Latest / The Financial Exchange Show / Ask Todd: Trust planning vs long-term care insurance

Transcript

Ask Todd: Trust planning vs long-term care insurance · The Financial Exchange Show

• 0:01
  Speaker 1: This is Asked Todd on the Financial Exchange Radio network.
• 0:05
  Speaker 1: If you have an existing estate plan or in the
• 0:07
  Speaker 1: market for one, Todd Letsky is here to answer your
• 0:09
  Speaker 1: questions and help you plan for a later life. Ask
• 0:12
  Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
• 0:15
  Speaker 1: New England for more than thirty five years, helping families
• 0:19
  Speaker 1: with a state and tax planning, Medicaid planning, and probate law.
• 0:22
  Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
• 0:28
  Speaker 2: And we are now joined by mister Todd Alotski for
• 0:32
  Speaker 2: Asked Todd. Phone lines are open. Last week, I believe
• 0:36
  Speaker 2: we may have set a new record with do we
• 0:39
  Speaker 2: get to five calls last week?
• 0:41
  Speaker 3: I think we might have. I think we did four.
• 0:42
  Speaker 3: Poor home run, then.
• 0:44
  Speaker 2: It felt like five. I think I've just felt like
• 0:46
  Speaker 2: we were rocketing through them. But we do have limited
• 0:50
  Speaker 2: room on the phone line so called eight eight eight
• 0:52
  Speaker 2: two zero five two two six three to be able
• 0:54
  Speaker 2: to ask Todd your state planning questions. That number again
• 0:59
  Speaker 2: is eighty eight to zero five two two six three.
• 1:03
  Speaker 2: Normally we can only get to two or three of you.
• 1:05
  Speaker 2: So again, get calling early, get calling often to get
• 1:08
  Speaker 2: in line to ask Todd your questions. That number one
• 1:12
  Speaker 2: more time is eight eight eight two zero five two
• 1:17
  Speaker 2: two six three. Mister Lutsky, how are you today?
• 1:20
  Speaker 3: I am never better and and you I'm good.
• 1:23
  Speaker 2: I actually I just quit my my side hustle as
• 1:27
  Speaker 2: a mannequin in a department store.
• 1:29
  Speaker 3: Yeah that I was a side hustle.
• 1:30
  Speaker 2: I held that position for a while.
• 1:32
  Speaker 3: Yeah. No, that's good.
• 1:33
  Speaker 2: I did you got rid of it? I did, Todd.
• 1:35
  Speaker 2: I want to talk to you a little bit about
• 1:38
  Speaker 2: retirement accounts and long term care costs. Okay, when it
• 1:43
  Speaker 2: comes to folks that have retirement accounts, be it a
• 1:46
  Speaker 2: four to oh one, k ira sep iray even you
• 1:50
  Speaker 2: get to you know, uh, tax free accounts roth irais
• 1:53
  Speaker 2: and things like that, How does someone go about trying
• 1:56
  Speaker 2: to protect those assets from the cost of long term
• 2:00
  Speaker 2: care given the unique tax implications of them.
• 2:03
  Speaker 4: And you really hit it on the head there, Chuck.
• 2:05
  Speaker 4: It is all about the unique tax implications of these
• 2:08
  Speaker 4: So when you're dealing with estate planning, taxes are important.
• 2:13
  Speaker 4: When you're dealing with the state planning, income taxes are important.
• 2:16
  Speaker 4: What you come into with these kind of plans so
• 2:19
  Speaker 4: you can't move them to an irrevocable trust in advance
• 2:25
  Speaker 4: of going into a nursing home, so that we can
• 2:27
  Speaker 4: protect them. So protecting these assets in advance is difficult.
• 2:32
  Speaker 4: Now i'd say difficult, nearly impossible, But there's a little
• 2:36
  Speaker 4: thing we can do, what you'll explain in a minute.
• 2:38
  Speaker 4: The reason I cannot put them into that irrevocable trust
• 2:41
  Speaker 4: is because then they would have to come out of
• 2:44
  Speaker 4: the entity that they're in, which is this qualified plan
• 2:48
  Speaker 4: called an IRA or even a wroth. Right if it
• 2:51
  Speaker 4: comes out of the regular IRA, it's going to be taxable.
• 2:54
  Speaker 4: You could lose forty percent if you pull a lot
• 2:57
  Speaker 4: of money out and have to put it into the
• 2:58
  Speaker 4: irrevocable trust. You might say, well, a lot of wroth
• 3:02
  Speaker 4: is could pull it out and there's no income tax,
• 3:04
  Speaker 4: and that that's absolutely right. But if you pull it
• 3:07
  Speaker 4: out and there's no income tax, but I put it
• 3:09
  Speaker 4: into the trust, when I invest it again in the
• 3:12
  Speaker 4: name of the trust, it will not be in a wroth.
• 3:15
  Speaker 4: So now it will grow income taxable depending on what
• 3:18
  Speaker 4: you buy. So again it's a trade off.
• 3:21
  Speaker 3: NOE.
• 3:21
  Speaker 4: I can protect it by putting it into the trust,
• 3:24
  Speaker 4: but it will grow income taxable, not like a wrath.
• 3:28
  Speaker 4: And I'll leave you with this last thought, because the
• 3:30
  Speaker 4: one way you have a i'll say a fifty percent
• 3:33
  Speaker 4: chance of protecting it in advance is dying and not
• 3:38
  Speaker 4: going into the nursing home, which we all want to do.
• 3:41
  Speaker 4: That's not our goal. And if we're married and we
• 3:44
  Speaker 4: do planning, we set up these things called testamentary trusts,
• 3:48
  Speaker 4: so that if you happen to die and never make
• 3:51
  Speaker 4: it to a nursing home, but you're over age seventy three,
• 3:54
  Speaker 4: I know a lot of rules, then the beneficiary can
• 3:59
  Speaker 4: be this testimon menary trust which is built into your will,
• 4:02
  Speaker 4: so that now the asset will be sheltered from future
• 4:05
  Speaker 4: estate taxes in that will, in that testamentary trust, and
• 4:10
  Speaker 4: available for your spouse what you want, but immediately protected
• 4:15
  Speaker 4: from the nursing home in case your spouse got sick later. Man,
• 4:19
  Speaker 4: remember if you don't do that and you just leave
• 4:22
  Speaker 4: it directly to your spouse, it's going to be available
• 4:25
  Speaker 4: first a tax when your spouse dies, and continue to
• 4:29
  Speaker 4: remain at risk for the nursing home when your spouse
• 4:32
  Speaker 4: gets sick. So it's a wonderful way of providing some
• 4:35
  Speaker 4: protection or a chance at protecting an asset that's very
• 4:41
  Speaker 4: hard to protect.
• 4:42
  Speaker 2: Talking with Todd A. Lotski from the law firm of
• 4:44
  Speaker 2: Cushing and Dolan. Still room on the phone lines at
• 4:47
  Speaker 2: eight eight eight two zero five two two sixty three.
• 4:51
  Speaker 2: That is the number to call speak with Todd live
• 4:54
  Speaker 2: on air about your estate planning questions right now again.
• 4:58
  Speaker 2: Eight eight eight two zero five two two six three
• 5:02
  Speaker 2: is the number. We're gonna take a quick break here,
• 5:05
  Speaker 2: but when we come back, we are going to get
• 5:07
  Speaker 2: to your questions with Todd. That phone number again is
• 5:11
  Speaker 2: eight eight eight to zero five two two six three.
• 5:14
  Speaker 2: One more time, it's eight eight eight two zero five
• 5:18
  Speaker 2: two two sixty three.
• 5:20
  Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
• 5:24
  Speaker 1: only here on the Financial Exchange Radio Network. Don't miss
• 5:29
  Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
• 5:33
  Speaker 1: only here on the Financial Exchange Radio Network.
• 5:45
  Speaker 2: Talking with Todd Lutsky from Cushing and Dolan. We do
• 5:47
  Speaker 2: still have a little room on the phone lines, so
• 5:50
  Speaker 2: call eight eight eight to zero five two two six
• 5:53
  Speaker 2: three to ask Todd your questions again. That number is
• 5:57
  Speaker 2: eight eight eight to zero five. I have two two
• 6:00
  Speaker 2: six three Tucker, I know that we have someone on
• 6:02
  Speaker 2: the line. I didn't see anything come through. Do you
• 6:05
  Speaker 2: have them? Sorry, that would be Rick and Chatham. There
• 6:08
  Speaker 2: we go. We got Rick and Chatham all queued up. Rick,
• 6:10
  Speaker 2: what's your question for Todd?
• 6:12
  Speaker 5: Okay, First, he was discussing the difficulties of moving like
• 6:18
  Speaker 5: an IRA into irrevocable What if you moved your like
• 6:25
  Speaker 5: E trade account in there, it's not enough retirement account?
• 6:29
  Speaker 5: How does that work?
• 6:30
  Speaker 1: Like?
• 6:30
  Speaker 5: Can you still get your dividends out like if you
• 6:32
  Speaker 5: want to use it for retirement type deal? Yeah?
• 6:35
  Speaker 3: Great, great, go ahead.
• 6:37
  Speaker 5: Yeah. Then the other thing would be you talked about
• 6:39
  Speaker 5: that trust at seventy three. Yeah, if you die with
• 6:43
  Speaker 5: an irrevocable trust, aren't you already covered that way? That
• 6:46
  Speaker 5: was what my spouse already be protected.
• 6:50
  Speaker 2: Yeah?
• 6:51
  Speaker 3: All right.
• 6:51
  Speaker 4: So two questions one and both by the way, just
• 6:54
  Speaker 4: for everybody else listing. Both of these questions revolve around
• 6:58
  Speaker 4: advanced medicaid nursing, home play planning, and estate planning, and
• 7:01
  Speaker 4: are dealing with an irrevocable medicaid trust? These are the
• 7:04
  Speaker 4: kinds we've talked about many times on the on the show.
• 7:08
  Speaker 4: So excuse me, how do we fund the irrevocable trust.
• 7:13
  Speaker 4: As as was pointed out by Rick and me a
• 7:15
  Speaker 4: minute ago, we cannot put the IRA directly into that
• 7:19
  Speaker 4: trust because of the big income tax hit. However, I've
• 7:22
  Speaker 4: got my Fidelity accounts of the world, I've got my
• 7:25
  Speaker 4: Schwab accounts of the world. I've got you know, e
• 7:27
  Speaker 4: trade whatever whatever it is you're using to invest your portfolio.
• 7:32
  Speaker 4: As long as it's a non qualified portfolio, So a
• 7:36
  Speaker 4: regular investment account like this one, can you retitle it?
• 7:40
  Speaker 4: Absolutely simple paperwork. You change you get you go to
• 7:45
  Speaker 4: your your brokerage house and you get change of name forms.
• 7:51
  Speaker 4: They have them, download them and you'll put you know,
• 7:55
  Speaker 4: new name on the account will be and it like
• 7:57
  Speaker 4: if it's my trust, it might be the Todd Letsky
• 8:00
  Speaker 4: Family Irrevocable Trust. Okay, that will be the name, and
• 8:03
  Speaker 4: then it'll have a place for the trustee name put it,
• 8:06
  Speaker 4: and then there'll be a place for an ID number
• 8:09
  Speaker 4: for the trust. Generally, if you're working with us anyway,
• 8:12
  Speaker 4: we will have already obtained that ID number for you from.
• 8:16
  Speaker 3: The IRS and that will be listed there.
• 8:19
  Speaker 4: So put those three items on that form, turn it
• 8:23
  Speaker 4: in and the brokerage house will retitle the account. Now
• 8:28
  Speaker 4: very important when I say retitle, Notice I didn't say
• 8:32
  Speaker 4: resell the account, because there will be no selling, no
• 8:36
  Speaker 4: capital gains tax, no taxable event whatsoever. For retitling. It's
• 8:42
  Speaker 4: just an in kind transfer, so easy for that, and yes,
• 8:46
  Speaker 4: I'd recommend it. Then once it's in there, this question is, well,
• 8:50
  Speaker 4: what can I do with it? Well, sure that language
• 8:52
  Speaker 4: and our trusts say all the income interest dividends, just
• 8:58
  Speaker 4: like Rick indicated, that is being generated by the items
• 9:03
  Speaker 4: in the trust, by that investment portfolio, belong directly to
• 9:07
  Speaker 4: Rick or me if it's my trust, or you if
• 9:09
  Speaker 4: it's your trust. So it will say you could just
• 9:12
  Speaker 4: tell you your broker to or your financial advisor to
• 9:16
  Speaker 4: simply set up the account so that it automatically distributes
• 9:20
  Speaker 4: that income directly to your personal bank account. And I
• 9:24
  Speaker 4: know you didn't ask this question, but at the end
• 9:26
  Speaker 4: of the year, yes, you will continue to pick up
• 9:29
  Speaker 4: that income on your individual income tax return, so you're
• 9:33
  Speaker 4: not going to have an adverse income tax liability. The
• 9:36
  Speaker 4: trust will file a Form ten forty one, but it
• 9:39
  Speaker 4: will pay no tax. It's a grand tour trust if
• 9:42
  Speaker 4: it's drafted right, So make sure you find the lawyer
• 9:45
  Speaker 4: that understands how to draft these. Then you just continue
• 9:48
  Speaker 4: to pick up all the income on your tax return
• 9:52
  Speaker 4: even if you don't take it. So wonderful there. And lastly,
• 9:56
  Speaker 4: this IRA thing, Yeah, it's relatively new. It's dealing with
• 10:00
  Speaker 4: the Secure Act that came out I guess effectively is
• 10:03
  Speaker 4: the second version in twenty twenty two. And if you
• 10:07
  Speaker 4: have reached the RBD required beginning date of seventy three,
• 10:12
  Speaker 4: then you name the estate, not ther not your irrevocable
• 10:16
  Speaker 4: trust RICK that I just described to you, not that trust,
• 10:20
  Speaker 4: a separate trust built into your will, and so you
• 10:24
  Speaker 4: have to name the estate of like if it's mine,
• 10:27
  Speaker 4: it would be the estate of Todd Lutsky, not my
• 10:30
  Speaker 4: wife as the designated beneficiary. And so what that will
• 10:33
  Speaker 4: do is, yes, that one item is going to have
• 10:35
  Speaker 4: to go to probate, but I don't care because the
• 10:38
  Speaker 4: benefits far exceed the probate issue. So now it will
• 10:44
  Speaker 4: sit in trust for the benefit of my wife. She
• 10:46
  Speaker 4: can use it. It's sheltered for future estate taxes, and
• 10:50
  Speaker 4: it's immediately protected from the nursing home for the family
• 10:53
  Speaker 4: in the event my wife gets sick, even.
• 10:55
  Speaker 3: If it's the next day doesn't matter, no five year
• 10:58
  Speaker 3: waiting period. So hope that was helpful. Great question on that,
• 11:02
  Speaker 3: and folks, that's how you do advance planning. However, lots
• 11:07
  Speaker 3: of times people are faced with nursing home admission and
• 11:10
  Speaker 3: have to deal with what we call last minute Medicaid
• 11:13
  Speaker 3: eligibility planning. In that regard, I've put together a guide
• 11:17
  Speaker 3: called just that Last Minute Medicaid Eligibility, and it describes
• 11:21
  Speaker 3: to you, for married people and single people treated differently,
• 11:26
  Speaker 3: how you have certain assets when you're applying for Medicaid
• 11:29
  Speaker 3: that are accountable and certain assets that are not countable,
• 11:33
  Speaker 3: like a primary residence or a rental property, they're treated differently.
• 11:38
  Speaker 3: What about a four oh one K or an ira?
• 11:40
  Speaker 3: What about jointly held investment accounts versus investment accounts held
• 11:45
  Speaker 3: singly in your own name, So there you go. Lots
• 11:48
  Speaker 3: of differences, and it even.
• 11:49
  Speaker 4: Has a few ideas about how to transfer assets to
• 11:53
  Speaker 4: avoid the five year waiting period last minute. My point
• 11:56
  Speaker 4: is there's something in here for everybody, whether you've planned
• 11:59
  Speaker 4: or you've not planned. And if you're faced with going
• 12:01
  Speaker 4: into the nursing home last minute, don't write the check,
• 12:04
  Speaker 4: get the guide, learn what you can do last minute
• 12:07
  Speaker 4: eight six six eight four eight five six nine nine
• 12:12
  Speaker 4: or Legal Exchange show dot com again eight six six
• 12:16
  Speaker 4: eight four eight five six nine nine or Legal Exchange
• 12:20
  Speaker 4: Show dot.
• 12:21
  Speaker 2: Comdud You reference there talking about you know, last minute
• 12:25
  Speaker 2: planning and things like that. But let's let's go you know,
• 12:27
  Speaker 2: kind of forward back in time, okay, which is the
• 12:33
  Speaker 2: best way to phrase it? Okay, Let's say that you
• 12:36
  Speaker 2: are not facing an urgent medicaid situation. I often see
• 12:42
  Speaker 2: people trying to figure out, Hey, what's the best tool
• 12:45
  Speaker 2: for me to deal with a potential long term care situation?
• 12:49
  Speaker 2: Is it trust planning or is it long term care insurance?
• 12:54
  Speaker 2: Is it really a binary decision? Or can the two
• 12:56
  Speaker 2: complement each other in certain situations as well?
• 13:00
  Speaker 4: I'm going to go with they can compliment each other
• 13:03
  Speaker 4: in certain situations. But let me explore it a little.
• 13:06
  Speaker 4: So the one thing you want to stay away from
• 13:09
  Speaker 4: is the idea that probably all I need is long
• 13:12
  Speaker 4: term care insurance. Again, assuming you're not self insured. If
• 13:14
  Speaker 4: you have enough assets, let's start there. If you have
• 13:16
  Speaker 4: enough assets, folks generating enough income, yourself insured. You don't
• 13:20
  Speaker 4: even need to go down the Medicaid eligibility road. But
• 13:23
  Speaker 4: if you're in that area where you might probably the
• 13:27
  Speaker 4: long term care insurance.
• 13:28
  Speaker 2: It works.
• 13:29
  Speaker 4: It can be costly, but if you get it, it's
• 13:31
  Speaker 4: a wonderful thing to have, if you get it early enough,
• 13:34
  Speaker 4: and it might provide some help.
• 13:36
  Speaker 3: But I don't think it's the end all be all.
• 13:39
  Speaker 4: Whereas on the flip side of it, if you did
• 13:41
  Speaker 4: nursing home planning and you didn't have long term care insurance,
• 13:44
  Speaker 4: or maybe you couldn't get it too old, too expensive, whatever,
• 13:49
  Speaker 4: I think you can actually use the irrevocable trust to
• 13:52
  Speaker 4: completely protect assets, Whereas I think it's a little tougher
• 13:56
  Speaker 4: just with long term care insurance. So I think probably
• 14:00
  Speaker 4: a complementary is good for both. But yes, putting the
• 14:03
  Speaker 4: assets in the trust can get you there all alone.
• 14:07
  Speaker 2: And if someone is looking to avoid a last minute
• 14:10
  Speaker 2: type of planning scenario, what's kind of the sweet spot
• 14:15
  Speaker 2: for starting to do planning that reflects the possibility of
• 14:18
  Speaker 2: a long term care situation.
• 14:20
  Speaker 4: A couple of things I would say, age you know,
• 14:24
  Speaker 4: sixty sixty five and up. If you're starting to do
• 14:26
  Speaker 4: your planning, you might want to think about whether I'm
• 14:29
  Speaker 4: gonna go down the irrevocable trust road, or I'm going
• 14:33
  Speaker 4: to go down the revocable trust road.
• 14:36
  Speaker 3: That's a great age.
• 14:37
  Speaker 4: Secondly, I would say, you know, asset level. Now you
• 14:42
  Speaker 4: got to start thinking about the asset level. Not just
• 14:44
  Speaker 4: the asset level, but what kind of assets. Do I
• 14:46
  Speaker 4: have a lot of liquid money or do I have
• 14:48
  Speaker 4: a lot of real estate? Somewhere in that four million
• 14:51
  Speaker 4: dollars in below range. I know it sounds high, but
• 14:54
  Speaker 4: I would say somewhere in that range you might want
• 14:55
  Speaker 4: to also consider it. You start getting up there in
• 14:57
  Speaker 4: the five six, seven million, you know you can pretty
• 15:00
  Speaker 4: much be self insured most of the time.
• 15:03
  Speaker 2: Todd Luski, thank you so much for joining us today.
• 15:05
  Speaker 2: We appreciate it.
• 15:06
  Speaker 3: It's always a pleasure. Thank you.
• 15:09
  Speaker 1: This has been asked Todd on the Financial Exchange Radio Network.
• 15:12
  Speaker 1: Ask Todd with Todd Lutsky has been presented by Cushing
• 15:15
  Speaker 1: and Dolan, serving Massachusetts and New England for more than
• 15:18
  Speaker 1: thirty years, helping families with the state and tax planning,
• 15:21
  Speaker 1: Medicaid planning, and probate law. Call eight hundred and three
• 15:23
  Speaker 1: nine three four thousand and one or visit Cushingdolan dot com.
• 15:27
  Speaker 1: The views expressed in this segment are solely those of
• 15:29
  Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
• 15:32
  Speaker 1: or tax advice. Please consult with your legal or tax
• 15:34
  Speaker 1: advisor on such matters. Cushing and Armstrong do not endorse
• 15:36
  Speaker 1: each other and are not affiliated.