
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  Speaker 3: your money to spend it just like you were spending
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  Speaker 3: it before you did this. And the last comment I'll
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  Speaker 3: make is from an income tax perspective, there's no adverse
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  Speaker 3: income tax because the LLC is a single member LLC
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  Speaker 3: owned by the trust, so it doesn't file a tax return.
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  Speaker 3: And the trust is a grand or trust for income taxes,
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  Speaker 3: which means all the income gets picked up on your
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  Speaker 3: personal income tax return Lisa, So no adverse income tax consequences. So, folks,
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  Speaker 3: that was a great question and I hope provides a
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  Speaker 3: detailed answer for everybody thinking about these trusts. But folks,
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  Speaker 3: there's more to a state planning than just what we
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  Speaker 3: talked about, because that was income taxes and estate taxes,
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  Speaker 3: probate avoidance. But what happens when Lisa dies? What happens
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  Speaker 3: when you die? Where does all your assets go? Well,
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  Speaker 3: the guide we're giving away this month is how to
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  Speaker 3: leave assets to your beneficiaries, and that can be the
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  Speaker 3: most important part of your estate plan. You might have
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  Speaker 3: special needs children, you might have kids that are not
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  Speaker 3: good with money, or you want to protect these assets
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  Speaker 3: from future divorces of the children. Maybe you're in a
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  Speaker 3: second marriage situation. Who knows. There's so many things to
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  Speaker 3: think about with your family as to how you leave
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  Speaker 3: these assets. Get it right, Get the guide and learn
• 12:36
  Speaker 3: what your options are eight six six eight four eight
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  Speaker 3: five six nine to nine or Legal Exchange Show dot
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  Speaker 3: nine to nine or legal Exchange Show dot com And
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• 12:59
  Speaker 2: Todd, I want to follow up on the conversation we
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  Speaker 2: were having earlier regarding beneficiaries and am I wrong in
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  Speaker 2: that the conventional wisdom surrounding naming beneficiaries on retirement accounts
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  Speaker 2: used to be to avoid naming a trust as a
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  Speaker 2: direct beneficiary Or am I misinterpreting and misremembering that.
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  Speaker 3: No, you're probably not. I think I think in the
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  Speaker 3: past it was maybe a little harder to do the rules. Remember,
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  Speaker 3: the Secure Act came out and that kind of cleared
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  Speaker 3: up some of the problems we had before the Secure Act,
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  Speaker 3: which it was always so you're absolutely right, it was
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  Speaker 3: it was always that way, But I think the Secure
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  Speaker 3: Act cleared up some of those some of those issues
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  Speaker 3: and you can name the trust as the beneficiary.
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  Speaker 2: Are there any issues that are still present? Just in
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  Speaker 2: terms of if someone's you know, trying to think of, hey,
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  Speaker 2: what would the estate administration process look like for my errors?
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  Speaker 2: What what does it look like if a trust is
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  Speaker 2: named as the beneficiary of a retirement account.
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  Speaker 3: So the trust doesn't have to have necessarily any special
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  Speaker 3: language in it anymore. It just has to be clear
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  Speaker 3: that you can identify beneficiaries. Usually you don't want to
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  Speaker 3: mix a charity with a you know, with the beneficiary
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  Speaker 3: in the trust, So you want to make sure that
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  Speaker 3: that you can clearly identify humans as beneficiaries. The nice
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  Speaker 3: part about that is once you've identified them, remember before
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  Speaker 3: you always had to say, well, who was the oldest
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  Speaker 3: child and all this different stuff with ages. You don't
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  Speaker 3: need that any Yeah, you know. Now now it's just
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  Speaker 3: if we can identify the group, and the group, let's
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  Speaker 3: say consists of children, well, then we know for distribution purposes,
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  Speaker 3: for what we call the required minimum distribution purposes, likely
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  Speaker 3: the IRA has to come out over ten years. But
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  Speaker 3: I think from an operational standpoint, a lot of people
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  Speaker 3: can't understand that. They mean, oh, so does the IRA
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  Speaker 3: then get dumped into the trust one hundred percent on
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  Speaker 3: the date of death? No, so it would stay Chucks Iira,
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  Speaker 3: but the beneficiary would be the trust, and you would
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  Speaker 3: literally reach into Chucks Eira after he's dead and make
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  Speaker 3: a withdrawal and deposit it into the bank over ten
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  Speaker 3: year period into the trust rather over a ten year period.
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  Speaker 3: So that's kind of operationally how it works, and that
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  Speaker 3: can be a little confusing for a lot of people.
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  Speaker 2: Yeah, no, that makes sense, and I again, it does
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  Speaker 2: seem like things have changed quite a bit there. Todd,
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  Speaker 2: appreciate the time today, Thanks so much.
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  Speaker 3: Always a pleasure.
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  Speaker 1: This has been Asked Odd on the Financial Exchange Radio Network.
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  Speaker 1: ASKEDDD with Todd. Lutsky has been presented by Cushing and Dolan,
• 15:44
  Speaker 1: serving Massachusetts and New England for more than thirty years,
• 15:47
  Speaker 1: helping families with the state and tax planning, Medicaid planning,
• 15:50
  Speaker 1: and probate law. Call eight hundred and three nine three
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  Speaker 1: four thousand and one or visit Cushingdolan dot com. The
• 15:56
  Speaker 1: views expressed in this segment are solely those of Cushing
• 15:58
  Speaker 1: and Dolan Armstrong Advisory. He does not provide at any
• 16:00
  Speaker 1: illegal or tax advice. Please consult with your illegal or
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  Speaker 1: tax advisor on such matters. Cushing and Armstrong do not
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  Speaker 1: endorse each other and are not affiliated