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Ask Todd: When is a revocable trust right for you? · The Financial Exchange Show

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Speaker 1: This is Ask Todd on the Financial Exchange Radio network.
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If you have an existing estate plan or in the
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market for one, Todd Lutsky is here to answer your
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questions and help you plan for a later life. Ask
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Todd is presented by Cushing and Dolan, serving Massachusetts and
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New England for more than thirty five years, helping families
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with a state and tax planning, medicaid planning, and probate law.
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Visit Cushingdolan dot com. Now here's Todd Lutsky.
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Speaker 2: As promised, We're joined now by Todd Lutsky from the
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law firm of Cushing and Dolan. Segment is Ask Todd.
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We got the phone lines open so you can ask
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Todd your estate planning questions. Eight eight eight two zero
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five two two sixty three is the number to call.
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Usually we can get through a few of these, so
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make sure that you get calling early to get in
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line and make sure Todd gets to your question. That
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number again is eight eight eight two zero five two
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two six three, and again you get to ask Todd
0:58
your questions about your eight plan at eight eight eight
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two zero five two two six three. We do have
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the phone lines open, so get calling and we will
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get to your calls in just a little bit.
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Speaker 3: But mister Todd Lutsky, how are you today?
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Speaker 4: I am never better? How you doing struggling? Yeah, it's
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always something with you.
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Speaker 2: Wife got a little upset with me last night and
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said that I have no sense of direction no, and
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I was kind of like, where's this coming from? And
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then I just got up and write. So it was, uh,
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you know, kind of a tough night, but we're doing
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better today. I want to talk to you a little
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bit about revocable trusts. I know everyone likes to talk
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about the irrevocable or irrevocable trusts, but basic revocable trust
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what does it do? And what's what's the situation where
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that is the right tool for a family to use
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for their planning.
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Speaker 4: Yeah, and naturally, I think that the last part of
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that question is really the most important part is how
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do we know what's right?
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Speaker 1: Right?
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Speaker 4: I mean that part of the thing is in the
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guide we're given in a way this month there's seven trusts,
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but there's a lot more than that in the real world. Right,
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There's all kinds of trusts. And the job is not
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just to determine how this trust works, but whether or
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not it's the right trust for you, And we don't
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always know. We have to ask a lot of individual
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questions to find out. I know, I'm going to say,
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if you're a family and you're maybe younger, let's say,
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you know, thirties, forties, maybe fifties, and you have children
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and you're concerned about you know, there might be miners,
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and you want to control things for their benefit when
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you're gone, but you want to stay in complete control
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of your assets, And I would say revocable is probably
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going to work for you right these are And I'm
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not even worried about size of the estates so much.
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Speaker 3: It's it's pretty much age.
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Speaker 4: You know that's going to say, you know, I'm at
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a point where I want to stay in control of
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my assets. I want to avoid the probate. I want
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to reduce or eliminate again federal or state death tax,
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it depends. Federal is going to start coming into play
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a lot more lately. I mean, as we get closer
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and closer to January twenty twenty six, we're going to
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start to see how federal becomes a bigger issue for
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a lot more people. Never mind just your state, whatever
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state you have there's about fifteen of them that have
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a death tax, so you want to look at those
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those numbers are much smaller. So I want to avoid
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the probate. I want to stay in control. I want
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to reduce my estate tax liability. But most importantly, I
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got perhaps minor children or children in general, that I
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want to make sure either they can't own the assets
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if they're minor, so the trust will own it when
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I die, or if they're older. I want to protect
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it for future divorces, creditors, things for the children. I'd
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say revocable trust would be would be right for that
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segment of the population.
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Speaker 2: When you talk about, hey, the downsides and things that
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you're missing on that side, is it really the protection
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from creditors that nursing home protection is the only thing
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missing here? There are other things that you don't necessarily
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get inside that wrapper of the revocable trust.
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Speaker 3: Yeah, it's a fair question.
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Speaker 4: I kind of did mention all the positives, and that's
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because there really are no negatives. So when I say that,
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I mean, I mean it right. This is a revocable trust.
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It's your alter ego, and I think to your point, Chuck,
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people ask me all the time they go. You know,
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what is a trust It's like it's this thing that
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they can't get their hands around. Right, it's a bunch
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of paper like this. Right, it's a bunch of paper,
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but it's an entity. But it's an entity you control.
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You're the trustee under your Social Security number, You file
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your own taxes, and you do everything you would do
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with the assets inside there, just like they weren't inside there.
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Speaker 3: So chuck no negative.
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Speaker 2: Talking with Todd Lutsky from the law firm of Cushing
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and Dolan. If you've got a question for Todd about
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your estate plan, this is the chance to ask it.
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We still have room on the phone lines here at
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eight eight eight to zero five two two six three.
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That is the number to call to ask Todd your
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question about your estate plan. Again, that number is eight
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eight eight to zero five two two six three. Still
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a spot or two available, so uh do make sure
5:18
you call in if you have a question for Todd.
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That number again is eight eight eight to zero five
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two two six three. We're gonna take a quick break,
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but after we come back, it's right to your questions
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with Todd. That number one more time is eight eight
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eight to zero five two two sixty three.
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Speaker 1: Ask Todd with Todd Letsky every Wednesday at ten thirty
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only here on the Financial Exchange Radio Network. Todd Letsky
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answers your questions about a state and elder life planning
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every Wednesday at ten thirty, right here on the Financial
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Exchange Radio Network.
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Speaker 2: All right, Tod, we've got callers lined up for you.
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Let's go to gym in the car. Jim, you're on
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with Tom Letsky. What's your question for him?
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Speaker 5: Well, I uh, I had a trust, irrevocable trust put
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together by Todd almost four years ago. And the question
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I have, I'm gonna a house. It's virtually it has
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no value, it's depreciated. It's almost a fully depreciated asset.
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I'm entertaining swapping it out to a ten thirty one exchange. Yeah,
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so I'll get rid of the house, probably get a
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bank loan for the balance. Now my question is for
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the new property coming in, does the clock, the five
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year clock start again or do I still dealing with
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the four foot the four years that I have from
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the original.
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Speaker 4: So great, great question. Let me just ask you one thing.
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You plan on selling the house, getting money in the
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trust and using the same money to buy another house.
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Speaker 3: Correct, That is correct?
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Speaker 4: Okay, because so the answer is if you do it
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that way, you will not restart the clock, so you
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will have one more year to go on the new
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house being protected. So this is a great question because
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it really shows the flexibility built into these trusts. One,
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it's a Grand Tour trust. So because it's a Grand
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Tour trust, you mentioned a minute ago that you wanted
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to do this ten thirty one exchange. What that means
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is you're selling property that has a lot of built
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in gain and then you don't want to pay the
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tax on that gain, so you're going to defer the
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gain by replacing the property with like kind property. Can
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you do it when it's in an irrevocable trust. Yes,
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because it's a Grand Tour trust, and because grant our
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trust means you're the owner for income tax purposes, so
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you have all the same benefits you would as if
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you owned it for income tax purposes. So great news.
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You can do the ten thirty one exchange. You can
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defer the gain and have it built into the new
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property and when you buy and sell through the trust,
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as long as the money comes in the trust and
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goes back out of the trust to buy new property
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that comes in the trust, you will not restart the
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five year waiting period, and in one year the new
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property will be protected from the cost of long term care.
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So great question. I hope that helps a lot, and folks,
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that is exactly why you want to get this guide.
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This guide not only talks about Medicaid irrevocable trusts, which
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is what Jim was talking about, but it adds seven
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to six other trusts, from nominee realty trusts to revocable
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trust that Chuck and I were talking about earlier, to
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you know, special needs trust if you have a child,
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or sole benefit trusts, life insurance trusts. It's really designed
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to explain a lot of these trusts. And if you've
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never done estate planning, this guide will help you figure
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out what's right for you. If you've done planning and
9:16
you want to switch, might be helpful as well, So
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call Get the Guide eight six six eight four eight
9:23
five six nine nine or Legal exchange Show dot com.
9:27
Demystifying the Top seven estate Planning Trusts eight sixty six
9:33
eight four eight five six nine nine or Legal exchange
9:36
Show dot com.
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Speaker 2: Next up for you, Todd is Tom in Burlington, Tom,
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what is your question for Todd Lunsky?
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Speaker 6: Yes, good morning. I have a piece of rental property.
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My father and I have it in a revocable trust
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with both trustees. If he was to pass and I
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sold it, would I be paying capital gains with the
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whole property or.
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Speaker 4: Just have So is this property when you say it's
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in the revocable try trust? Is the revocable trust your
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dad's revocable trust.
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Speaker 6: We're both on it as trustee.
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Speaker 4: No, no, no, no, But that doesn't matter. Who the trustee
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is is irrelevant who owned the property, whose name was
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on the property prior to it going into the revocable trust.
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Speaker 6: It was an estate with my grandfather, and there was
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a deed putting anything into this trust back well, when.
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Speaker 3: Your grandfather died, did the property go to your dad?
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Speaker 6: His dad and his sister and his sister signed off
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and put it into this trust.
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Speaker 4: So your dad got it one hundred percent. In other words,
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it went to your dad and your and his sister.
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Your sister gave it to your dad, and your dad
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put it one hundred percent into this trust. Yes, if
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that's how it went, you don't own any part of it. Okay,
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which is good actually, because if you don't own any
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part of it, even though you're the trustee on the trust,
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when he dies, because it's a revocable trust, the assets
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in there will be one hundred percent included in his
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gross estate, not his probate estate. It'll avoid probate, but
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it'll be included in his gross estate, thereby giving the
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beneficiaries who get it upon his death. Let's assume it's
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his kids and you're one of them. When you kids
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get the property, you will get it with a brand
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new basis equal to fair market value. Example, if the
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house is worth a million on the date of death,
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regardless of how much it was rented, and the basis
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depreciated during life. When you kids get it, if it's
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worth a million on the date of death, it's as
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if you paid a million dollars for it. And then
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if you sell it relatively close to death close after death,
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there will be zero capital.
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Speaker 3: Gains tax to be paid. So that answers your question. Todd,
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I've got another one here for you.
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Speaker 2: Let's see if we can get through this call from
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Joyce in rent them. Joyce, We've only got a couple minutes,
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so you've got to be quick. But what's your question
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for Todd?
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Speaker 7: Hey, I'll be real quick. My husband and I have
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a revocable trust, and I wanted to know if we
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should have checking accounts in the revocable trust in US
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stocks also great question.
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Speaker 4: Answer, quick answer, of course is yes they should be
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in there. But let me explain a little bit about
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why and how. So when you have a revocable trust,
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and again, I know the guide talks about many trusts,
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this is a revocable trust. So when you have a
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revocable trust, there is almost nothing that shouldn't be in there.
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Accept retirement accounts, okay, so your bank accounts, your rental
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property like Tom had, or a primary residence like you
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might have, should be retitled to the trust. And then yes,
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your investment portfolio should also be titled to the trust.
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Your bank accounts. Now, some people say, why bother putting
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a you know, a small bank account into the trust.
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Well you don't. You don't have to. Sometimes they say,
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I don't want to change my checking account. I don't
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want to get new checks. You know you can't. You
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can't put those in the trust.
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Speaker 3: You can.
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Speaker 4: There's no downside to doing it right, if you want
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to leave a small account out, you can, but there's
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no downside. Everything is in your Social Security number. When
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you retitle these to the trust. There's no separate tax return,
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and you are one hundred percent in charge of what's
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in there. Now, why am I stressing everything should go
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in there, Because if it's not in there, you might
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not be helping your estate tax liability situation, which is
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likely one of the reasons.
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Speaker 3: You have a revocable trust.
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Speaker 4: In other words, on the first death, you want to
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shelter assets so they're not taxed on the second death.
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And if they're not in the trust to be sheltered,
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then you're wasting some of your exemption. So if it's
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just jointly owned, it goes to each other and you
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waste sheltering it first ay taxes. So the more you
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can put in a revocable trust likely the better. Sorry
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for the long winded answer, but I hope that that
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helps out.
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Speaker 2: Mister Lutski. Thank you so much for joining us today.
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We appreciate it.
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Speaker 3: You're always always a pleasure. Thank you.
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Speaker 1: This has been asked Odd on the Financial Exchange Radio
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network Ask Todd with Todd. Lutsky has been presented by
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Cushing and Dolan, serving Massachusetts and New England for more
14:35
than thirty years, helping families with the state and tax planning,
14:38
Medicaid planning, and probate law. Call eight hundred and three
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nine three four thousand and one or visit Cushingdolan dot com.
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The views expressed in this segment are solely those of
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Cushing and Dolan Armstrong advisor. He does not provide any
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legal or tax advice. Please consult with your legal or
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tax advisor on such matters. Cushing and Armstrong do not
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endorse each other and are not affiliated. Cushing and Dolan
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are experts in elder life planning and taxation. They know
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that every families unique and that every estate plan must
15:02
be different. Early planning is crucial if you want to
15:04
stress free your retirement and trusts are oftentimes the document
15:08
of choice to help protect your assets, but with so
15:10
many kinds of trusts, you need to learn about which
15:13
one is right for your plan. Revocable and irrevocable trusts
15:16
are most common, but there are several differences, as well
15:19
as numerous tax implications with each. If you are ready
15:21
to start your planning or need to a fresh and
15:23
existing plan, Call Cushing and Dolan and ask for their
15:26
new guide called Dmistifying the Top seven Estate Planning Trusts.
15:30
Learn how to protect your assets and potentially eliminate your
15:33
estate taxes. Call eight six six eight four eight five
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six ninety nine right now and ask for your guide today.
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That's eight six six eight four eight five six nine nine,
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or request it online at Legal exchange show dot com.
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The proceeding was pay four and the US expressed are
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sole le those of Cushing and Dolan. Cushing and Dolan
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and or Armstrong Advisory may contact you offering legal or
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investment services. Cushing and Dolan and Armstrong Advisory do not
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endorse each other and are not affiliated