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Life estates: good, bad or really bad? · The Legal Exchange

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  Speaker 1: This is the Legal Exchange with Todd Lutsky from the
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  Speaker 1: law firm of Cushing and Dolan and Susan Powers of
• 0:07
  Speaker 1: the Armstrong Advisory Group. Each week, Todd and Susan will
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  Speaker 1: discuss many topics, including estate planning, how to avoid probate,
• 0:13
  Speaker 1: and protecting your money from a nursing home. If you
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  Speaker 1: need assistance in any of these areas, or have a
• 0:18
  Speaker 1: question about another issue that may affect your future, call
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  Speaker 1: eight six six eight four eight five six ninety nine
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  Speaker 1: to make an appointment. That's eight sixty six eight four
• 0:27
  Speaker 1: eight five six ninety nine. Operators are standing by. Now
• 0:31
  Speaker 1: Here are your hosts, Todd Lutsky and Susan Powers.
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  Speaker 2: Welcome into the Legal Exchange with Todd Lutsky. I'm Susan Powers,
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  Speaker 2: a financial advisor with the Armstrong Advisory Group, and I'm
• 0:45
  Speaker 2: joined by Todd Lutsky, a partner with the law firm
• 0:47
  Speaker 2: of Cushing and Dolan with a master's in taxation. Welcome Todd,
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  Speaker 2: How are you today?
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  Speaker 3: I'm never better on you?
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  Speaker 2: I'm great, Thank you. What do you have for us?
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  Speaker 2: This week?
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  Speaker 4: We're going to lead off with a real life store,
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  Speaker 4: one that actually changed my entire seminar that I did
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  Speaker 4: last week when I read this, when I had this
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  Speaker 4: client walk in regarding life estates and how they own
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  Speaker 4: life estates in two properties, second marriage, all three kids
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  Speaker 4: own it, and it gets better. One's an attorney who's
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  Speaker 4: a gambler, huge debts. How do we fix this? It
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  Speaker 4: is a problem. So we're going to explain how we
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  Speaker 4: fixed it. We're going to explain, you know, how life
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  Speaker 4: estates work. It really brought life estates back to the
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  Speaker 4: forefront and it's something that many many people have, and
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  Speaker 4: I want them to understand the pros and cons of
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  Speaker 4: what they actually have.
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  Speaker 3: So stay tuned for that for sure.
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  Speaker 4: And then a New York appellate course, a pellet court
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  Speaker 4: case basically showing you how planning works. It does have
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  Speaker 4: a no contest clause involved, but that's not really my
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  Speaker 4: point here. This is a case they're not married, the
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  Speaker 4: significant others one cared for the other one, and they
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  Speaker 4: did a revocable trust to take care of a significant other. Folks,
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  Speaker 4: trusts work. You'll see how this ends up in a
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  Speaker 4: somewhat good way, but without the trust, it might not
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  Speaker 4: have turned out that way. So, folks, that is the cases.
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  Speaker 4: But that's my point, right the estate planning potholes is
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  Speaker 4: the guide. There's so many things that you need to
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  Speaker 4: understand on what to do and what not to do,
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  Speaker 4: and this guide gives you those. So if you've done
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  Speaker 4: your planning, it's going to tell you how to maybe
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  Speaker 4: fix something that you've done wrong. If you haven't done
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  Speaker 4: your planning, it might show you things to avoid, right
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  Speaker 4: from don't rely on a will, don't rely on a
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  Speaker 4: nominee realty trust. Don't think you don't have kids, you
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  Speaker 4: don't need to plan. Don't think that fifteen years went
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  Speaker 4: by them and I shouldn't look at my will or
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  Speaker 4: I got divorced?
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  Speaker 3: What does that do? Folks?
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  Speaker 4: One thing after another, call and get the guide. Learn
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  Speaker 4: how to get your estate plan in order eight six
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  Speaker 4: six eight four eight five six nine nine or Legal
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  Speaker 4: Exchange Show dot com again eight six six eight four
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  Speaker 4: eight five six ninety nine or Legal Exchange Show dot Com.
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  Speaker 4: And now let's head back to this real life situation.
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  Speaker 4: So husband, wife come in. They're about seventy seven and
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  Speaker 4: sixty seven, so it's a little age gap and back
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  Speaker 4: in twenty fourteen, which is really important. Dates are important here.
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  Speaker 4: They gifted the home to their three kids, two that
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  Speaker 4: they had together, one that he had from a prior marriage.
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  Speaker 4: They all get along great. And by the way, that's
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  Speaker 4: the saving grace here. And they're cooperative, also the saving
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  Speaker 4: grace here. And so what they did is they gave
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  Speaker 4: the house to the to the children, and they reserved
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  Speaker 4: a life estate. Then they also gifted their second home,
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  Speaker 4: which is more of a vacation home, to the kids,
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  Speaker 4: and again and reserved a life estate. As I said,
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  Speaker 4: it turns out that one of the children has a
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  Speaker 4: real bad gambling problem. And you know, the you know,
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  Speaker 4: the father did the right thing, the mother did the
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  Speaker 4: right thing. They tried to help him out. They gave
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  Speaker 4: Hi one hundred and ten thousand dollars to get him
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  Speaker 4: bail him out of some of his debts, and sure
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  Speaker 4: enough he's right back at him. And so now we've
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  Speaker 4: got this arrangement and we've got a child that's a gambler,
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  Speaker 4: and they're worth in total about I don't know, call
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  Speaker 4: it one point six in the real estate, maybe a
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  Speaker 4: little bit more in money, but that's about it. And
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  Speaker 4: they have no other planning in place really other than
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  Speaker 4: perhaps a will.
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  Speaker 3: And so.
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  Speaker 4: They came in and said, you know, we were listening
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  Speaker 4: to the show and we think we might have done
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  Speaker 4: something wrong. It's not that you did it wrong, folks,
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  Speaker 4: it's just I just feel like the advice you got.
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  Speaker 4: I never blamed the client, you know, I'm sort of
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  Speaker 4: blaming the lawyers for putting you in this position. So
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  Speaker 4: let's just run through what they have and then we're
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  Speaker 4: going to fix it. Right, Just just remember this, right.
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  Speaker 4: So now, let's focus on the home first. Then I'll
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  Speaker 4: tell you about the second property. So are there some
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  Speaker 4: pros to what they did? Yeah, the home is at
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  Speaker 4: least protected from the nursing home. It was done more
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  Speaker 4: than five years ago, and it's going to avoid probate.
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  Speaker 4: When they die, and when they ultimately passed, the kids
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  Speaker 4: will get the property in the remainder interest in the
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  Speaker 4: life estate will vest in the kids, and they will
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  Speaker 4: get it with a full step up in basis, which
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  Speaker 4: simply means if they sell the property after they die,
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  Speaker 4: the kids will have very little to know capital gains tax.
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  Speaker 3: That's all good stuff.
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  Speaker 4: Yeah, and I agree, And I don't want to disturb
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  Speaker 4: that because they're seventy seven and sixty seven and not
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  Speaker 4: that that's really old. But you know, it's already protected
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  Speaker 4: and you have.
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  Speaker 2: To plan for the older spouse though.
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  Speaker 3: Right, Yeah, a good point.
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  Speaker 4: But what are the problems here, Well, the problem is
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  Speaker 4: that they cannot sell it. If they wanted to sell
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  Speaker 4: it without the kids permission, that's the problem. And thankfully
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  Speaker 4: the kids would give permission. But you know, if they
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  Speaker 4: wanted to move, let's say they can't. And then you know,
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  Speaker 4: depending on their age, even if they sold the property,
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  Speaker 4: a large portion of the money and the gain would
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  Speaker 4: go to the kids because their remainderment. Right, as a
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  Speaker 4: life tenant, you own the present right to live there
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  Speaker 4: in the hole. But when you sell it, you don't
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  Speaker 4: get the whole.
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  Speaker 2: You only get a little bit.
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  Speaker 4: You only get a piece based on your age, right,
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  Speaker 4: And so the older you are, the smaller you get.
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  Speaker 5: Right.
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  Speaker 4: So maybe they get twenty percent, maybe they get twenty
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  Speaker 4: five percent. It depends on how old they are on
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  Speaker 4: the day they sell it, okay, And so that can
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  Speaker 4: result in adverse capital gains tax problems. Right, So if
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  Speaker 4: let's just say seventy five percent of the gain goes
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  Speaker 4: to the kids and twenty five percent of the gain
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  Speaker 4: and proceeds go to the life tenant, well, life tenant
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  Speaker 4: gets you know, they're married, they get a five hundred
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  Speaker 4: thousand dollars capital gain exclusions. They're probably gonna have no tax.
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  Speaker 4: The kids don't get that, so they're going to end
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  Speaker 4: up paying more tax than they would have needed.
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  Speaker 2: To pay, right because they don't live there.
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  Speaker 4: Yeah, but that doesn't end the problems. Right now, they
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  Speaker 4: got the money and if they want to buy a
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  Speaker 4: new house.
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  Speaker 2: They got to get it back.
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  Speaker 4: They got to get it back because they don't have
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  Speaker 4: enough money to get to buy the new house because
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  Speaker 4: they only got twenty five percent of the proceeds. So
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  Speaker 4: now you've got to ask the kids to give the
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  Speaker 4: money back, which is not a great place to be ever. No,
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  Speaker 4: and then if the kids do cooperate and give the
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  Speaker 4: money back, then the kids have a gift tax problem
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  Speaker 4: that they have to face.
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  Speaker 2: That's if there's no leans on his bank account, the
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  Speaker 2: gambling sun. I mean there could be.
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  Speaker 3: There could be leans issues. There could be issues because
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  Speaker 3: they could have.
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  Speaker 2: Leaned his bank accounts, not not They might not know
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  Speaker 2: about that property, but they're going to know when it
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  Speaker 2: comes into his bank account.
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  Speaker 4: Yeah, there's going to be issues, and that's why they
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  Speaker 4: want to undo this, right and so now they don't
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  Speaker 4: have it. And let's just take it one step further.
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  Speaker 4: Let's say, you know, they don't have a big tax problem.
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  Speaker 4: They use up some of their exemption. It's going to
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  Speaker 4: affect them for mass the kids. But now mom and
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  Speaker 4: dad got the property back. And now they got the
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  Speaker 4: property back, and the question is they don't have but
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  Speaker 4: they want to buy a new house. All the money's
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  Speaker 4: all at risk for a nursing home all over again.
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  Speaker 3: Again not helpful.
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  Speaker 2: But if they had transferred it to a trust to
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  Speaker 2: begin with.
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  Speaker 4: You wouldn't have had any of those problems. Right, So
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  Speaker 4: if you compare this with a trust, they can sell it.
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  Speaker 4: They don't need the kid's permission. They could just tell
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  Speaker 4: the trustee to sell or remove the trustee. All the
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  Speaker 4: money or a big chunk. Seventy five percent would go
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  Speaker 4: to the trust. Twenty five percent would go to them.
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  Speaker 4: They can use the seventy five percent in the trust
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  Speaker 4: to buy another house in the trust, not restarting the
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  Speaker 4: five year waiting period. No adverse capital gains tax problems,
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  Speaker 4: because they would get the capital gain would show up
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  Speaker 4: on their personal return. Because it's a grand tour trust,
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  Speaker 4: they'd get to use the whole five hundred thousand dollars
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  Speaker 4: of gain.
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  Speaker 2: No issues from any kid's creditors.
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  Speaker 4: No giving back, no issues for credit or protection, no
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  Speaker 4: gift tax.
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  Speaker 3: Wow gets worse though.
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  Speaker 4: The second home, the life estates not protected at all ever,
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  Speaker 4: because it's not your primary residence. So they think they
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  Speaker 4: protected the second home from the nursing home, but they
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  Speaker 4: haven't because the value of the life estate is at
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  Speaker 4: risk because it's not a life estate in your primary residence.
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  Speaker 4: The only reason the life estate's not at risk and
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  Speaker 4: your primary residence is because it's your primary residence, right,
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  Speaker 4: But the life estate in the second home already at risk.
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  Speaker 3: But we're able to fix it.
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  Speaker 4: They have cooperating kids, and so we're able to actually
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  Speaker 4: have the remainder interest of both properties given to an
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  Speaker 4: irrevocable trust that we're creating now for them. They will
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  Speaker 4: keep the life estate in their home so as not
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  Speaker 4: to restart that clock, and they will gift the life
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  Speaker 4: estate in the balance in the other property to the trust,
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  Speaker 4: and so it will be protected. There will be a
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  Speaker 4: new five year waight just for the life estate peace.
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  Speaker 4: But all around, we also preserved to step up in
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  Speaker 4: basis win win for them creditors are off the table.
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  Speaker 4: Everyone's going to feel better about this arrangement. So fixable,
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  Speaker 4: but folks not the best to do. Seems like that's
• 10:09
  Speaker 4: a really big pothole. Get the guide and learn about
• 10:12
  Speaker 4: other potholes to avoid eight six six eight four eight
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  Speaker 4: five six nine nine or Legal Exchange show dot com.
• 10:20
  Speaker 2: You've been listening to Todd Lutsky, a partner with the
• 10:22
  Speaker 2: law firm of Cushing and Dolan. I'm Susan Powers, a
• 10:26
  Speaker 2: financial advisor with the Armstrong Advisory Group. We've got much
• 10:30
  Speaker 2: more to come when we return to the legally Exchange
• 10:33
  Speaker 2: with Todd Lutsky.
• 10:36
  Speaker 1: Creating an estate plan can be a difficult process if
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  Speaker 1: you aren't working with an expert who can make sure
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  Speaker 1: your plan is secure. Cushing and Dolan can help. Call
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  Speaker 1: blunders to avoid. Don't put your assets at risk and
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  Speaker 1: open yourself up to severe tax consequences, even if you
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  Speaker 1: already have a plan this This guide may correct an
• 11:00
  Speaker 1: issue that could come back to haunt you in the
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  Speaker 1: years to come. Proper estate planning is crucial to you
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  Speaker 1: being able to enjoy your later years, and it may
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  Speaker 1: be the difference between retiring comfortably or living under incredible
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  Speaker 1: financial pressure. Call Cushing and Dolan right now at eight
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  Speaker 1: Exchange with Todd Lutsky, an expert in elder life planning
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  Speaker 2: Welcome back into the Legal Exchange with Todd Lutsky. I'm
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  Speaker 2: Susan Powers, a financial advisor with the Armstrong Advice Group,
• 14:00
  Speaker 2: and I'm joined by Todd Letsky, a partner with the
• 14:03
  Speaker 2: law firm of Cushing and Dolan with a masters in taxation.
• 14:07
  Speaker 2: Where are we headed now, Todd.
• 14:09
  Speaker 3: New York?
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  Speaker 4: How about that excellent New York Appellate Court not too
• 14:13
  Speaker 4: far away? So in this case, it's a no contest
• 14:17
  Speaker 4: clause case. But that isn't really why we're gonna tell
• 14:20
  Speaker 4: you about it. But let's go through the fact. So
• 14:22
  Speaker 4: Christine and Donald began a romantic relationship in two thousand
• 14:27
  Speaker 4: and four, two thousand and five, she became his full
• 14:30
  Speaker 4: time caregiver and continued in that role till his death
• 14:36
  Speaker 4: ten years later. So that's worth something, I would think.
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  Speaker 4: So Donald had put together a revocable trust. This revocable
• 14:46
  Speaker 4: trust directed his daughter as trustee. Just to make things complicated,
• 14:50
  Speaker 4: her name is Chrissy, not to be confused with Christine,
• 14:54
  Speaker 4: who is the significant other, to pay income to Christine
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  Speaker 4: and to give Christine title to the home. Okay, okay, Well,
• 15:05
  Speaker 4: the trust did have a no contest clauset and in
• 15:08
  Speaker 4: about two years later, Christie's lawyer sent a letter to
• 15:13
  Speaker 4: Christine indicating that the trust had some precatory language in
• 15:16
  Speaker 4: it and had insufficient assets to distribute anything to Christine. Well,
• 15:21
  Speaker 4: Christine didn't like that, so Christine requested a transfer of
• 15:24
  Speaker 4: the home, which she knew she was entitled to, yep,
• 15:29
  Speaker 4: and a copy of the trust. I just got to
• 15:31
  Speaker 4: learn what else I'm entitled to, so Christine. Christine sued
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  Speaker 4: Chrissy for breach of fiduciary duty and the commingling of
• 15:40
  Speaker 4: the funds in the trust to unjustly enrich herself and
• 15:45
  Speaker 4: asked for a declaratory judgment and that she is entitled
• 15:48
  Speaker 4: to an income stream from the trust.
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  Speaker 3: Well, Chrissy moved to.
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  Speaker 4: Dismiss that, and as to her assertion to her being
• 15:58
  Speaker 4: entitled to a stream of income, and she indicated that
• 16:01
  Speaker 4: this triggered the no contest clause. Well, the court denied
• 16:05
  Speaker 4: the motion to dismiss, so Christie filed a summary judgment. Well,
• 16:09
  Speaker 4: Christine opposed the summary judgment, meaning there's no issue of
• 16:13
  Speaker 4: material fact, this case should go away. Christine opposed the
• 16:16
  Speaker 4: motion and then was seeking saying, look, all I'm trying
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  Speaker 4: to do is construe and enforce the trust, not contest it.
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  Speaker 1: Yep.
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  Speaker 4: Well, the lower court ended up granting Chrissy's motions that
• 16:28
  Speaker 4: it violated the no contest clause. Really, so Christine appealed,
• 16:32
  Speaker 4: and the appellate court affirmed, and then Christine appealed all
• 16:35
  Speaker 4: the way up to the New York Court of Appeals
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  Speaker 4: where they reversed, basically saying she wasn't trying to contest
• 16:43
  Speaker 4: the trust, just enforce it. Right again, This isn't a
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  Speaker 4: no contest clause, folks, This is more than that. I
• 16:49
  Speaker 4: just want to explain that this ended up working. Right,
• 16:52
  Speaker 4: So you're now going to find out that Christine is
• 16:58
  Speaker 4: going to be taken care of here in case you
• 17:00
  Speaker 4: weren't able to follow the bouncing ball. Christine is going
• 17:03
  Speaker 4: to be taken care of here. And I believe also
• 17:06
  Speaker 4: the children will get taken care of here. But again,
• 17:10
  Speaker 4: that's what you want to happen when you do your
• 17:14
  Speaker 4: state plan. And I thought it was interesting here that
• 17:17
  Speaker 4: that you weren't even married, right, this is just a
• 17:20
  Speaker 4: significant other.
• 17:21
  Speaker 2: But you don't have to leave things all for your kids.
• 17:24
  Speaker 2: You don't have whoever you want to, but have a plan, right.
• 17:27
  Speaker 4: And I think that's what I want to mention, that
• 17:29
  Speaker 4: a state planning potholes to avoid, right, if you have
• 17:33
  Speaker 4: a second marriage, look at your plan, if you got divorced,
• 17:37
  Speaker 4: look at your plan if you're moving to another state
• 17:40
  Speaker 4: and changing residencies. You need to look at your plan.
• 17:43
  Speaker 4: These are potholes that you could run into. Don't rely
• 17:46
  Speaker 4: on a whale, don't rely on a nominee realty trust.
• 17:48
  Speaker 4: Don't think because I have no kids or I'm not
• 17:50
  Speaker 4: married like this case, that I don't need to do planning.
• 17:53
  Speaker 4: Planning works, needing even more so, and even more so
• 17:58
  Speaker 4: not planning is a pothole in and of itself, but
• 18:01
  Speaker 4: there's a lot of other ones as well. Folks, Please
• 18:04
  Speaker 4: call and get the guide. Learn what's right for you
• 18:06
  Speaker 4: if you've done your planning, and how to fix it
• 18:08
  Speaker 4: if you haven't done it. How to avoid these problems
• 18:11
  Speaker 4: eight six six eight four eight five six nine nine
• 18:16
  Speaker 4: or Legal Exchange Show dot com again eight six six
• 18:19
  Speaker 4: eight four eight five six nine nine or Legal Exchange
• 18:23
  Speaker 4: Show dot com. What are we gonna learn from this? Yeah,
• 18:27
  Speaker 4: I'm glad the no contest clause was there.
• 18:29
  Speaker 3: I mean it did.
• 18:30
  Speaker 4: It did provide protection for sure, But let's let's walk
• 18:33
  Speaker 4: through this right. This is to me a great example
• 18:36
  Speaker 4: of how a trust, even for an unmarried or second
• 18:41
  Speaker 4: marriage situation, can provide for the significant other or a
• 18:46
  Speaker 4: second spouse while still protecting the kids. So here you
• 18:52
  Speaker 4: have a house that is going to a significant other. Well,
• 18:55
  Speaker 4: we'll talk about other options as we go through the segment,
• 18:59
  Speaker 4: but I mean, that's certainly an option. If that's what
• 19:01
  Speaker 4: you want to do, you can you can give it
• 19:04
  Speaker 4: to the to the significant other or to the second spouse.
• 19:07
  Speaker 4: In this case, that's what the trust ordered, give her
• 19:10
  Speaker 4: the house.
• 19:11
  Speaker 3: Okay.
• 19:11
  Speaker 4: In addition and uh and again she she did provide
• 19:15
  Speaker 4: care for ten years for this person, So again I
• 19:18
  Speaker 4: think she certainly earned it. And then they gave her
• 19:22
  Speaker 4: a stream of income in my head to help her
• 19:26
  Speaker 4: maintain the house that she just got. I think that
• 19:30
  Speaker 4: makes makes decent sense right now. And so to me
• 19:36
  Speaker 4: that that's a good, a good approach.
• 19:38
  Speaker 3: Now. It it that.
• 19:41
  Speaker 4: If that follows this, there will be principal left at
• 19:44
  Speaker 4: the end of the day, there will be principal left
• 19:46
  Speaker 4: for from the trust, presumably for the kids if you
• 19:50
  Speaker 4: follow this. This rule now, the no contest clause here,
• 19:55
  Speaker 4: I think served really to protect both parties, right.
• 19:58
  Speaker 3: Think about it.
• 19:59
  Speaker 4: If the kid sued saying, ah, we're going to try
• 20:02
  Speaker 4: and challenge the trust. We don't want the house going
• 20:04
  Speaker 4: to her, and we don't think the money should go
• 20:06
  Speaker 4: to her, well, then they would have probably lost everything
• 20:09
  Speaker 4: they would get, so that no contest clause works both ways,
• 20:14
  Speaker 4: right And then of course if she was to sue,
• 20:18
  Speaker 4: it would be the same thing. But in this case
• 20:19
  Speaker 4: it really protected the significant other. So the trust itself
• 20:24
  Speaker 4: really ensured that the significant other was taken care of,
• 20:27
  Speaker 4: which is exactly what the donor want. Now, a couple
• 20:32
  Speaker 4: of things, could you have done it differently? Could you
• 20:36
  Speaker 4: have provided more for your children and still provided for
• 20:40
  Speaker 4: the significant other? Yeah, I mean a couple of things
• 20:43
  Speaker 4: that other options that come to mind here for me
• 20:47
  Speaker 4: would be you know, maybe I would have put the
• 20:49
  Speaker 4: significant other on as a co trustee with the kid,
• 20:53
  Speaker 4: you know, because that at least allows the trustee the
• 20:58
  Speaker 4: significant other, to be more actively involved.
• 21:02
  Speaker 2: And you'd have that transparency.
• 21:04
  Speaker 4: You'd have the transparency. Good point, Susan, So what that
• 21:06
  Speaker 4: would be good? And again notice here nothing happened for
• 21:09
  Speaker 4: two years. The suit didn't come right until two years later.
• 21:14
  Speaker 4: So I'm like, I don't think it would have been
• 21:16
  Speaker 4: a two year delay for the significant other to start
• 21:20
  Speaker 4: either collecting the stream of income or get the house
• 21:22
  Speaker 4: right if she were.
• 21:24
  Speaker 2: It seems like trustee.
• 21:25
  Speaker 4: Oh, yeah, right, yeah, So to me, adding her as
• 21:29
  Speaker 4: a co trustee might be something that if you're thinking
• 21:32
  Speaker 4: about doing your planning, you might want to think about.
• 21:35
  Speaker 2: And he could have, Todd if he wanted to. He
• 21:38
  Speaker 2: could have kept that house in trust for the significant
• 21:41
  Speaker 2: other to live there, but when she passes, it could
• 21:44
  Speaker 2: have ultimately gone to his children.
• 21:47
  Speaker 3: Right, that was exactly my next point. Suit.
• 21:49
  Speaker 2: That sounds like we've been doing this really twenty years
• 21:51
  Speaker 2: together or something.
• 21:52
  Speaker 4: Read in my mind, I mean, that would be my
• 21:54
  Speaker 4: next point would be, did you have to actually give
• 21:57
  Speaker 4: her the house? No, you're exactly what you said, Susan
• 22:00
  Speaker 4: hold it in trust. And again, the stream of income
• 22:03
  Speaker 4: could have been used to maintain the property while she's
• 22:06
  Speaker 4: living there, even though.
• 22:08
  Speaker 3: The property is owned in the trust.
• 22:10
  Speaker 4: So now you've provided her with a place to live
• 22:13
  Speaker 4: and a mechanism to maintain the place to live without
• 22:18
  Speaker 4: giving her the place to live. Wow, that's awesome. And
• 22:22
  Speaker 4: and you know she couldn't sell it again if you
• 22:24
  Speaker 4: have co trustees, it would require both to sell it,
• 22:27
  Speaker 4: and if you did, the money would flow right into
• 22:30
  Speaker 4: the trust, not out to a significant other or a
• 22:33
  Speaker 4: second spouse.
• 22:35
  Speaker 3: If that's the case. And in that regard.
• 22:38
  Speaker 4: You could have then preserved the entire property because it
• 22:43
  Speaker 4: would say, like upon her death or her moving out
• 22:46
  Speaker 4: and doesn't want it anymore, or you know other trigger
• 22:49
  Speaker 4: events that you could put in there that when those
• 22:52
  Speaker 4: trigger events happen, the property then reverts back to his kids.
• 22:58
  Speaker 4: So his kids could have altimate. We got the property
• 23:01
  Speaker 4: and all the related appreciation while she enjoys a place
• 23:05
  Speaker 4: to live and a stream of income. Now the kids
• 23:07
  Speaker 4: hold off on the principle because they can't take the
• 23:09
  Speaker 4: principle because it was screw up the income. But then
• 23:12
  Speaker 4: when she passes all the principal would still be there,
• 23:15
  Speaker 4: right and they would get the house and the principle.
• 23:17
  Speaker 4: So there's no right or wrong answer here, folks. It's
• 23:19
  Speaker 4: just options, and I wanted to share those with you.
• 23:22
  Speaker 4: And when you're doing your planning, there are right wrong answers.
• 23:25
  Speaker 4: There's potholes to avoid, and that's what the guide's about.
• 23:27
  Speaker 4: So get the guide and learn how to avoid the
• 23:30
  Speaker 4: potholes when doing your estate plan, or maybe how to
• 23:33
  Speaker 4: update your estate plan for something that you didn't see
• 23:36
  Speaker 4: when you did it. Eight six six eight four eight
• 23:39
  Speaker 4: five six nine to nine.
• 23:40
  Speaker 2: You've been listening to Todd Lutsky, a partner with the
• 23:43
  Speaker 2: law firm of Cushing in Dolan. I'm Susan Powers with
• 23:46
  Speaker 2: the Armstrong Advisory Group and Todd will be answering your
• 23:49
  Speaker 2: questions when we return to the legal exchange with Todd Lutsky.
• 23:54
  Speaker 1: Creating an estate plan can be a difficult process if
• 23:57
  Speaker 1: you aren't working with an expert who can make sure
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• 27:26
  Speaker 1: You're listening to the Legal Exchange and it's time for
• 27:29
  Speaker 1: Ask Todd, the segment where Todd will answer your questions
• 27:32
  Speaker 1: about anything and everything that's included in the estate planning process.
• 27:36
  Speaker 1: Once again, here's Todd Lutsky and Susan Powers.
• 27:41
  Speaker 2: Welcome back, Todd. We have a few questions from listeners
• 27:44
  Speaker 2: for you. First question comes from ed in Cranston, Cranston,
• 27:48
  Speaker 2: Rhode Island and ed Wrights. My daughter predeceased me, leaving
• 27:52
  Speaker 2: behind two children. I have one living son. Now I'd
• 27:56
  Speaker 2: like to make sure my daughter's children are taken care
• 27:58
  Speaker 2: of after I pass. Would it be best if I
• 28:01
  Speaker 2: leave my assets all to my son with the understanding
• 28:05
  Speaker 2: that he is to take care of his niece and nephew.
• 28:07
  Speaker 2: Or should I leave it for my son in law
• 28:10
  Speaker 2: for them?
• 28:11
  Speaker 3: Hm? So let's let's see here.
• 28:14
  Speaker 4: So we've got a person who passed leaving two kids,
• 28:18
  Speaker 4: which fine, we usually take care of that in our
• 28:20
  Speaker 4: in our documents, and is saying, would I leave my
• 28:24
  Speaker 4: assets to my son? You never want to just do that,
• 28:28
  Speaker 4: leaving assets to another person and relying on that person
• 28:33
  Speaker 4: to take care of somebody else's family members. I mean,
• 28:38
  Speaker 4: I mean they're related. I guess, yeah, uncle, But if
• 28:43
  Speaker 4: you leave it directly to the son, who I guess
• 28:46
  Speaker 4: would be the uncle here? One, it's now owned by
• 28:52
  Speaker 4: the Sun right, and the son might be married, and
• 28:57
  Speaker 4: the son could get divorced. And if the son gets divorced,
• 29:01
  Speaker 4: but you gave half of your assets to your son
• 29:04
  Speaker 4: that you didn't mean to give to your son because
• 29:06
  Speaker 4: you really wanted it to go to your niece, to
• 29:08
  Speaker 4: your grandchildren.
• 29:10
  Speaker 3: You're going to lose half of that.
• 29:12
  Speaker 2: And how about the other alternative were he's saying, should
• 29:15
  Speaker 2: I leave it for their dad? So his son in law.
• 29:18
  Speaker 3: I'm a little confused there. What does he want to do?
• 29:19
  Speaker 2: He wants to leave the grandchildren have a father, Their
• 29:22
  Speaker 2: mother died, but their father is still living.
• 29:25
  Speaker 3: Oh yeah, no, we don't want that to a son
• 29:26
  Speaker 3: in law. So let's play out.
• 29:28
  Speaker 4: Well, I wanted to finish the other course, right, So
• 29:30
  Speaker 4: not only could if the uncle has it, could the
• 29:32
  Speaker 4: uncle get divorced and lose the asset. The uncle could
• 29:35
  Speaker 4: have creditor problems, The uncle could do an estate plan
• 29:38
  Speaker 4: and when they just die suddenly and leave it to
• 29:41
  Speaker 4: his own kids, his spouse and his kids. So I mean,
• 29:45
  Speaker 4: it's just Oh and finally, if it's not bad enough yet,
• 29:48
  Speaker 4: if you leave it to the uncle, every time the
• 29:51
  Speaker 4: uncle uses the money to pay for something for the
• 29:56
  Speaker 4: niece or nephew, it's a gift and he could be
• 30:01
  Speaker 4: running into gift tax consequences depending on how much it is.
• 30:04
  Speaker 4: I mean, you are allowed to give nineteen thousand per
• 30:07
  Speaker 4: year per person without having to file a gift tax
• 30:11
  Speaker 4: return or report anything when you're.
• 30:12
  Speaker 2: A college blows that out of the water.
• 30:14
  Speaker 4: Yeah, So if that's a good point, if you're trying
• 30:17
  Speaker 4: to pay for college, that's going to be a taxable
• 30:19
  Speaker 4: gift from technically, I mean, I guess if he gave
• 30:23
  Speaker 4: it directly to the institution he could get around that.
• 30:25
  Speaker 4: But still it's complicated. Yeah, And the vice versa part
• 30:31
  Speaker 4: is do I leave it to their dad my.
• 30:36
  Speaker 3: Son in law?
• 30:38
  Speaker 4: Probably not. Again, I think the bigger problem you have
• 30:40
  Speaker 4: there is depending on how you know. When you lose
• 30:43
  Speaker 4: a child before you die, that person could be relatively young. Well,
• 30:48
  Speaker 4: that means that the spouse is relatively young, right, and
• 30:51
  Speaker 4: if the spouse is relatively young, you want the spouse
• 30:53
  Speaker 4: to go on with their life, and so likely they
• 30:56
  Speaker 4: will marry so.
• 30:57
  Speaker 2: They could spend their inheritance on something their new family.
• 31:01
  Speaker 4: They could die and leave their inheritance to someone else
• 31:04
  Speaker 4: or are more importantly, they could remarry and get divorced. Right,
• 31:08
  Speaker 4: and then you lose half of what you you know,
• 31:11
  Speaker 4: what you hoped was going to go to.
• 31:13
  Speaker 3: And I get it.
• 31:13
  Speaker 4: The son in law, it is their own kids, So
• 31:17
  Speaker 4: they do want to take care of the kids. But
• 31:19
  Speaker 4: things happen right to the father and so I wouldn't
• 31:22
  Speaker 4: do that.
• 31:22
  Speaker 2: So how does it work if you you said you
• 31:24
  Speaker 2: make accommodations for this in your trust documents. How would
• 31:27
  Speaker 2: it work if if there were money left for them?
• 31:30
  Speaker 4: And there's so many clients that call all the time
• 31:32
  Speaker 4: and say and I'm glad they call. I mean, but
• 31:33
  Speaker 4: they call and they'll say, oh my gosh, I just
• 31:35
  Speaker 4: had another child, grandchild born unexpectedly.
• 31:38
  Speaker 3: I go, they're covered.
• 31:39
  Speaker 4: I know, oh I just had I just lost my child,
• 31:43
  Speaker 4: And I want to you know, I want to change
• 31:45
  Speaker 4: the document, make sure it goes to the grandkids. You're covered, right,
• 31:48
  Speaker 4: you don't have to do that. So if someone died
• 31:51
  Speaker 4: and it was the property was in the trust and
• 31:54
  Speaker 4: it said equally to my two kids if living otherwise
• 31:57
  Speaker 4: their kids. So even though dad's still alive or the
• 32:02
  Speaker 4: creator the trust is still alive, when a child dies,
• 32:07
  Speaker 4: nothing happens. But then when the father the donor dies,
• 32:10
  Speaker 4: then it would just break down still into two buckets.
• 32:13
  Speaker 4: But the bucket for the child who's not living would
• 32:17
  Speaker 4: just flow down to buckets for that child's children. So
• 32:20
  Speaker 4: it would remain in trust and be protected. So, folks,
• 32:23
  Speaker 4: these are little potholes I guess that you need to
• 32:25
  Speaker 4: think about when you're doing your planning. So think about
• 32:28
  Speaker 4: them if you get divorced, if you do get remarried.
• 32:31
  Speaker 4: I if you you know you're gonna say, I only
• 32:33
  Speaker 4: have a will, I don't need to do anything, or
• 32:35
  Speaker 4: I can rely on a nominee realty trust. These are
• 32:37
  Speaker 4: all things that are potholes.
• 32:39
  Speaker 3: Don't do it.
• 32:40
  Speaker 4: Pull out your plan, look at it. If you've done
• 32:42
  Speaker 4: your planning, get the guide and see how you can
• 32:45
  Speaker 4: update your plan or what you might need to do
• 32:47
  Speaker 4: to update your plan. For folks that haven't done planning,
• 32:50
  Speaker 4: this will prevent you from making all those mistakes. Eight
• 32:53
  Speaker 4: six six eight four eight five six nine nine or
• 32:56
  Speaker 4: Legal Exchange Show dot com again eight six six eight
• 33:00
  Speaker 4: four eight five six nine nine or Legal Exchange Show
• 33:04
  Speaker 4: dot Com.
• 33:05
  Speaker 2: Our last question comes from Deb in Middleborough, Mass and
• 33:08
  Speaker 2: Deb brights. My mother is aging and has some health
• 33:11
  Speaker 2: concerns and I'm going to be moving her into my home.
• 33:14
  Speaker 2: I would like to build an in law addition onto
• 33:16
  Speaker 2: my home and she wants to pay for it. What
• 33:19
  Speaker 2: should we consider in doing so? I don't want to
• 33:21
  Speaker 2: make any mistakes legally if she needs to ultimately go
• 33:25
  Speaker 2: into a nursing.
• 33:26
  Speaker 4: Home, all right, So this one is a little more complicated. Obviously,
• 33:33
  Speaker 4: she wants to give money to the daughter to build that,
• 33:36
  Speaker 4: to build that, so that's a gift. I'm not worried
• 33:38
  Speaker 4: about the gift tax. She's not gonna have any problems there.
• 33:41
  Speaker 4: She can give away thirteen point nine million and not
• 33:43
  Speaker 4: pay a gift tax currently. But if you do that,
• 33:48
  Speaker 4: you create a five year waiting period for the nursing home,
• 33:50
  Speaker 4: which is what the daughter's worried about, right, But it
• 33:53
  Speaker 4: sounds like we're not giving the mother anything, So I
• 33:57
  Speaker 4: guess nothing would happen other than yeah, you'd have a
• 33:59
  Speaker 4: five year waiting period. Well that's not helpful because then
• 34:02
  Speaker 4: the daughter would have to private pay the nursing home.
• 34:05
  Speaker 4: So I think the way to fix it is probably
• 34:08
  Speaker 4: to have and again, mom living there really doesn't have
• 34:12
  Speaker 4: any rights to live there, So I want to make
• 34:15
  Speaker 4: sure she has a right to live there and that
• 34:17
  Speaker 4: the daughter can't just throw her out because they're having
• 34:20
  Speaker 4: a bad day. So I would suggest that they value
• 34:24
  Speaker 4: this property, figure out what this addition is going to
• 34:27
  Speaker 4: be worth. And then buy a life interest in the
• 34:33
  Speaker 4: daughter's house. So you actually say, instead of giving you
• 34:36
  Speaker 4: the money, which stops the five year problem, you purchase
• 34:41
  Speaker 4: an interest in the house. And the government has thought
• 34:44
  Speaker 4: of this, and so what they say is, if you
• 34:46
  Speaker 4: purchase a life interest in the house, now you the
• 34:51
  Speaker 4: person who purchased it, the mother must live there at
• 34:55
  Speaker 4: least for one year from.
• 34:57
  Speaker 3: The day you purchased it.
• 34:59
  Speaker 4: So stay out of the nursing home for one year
• 35:02
  Speaker 4: from the day you purchased this life estate. So you've
• 35:05
  Speaker 4: now converted a gift to a purchase. And when you
• 35:11
  Speaker 4: since it's not treated as a gift, you've converted the
• 35:15
  Speaker 4: five year waiting period for nursing home eligibility that goes
• 35:19
  Speaker 4: along with the gift to a one year waiting period.
• 35:23
  Speaker 4: It's great, which is great. Just live in the house,
• 35:25
  Speaker 4: which is what you want to do anyway.
• 35:27
  Speaker 2: Yeah, are there any tax implications for the daughter then
• 35:30
  Speaker 2: if mom's buying part of her house. I think of
• 35:32
  Speaker 2: like when you sell your home, there's tax implications, right,
• 35:35
  Speaker 2: I mean.
• 35:35
  Speaker 4: Arguably there there would be some capital gain perhaps that
• 35:39
  Speaker 4: could be created. And I don't believe you get the
• 35:42
  Speaker 4: one twenty one capital gains exclusion for selling a partial
• 35:47
  Speaker 4: interest to a related party. Okay, so there's little rules
• 35:51
  Speaker 4: that go along with that two hundred and fifty thousand
• 35:54
  Speaker 4: or five hundred thousand dollars capital gains exclusion for your house.
• 35:58
  Speaker 4: So yeah, there might be a little capital gain there,
• 36:01
  Speaker 4: but you know what, that's okay. I think at the
• 36:04
  Speaker 4: end of the day, you're getting a much better result
• 36:06
  Speaker 4: than you had before.
• 36:07
  Speaker 2: Yeah, so then mom gets to stay. So if the
• 36:10
  Speaker 2: daughter gets divorced or changes jobs and they have to
• 36:14
  Speaker 2: sell the house for.
• 36:15
  Speaker 3: Some reason, Yeah, that's a good point.
• 36:17
  Speaker 2: Mom would get the value of that home back, her
• 36:19
  Speaker 2: purchase back.
• 36:20
  Speaker 4: Well, so that's a great point. Again, we're doing the
• 36:23
  Speaker 4: life estate for a couple of reasons. Reduce the waiting period,
• 36:25
  Speaker 4: give mom a right to live there so she feels
• 36:28
  Speaker 4: protected and safe. But you're right, she wouldn't get every
• 36:31
  Speaker 4: penny back.
• 36:31
  Speaker 3: Member.
• 36:32
  Speaker 4: Life estates are valued based on the date of the
• 36:34
  Speaker 4: transaction and your age. Okay, So if it's five years later,
• 36:39
  Speaker 4: she's five years older. So when you go do the
• 36:41
  Speaker 4: calculation for the sale, she's going to get a smaller
• 36:44
  Speaker 4: piece at it, but she will get something. Folks, definitely
• 36:48
  Speaker 4: potholes involved here, call and learn how to avoid potholes
• 36:51
  Speaker 4: when doing your estate plan eight six six eight four
• 36:55
  Speaker 4: eight five six ninety nine, or go to our website
• 36:58
  Speaker 4: and you can download the there eight six six eight
• 37:03
  Speaker 4: four eight five six nine nine, or Legal Exchange Show
• 37:07
  Speaker 4: dot com.
• 37:08
  Speaker 2: If you have a question you would like to ask Todd,
• 37:10
  Speaker 2: visit his website Legal Exchange Show dot com and click
• 37:14
  Speaker 2: on the ask Tod tab. Maybe I'll be able to
• 37:16
  Speaker 2: read your question on the air, and hopefully his answer
• 37:19
  Speaker 2: will stop you from becoming one of his next real
• 37:22
  Speaker 2: life stories. You've been listening to Todd Lutsky, a partner
• 37:26
  Speaker 2: with the law firm of Cushing and Dolan. I'm Susan Powers,
• 37:29
  Speaker 2: a financial advisor with the Armstrong Advisory Group. We'll be
• 37:33
  Speaker 2: back with more after this quick break on the Legal
• 37:36
  Speaker 2: Exchange with Todd Lutsky.
• 37:39
  Speaker 1: Creating an estate plan can be a difficult process if
• 37:41
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• 38:28
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  Speaker 1: eight five six nine nine, Or visit him online at
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  Speaker 1: Legal Exchange Show dot com.
• 41:00
  Speaker 2: Welcome back into the Legal Exchange with Todd Lutsky. I'm
• 41:03
  Speaker 2: Susan Powers, a financial advisor with the Armstrong Advisory Group,
• 41:07
  Speaker 2: and I'm joined, of course by Todd Lutsky, a partner
• 41:10
  Speaker 2: with the law firm of Cushing and Owen with a
• 41:13
  Speaker 2: master's in taxation. So, Todd, your guide is all about
• 41:17
  Speaker 2: avoiding these potholes and mistakes you want to try and
• 41:20
  Speaker 2: avoid when it comes to your estate planning. So last
• 41:23
  Speaker 2: week we were talking about some life events that really
• 41:27
  Speaker 2: warrant a review or a change to your documents. And
• 41:30
  Speaker 2: I want to keep going down that path because there
• 41:32
  Speaker 2: are a lot of things that can happen in life
• 41:34
  Speaker 2: that would warrant that. So I want to talk about
• 41:38
  Speaker 2: instead of the doom and gloom things, how about a
• 41:41
  Speaker 2: happy thing where you suddenly have an increased net worth. Okay,
• 41:46
  Speaker 2: so we can kind of make up our own facts
• 41:49
  Speaker 2: here in terms of where you were and where you
• 41:52
  Speaker 2: are now, what level of net worth? Kind of starting
• 41:57
  Speaker 2: at the basics, where do you have to be from
• 41:59
  Speaker 2: a net worth perspective to do any trust planning? Let's
• 42:04
  Speaker 2: start with that.
• 42:06
  Speaker 4: It's a great question because I'm not always sure that
• 42:10
  Speaker 4: trust planning is based on money only, okay, because you
• 42:14
  Speaker 4: can't forget about the family. So let's think about a
• 42:18
  Speaker 4: young family who might have way less than the estate
• 42:21
  Speaker 4: tax exemption of two million in Massachusetts, and forget federal
• 42:26
  Speaker 4: it's way high. Right, you're just starting out. You might
• 42:29
  Speaker 4: just have a house with a mortgage, and you know,
• 42:31
  Speaker 4: small bank accountant on a beginning investment account in a
• 42:33
  Speaker 4: beginning for a one k maybe a little.
• 42:35
  Speaker 2: Life insurance term life or something like that.
• 42:37
  Speaker 4: Yeah, well, let's say you didn't even have that, just
• 42:40
  Speaker 4: to make the point crystal clear. You know, you're certainly
• 42:43
  Speaker 4: not worth a lot, so you're not needing a trust
• 42:46
  Speaker 4: at all really for tax avoidance at that point.
• 42:50
  Speaker 3: Right, But you have.
• 42:51
  Speaker 4: Two young kids. Oh well, if you have two miners
• 42:55
  Speaker 4: and you die, they can't own your house, they can't
• 42:58
  Speaker 4: own any of your assets. So I don't want some
• 43:02
  Speaker 4: guardian owning all my stuff. I'd rather have a trust
• 43:06
  Speaker 4: own my stuff and direct how those assets will be
• 43:10
  Speaker 4: held and used.
• 43:11
  Speaker 2: For my children for the benefit of them.
• 43:13
  Speaker 4: Right, And so then I need a trust regardless of
• 43:16
  Speaker 4: my net worth because I have minor children.
• 43:19
  Speaker 3: But that's a good point. That's where you've got to
• 43:21
  Speaker 3: start though.
• 43:21
  Speaker 4: You think about net worth mostly, but don't forget about
• 43:24
  Speaker 4: the family behind the estate plan. And even folks that
• 43:27
  Speaker 4: are older that, let's say are under two million, well
• 43:31
  Speaker 4: then they would need a trust maybe to avoid the
• 43:35
  Speaker 4: nursing home cost. So again not driven by taxes, which
• 43:38
  Speaker 4: is what we would always be thinking about.
• 43:40
  Speaker 3: Right, that's the obvious question. That's why you asked it.
• 43:43
  Speaker 4: And I'd say, well, maybe they don't need it for
• 43:45
  Speaker 4: tax purposes, but they need it to protect it from
• 43:46
  Speaker 4: the nursing home or even for them even if there's
• 43:49
  Speaker 4: not a nursing home concern. Maybe they've got great long
• 43:52
  Speaker 4: term care insurance and they don't have a tax problem
• 43:56
  Speaker 4: because they're under two million dollars, but they just want
• 43:59
  Speaker 4: to make sure the kids get it in a way,
• 44:01
  Speaker 4: in a manner, and maybe they want to skip a
• 44:03
  Speaker 4: generation get some stuff down to a grandkid.
• 44:05
  Speaker 3: Maybe they want to protect it from divorces whatever.
• 44:08
  Speaker 4: So again a trust is needed for the after you
• 44:11
  Speaker 4: die part of the trust life. So those would be
• 44:16
  Speaker 4: reasons to think about a trust anyway.
• 44:19
  Speaker 2: Other than your net worth.
• 44:20
  Speaker 3: But you're right from a network standpoint, I'll come back
• 44:23
  Speaker 3: to that.
• 44:23
  Speaker 2: Yeah, where's the level where you have to do like
• 44:26
  Speaker 2: your basic plan your revocable trust plan irrevocable. Either one
• 44:30
  Speaker 2: will take care of the vast majority of folks. What
• 44:34
  Speaker 2: level of net worth do you get to where you
• 44:37
  Speaker 2: need more complex planning beyond just your basic right trust?
• 44:43
  Speaker 4: So the basic trust, you're right, over four million in
• 44:46
  Speaker 4: Massachusetts at least, or over two million in Massachusetts if
• 44:50
  Speaker 4: you're married, you're going to need basic trusts to eliminate
• 44:53
  Speaker 4: and double if you're married, the exemption from two to four.
• 44:56
  Speaker 4: Other folks listening, check with your state and your exemption
• 45:00
  Speaker 4: and for your state, same idea, though double it for
• 45:03
  Speaker 4: your situation. Basic planning will eliminate the tax federally, You're right,
• 45:07
  Speaker 4: the tax exemptions fourteen million almost each, so twenty eight million. Well,
• 45:13
  Speaker 4: you start getting, you know, you start getting north of that,
• 45:16
  Speaker 4: I think, and you you're going to need more than
• 45:18
  Speaker 4: the basics, but you're gonna need the basics for that,
• 45:20
  Speaker 4: but definitely more than the basics when you get over that. So, folks, again,
• 45:26
  Speaker 4: these are great comments that Susan's making because they are potholes.
• 45:29
  Speaker 4: They are things to think about when you're doing your planning.
• 45:31
  Speaker 4: So don't rely on a will don't rely on a
• 45:33
  Speaker 4: nominee realty trust. Think about what happens if you don't
• 45:37
  Speaker 4: have kids, you still need to plan If you do
• 45:39
  Speaker 4: have kids, what about if you got a divorce. There's
• 45:42
  Speaker 4: so many things to think. I'm moving, changing residency, folks.
• 45:46
  Speaker 4: If you've done your planning, get the guide, learn how
• 45:49
  Speaker 4: you might need to know what to do for events
• 45:51
  Speaker 4: that come up. If you haven't done your planning, get
• 45:53
  Speaker 4: the guide and learn what not to do and get
• 45:56
  Speaker 4: started doing your planning eight six six eight four eight
• 46:00
  Speaker 4: five six nine nine or Legal Exchange Show dot com.
• 46:04
  Speaker 4: Avoiding potholes when doing your planning eight six six eight
• 46:08
  Speaker 4: four eight five six nine nine or Legal Exchange Show
• 46:12
  Speaker 4: dot com.
• 46:13
  Speaker 2: So we have a network a federal estate tax exemption
• 46:16
  Speaker 2: of fourteen million. So if you're close to that point,
• 46:21
  Speaker 2: if you're over that point, when do you need to
• 46:24
  Speaker 2: do more complex estate planning? Do you think so?
• 46:27
  Speaker 4: If you're married, you you know you have to think
• 46:29
  Speaker 4: about it. I mean, do I wait to get to
• 46:31
  Speaker 4: twenty eight million? Twenty eight million? You're you're going to
• 46:34
  Speaker 4: depending on how old you are at that point. Right,
• 46:36
  Speaker 4: if you're twenty eight million in year sixty, your twenty
• 46:39
  Speaker 4: eight million could double more than one.
• 46:40
  Speaker 3: Time before you die.
• 46:42
  Speaker 4: Right and again, remember you get older, you spend less
• 46:44
  Speaker 4: as your activities decline, so you really need to think
• 46:47
  Speaker 4: about that.
• 46:49
  Speaker 3: So I don't know if there's a number.
• 46:51
  Speaker 4: I mean, I would say a little under twenty eight
• 46:53
  Speaker 4: million anyway, you know, maybe twenty five million, again, depending
• 46:56
  Speaker 4: on how old you are.
• 46:57
  Speaker 3: And and the goal is.
• 46:58
  Speaker 4: Remember to get the assets out of the estate before
• 47:02
  Speaker 4: you lose your exemption.
• 47:03
  Speaker 2: And how would you actually do that? Gift them away
• 47:05
  Speaker 2: to people?
• 47:06
  Speaker 3: No? No, no, never.
• 47:07
  Speaker 4: I would set if I'm married, I would set up
• 47:09
  Speaker 4: these spousal lifetime access trusts where you can actually enjoy
• 47:13
  Speaker 4: what you give away and control what you give away,
• 47:19
  Speaker 4: but yet have it outside your estate. First state tex
• 47:22
  Speaker 4: Per loophole. Yeah, it's really a phenomenal idea. Otherwise people
• 47:26
  Speaker 4: wouldn't do it. You know, if you tell somebody I'd
• 47:28
  Speaker 4: got to give away ten million dollars, they'd be like, well,
• 47:30
  Speaker 4: hold on.
• 47:30
  Speaker 2: God, I don't want to give away my ten million dollars.
• 47:32
  Speaker 4: I'm happy to have some fun with my life, right,
• 47:34
  Speaker 4: I'd like to keep it, so I don't want to
• 47:36
  Speaker 4: give it away. So my point here is that you
• 47:39
  Speaker 4: got to learn how to do these. And remember, the
• 47:41
  Speaker 4: point really is it's not about what you're doing today.
• 47:45
  Speaker 4: When you're talking about gifting and you're talking about what
• 47:48
  Speaker 4: that next step, next level of a state planning is.
• 47:52
  Speaker 4: It's not that, Okay, I'm moving ten million dollars into
• 47:55
  Speaker 4: these spousal lifetime access trusts today. Think about whole life.
• 48:00
  Speaker 4: It's what's that ten million going to become over the
• 48:04
  Speaker 4: next ten twenty years of my life. It's not today,
• 48:08
  Speaker 4: it's the growth after today. And the comfort you have
• 48:12
  Speaker 4: is you might say, well, Todd, we don't know what
• 48:14
  Speaker 4: the exemption is going to be. That's true, could go up,
• 48:17
  Speaker 4: could come down, right, But at that point, if you're
• 48:20
  Speaker 4: high enough in the estate planning world already, you won't
• 48:24
  Speaker 4: care because if you move it out of your estate
• 48:27
  Speaker 4: and it becomes twenty million or doubles one more time
• 48:30
  Speaker 4: to forty million, you're saying, I don't care who the
• 48:33
  Speaker 4: next president is or what the next administration in the
• 48:36
  Speaker 4: office does. We don't care why because this money will
• 48:41
  Speaker 4: never be federally or state estate taxed again, become tax
• 48:47
  Speaker 4: yess estate taxed. No, so have at it. Government, do
• 48:53
  Speaker 4: what you want. I'm not worried about it anymore, right,
• 48:55
  Speaker 4: a great feeling.
• 48:56
  Speaker 2: So when you transfer assets into that, you must be
• 48:59
  Speaker 2: very specific about the type of assets that you're transferring
• 49:02
  Speaker 2: into that.
• 49:03
  Speaker 4: Well, you need you need to think about that for sure.
• 49:06
  Speaker 4: I mean, I mean, you're if your assets are low basis,
• 49:10
  Speaker 4: you have to understand that you're trapping capital gain when
• 49:14
  Speaker 4: you make the transfer. But if you're making a transfer
• 49:19
  Speaker 4: knowing that I'm in a federal tax bracket for a
• 49:23
  Speaker 4: state taxes anyway, which is huge compared to forty percent. Yeah,
• 49:28
  Speaker 4: and here in Mass roughly ten percent. If you combine
• 49:32
  Speaker 4: the two, let's just call it fifty percent. Well, if
• 49:35
  Speaker 4: I'm in a fifty percent tax bracket on money that
• 49:38
  Speaker 4: I don't give away, I worry less about what assets
• 49:42
  Speaker 4: I'm giving away. I still want to make sure I
• 49:44
  Speaker 4: give away high basis if I can, because if I
• 49:47
  Speaker 4: give away low basis, I'm trapping twenty eight point eight
• 49:51
  Speaker 4: percent capital gain. If I keep it, I'm paying fifty
• 49:56
  Speaker 4: federal in state. So you have to understand that dynamic. Okay,
• 50:00
  Speaker 4: But again, if I'm only gifting to save ten percent
• 50:03
  Speaker 4: for the state m hm, then you have to really
• 50:06
  Speaker 4: think twice, because I don't want to trap twenty eight
• 50:10
  Speaker 4: percent capital gains tax to save ten percent mass death tax. Yeah,
• 50:16
  Speaker 4: lots of thinking. Lots of potholes could come up when
• 50:19
  Speaker 4: you're doing your estate planning, folks. That's just these have
• 50:24
  Speaker 4: basic estate planning potholes, but for more sophisticated you have
• 50:27
  Speaker 4: to also figure.
• 50:28
  Speaker 3: Out where those potholes are.
• 50:30
  Speaker 4: Learn how to do your estate plan and avoid all
• 50:32
  Speaker 4: of these potholes in your planning by getting the guide
• 50:36
  Speaker 4: eight six six eight four eight five six nine nine,
• 50:40
  Speaker 4: or go to our website Legal Exchange show dot com.
• 50:43
  Speaker 2: Todd Lutsky from the law firm of Cushing in Dolan,
• 50:46
  Speaker 2: thank you so much.
• 50:47
  Speaker 3: Thank you, Susan, always a pleasure.
• 50:48
  Speaker 2: I'm Susan Powers, a financial advisor with the Armstrong Advisory Group.
• 50:52
  Speaker 2: We thank you for joining us today and we'll be
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