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Ask Todd: Naming your estate as an IRA beneficiary · 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 Letsky is here to answer your
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  questions and help you plan for later life. Ask Todd
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  is presented by Cushing and Dolan, serving Massachusetts and New
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  England for more than thirty five years, helping families with
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  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: And we are now joined by mister Todd Lutsky from
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  the law firm of Cushing and Dolan. We call the
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  segment Ask Todd is your chance to ask Todd your
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  questions about your state plan. Phone number here eight eight
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  eight two zero five two two sixty three. That is
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  the studio line to get in line to ask Todd
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  your questions again. Normally we can get through two to
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  three calls, so do get call on KIS. Last week
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  we had four fourth person didn't get hurt and it
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  was very, very very sad, So we we want to
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  make sure that we get to you if possible again.
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  Speaker 3: Eight eight eight to zero five two two six three.
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  Speaker 2: That is the number to call to speak now with
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  Todd Lutsky one more time. It is eight eight eight
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  to zero five two two six three. Mister Loutsky, how
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  are you today?
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  Speaker 4: I am never better? How how are you doing?
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  Speaker 5: Uh?
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  Speaker 3: Tough day yesterday?
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  Speaker 4: Yeah, what happened?
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  Speaker 3: Got fired from the pasta factory.
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  Speaker 4: It's a pasta factory. Yeah.
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  Speaker 3: Why why is that made of fucilly mistakes?
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  Speaker 4: Of silly mistakes? Yeah, I get it.
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  Speaker 3: It was a tough tough day, but we're bouncing back. Todd.
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  Speaker 2: Let's talk a little bit about, uh, naming beneficiaries on
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  iras specifically. Yeah, that's a niche topic, but I think
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  there's some some meat in this niche here.
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  Speaker 4: Oh yeah, a lot of meat.
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  Speaker 2: Historically, the guidance that I've heard on irays and naming
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  beneficiaries has been name individuals as beneficiaries on irays, don't
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  name trust or a states. Does that fit with kind
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  of what the historical pattern has been.
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  Speaker 6: Yeah, And I think starting with the historical pattern makes
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  a lot of sense because for a very very long time,
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  you know, the primary beneficiary rule of thumb, and even
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  today a lot the primary beneficiary or the rule of
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  thumb is surviving spouse. Yeah, that's what you would go with,
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  you know, generally, and then over time, and it's been
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  going on now for a while, that that if you've
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  done your estate plan and you still would name the
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  surviving spouse the primary beneficiary, but your contingent beneficiary might
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  be your family revocable trust if you know, if you
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  want to ensure that the assets ultimately flow through a trust,
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  and when you would do that is is if you
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  if your revocable trust has language in it that says
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  I want to protect my children from future divorces and
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  future creditors and you know, maybe they're not great with
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  money or whatever reason you're holding assets in the trust.
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  Remember when I say assets in the trust, all of
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  your other estate planning assets are in the trust already,
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  but not your era.
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  Speaker 4: But let's say you have, you know, a.
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  Speaker 6: Million dollar IRA, Well you might not want to say,
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  you know, and I've got my trust over here with
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  another couple million in it of assets protected for my kids.
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  I got a million dollar IRA not in there. Maybe
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  I don't want to list the kids as the contingent
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  beneficiary because then it will what come out to them
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  directly over ten years. I get it. That's the new rule.
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  But the point is it's coming out to them, not protected,
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  not sheltered from creditors, not you know. And so if
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  you're saying, you know what, I really want to make
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  sure that those assets find their way to the protection
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  of the trust for the kids, then the contingent beneficiary
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  should be the trust.
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  Speaker 4: Okay.
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  Speaker 6: So that's been sort of the evolution, and that's for
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  people who've done revocable trust planning, never mind irrevocable trust.
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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 that you'd like
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  to ask Todd during this segment here studio line is
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  open at eight eight eight to zero five two two
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  six three. That number again is eight eight eight two
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  zero five two two sixty three. In order to chat
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  with mister Todd Lutsky one more time, it's eight eight
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  eight to zero five two two six three. Todd, is
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  there anything that you can do in terms of beneficiaries
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  or contingent beneficiaries on iras that impacts how they're viewed
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  from a medicaid perspective where you're still kind of in
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  a tough spot with that, and there's not much you
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  can do well.
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  Speaker 6: It is a tough spot generally, but now with the
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  Secure Act two point zero that I believe came out
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  in about twenty twenty two, seemingly getting to be long ago.
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  But you can name the estate the beneficiary, but there's
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  a lot of rules you got to follow. You would
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  generally do it only if you're a married couple number one,
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  and you'd kind of want to be seventy three to
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  do it. And then by naming the estate the beneficiary,
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  which is remember as you said, the iras are assets
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  I cannot protect in advance from the nursing home generally,
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  but if you qualify, you can name the estate the
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  beneficiary and then you can protect these assets from nursing
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  homes for the surviving spouse. And the real key is
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  without a five year waiting period.
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  Speaker 2: Huge talking with Todd Leutski from the law firm of
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  Cushing and Dolan. Again, if you've got a question for Todd,
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  studio line is open at eight eight eight to zero
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  five two, two six three. Still have a little bit
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  of open space there on those lines, So please if
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  you got a question for Todd, this is your chance
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  to ask him that question again. Eight eight eight to
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  zero five two two sixty three. We're gonna go to
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  a quick break here, but it's right to your questions
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  when we return. That number again is eight eight eight
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  two zero five two two sixty three.
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  Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
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  only here on the Financial Exchange Radio Network. You're listening
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  to Ask Todd with Todd Lutsky on the Financial Exchange
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  Radio Network.
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  Speaker 2: All right, Todd, we got college lined up for you.
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  Let's get to him with Paul in Sandwich kicking things off. Paul,
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  you're on with Tod Lutsky.
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  Speaker 1: Heany, good morning?
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  Speaker 7: How are you good morning? Can you help me understand
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  if I set up in the irrevocable trust and the
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  beneficiaries are my children who are who are married? What
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  you know? God forbid that the marriages don't last. But
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  in this day and age, a lot of marriages don't last.
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  What rights did the spouse or expouses have?
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  Speaker 6: So this is a great question because it applies, and
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  I want to answer it for a lot of listeners.
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  I'm going to expand the answer to include not only revocable,
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  not only irrevocable trust, which is what.
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  Speaker 4: You asked for. Paul, but revocable trust.
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  Speaker 6: So I don't care if you've done revocable trust planning
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  or you've done irrevocable trust planning. You know, I always
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  tell people you add, you know, sheltering assets for estate
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  taxes and probate avoidance. All that is is important, but
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  that's kind of the noise, right. The family behind the
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  estate plan is really why we're doing this, and that
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  is when you pass away, you can actually control the
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  assets as to how they get to the beneficiaries, in
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  this case protection from future divorces. And so you put
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  language in the document that does that, and basically, in
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  a nutshell to answer your question is they will have
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  no right to the assets when the divorce comes. So
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  I'll just tell you how it works quickly. You put
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  language in that says if it said I divide my
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  assets equally to my kids and I give it to them, well,
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  then you can imagine that five years later, after you're dead,
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  when the divorce comes, whatever you gave your children is
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  now going to be gone. There is going to be
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  cut in half on a good day subject to that divorce.
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  And it does happen by not giving it to them.
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  And I'm going to sort of put the pen back
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  here into the trust bucket and hold it. If you
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  hold it in trust, you put language in there that
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  says things like, you know, your kids can be trustee.
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  Your kids can have the power to appoint a disinterested
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  trustee and even remove and replace the disinterested trustee. So
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  no problem there. But language says that when distributions come out,
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  the only job the disinterested trustee has is to authorize
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  distributions to that kid or to that to that kid's kids,
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  your grandkids. And so your child as general trustee is
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  doing everything and the disinterested trustee is doing very little.
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  But you know, every time the child says, you know,
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  we're going on a family vacation, we're taking a family trip,
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  we need a car, you know whatever, the disinterested trustee
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  authorizes the distribution. Now, the child, five years after your
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  dead gets a divorce and the surviving the soon to
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  be ex spouse says, I want half of what's in
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  that trust we've been taking money out of over the
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  last five years. And your child says, that's a really
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  great idea, But you got asked the disinterested trustee.
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  Speaker 4: Oh see how that works.
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  Speaker 6: It's protected, and it's not just protected because the disinterested
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  trustee can say no, think about it from an ownership perspective.
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  From an ownership perspective, the individual your child never owned
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  what's in that trust, So if they don't own it,
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  it's really not a marital asset to begin with. So
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  you simply tell the other side that it's not a
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  marital asset, so you know, no, it's not available. So
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  really provide some great protection. And that can be in
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  a revoke trust or an irrevocable trust, because remember, once
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  you die, all trusts are irrevocable. Now, folks speaking of that,
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  that's one way to protect assets. One of the assets
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  that's tough to protect is an IRA. And that's why
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  we're doing a guide in this case to go to
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  Paul's situation. By naming the trust the beneficiary of the
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  IRA the trust, at least then it would be protected
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  from these future divorces that I just discussed. So naming
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  the kid outright might not be the way to go
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  for everyone.
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  Speaker 4: In addition, folks.
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  Speaker 6: That specifically want to add nursing home protection to their
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  estate planning and are married, and there's a lot of
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  other restrictions. You can learn how to name your es
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  state the beneficiary of the IRA, which, as Chucker mentioned earlier,
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  is very much outside the norm. It will avoid It
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  will allow you to shelter assets these iras from the
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  state taxes. It will allow you to not have any
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  adverse income taxes, and without a five year waiting period,
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  can protect it from the nursing home. But you need
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  a couple it with a testament of trust. Get the guide, folks,
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  learn how to do it with your IRA eight sixty
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  six eight four eight five six ninety nine or Legal
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  Exchange Show dot com again eight six six eight four
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  eight five six ninety nine or Legal Exchange Show dot com.
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  Speaker 2: Todd, I've got another caller for you here. Let's go
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  to Jerry in the hunt. Jerry, what is your question
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  for Todd?
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  Speaker 5: My question is I own a lot of real estate
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  and everything's in LLCs. So each individual warehouse or buildings
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  I own are in LLC. So now I'm at fifty
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  four years old, and now I get to get a trust.
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  Uh huh, every rookable trust, some type of trust, a
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  team together that can put this together. Unfortunately, I'm I'm
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  either between ten million dollars in real estate or over
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  on the assessed values. I could be up to ten sure,
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  so I don't know how to number one tax defer
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  it some of the situation that I have put everything
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  in the trust because I'm at fifty four years old
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  now and are you married sixty and sixty years? I'm married,
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  I have five kids. So I really I've been listening
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  to you guys for a while. I really think that
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  you're the right choice. I just need a team of
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  you know, tax lawyers and everybody else they can put
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  this together. And well, I don't know nothing about it.
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  I just know that I do real estate and I
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  collect rent.
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  Speaker 6: And that's why I can tell you certainly that we
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  have you know, pick you needed a lawyer of some
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  of for sure, you need an estate planning attorney with
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  that kind of an estate and married in five kids,
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  so who you pick up to you? But but certainly
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  one you need one two, yes, an estate plan to
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  help you shelter. And again, remember folks, the federal estate
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  tax exemption is going to drop to about seven million
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  in a year and a half or so, so you
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  know ten million, and you're looking at fifty percent of
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  state tax on the amount over prefer federal and states.
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  So there's a lot of money right there. I love, Jerry,
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  the fact that you have iras. I'm sorry that you
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  have LLC's in place for your real estate, right that
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  is really a great, a great idea. But now you
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  need to take the shares of the LLC and put
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  them into probably a revocable trust, whether you can get
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  away with a joint or not.
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  Speaker 4: Would really need.
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  Speaker 6: To sit down and learn about the size of your estate,
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  whether we need one trust or two. So we'd take
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  the LLC shares, put them in there. You would always
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  be able to then, and we put your other assets
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  in there, and I will look at your LLC's and
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  see if there's a way to you know, you know,
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  sort of fine tune how you own those a little bit.
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  But yes, I think an estate plan is in order
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  to get your shares in there, to get your other
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  assets in there, and then structure it to reduce, really
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  eliminate your federalistate tax completely and then significantly reduce your
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  mass tax while also providing for your family and maybe
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  even whether in a state this large, protecting those five
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  kids from their future divorces and creditors, et cetera.
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  Speaker 4: I would certainly want to do that, Todd.
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  Speaker 3: I've got one more for you. Let's go to Peter
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  and Worcester.
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  Speaker 2: Peter, we've only got about a minute and a half,
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  so we got a speed run this one a little bit.
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  Speaker 3: What's your question for Todd?
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  Speaker 8: All right, Tod, thanks for thinking. Nicole. Hey, listen, I
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  set up to trust about five years ago. I'm retired
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  state eployee. I'm retired police.
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  Speaker 4: Is it an irrevocable trust.
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  Speaker 8: It's a it's a revocable truck god trust.
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  Speaker 4: Go ahead.
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  Speaker 8: My two daughters a twenty three and twenty six, and
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  I'm looking at right now. Haven't looked at again. I
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  have a four to fifty seven with the state that
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  I started way back when in the eighties.
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  Speaker 4: Yep.
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  Speaker 8: There's probably about a million bucks in there. Yeah, and
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  that's going through.
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  Speaker 4: What's the question? Get right to the question. What's the question?
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  Speaker 8: Okay, here's here's what I want to do. I was
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  thinking about making my oldest daughter the trustee. And I
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  don't know if that's a good idea.
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  Speaker 6: Okay, well it can be when you you mean, when
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  are you married. I'm not so when you pass away.
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  I don't want the trustee to be your daughter. Now
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  you should be the trustee because it's a revocable trust,
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  and then you could you when you die, you certainly
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  can have your daughter as trustee.
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  Speaker 4: That's not not a problem.
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  Speaker 6: Ever, if, on the other hand, based on as you
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  get older you want to do irrevocable trust planning, it's
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  also not a problem to have your daughters trustee. But
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  you know you don't have to have a daughter as trustee,
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  so you need to think about that. So if that's
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  the question, no real problem there. Todd, thanks so much
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  for joining us today. We appreciate it.
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  Speaker 4: Thank you always a pleasure.
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  Speaker 1: This has been asked Odd on the Financial Exchange Radio network.
• 15:39
  Ask Todd with Todd Ledskey has been presented by Cushing
• 15:41
  and Dolan, serving Massachusetts and New England for more than
• 15:44
  thirty years, helping families with a state and tax planning,
• 15:47
  Medicaid planning, and probate law. Call eight hundred three nine
• 15:50
  three four thousand and one or visit Cushingdolan dot com.
• 15:54
  The views expressed in this segment are solely those of
• 15:56
  Cushing and Dolan Armstrong Advisory. He does not provide any
• 15:58
  legal or tax advice. Please can sell with your illegal
• 16:00
  or tax advisor on such matters. Cushing and Armstrong do
• 16:02
  not endorse each other and are not affiliated