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Ask Todd: Making the most of gifted assets · 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.
• 0:22
  Visit Cushingdolan dot com. Now here's Todd Lutsky.
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  Speaker 2: Ask problems.
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  Speaker 3: We got Todd Lutsky from the law firm of Cushing
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  and Dolan with us.
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  Speaker 2: Now.
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  Speaker 3: The segment here is called Ask Todd because it is
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  your chance to ask Todd your estate planning questions. I'm
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  sure you might have some with the Trump election. Hey,
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  what does the estate planning landscape look like for the future?
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  How might it change? Give us a call eight eight
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  eight two zero five two two six three. That is
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  the number to call in order to speak with Todd
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  about your estate planning questions. We got the phone lines
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  open again at eight eight eight two zero five two
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  two six three. Mister Lutsky, how are you doing today?
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  Speaker 2: I am doing great? You I'm good do.
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  Speaker 3: You know why the lifeguard didn't rescue the hippie. No,
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  cause he's too far out man. That's good, Todd. I
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  want to talk to you a little bit about gifting.
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  We're getting towards the end of the year right now,
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  and when it comes to the current state of being
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  able to make gifts to individuals, what's the law of
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  the land today, the current landscape for making just it
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  doesn't matter the size of the gift. Are we talking
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  about smaller, bigger gifts? How much is allowed without having
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  to pay tax? Like how what's the law of the
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  land today.
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  Speaker 4: That's that's fair because that really covers two questions. We'll
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  try to take care of both of them. So One,
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  many folks who don't really you can, don't really care
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  about the impact of the gift, right, So if it's if,
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  if it's a present interest exclusion gift. Today it's eighteen
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  thousand dollars per year per person January one tax law change,
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  nineteen thousand per year per person. I say these are
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  the simple gifts and the freebies because they require no
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  filing of a seven h nine gift tax return, no
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  reporting to the irs of any kind. You simply write
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  to check and it's tax free to the giver, and
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  of course, as always tax free to the recipient. However,
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  people say, well, what if I have a lot more
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  money I want to give. What if I want to
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  give away one hundred thousand, or if I want to
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  give away a million, can I? Yeah, Now you move
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  to what is called a taxable gift. So let's use
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  a million dollars as an example. If I had a
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  million dollars and I wanted to get it out of
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  my estate. Maybe it's going to bring my estate down
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  to reduce my state estate tax. Maybe it's going to
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  help reduce my federal estate tax. So I want to
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  make this gift. Let's just say it's cash for now.
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  If I move a million dollars out of the estate,
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  now I've made a taxable gift. Call it a million
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  eighteen thousand, So I can bring back in the present
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  interest exclusion for you. If I give away a million
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  eighteen thousand dollars, the first eighteen I just said was
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  a freebie. Now you back that out and the taxable
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  gift is a million dollars, and that gets reported on
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  the seven h nine gift tax return that the giver files,
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  not the recipient. Okay, now I've made a million dollar gift.
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  I don't want to pay tax on that. What's that
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  bottom line tax do on that million dollar transfer?
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  Speaker 2: Well, it's going to be zero.
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  Speaker 4: But why because we now shift over to what is
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  known as a federal gift tax exemption, which happens to
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  mirror the federal estate tax exemption of thirteen million, six
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  hundred thousand and change roughly today. Now that's going up
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  January one as well. But today that's so much I
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  can give away. So if I have thirteen point six
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  and I give a million, I just eat into that
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  thirteen point six by one million, leaving me an exemption
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  of twelve point six and zeroing out my tax.
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  Speaker 2: Liability on that gift. So pretty easy to do. Can
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  you give away more than a million? Sure? Can the
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  whole thirteen six?
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  Speaker 3: If you like talking with Todd Lutsky from the law
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  firm of Cushing and Dole, and if you've got questions
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  for Todd about your estate plan. We got the phone
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  lines open here at eight eight eight two zero five
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  two two six three. That number again is eight eight
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  eight two zero five two two six three. Still got
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  some room on the phone line, So again, that number
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  is eight eight eight two zero five two two six
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  three Todd. If someone is trying to incorporate a gifting
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  strategy into their estate plan, what are some of the
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  constructions that you've seen that could potentially be successful.
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  Speaker 4: So the first there's so many things to think about, though, Chuck,
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  But I'll just try and give you a quick heads up. Right,
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  think about what you're gifting.
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  Speaker 2: Is it cash?
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  Speaker 4: Is it low basis stock that I bought years and
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  years ago and I'm gonna have a huge built in gain.
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  Speaker 2: Is it rental.
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  Speaker 4: Property that I have had and depreciated the basis to
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  zero with a huge built in gain. So you want
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  to think about the type of asset I gift. Gifting
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  away high basis assets is better than low basis assets.
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  So to the extent you can do that, do that,
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  like what cash or stock that I just bought that
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  has a high basis That way you're getting it out
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  of your estate without incurring or trapping I should say
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  a built in capital gain, because remember, folks, the capital
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  gains tax that you're building in could be higher than
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  the estate tax you're trying to avoid. Lots to think about, folks,
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  for sure, talking with Tom Lotski from the law firm
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  of Cushing and Dolan. If you've got a question for Todd,
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  we've got the phone lines open at eight eight eight
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  to zero five to two sixty three. That number again
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  is eight eight eight to zero five two two six three.
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  We're gonna take a quick break here, but when we
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  come back, it's going to be right to your questions
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  with Todd again. Still a little bit of room on
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  the phone lines at eight eight eight to zero five
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  two two sixty three. Quick break, then your questions with Todd.
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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, let's get right to the callers here.
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  Speaker 3: We got ed in Newberry ed. What's your question for
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  Todd Lutsky.
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  Speaker 5: Well, maybe I'm misunderstanding what you just said, but we
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  have five kids. If I give each of them a
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  nineteen thousand dollars gift or ninety five thousand dollars, I
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  understand it's tax free for them, but won't I have
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  to pay taxes on that money? When I pull it
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  out with my account.
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  Speaker 4: Well, if you pull it out of an IRA, yes,
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  But if it's sitting in your investment brokerage account, no, right,
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  because distributions out of your brokerage account are not taxable. Now,
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  if you have to sell something to liquidate the investment
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  to generate cash, well, sure you have a capital gain
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  if you sell something, or a capital loss depending on
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  what you sell. But no, there's no tax on withdrawing
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  money from your non IRA account. It's just whatever you incurse.
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  So if you've got a core account with cash sitting
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  in it, you can give. And by the way, the
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  nineteen is next year, eighteen is this year, So yeah,
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  you can give away eighteen thousand per year per person,
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  no tax for you, no filing for you, no gift
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  tax for you, no filing for you, and no income
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  tax or gift tax to the recipient at all. So
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  hope that helps. Definitely have a that. But folks, you know,
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  gifting is not easy. We're starting to learn this right now,
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  just as we start to touch the tip of the
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  gifting iceberg. If you will, we'll be exploring these all
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  month long. But you can get ahead of the curve
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  by getting the guide making the most of gifting your assets.
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  Don't make mistakes like, oh, I added a joint name
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  to an account.
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  Speaker 2: That's easy. Was that a problem? I don't know.
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  Speaker 4: Well, I put a joint name on a rental property
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  with my kid. I decided to put my kid's name
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  on the property. Oh my gosh, did I make a
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  completed gift? Do I have income tax problems? Did I
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  expose assets to creditors unnecessarily? So many things can happen
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  when you make simple moves or simple things that you
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  think are simple, like gifting. Please learn how to gift
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  the right way. Get the guide eight six six eight
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  four eight five six nine nine or Legal Exchange Show
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  dot com. Making the Most of Gifting your Assets eight
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  six six eight four eight five six nine nine or
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  Legal Exchange Show dot com.
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  Speaker 3: Todd, I've got another one here for you. We've got
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  Carol an old Orchard Beach. Carol, what's your question for Todd?
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  Speaker 6: Well, it's fairly similar, But I don't have a million
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  to give someone. I'm probably gonna have about that much
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  sluv on myself as I go into retirement. Hopefully that'll
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  take me through. But my question is a smaller amount.
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  If I want to give, like one of my kids,
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  let's say ten thousand dollars. How do I do it
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  so that I'm not taxed on that ten thousand? And
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  when I give it to him, he doesn't you know,
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  it doesn't add to his income and therefore he gets
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  taxed so on it.
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  Speaker 4: You're right, it was very similar to the last question, Carol.
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  But that's okay, So let me do it this way.
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  The ten thousand you're giving, is it cash?
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  Speaker 6: Well, okay, let's I guess I'd better make myself clear.
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  What if I write a check? I mean, yes, I can.
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  Speaker 2: Call out catch Yes.
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  Speaker 4: Absolutely, So all you need to do to accomplish your
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  goal of getting that ten thousand dollars to your beneficiary
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  is simply go to your bank, write a check, pay
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  to the order of hand it to him. You do
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  not need to file any federal gift tax return. You
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  are not required to do it, nor do you have to. Secondly,
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  so that means there's no gift tax for you. Your
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  child who receives the money does not have an income
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  tax liability because gifts are never an income taxable event,
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  so does it matter how much they receive. The recipient
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  has no gift tax and the recipient has no income tax.
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  Simply right the check and you can do that. So
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  great question. I hope that that helps Todd.
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  Speaker 3: We'll keep the train moving.
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  Speaker 6: Here.
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  Speaker 3: We've got Tom in Charlestown with a question for you. Tom,
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  you're on with Todd Lutsky.
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  Speaker 7: Thank you, Good morning, Todd. Last week you spoke about
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  leaving your IRA to your state, and I have two
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  questions about that. One is is it subject to probate
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  in order to get it out of the estate. And secondly,
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  since it is subject to probate, if you find yourself
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  in a situation where you qualify for medicaid, but medicaid
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  is going to have a lean, will that lean attached
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  to that iora that you've left to your estate.
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  Speaker 2: Great question. So two answers.
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  Speaker 4: One in order to name the estate the beneficiary, Yes,
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  you are going to go to probate, No way to
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  avoid it for that one item. Then that item, and
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  again that only happens when you die, so you have
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  to be married. Let's say you pass away, Tom, you
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  never went to the nursing home. The asset flows through
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  probate into your testamentary trust. So yes, you have to
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  have a testamentary trust in place as well to receive
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  the money through probate, but then it is in trust
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  for the benefit of your spouse who can enjoy the
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  income and the principle. And the next day gets sick
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  and go to a nursing home and it is immediately
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  protected from the nursing home. And lastly there will be
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  no lean on that. So it really is a home
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  run for the one bad part. I got to go
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  to probate, but the pros in my mind, generally outweigh
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  the cons here, so hopefully that helps.
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  Speaker 2: Todd.
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  Speaker 3: I've got another one for you here. Let's go to
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  Steve in Maine. Steve, what's your question for Todd?
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  Speaker 8: Yeah, Hi, Todd, I have a question for you. So,
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  my mom has owned that beach home for about thirty years.
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  It's not her primary residence. It's worth a little under
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  a million dollars, and after she passes, she's giving it
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  to my brother and I, but she just wants us
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  to sell it just so we don't have to share it,
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  which is challenging. Would it be better taxes if she
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  were to sell it before she passes or would it
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  make any difference?
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  Speaker 4: Yeah, it'd be horrible. Horrible to sell it before she passes.
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  So please, folks, this is exactly what we talk about.
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  Thirty years ago. She bought this property. I don't know,
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  maybe she paid one hundred grand for it. Maybe she
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  paid fifty grand for it, say one hundred grand. We've
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  got nine hundred thousand dollars of built in game here.
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  You give away an asset like this. When I talked
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  earlier about high basis and low basis, right, this is
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  low basis. You give this away, you're trapping nine hundred
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  thousand dollars of gain during life. Don't give it away.
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  Don't sell it during life because you got the nine
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  hundred thousand dollars of built in gain to pay tax on. Instead,
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  hang on to it right, plan for it, put it
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  in a trust, whatever you want, die owning it, and
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  when you dine, it passes to you kids. You kids
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  will now get it with a brand new basis of
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  a million dollars fair market value. Date of death eliminates
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  the built in gain. Sell it you guys, pay no
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  capital gains tax, or if one of you want it,
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  buy out the interest of the other one. You have
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  every option available to you. Don't just sell it or
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  give it away now.
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  Speaker 3: Todd, any other final thoughts on gifting We got a
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  little bit of time here, and any last thoughts before
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  we wrap up.
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  Speaker 4: Yeah, I think I just want to spend a little
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  more time on Steve's question because I didn't know if
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  there was another caller. But on Steve's question again, Folks this,
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  if you have the time, right, you should not just
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  not give it away but stick it into an irrevocable
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  medicaid trust. I don't know how old she is or
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  she didn't mention anything about her health. Right, if we
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  have time, I would put that into an irrevocable medicaid
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  trust so that I can get a clock running so
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  that yes, I'm keeping it, but I also don't want
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  to lose it in case she needs long term care
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  before she dies.
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  Speaker 2: This kind of irrevocable.
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  Speaker 4: Trust, unlike gifting trusts, will allow the asset to be
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  protected and included in the estate when you pass away,
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  therefore still preserving that step up in basis I just
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  talked about for the kids who then can sell it
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  with no capital gains tax.
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  Speaker 3: Mister Lutsky, thank you so much for joining us today.
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  We appreciate the time.
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  Speaker 2: It's always a pleasure, Thank you.
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  Speaker 1: This has been asked on on the Financially Exchange Radio network,
• 15:01
  Ask Todd with Todd. Lutsky has been presented by Cushing
• 15:04
  and Dolan, serving Massachusetts and New England for more than
• 15:06
  thirty years, helping families with the state and tax planning,
• 15:09
  Medicaid planning, and probate law. Call eight hundred and three
• 15:12
  nine three four thousand and one or visit Cushingdolan dot com.
• 15:16
  The views expressed in this segment are solely those of
• 15:18
  Cushing and Dolan Armstrong Advisory. He does not provide any
• 15:20
  legal or tax advice. Please consult with your illegal or
• 15:22
  tax advisor on such matters. Cushing and Armstrong do not
• 15:25
  endorse each other and are not affiliated