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Ask Todd: What is a nominee realty trust? · 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
• 0:07
  market for one, Todd Lutsky is here to answer your
• 0:09
  questions and help you plan for later life. Ask Todd
• 0:12
  is presented by Cushing and Dolan, serving Massachusetts and New
• 0:15
  England for more than thirty five years, helping families with
• 0:18
  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: As promised, We're joined now by Todd Lutsky from the
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  law firm of Cushing and Dolan. The segment here is
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  Ask Todd, and the premise is very simple. You get
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  to ask Todd your estate planning questions live on air.
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  We've got the studio lines open at eight eight eight
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  to zero five two two six three. Last week, I
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  know we left one of a hang in, so make
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  sure that you call in early to make sure that
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  you get in line to ask Todd your estate planning
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  questions again. That number is eight eight eight to zero
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  five two two six three. Phone lines are open, so
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  get all cued up there and we'll get to you
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  as they come in again. Eight eight eight two zero
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  five two two six three to be able to ask
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  Todd Lutsky your estate planning questions. Mister Lutsky, how are
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  you today?
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  Speaker 3: I am doing well in yourself?
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  Speaker 2: Uh, A little tough, A little tough this week.
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  Speaker 3: What happened?
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  Speaker 2: Well, open my uh paycheck on last Friday and all
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  there wasn't there was a big thing of parsley. Yeah,
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  wagers are being garnished.
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  Speaker 3: Yeah, you got to watch that.
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  Speaker 2: Yeah, it's a real issue, Todd. I want to talk
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  to you about some different kinds of trust today, just
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  just to kind of clear my head on the whole topic.
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  I want to start first with nomine realty trusts.
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  Speaker 3: What are they?
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  Speaker 2: What do they actually do?
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  Speaker 4: So this is one of the unfortunately most commonly used
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  trust because lots of times, you know, real estate lawyers
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  will we'll set them up for people just because they
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  bought a piece of property and they'll throw them in there,
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  and they're used just so frequently, but they're so misunderstood.
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  What I mean by that is there. I know it
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  sounds strange, but they're not really a trust at all.
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  I mean, it's got the word trust in it, which
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  just adds to the confusion. But a nominee realty trust,
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  the word nominee means that it's more of a principal
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  agency employer employee relationships. So what I mean by that is,
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  and when you put assets in these trusts, these nominee
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  realty trusts, you got to look to the schedule of
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  beneficiaries because it's a complete flow through. So the schedule
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  of beneficiaries is actually the owners and here's the power
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  they have. There'll be language in the trust itself that
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  says the trustee of the trust shall have no power
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  to deal with the trust property unless directed by the beneficiaries. Well,
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  that means that the beneficiaries really control this and they
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  are really the owners of the property. So why this
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  is so problematic? You say, well, that doesn't sound so
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  much of a problem. Well, it generally is because people
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  put this property. Let's say they put their piece of
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  property in the trust and then they list the schedule
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  of beneficiaries as their kids. And they didn't mean to
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  give their kids the property, but they did just that
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  because they're the ones listed as the schedule beneficiaries. So
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  they're really the current owners. And why that's a problem
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  is what happens if one of the kids get a divorce, well,
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  mom and dad are living, they might not even realize
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  they own it until the divorce comes, and I can
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  assure you the divorcing parties will discover that this property
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  is really theirs and now part of the marriage. And
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  you could have parents, you know, having to buy out
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  their own home not realizing they gave it away, And
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  that to me is a is a big issue. So
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  lots of other problems can come with it. But that's
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  just a trust. Look at your schedule of beneficiaries and
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  determine whether or not you've got the right people listed,
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  and maybe how to undo it. And they are fixable,
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  by the way, so at the end of the day, folks,
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  that is something that you should consider. Now, let's look
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  at one other thing in this case.
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  Speaker 3: If what if you.
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  Speaker 4: Put rental property in one of these Nominee realty trusts.
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  If you put rental property into the Nominee Realty trust
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  and the rent is going to you, mom and dad,
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  you put the rent property and you're getting the rent, well,
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  then you're not entitled to the rent because you don't
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  own the property, and the IRS doesn't tend to like
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  that too much. The IRS says well, wait a minute.
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  The rent might be tax at a higher rate if
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  it went to the kids, and they're the ones really
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  entitled to that rent. So at the end of the day,
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  that could be an income tax problem on top of that.
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  So lots to think about with these nominee realty trusts.
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  Speaker 2: Talking with Todd Lutsky from the law firm of kushingan Dolan.
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  If you've got a question that you'd like to ask
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  Todd about your estate plan, studio line here is eight
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  eight eight to zero five two two six three. Again,
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  that is eight eight eight to zero five two two
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  six three to get your question right over to mister
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  Todd Lutsky there. We're going to take a quick break here,
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  but when we come back it is going to be
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  right to your questions with Todd. Again. We got room
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  on the phone lines for you at eight eight eight
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  to zero five two two six three. Quick break, then
• 5:48
  your questions when we return.
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  Speaker 1: Ask Todd with Todd Letsky every Wednesday at ten thirty
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  only here on the Financial Exchange Radio Network. 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: Still got a little bit more room on the phone
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  lines at eight eight eight two zero five two two
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  sixty three. If you've got a question for Todd, but
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  let's go first to Kenny and Tiksbury. Kenny, what's your
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  question for Todd Lutsky?
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  Speaker 5: Yes, I've got a piece of property coming out of
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  an irrevocable trust. It was May twenty years ago.
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  Speaker 3: Huh.
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  Speaker 5: There's five siblings, and one sibling would like to buy out.
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  The rest is their capital game.
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  Speaker 4: Okay, So that's a it's a question that I can
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  give you an answer to, but understand, not having read
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  the trust, It's it's complicated for me to know.
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  Speaker 3: But here's what you need to look for.
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  Speaker 4: I'm assuming that your parents maybe put the property in
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  the trust.
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  Speaker 3: Is that correct?
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  Speaker 5: Yes?
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  Speaker 3: And when did they die?
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  Speaker 2: Uh?
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  Speaker 5: There's one My mother is still living, Oh, James, I'm
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  talking about in the future.
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  Speaker 4: I mean okay, So so they they it hasn't come
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  out yet, and it's not coming out till she dies, correct, Yes, Okay,
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  so upon her death you'll have to determine whether or
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  not the assets in that trust are included in her
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  estate for state tax purposes. What I mean by that
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  is irrevocable trusts are not always completed gifts.
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  Speaker 3: So when I.
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  Speaker 4: Take when when when we prepare an irrevocable trust at
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  Cushing and Dolan for medicaid nursing home purposes, assuming that's
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  what this was prepared for. Was it designed to protect
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  the house from the nursing home?
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  Speaker 5: Yes, with a living estate.
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  Speaker 4: Oh so you're saying she kept a life estate in
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  the deed, the right to live there. Yes, okay, so
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  they put the remainder interest into the trust and retained
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  a life interest.
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  Speaker 6: Yes.
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  Speaker 4: Oh okay, that's entirely different. So now I don't need
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  to read the trust. I don't need to know what
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  the trust says, because when you retain the right to
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  live in a property, the government says, yes, you gave
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  away the remainder interest, but you retained the right to
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  enjoy what it is that you gave away. And therefore
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  the government says, you didn't cut the string, you didn't
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  make a completed gift, and the asset is going to
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  be included or pulled back into the estate for state
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  tax purposes, not for probate purposes, but for gross estate
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  tax purposes, so the full value of that property will
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  be included. I don't know if she's if that's going
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  to push her over the two million dollar Massachusetts limit
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  or not. But if it does, then there'll be a
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  massive state tax. But the good news for you is
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  there will be no probate or there will be a
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  full step up in basis. So when the property comes out,
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  if it's worth a million, it'll be as if the
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  kids paid a million. They can sell it the next
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  day for a million in their gain would be zero.
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  So there'll be no capital gains tax when this property
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  is sold. If it's sold shortly after the death of
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  the decedent, I say shortly, you know, within six months,
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  nine months, something like that. So hopefully that's helpful, and
• 9:23
  that's good news, folks. It's very important to understand these trusts.
• 9:26
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• 9:38
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• 9:41
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• 9:44
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• 9:48
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• 10:36
  Speaker 2: Todd, I've got another caller for you here. Let's go
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  to Hillary in Maryland. Hillary, what's your question for Todd Lutsky.
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  Speaker 6: Yes, I have a living revocable trust, and I was
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  just going to put my property in that. But I
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  also was thinking of putting it in a I guess
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  it's a nominee land trust, but it would land trust
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  privacy purposes, and then have that trust, my living trust
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  be the beneficiary of that and then just you know,
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  and then upon my death, you know my beneficiaries. I suppose,
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  would you know? I don't know if it's hard to
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  unravel once you know, if you have a trust and
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  a trust, But I was wondering if that's maybe what
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  you're talking about when you're talking about this nominee land
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  trust being a problem.
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  Speaker 4: Well, I can tell you in Maryland. It's probably hard
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  for me to speak too, because I'm not licensed in Maryland,
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  but I can tell you if it's a nominee realty trust. Yeah,
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  it's that flow through vehicle. And that's the way you
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  could do it. You could use a nominee realty trust,
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  make the beneficiary is a family revocable trust that you're
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  speaking of, and that'd be okay because then it would
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  be in the revocable trust. But you know, I don't
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  think you need it. I don't think you need that
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  intermediate step, is my point.
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  Speaker 3: Right.
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  Speaker 4: You can simply just need the property directly into the
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  revocable trust. Now, in Massachusetts we do this. We need
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  it directly into the revocable trust, and we do not
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  put the revocable trust on record. That's got all your wishes,
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  your you know, family wishes, where things are going to
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  go when you die, and how they get there and
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  when they get there and why they get there. That
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  doesn't go on record. A simple trustee certificate goes on
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  record indicating that this trust, This revocable trust exists so
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  that you don't have to, you know, reveal any of
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  that other information. So I would say, my only question
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  to you would be the revocable trust would be enough,
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  not the nominee realty trust.
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  Speaker 3: But but how how old are you? I'm sorry you
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  beeped out. How old?
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  Speaker 6: Late fifties?
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  Speaker 4: Yeah, so you know, I don't know if you're starting
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  to think about protecting assets from the cost of long
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  term care. If you are, then you know, I bring
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  it up when I meet clients sixty, sixty, sixty and over,
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  sixty five and over. So you know, if you're like
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  fifty eight or fifty nine and you're approaching sixty, that
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  quickly you might say, well, why would I want to
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  set up something now that I might just have to,
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  you know, redo in three years, five years if I
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  want to protect it from a nursing home. And so
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  if that's a concern of yours at all, then think
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  about an irrevocable trust. And if it's not, then even
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  with the revocable trust, I'm gonna mention, don't just stop
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  with putting your house in So with the revocable trust,
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  I'd put in your bank accounts, your investment portfolio, you know,
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  retitle it to the trust so it too will avoid
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  probate and get to your family in exactly the manner
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  that you want all those assets to go. Caution, though,
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  one thing you don't put in a revocable trust or
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  a medicaid irrevocable trust would be the IRA type assets
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  of the world you're retire German accounts.
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  Speaker 3: That would be the problem.
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  Speaker 4: So don't put those in because those would then create
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  a taxable event on the moment you transfer to the trust.
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  So just some things to think about, folks, different kinds
• 14:13
  of trusts for different objectives that you want to accomplish
• 14:16
  in your estate plan.
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  Speaker 2: Mister Watski, thank you so much for joining us today.
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  Speaker 3: Always a pleasure. Thank you.
• 14:23
  Speaker 1: This has been Asked Odd on the Financial Exchange Radio network.
• 14:27
  Askedd with Todd Lutsky has been presented by Cushing and Dolan,
• 14:30
  serving Massachusetts and New England for more than thirty years,
• 14:33
  helping families with estate and tax planning, medicaid planning, and
• 14:36
  probate law. Call eight hundred three nine three four thousand
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  and one or visit Cushingdolan dot com. The views expressed
• 14:43
  in this segment are solely those of Cushing and Dolan.
• 14:45
  Armstrong Advisory does not provide any legal or tax advice.
• 14:47
  Please consult with your legal or tax advisor on such matters.
• 14:50
  Cushing and Armstrong do not endorse each other and are
• 14:52
  not affiliated. Cushing and Dolan are experts in elder life
• 14:55
  planning and taxation. They know that every family is unique
• 14:58
  and that every estate plan must be different. Early planning
• 15:01
  is crucial if you want to stress for your retirement,
• 15:03
  and trusts are oftentimes the document of choice to help
• 15:06
  protect your assets, but with so many kinds of trusts,
• 15:09
  you need to learn about which one is right for
• 15:11
  your plan. Revocable and irrevocable trusts are most common, but
• 15:14
  there are several differences as well as numerous tax implications
• 15:17
  with each. If you are ready to start your planning
• 15:20
  or need you are a fresh and existing plan, call
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  Cushing and Dolan and ask for their new guide called
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  Dmistifying the Top seven Estate Planning Trusts. Learn how to
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  protect your assets and potentially eliminate your estate taxes. Call
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  eight sixty six eight four, eight five six ninety nine
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  right now and ask for your guide today. That's eight
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  proceeding was paid for, and the views expressed are solely
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