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Ask Todd: Estate Planning Basics, Trusts & What Really Counts Toward Your Estate · The Financial Exchange Show

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  Speaker 1: This is Ask Todd on the Financial Exchange Radio network.
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  Speaker 1: If you have an existing estate plan or in the
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  Speaker 1: market for one, Todd Letsky is here to answer your
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  Speaker 1: questions and help you plan for a later life. Ask
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  Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
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  Speaker 1: New England for more than thirty five years, helping families
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  Speaker 1: with a state and tax planning, medicaid planning, and probate law.
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  Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
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  Speaker 2: As promised, We're now joined by the one and only
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  Speaker 2: Todd Lutsky from the law firm of Cushing and Dolan.
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  Speaker 2: Phone lines are open because this segment is called Ask Todd,
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  Speaker 2: which means get calling so that you can ask Todd
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  Speaker 2: your estate planning questions about your estate plan. Eight eight
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  Speaker 2: eight two zero five two two sixty three is the
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  Speaker 2: number again, that is eight eight eight two zero five
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  Speaker 2: two two six three. We can usually get through two
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  Speaker 2: to three questions, so get in line or early get
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  Speaker 2: those phones down. Is on those fingers warmed up eight
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  Speaker 2: eight eight to zero five two two six three. Again
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  Speaker 2: it is eight eight eight two zero five two two
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  Speaker 2: six three. Mister Lutsky, how are you doing today?
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  Speaker 3: I am never better? How are you doing? Not great? No,
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  Speaker 3: it's always something with you.
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  Speaker 2: Got fired from the calendar factory.
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  Speaker 3: A calendar factory. Try to take a day off that
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  Speaker 3: doesn't work so well? Not fans, not on the calendar. No, no, no, Todd.
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  Speaker 3: Want to talk to you a little bit about really
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  Speaker 3: simple estate planning questions. I know sometimes we get all
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  Speaker 3: into these, you know, really complex scenarios.
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  Speaker 2: For a person listening that knows nothing about estate planning. Right,
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  Speaker 2: what are the basic legal documents that exist? And when
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  Speaker 2: should people have those as their estate plan?
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  Speaker 3: Yeah? So, I think when you're thinking about starting your
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  Speaker 3: estate plan, the way to go is, you know, there's
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  Speaker 3: a there's a series of things to think about. Right,
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  Speaker 3: you don't know what kind of trust I need? You
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  Speaker 3: don't know how many trusts you need? You know, you're
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  Speaker 3: not sure what you need to do. I think the
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  Speaker 3: place to start is valuation. I think you take a
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  Speaker 3: look at you know, what's my estate even worth? How
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  Speaker 3: do I know whether I even need to do the
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  Speaker 3: state tax planning? Well, when I talk about what's your
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  Speaker 3: a state worth? People don't even know what to include
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  Speaker 3: in that sore they're thinking about it so very basic, right,
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  Speaker 3: think about the value of all your bank accounts, the
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  Speaker 3: value of all your brokerage accounts, the value of your IRA.
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  Speaker 3: People forget that. Here's another one they forget wroth IRA.
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  Speaker 3: I say, wait, whatit isn't a wroth tax free? Yeah,
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  Speaker 3: but it's not a state tax free. So think about
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  Speaker 3: your wroth IRA four oh one k. Then head down
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  Speaker 3: things like on the real estate world, do I have
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  Speaker 3: a home? Do I have a vacation home, a rental property,
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  Speaker 3: all things that most people don't think that doesn't make
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  Speaker 3: them feel rich, you know, you say, oh yeah, I
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  Speaker 3: got real estate, but doesn't feel like I'm worth millions
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  Speaker 3: because I have real estate. But when you die, it
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  Speaker 3: is valued, So put those in play. And here's the
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  Speaker 3: last one that people always forget about life insurance. So
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  Speaker 3: many people are say, you know, life insurance is tax free.
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  Speaker 3: I was told that when I bought it, they told
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  Speaker 3: me that it's tax free. Well that's accurate. The problem
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  Speaker 3: with it is that the life insurance agents don't always
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  Speaker 3: tell you what kind of tax free it is. It
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  Speaker 3: is income tax free to the recipient. So if I die,
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  Speaker 3: my wife would get my policy and it would be
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  Speaker 3: income tax free. But when I die and I transfer
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  Speaker 3: it to her, it's an estate taxable event for what
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  Speaker 3: for the value of life insurance? Oh well, Todd, I
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  Speaker 3: got a term policy, so I have zero value on
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  Speaker 3: my life insurance. There's no cash surrender value, so it's
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  Speaker 3: worth nothing. True today, But remember when we're talking about
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  Speaker 3: valuation and figuring out what's in your estate, it's date
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  Speaker 3: of death value that matters. So if that policy is
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  Speaker 3: a million dollar face value and I die, it's worth
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  Speaker 3: a million dollars, that's when they value it. So you
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  Speaker 3: need to think of that. And why this is important, folks,
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  Speaker 3: is because obviously there's a two million dollar Massachusetts exemption,
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  Speaker 3: and if I'm married, I can double it to four million.
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  Speaker 3: So knowing the value of your estate will help you
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  Speaker 3: decide which kind of estate planning you need. And of
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  Speaker 3: course there's a fifteen million dollar federal exemption. But again,
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  Speaker 3: if you're lower, maybe I need revocable trusts and it
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  Speaker 3: would be one versus two, or if I need nursing
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  Speaker 3: home planning thrown in the mix. Because I'm in a
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  Speaker 3: smaller number, I'm likely going to need two irrevocable trusts.
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  Speaker 3: If I'm over the two million dollar number, so valuation
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  Speaker 3: very good place to start.
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  Speaker 2: Talking with Todd Lutsky from the law firm of Cushing
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  Speaker 2: and Dolan. We still have room on the phone lines
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  Speaker 2: for your estate planning questions. Eight eight eight to zero
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  Speaker 2: five two two sixty three is the number again, That
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  Speaker 2: is eight eight eight to zero five two two six three.
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  Speaker 2: We're going to take a quick break, but when don't
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  Speaker 2: we come back write to your questions with Todd again.
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  Speaker 2: That phone number is eight eight eight to zero five
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  Speaker 2: two two six y three.
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  Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
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  Speaker 1: only here on the Financial Exchange Radio Network. You're listening
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  Speaker 1: to Ask Todd with Todd Lutsky on the Financial Exchange
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  Speaker 1: Radio Network.
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  Speaker 2: Still room on the phone lines for your estate planning
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  Speaker 2: questions at eight eight eight to zero five two two
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  Speaker 2: six three. That phone number again to ask Todd your
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  Speaker 2: estate planning questions live on air right now is eight
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  Speaker 2: eight eight two zero five two two six three. We
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  Speaker 2: do have our first caller all queued up here. Let's
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  Speaker 2: go to Dave in Melrose. Dave, what is your question
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  Speaker 2: for Todd Lensky?
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  Speaker 4: Good morning, gentlemen. My question is I've got some rental
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  Speaker 4: property that the money is. One of my tenants sends
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  Speaker 4: the money using zel you know, yeah, and it goes
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  Speaker 4: directly to the trust account. Okay, So all right, so
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  Speaker 4: everything's fine.
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  Speaker 3: Is the trust revocable or irrevocable irrevocable irrevocable trust? Got it?
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  Speaker 4: Yeah? And he changes his bank, and when he changes
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  Speaker 4: his bank, the new bank sends it by mistake to
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  Speaker 4: personal account. So I picked this up after two months
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  Speaker 4: and reverse, you know, straightened it out so that it
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  Speaker 4: goes directly to the account that's owned by the trust.
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  Speaker 3: Okay, So.
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  Speaker 4: Do I have to do anything other than what I did,
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  Speaker 4: like give the money from my personal account to the
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  Speaker 4: trust and then take it back again, or any of
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  Speaker 4: that stuff. So just forget about it.
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  Speaker 3: So let me ask you this. Of course, the toughest
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  Speaker 3: part for me to answer this kind of question is
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  Speaker 3: that I've never read or looked at your trust. So
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  Speaker 3: I need to ask you a couple of questions and
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  Speaker 3: hopefully you can you can answer. You know this, your
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  Speaker 3: irrevocable trust. Does it have a tax ID number?
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  Speaker 4: Yes?
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  Speaker 3: Great?
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  Speaker 4: Yes?
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  Speaker 3: And do you file income tax returns for that trust
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  Speaker 3: every year?
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  Speaker 4: Yes?
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  Speaker 3: Okay, so you file a ten forty one income tax return.
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  Speaker 3: Do you know if that trust is designed as a
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  Speaker 3: grand tour trust for income tax purposes, meaning that the
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  Speaker 3: trust pays zero income tax, all the income on that
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  Speaker 3: that was earned by the trust flows onto your personal
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  Speaker 3: income tax return and you pick it up on your
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  Speaker 3: ten forty.
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  Speaker 4: Yes, and you folks set it up for me.
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  Speaker 3: So well, that's that's all. Yeah that Once you said that,
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  Speaker 3: now I know the answer, So I guess, I guess
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  Speaker 3: I do know what it is. Then if that's the case,
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  Speaker 3: so okay, you're right, so so so yes, that is
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  Speaker 3: a grant toward trust. Now I totally understand the trust.
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  Speaker 3: So here's along in the short of it. The trust
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  Speaker 3: has language in it then, since I know it's one
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  Speaker 3: of cushing indolence trusts, it has language in it that
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  Speaker 3: says all the income belongs to you, Dave. Okay. So
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  Speaker 3: the rent as it flows into the trust, like it
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  Speaker 3: was doing under the old Zell account could hit the
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  Speaker 3: bank account in the name of the trust, and then
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  Speaker 3: the trust could distribute the money out to your personal account.
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  Speaker 3: In fact, it can be set up as an automatic
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  Speaker 3: transfer for so everybody else who's listening. If you've got this,
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  Speaker 3: the money could just go right into that direct deposit
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  Speaker 3: irrevocable trust account, and then the irrevocable trust account could
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  Speaker 3: be set up as an automatic transfer, so every time
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  Speaker 3: that check hits it, it automatically kicks it out to
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  Speaker 3: his personal bank account. Because it's his money, he's entitled
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  Speaker 3: to it, and so that's how it should work. Now
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  Speaker 3: in this case, the last two months, what I'm understanding
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  Speaker 3: is two months of the checks went directly to the
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  Speaker 3: personal bank account and did not go through the trust
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  Speaker 3: And is that going to be a problem for medicaid
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  Speaker 3: eligibility if later on, you know, he applies for medicaid.
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  Speaker 3: The answer is going to be no, it's not going
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  Speaker 3: to be a problem. Why because the money is entitled
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  Speaker 3: to go to him anyway. The fact that you know,
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  Speaker 3: we skipped this middle ground by hitting the trust account
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  Speaker 3: for first in coming out is more of an operator
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  Speaker 3: error a trustee error. It is not going to cause
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  Speaker 3: the trust to be invalid, and it is not going to
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  Speaker 3: cause the trust to somehow not work for medicaid, and
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  Speaker 3: it is not going to restart a five year waiting period.
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  Speaker 3: Why Because at the end of the day, for income
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  Speaker 3: tax purposes, whether Dave would have taken that money out
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  Speaker 3: or not, it's still all going to be picked up
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  Speaker 3: on his personal income tax return. So this is not
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  Speaker 3: an IRS problem, and it's not a Medicaid nursing home
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  Speaker 3: problem because we're only dealing with income here, not assets,
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  Speaker 3: not principle, So that income comes in comes out doesn't
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  Speaker 3: affect medicaid. If that income goes in and doesn't come out,
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  Speaker 3: it doesn't affect medicaid because the way we've got our
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  Speaker 3: trust drafted is if you earn like five thousand dollars
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  Speaker 3: an income one year, and then five thousand the next,
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  Speaker 3: and five thousand the next, and you got now fifteen
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  Speaker 3: thousand dollars of in come over three years, but you
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  Speaker 3: never actually took it out. The trust says it shall
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  Speaker 3: be paid out. But even if it didn't physically come out,
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  Speaker 3: it's still going to be considered an account receivable, so
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  Speaker 3: it's still income. It's not restarting a five year clock.
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  Speaker 3: In other words, Dave, under this example could reach in
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  Speaker 3: and say I need fifteen thousand dollars in year three
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  Speaker 3: and take it out. Why Because the fifteen thousand is
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  Speaker 3: an account receivable. It's a little complicated, David, But I
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  Speaker 3: think the easy answer, which I was trying to explain
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  Speaker 3: everything for the other listeners. The easy answer for you
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  Speaker 3: is please just fix it going forward and have the
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  Speaker 3: money hit the account like you've been doing, and don't
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  Speaker 3: go back and try and correct the two months that
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  Speaker 3: went directly to your account. Folks, this is how the
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  Speaker 3: irrevocable trust work. That guide we're giving away is back
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  Speaker 3: to the basics to help people figure out what's the
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  Speaker 3: right way to do an estate plan for them. You know,
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  Speaker 3: how do I get started? I've never done this before.
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  Speaker 3: Valuation ideas are in here, you know, look at age,
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  Speaker 3: look at family dynamics, look at second marriages. These are
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  Speaker 3: all things to think about when you're doing your planning.
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  Speaker 3: Then once you and these are listed in the guide,
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  Speaker 3: then once you have that this guide is actually a
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  Speaker 3: four million dollar example. You could put your own fact
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  Speaker 3: pattern in, but at the end of the day, it
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  Speaker 3: explains how to do an estate plan for a four
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  Speaker 3: million dollar client husband and wife, and goes into and
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  Speaker 3: detail how the irrevocable trust works, because that's what was
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  Speaker 3: recommended in this particular case. It's literally one of my
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  Speaker 3: engagement letters explaining in a state plan to a client
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  Speaker 3: which is a great way for you to see if
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  Speaker 3: your fact pattern fits this fact pattern and maybe this
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  Speaker 3: is actually a recommendation for you. Either way, it's going
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  Speaker 3: to help you get started. Folks, call and get the
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  Speaker 3: guide eight six six eight four eight five six nine
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  Speaker 3: nine or Legal Exchange Show dot com again eight six
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  Speaker 3: six eight four eight five six nine nine or Legal
• 13:05
  Speaker 3: Exchange Show dot com. And also check out our Instagram
• 13:08
  Speaker 3: page Cushing and Dolan PC. Lots more information is there, Todd.
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  Speaker 2: If someone's starting to research estate planning, how do they
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  Speaker 2: figure out what tool is right for their specific estate
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  Speaker 2: because there are a lot of different choices out there.
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  Speaker 3: Yeah, no, that's true. And of course if you're Google
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  Speaker 3: estate plan you're going to be inundated with like millions
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  Speaker 3: of hits and you're going to say, how do I
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  Speaker 3: get started? Again, not to say it, but this guide
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  Speaker 3: really will help you narrow things down, so please get it.
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  Speaker 3: But to address your question, Chuck, you know we just
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  Speaker 3: talked about valuation as one goal, right, and I just
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  Speaker 3: mentioned family dynamics, second marriages, things like that to think about.
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  Speaker 3: But once you get the size of your estate, let's
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  Speaker 3: say it's four million, just to give you an example,
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  Speaker 3: then you need to ask yourself how old you are. Well,
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  Speaker 3: let's say I'm six and over. I just throw that
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  Speaker 3: age out. Well, it's sixty and over on a four
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  Speaker 3: million dollar estate. Yes, you're worried about probate. Yes, you're
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  Speaker 3: worried about a state taxes. So those are going to
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  Speaker 3: help guide you as to what kind of trust you need.
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  Speaker 3: But then if you throw in the question of you
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  Speaker 3: know what, I also need to protect assets from a
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  Speaker 3: nursing home, well, now you've really geared yourself away from
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  Speaker 3: the revocable trust idea and right into the irrevocable trust idea.
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  Speaker 3: So that's a good way of looking at that. The
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  Speaker 3: other thing is if you say no, I don't need
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  Speaker 3: Oh and by the way, since it's four million and
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  Speaker 3: you now know you want nursing home planning, you also
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  Speaker 3: now know you're going to need two irrevocable trusts. But if,
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  Speaker 3: on the other hand, you say, you know what, Todd
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  Speaker 3: not worried about nursing home planning, or you have long
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  Speaker 3: term care insurance or something, I want a revocable trust, Well, now,
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  Speaker 3: because you only have four million dollars or five million
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  Speaker 3: or six million, would need a revocable trust. And due
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  Speaker 3: to the size of the estate. It's called a moderate estate.
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  Speaker 3: I'm only going to need one trust, a joint revocable trust,
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  Speaker 3: which is more efficient and less expensive. So those are
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  Speaker 3: the things to look for when you're beginning your process.
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  Speaker 2: Mister Lutski, thank you so much for joining us today.
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  Speaker 3: Always a pleasure. Thank you.
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  Speaker 1: This has been Aske Todd on the Financial Exchange Radio Network.
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  Speaker 1: Aske Todd with Todd Lutsky has been presented by Cushing
• 15:29
  Speaker 1: and Dolan, serving Massachusetts and New England for more than
• 15:31
  Speaker 1: thirty years, helping families with the state and tax planning,
• 15:34
  Speaker 1: Medicaid planning, and probate law. Call eight hundred three nine
• 15:37
  Speaker 1: three four thousand and one or visit Cushingdolan dot com.
• 15:41
  Speaker 1: The views expressed in this segment are solely those of
• 15:43
  Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
• 15:45
  Speaker 1: or tax advice. Please consult with your illegal or tax
• 15:47
  Speaker 1: advisor on such matters. Cushing and Armstrong do not endorse
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  Speaker 1: each other and are not affiliated