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Divorce and your estate plan · The Legal Exchange

0:01
Speaker 1: This is the Legal Exchange with Todd Lutsky from the
0:04
Speaker 1: law firm of Cushing and Dolan and Susan Powers of
0:07
Speaker 1: the Armstrong Advisory Group. Each week, Todd and Susan will
0:10
Speaker 1: discuss many topics, including estate planning, how to avoid probate,
0:13
Speaker 1: and protecting your money from a nursing home. If you
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Speaker 1: need assistance in any of these areas, or have a
0:18
Speaker 1: question about another issue that may affect your future, call
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Speaker 1: eight six six eight four eight five six ninety nine
0:24
Speaker 1: to make an appointment. That's eight sixty six eight four
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Speaker 1: eight five six ninety nine. Operators are standing by. Now
0:31
Speaker 1: Here are your hosts, Tod Lutsky and Susan Powers.
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Speaker 2: Welcome into the Legal Exchange with Todd Lotsky. I'm Susan Powers,
0:40
Speaker 2: a financial advisor with the Armstrong Advisory Group, and I'm
0:43
Speaker 2: joined by Todd Lutsky, a partner with the law firm
0:46
Speaker 2: of Cushing and Dolan with a master's in taxation. Welcome Todd.
0:50
Speaker 2: How are you doing today?
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Speaker 3: I'm never better? How are you here? Surpass?
0:55
Speaker 2: I am good, Thank you.
0:56
Speaker 3: I got a couple of cases, folks, A Mississippi Pella
0:59
Speaker 3: Court case dealing with fee simple ownership. That means you
1:02
Speaker 3: owned the entire parcel of land. Right, That's what fee
1:05
Speaker 3: simple means. Well, Bernice died without a will, and we
1:10
Speaker 3: think she owned one hundred and twenty acres of land,
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Speaker 3: But twenty years later, when it's being conveyed to one
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Speaker 3: of the daughter's daughters, turns out that she might not
1:19
Speaker 3: have owned that. So we're going to learn how to
1:22
Speaker 3: deal with real estate better than how Bernice did in
1:26
Speaker 3: this case. And real estate is an important asset. Most
1:31
Speaker 3: people have it when they're doing estate planning, so got
1:33
Speaker 3: to learn how to do that. Then we go to
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Speaker 3: a wow case. This is a case that just makes
1:39
Speaker 3: you say wow when you get to the conclusion. Right.
1:41
Speaker 3: It's a Tennessee Appellate Court case where Mike and Tammy
1:44
Speaker 3: were divorced in twenty fifteen and spent a good deal
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Speaker 3: of time putting together a detailed marital agreement about a
1:52
Speaker 3: tai tiaa cref account and how it would not go
1:57
Speaker 3: to the spouse. But then he didn't change the beneficiary
2:02
Speaker 3: designation and we're going to find out whether that carries
2:04
Speaker 3: the day or not. So, folks, just this case is
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Speaker 3: just all about what when you get divorced. I can't
2:11
Speaker 3: say it enough. Please update your plan.
2:13
Speaker 2: These life events that need you to look at things, I'll.
2:16
Speaker 3: Tell you, Susan, You're absolutely right. I mean you got
2:18
Speaker 3: to really look at things now. Another thing to look
2:21
Speaker 3: at is a lot of you folks out there, A
2:23
Speaker 3: lot of people have done the thing things called life estates.
2:27
Speaker 3: It's simple, it's easy, you think it's cheaper. It's not
2:30
Speaker 3: always better though, right. A life estate is something you
2:33
Speaker 3: might have done. You put your house in the kid's
2:35
Speaker 3: name and reserve the right to live there. The guide
2:37
Speaker 3: for this month is calculating the consequences of doing that.
2:41
Speaker 3: Calculating the consequences of a life estate right. There are
2:44
Speaker 3: pros and cons. There are tax issues from an income
2:48
Speaker 3: gift tax issues. There's complications with selling it in the future.
2:52
Speaker 3: How do you do it? The control you lost, the creditors,
2:55
Speaker 3: risk that you gave to your children. Is it the
2:58
Speaker 3: right way to go? Just because it seemingly as cheap,
3:02
Speaker 3: quick and easy. Probably not better. If you've done it,
3:06
Speaker 3: learn how to maybe get out of it. Get the guide.
3:09
Speaker 3: If you're thinking about doing it, please get the guide
3:12
Speaker 3: eight six six eight four eight five six nine nine
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Speaker 3: or legal Exchange show dot com again eight six six
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Speaker 3: eight four eight five six nine nine or Legal Exchange
3:23
Speaker 3: show dot com. It's head over to Mississippi. Okay, what's
3:28
Speaker 3: going on? This is where Bernice died in two thousand
3:35
Speaker 3: and one without a will. It's called intestate. She had
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Speaker 3: a daughter named Zelfa, who became the pr of the
3:41
Speaker 3: estate in two thousand and two. Okay, that seems timely.
3:45
Speaker 3: Twenty years later, Okay, right off the bat, I'm scratching
3:49
Speaker 3: my head. Huck on the estate wasn't closed. She files
3:52
Speaker 3: a motion with the court to convey six of the
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Speaker 3: one hundred and twenty acres that she believed Pernice's estate
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Speaker 3: owned to her son Alroy, and Zelfa again alleged that
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Speaker 3: she had a fee simple ownership over the whole one
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Speaker 3: hundred and twenty acres.
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Speaker 2: What does that mean? A fee simple ownership.
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Speaker 3: That she's one hundred percent owner, She is the complete
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Speaker 3: owner of the property. Well. Wilhelmina, another daughter of Bernice,
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Speaker 3: opposed the motion, stating that no, the estate only owned
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Speaker 3: about forty acres or nevertheless, something less than one hundred
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Speaker 3: and twenty acres because one of Bernice's nieces inherited an
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Speaker 3: interest in some of the one hundred and twenty acres. Well,
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Speaker 3: the trial court didn't agree with that. The trial court
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Speaker 3: granted Zelfa's motion, finding that Bernice was in fact the
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Speaker 3: feat simple owner, and two days later Zelfa went ahead
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Speaker 3: and recorded the deed transferring the six acres to her son,
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Speaker 3: her son Alroy. Okay, well, as you might.
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Speaker 2: Imagine, Willemina didn't like that.
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Speaker 3: Yeah, there was an appeal, and so the appellate court
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Speaker 3: dug deeper into this situation, into further discovery, and found Halle,
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Speaker 3: which is Bernice's mom. Okay, so we're back up up
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Speaker 3: a generation. Halle, Bernice's mother, had devised some of the
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Speaker 3: real estate to Bernice and another daughter, Margaret, So Halle
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Speaker 3: had Bernice and Margaret. Bernice and Margaret are sisters. Okay,
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Speaker 3: well that might make sense, and I guess Margaret must
5:30
Speaker 3: have died and maybe some of the property went to
5:32
Speaker 3: the niece. So that's what they think happened, that this
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Speaker 3: other daughter, Margaret, had got some. So then the question
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Speaker 3: was whether or not Halle actually owned one hundred percent
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Speaker 3: interest in the real estate or it was her will
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Speaker 3: even probated property properly excuse me. But regardless, at this point,
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Speaker 3: we know that Bernice at most could have only had
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Speaker 3: fifty percent interest in the one hundred and twenty acres,
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Speaker 3: because even if Halle owned all of it, she gave
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Speaker 3: half to each kid, so at a bare minimum, that's
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Speaker 3: all it is. So this court had to remand the case.
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Speaker 3: I know you don't like that, but I'm going to
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Speaker 3: give you an answer, So don't worry. You better get
6:18
Speaker 3: me an answer. So they would have had to reman
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Speaker 3: the case to find out exactly whether or not the
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Speaker 3: six acres could go to them. Well, let's just play
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Speaker 3: out the string here, folks. What do we learn from
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Speaker 3: something like this? First of all, you know, you die
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Speaker 3: without a will, you run into problems. Right. The first
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Speaker 3: problem is, you know, without a will, any of the assets,
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Speaker 3: including the real estate that she owned, is going to
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Speaker 3: go equally to the next closest next of kin. So
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Speaker 3: back to Bernice. Forget Halle for a minute. Back to Bernice.
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Speaker 3: When she died without a will, she could have would
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Speaker 3: have given at least half to each of her daughters,
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Speaker 3: which would be Wilhelmina and I guess Alroy right, I'm sorry, yeah,
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Speaker 3: Willhelmina and Alroy, right, those would have been the people
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Speaker 3: because Zelfa, No, Zelfa was a daughter. I'm sorry, Zelfa
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Speaker 3: and Wilhelmina are the daughters. Alroy is the grand great grandson.
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Speaker 1: Yep.
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Speaker 3: So that's the most that she could have given. So
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Speaker 3: let's just play out the string like, if that's the
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Speaker 3: case and one hundred and twenty acres belonged to Halle,
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Speaker 3: that means when Halle died and she gave half to
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Speaker 3: each of her kids, Bernice would only have sixty acres. Well,
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Speaker 3: when Bernice died without a will, she would have the
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Speaker 3: next closest next of kin would be her kids would
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Speaker 3: be her two kids, Zelfa and Wilma Wilhelmina, so they
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Speaker 3: would have gotten thirty acres each. So worst case scenario,
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Speaker 3: Bernice would have at least had thirty acres or zelf
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Speaker 3: Bernice would have had sixty acres and would have given
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Speaker 3: Zelfa thirty and will Helmina thirty. So it's very possible
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Speaker 3: then that Zelfa could give to her son Alroy six
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Speaker 3: acres because she had at least thirty. So at the
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Speaker 3: end of the day, boy, I'm scratching my hand.
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Speaker 2: They figure out what acrees two's.
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Speaker 3: You know, that's a whole other problem that you're bringing up.
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Speaker 3: That's a good problem to bring up, so, folks, I
8:24
Speaker 3: mean that makes you scratch your head, right, So it's like,
8:26
Speaker 3: why are we doing this right? Don't folks don't go
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Speaker 3: one They had to go to probate to get all
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Speaker 3: this done. If you just set up a trust, you
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Speaker 3: fund the trust, right, it's so important we do title rundowns.
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Speaker 3: We convey the property to the trust. We know what's
8:41
Speaker 3: in there, so we don't have a problem when the
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Speaker 3: time comes to conveying it out. And can you imagine
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Speaker 3: the loss of the step up in bases here? Just
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Speaker 3: play out the string if nobody if instead of doing
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Speaker 3: this Hallie gave away her property to Bernice and Willhelmina,
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Speaker 3: and then Bernice gave her property to Zelfa, and then
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Speaker 3: Zelfa gives it to Alroy.
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Speaker 4: Can you imagine them built in games cost basis. Oh
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Speaker 4: my gosh, folks, this is really what I want to
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Speaker 4: talk about. But these kind of things happen, right because
9:14
Speaker 4: in this point we do have Zelfa making a gift
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Speaker 4: to Alroy. So if the gifting had just occurred, all
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Speaker 4: the way down, folks. There's a huge carryover basis that
9:23
Speaker 4: could be built in here, and I have people who
9:25
Speaker 4: have done that. I have run into people who just say,
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Speaker 4: I just keep giving the property and I'm like.
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Speaker 2: Wow, you got to stop that step.
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Speaker 3: Up right if you can now, just at some point stop,
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Speaker 3: do your plan, put your trust in place right and
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Speaker 3: get a step up now. As much as I talk
9:42
Speaker 3: about our guide in calculating the life estate, at least
9:45
Speaker 3: if you had a life estate, you'd get a step
9:47
Speaker 3: up in basis. So again, the guide's not all about
9:50
Speaker 3: the negatives. There's some pros to doing a life estate
9:53
Speaker 3: and it might be right for you, and one of
9:55
Speaker 3: them would be it does ultimately protect it from the
9:57
Speaker 3: nursing home and get you that all important step up
10:00
Speaker 3: in basis to stop that capital gains tax bleeding that's
10:04
Speaker 3: going on by making lifetime gifts. Folks, call and get
10:08
Speaker 3: the guide. Learn about calculating the consequences of a life
10:12
Speaker 3: estate eight sixty six eight four eight five six ninety
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Speaker 3: nine or Legal Exchange show dot com.
10:19
Speaker 2: You've been listening to Todd Lutsky, a partner with the
10:22
Speaker 2: law firm of Cushing and Dolan. I'm Susan Powers, a
10:25
Speaker 2: financial advisor with the Armstrong Advisory Group. We've got much
10:29
Speaker 2: more to come when we return to the legal exchange
10:32
Speaker 2: with Todd Lutsky.
10:35
Speaker 1: Life estates carry a higher risk of income tax penalties
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Speaker 2: Welcome back into the Legal Exchange with Todd Lutsky. I'm
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Speaker 2: Susan Powers of financial Advisor the Armstrong Advisory Group, and
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Speaker 2: I'm joined by Todd Lutsky, a partner with the law
14:01
Speaker 2: firm of Cushing and Dolan with a master's in taxation.
14:05
Speaker 2: Where we headed now, Todd crazy divorce land.
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Speaker 3: Right, Yeah, this is this is the wow case. Let's
14:12
Speaker 3: let's see if you say wow when we're done? All right,
14:15
Speaker 3: answer there is all right there, it's going to make
14:17
Speaker 3: you say wow or not. Yeah. So Mike and Tommy
14:21
Speaker 3: or Mike and Tammy, excuse me. Mike and Tammy get
14:24
Speaker 3: divorced in twenty fifteen. They put together a nice marital
14:28
Speaker 3: dissolution agreement, the MDA, and it states very clearly that
14:33
Speaker 3: Mike's Tia Kraft account, a retirement account of which Tammy
14:38
Speaker 3: is currently the designated beneficiary, would not what would be
14:42
Speaker 3: Mike's sole property, and Tammy would waive any marital interest
14:49
Speaker 3: in that account. Yep, done, laid out well. February twenty
14:55
Speaker 3: twenty two, Mike starts working with his own power of attorney.
14:59
Speaker 3: I don't know why he didn't do himself, but doesn't
15:01
Speaker 3: say to change the beneficiary to his estate on his
15:06
Speaker 3: retirement account. But even though he tried several times to
15:11
Speaker 3: get it changed, he was not able to get it changed.
15:13
Speaker 3: And then, of course Mike died the next month.
15:17
Speaker 1: Oh.
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Speaker 3: Within two months later, Tammy receives a check for two
15:22
Speaker 3: hundred and seventy thousand dollars from the retirement account. Well,
15:28
Speaker 3: the personal representative sued Tammy for breach of contract by saying,
15:31
Speaker 3: by accepting the money, you failed in your obligation to
15:36
Speaker 3: you know, divest yourself of any marital interest in that account,
15:41
Speaker 3: which is what you said you would do in the
15:44
Speaker 3: marital divorce agreement. Tammy said, no, no, no, designated beneficiary
15:50
Speaker 3: is not a marital interest. Trial court said, well, we
15:55
Speaker 3: are going to grant summary judgment for the estate, saying no,
16:02
Speaker 3: by you not divesting yourself of that future inheritance, you
16:07
Speaker 3: violated your agreement. Tammy, you're out. Yeah. Well, Tammy wasn't
16:12
Speaker 3: happy with that result, so Tammy appealed. The appellate court
16:18
Speaker 3: said reverse, because Tennessee law states that being a beneficiary
16:27
Speaker 3: on an asset is not a marital interest, nor is
16:30
Speaker 3: it a property right, and in fact, a marital dissolution
16:33
Speaker 3: agreement has no impact on party status as named beneficiaries.
16:40
Speaker 3: In addition, divorce in Tennessee does not create a presumption
16:45
Speaker 3: that you are removed as a beneficiary. Therefore, Tammy, congratulations,
16:51
Speaker 3: you get two hundred and seventy thousand dollars go away estate. Wow?
16:56
Speaker 2: Right, yeah, because she would if it's an employer plan,
16:59
Speaker 2: she would have had to have signed off on not
17:02
Speaker 2: being the beneficiary, on waving.
17:04
Speaker 3: Her around on four oh one K type plans.
17:06
Speaker 2: Right, and Tia Craft more than likely it's an employer plan.
17:10
Speaker 2: It's not a retail plan, So so you're right. Otherwise
17:13
Speaker 2: he would have been able to change it, no problem.
17:16
Speaker 2: They needed her signature and that's why he couldn't up.
17:18
Speaker 3: Oh so you're saying that's what the problem wasn't getting
17:20
Speaker 3: it to sign off? Yeah, because she didn't sign off,
17:22
Speaker 3: So she's even more just more sort of devious here.
17:26
Speaker 3: Then I'm giving.
17:28
Speaker 2: Her the more background to know whether or not they
17:30
Speaker 2: sent it to her to sign off on.
17:32
Speaker 3: But you're absolutely right as a four oh one k folks,
17:34
Speaker 3: the spouse, by law needs to be on unless but
17:37
Speaker 3: then they got divorced, I suppose, so she wasn't the spouse.
17:40
Speaker 2: Decree would be enough to show.
17:42
Speaker 3: If she wasn't the spouse anymore, So that should have
17:44
Speaker 3: been the end of that.
17:45
Speaker 2: I mean, they can't make it a rule that you
17:47
Speaker 2: have to have your ex spouse sign off on something.
17:49
Speaker 2: Non't ever get anything done.
17:50
Speaker 3: Yeah, So then that case, I don't know why, but
17:52
Speaker 3: it didn't happen.
17:53
Speaker 2: Maybe they just didn't send that in so yeah, all right.
17:56
Speaker 3: Wow, wow, right, I mean it's unbelievable that you don't.
18:00
Speaker 3: You think you've done everything and at the end of
18:02
Speaker 3: the day you still have not and two hundred and
18:04
Speaker 3: seventy thousand dollars is going to an ex wife. Folks,
18:09
Speaker 3: please do your planning. And if you've not done your
18:12
Speaker 3: planning but you thought you'd take a shortcut and you
18:13
Speaker 3: did a life estate, then you need to get this guide.
18:17
Speaker 3: This guide is calculating the consequences of a life estate.
18:20
Speaker 3: Look at the consequences of this case for someone who
18:23
Speaker 3: got a divorce and just didn't step up to the
18:25
Speaker 3: plate afterwards and address their own estate plan. So in
18:29
Speaker 3: this case. Sometimes people think it's quick or cheap or
18:33
Speaker 3: easier to just do a life estate. You may have one,
18:36
Speaker 3: you may be thinking of getting one. Learn what the
18:39
Speaker 3: pros and cons are of them, how they work, from
18:42
Speaker 3: a income tax perspective, a gift tax perspective, selling in
18:46
Speaker 3: the future, your loss of control, and selling the tax
18:49
Speaker 3: consequences associated with selling it after you've set up a
18:53
Speaker 3: life estate. Folks, there's enough things in here that you
18:57
Speaker 3: really need to know how to do it. One just
19:01
Speaker 3: may or may not be right for you anymore. Get
19:04
Speaker 3: the guide eight six six eight four eight five six
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Speaker 3: ninety nine or Legal Exchange Show dot Com again eight
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Speaker 3: six six eight four eight five six nine nine or
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Speaker 3: Legal Exchange show dot com.
19:18
Speaker 2: So if they got divorced, I haven't been thinking because
19:23
Speaker 2: I'm thinking that if they had kids, likely it's the
19:26
Speaker 2: kids that would be beneficiaries, which is a pretty low
19:29
Speaker 2: move on Tamy's part. If her kids were supposed to
19:31
Speaker 2: get it and not her, I'm making up a whole
19:33
Speaker 2: bad story.
19:34
Speaker 3: You're absolutely right. I mean, they are married, they were married.
19:37
Speaker 3: They it might have been their first marriage, it might
19:39
Speaker 3: have been their kids. I'm but then, you know, why
19:41
Speaker 3: are you taking it and not letting it go to
19:43
Speaker 3: the kids. I mean, that's again he was thinking about
19:46
Speaker 3: trying to name his estate, which also scratches my home.
19:49
Speaker 2: So maybe there weren't kids.
19:51
Speaker 3: Why would you be naming your estate. I guess then
19:53
Speaker 3: it would just go First of all, then if you
19:54
Speaker 3: name your estate, it's going to come out over five
19:56
Speaker 3: years to the people, which is a bad income tax
20:00
Speaker 3: issue if it's you know, if it's a qualified plan,
20:03
Speaker 3: and then it's going to go to probate number two
20:05
Speaker 3: and number three. If if you name your state and
20:09
Speaker 3: you don't have a will, now it's going to go
20:11
Speaker 3: to the next closest next of kin, which is who
20:13
Speaker 3: the heck is that? I mean that's really that's just
20:17
Speaker 3: a really bad idea to begin with. So it's good
20:19
Speaker 3: that you bring that up, but it's it's a it's
20:21
Speaker 3: a it makes it even worse and makes the mystery
20:24
Speaker 3: of this case even more sort of mind blowing. But folks,
20:28
Speaker 3: if you've got family, you want to make sure you
20:31
Speaker 3: take care of them, and when you get a divorce,
20:33
Speaker 3: the first thing you need to do is redo your plan.
20:36
Speaker 3: I'm going to leave trusts off the table for a minute.
20:39
Speaker 3: At a bare minimum. You want to come in and say,
20:41
Speaker 3: you know what, I need a new healthcare proxy, I
20:43
Speaker 3: need a new power of attorney, I need a new will.
20:46
Speaker 3: Why well, because the primary fiduciary on every one of
20:50
Speaker 3: those positions was likely your spouse, and the contingent was
20:56
Speaker 3: whoever you put. Well, now you don't want that spouse
20:59
Speaker 3: to be in those fiduciary roles making medical decisions or
21:03
Speaker 3: serving on your will. So you need to redo those
21:08
Speaker 3: three documents, no matter what, put on a new primary
21:13
Speaker 3: and a new alternate. So you put that behind you.
21:17
Speaker 3: Then you say, okay, well now I need to update
21:20
Speaker 3: my state plan. I'm go doing my trust. So if
21:23
Speaker 3: you redo your trust, and I know when you work
21:25
Speaker 3: with us. We actually put the assets in there for you,
21:29
Speaker 3: so we'd be changing your investment account, your bank account,
21:34
Speaker 3: your deeds would be retitled, we wouldn't, you know, and
21:37
Speaker 3: so at the end of the day, you wouldn't have
21:39
Speaker 3: to worry about who the designated beneficiary is on these
21:43
Speaker 3: accounts because they would be owned by the trust and
21:46
Speaker 3: the trust would direct where they go. And then when
21:49
Speaker 3: we're doing that, we would also address the eras and
21:52
Speaker 3: the life insurances of the world, making sure that those
21:56
Speaker 3: beneficiaries are changed. So by redoing your estate plan, you
21:59
Speaker 3: are going to prevent this from happening. Now, is it important?
22:04
Speaker 3: Very important? In fact, I have a real life example.
22:07
Speaker 3: I have a client who I've been my client for
22:09
Speaker 3: about ten years and now they're getting divorced. It seems amicable,
22:13
Speaker 3: as amicable as the divorce can be, and that's good news.
22:16
Speaker 3: You know, they worked it out and there's no reason
22:18
Speaker 3: to fight. And now they've come back to me, both
22:22
Speaker 3: of them, and told me about this, and I am
22:25
Speaker 3: now redoing their estate plans for both of them individually,
22:30
Speaker 3: of course, but there's no reason I can't represent you know,
22:34
Speaker 3: them separately. And it was nice because they kind of
22:37
Speaker 3: wanted to know what the other one was doing. They
22:40
Speaker 3: wanted their kids to be taken care of, and it
22:42
Speaker 3: was a nice kind of understanding. And so we are
22:45
Speaker 3: doing that, and we're now going to make sure that
22:47
Speaker 3: their individual plans are Now we're doing their plan as individuals,
22:52
Speaker 3: but still the planning needed to be done. And so
22:55
Speaker 3: that's the kind of thing that you know, you want
22:57
Speaker 3: to share with people. Now, remember in some states there
23:02
Speaker 3: is an automatic revocation, but don't rely on it. Right,
23:06
Speaker 3: do your state plan. But I just want you to
23:07
Speaker 3: know in this state they didn't have it. But some states,
23:10
Speaker 3: if you get divorced, that does automatically revoke certain designated beneficiaries,
23:15
Speaker 3: and you could you could fall into that safe harbor.
23:18
Speaker 3: But check with your state. My advice do your planning.
23:22
Speaker 3: My last piece of advice is if you have a
23:24
Speaker 3: life estate or you're thinking of doing one, please get
23:27
Speaker 3: the guide eight six six eight four eight five six
23:31
Speaker 3: ninety nine or Legal Exchange show dot com.
23:35
Speaker 2: You've been listening to Todd Lutski, a partner with the
23:38
Speaker 2: law firm of Pushing A. Dolan. I'm Susan Powers, a
23:41
Speaker 2: financial advisor with the Armstrong Advisory Group. Todd will be
23:45
Speaker 2: answering your listener questions when we return to the Legal
23:48
Speaker 2: Exchange with Todd Lutsky.
23:51
Speaker 1: Life estates carry a higher risk of income tax penalties
23:54
Speaker 1: and hidden gift issues, and while they can be beneficial
23:56
Speaker 1: in some cases, if you use one, you need to
23:59
Speaker 1: be aware of the pitfall they make cause. Cushing and
24:01
Speaker 1: Dolan are experts in elder law and have nearly forty
24:04
Speaker 1: years of experience helping families with their estate planning. Their
24:07
Speaker 1: new guide called Calculating the Consequences of Life Estates can
24:10
Speaker 1: help you make the right decisions about how to protect
24:12
Speaker 1: your assets from probate and the nursing home. Life estates
24:15
Speaker 1: are not simple documents and can create the potential for
24:18
Speaker 1: you to lose control of your estate. So if you
24:20
Speaker 1: haven't done your planning yet, now's the time to learn
24:23
Speaker 1: about the effects that life estates can have when it
24:25
Speaker 1: comes to protecting your assets. Call Cushing and Dolin today
24:28
Speaker 1: at eight sixty six eight four eight five six ninety
24:30
Speaker 1: nine and request their new guide called Calculating the Consequences
24:33
Speaker 1: of Life Estates. That's eight sixty six eight four eight
24:36
Speaker 1: five six ninety nine, or request the guide online at
24:39
Speaker 1: Legal Exchange Show dot com the proceeding was paid for
24:41
Speaker 1: and the views expressed are solely those of Cushing and Dolan.
24:43
Speaker 1: Cushing and Dolan and or Armstrong Advisory may contact you
24:46
Speaker 1: offering legal or investment services. Cushing and Dolan in Armstrong
24:49
Speaker 1: Advisory do not endorse each other and are not affiliated.
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25:53
Speaker 6: Financial planning is hard enough. That's why having the right
25:55
Speaker 6: advisor on your side is so important. This is Mike
25:58
Speaker 6: Armstrong from the Armstrong Avisory Group, and our new guide
26:01
Speaker 6: is called What Can a Financial Advisor Do for Me?
26:04
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26:04
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26:08
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26:16
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Speaker 6: much more than a money manager, and we wrote this
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26:35
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26:39
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
26:41
Speaker 1: registered investment advisor. Nothing in the ad or in any
26:44
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
26:47
Speaker 1: your own financial tax into state planning advisors before making
26:49
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
26:52
Speaker 1: advisory services. You're listening to the Legal Exchange and it's
26:57
Speaker 1: time for Ask Todd, the segment where Todd will answer
27:00
Speaker 1: your questions about anything and everything that's included in the
27:03
Speaker 1: estate planning process. Once again, here's Todd Lutsky and Susan Powers.
27:09
Speaker 2: Welcome back, Todd. I have a few questions from listeners
27:12
Speaker 2: for you. First question comes from Joan in Braintree, mass
27:15
Speaker 2: And Joan writes, my father has a nominee reality trust
27:18
Speaker 2: that his home was transferred into around six years ago.
27:22
Speaker 2: He is listed as the primary beneficiary and I am
27:25
Speaker 2: listed as the contingent beneficiary When he passes. Will this
27:28
Speaker 2: protect his home from the nursing home? If not, can
27:32
Speaker 2: we take it out of this trust and move it
27:34
Speaker 2: into an irrevocable trust.
27:36
Speaker 3: At this point, people thinks this sounds like an easy question,
27:41
Speaker 3: but there are so many things in this question that
27:44
Speaker 3: need to be addressed.
27:45
Speaker 2: I think you're up for the challenge.
27:47
Speaker 3: Oh, I'm going to get there. So, folks, this is dealing,
27:51
Speaker 3: first of all, with a nominee realty trust. So the
27:55
Speaker 3: problem with those are there. They're not really trusts at all.
27:58
Speaker 3: They're a Massachusetts sort of anomaly, more of a principal
28:02
Speaker 3: agency relationship than anything else. What I mean by that
28:06
Speaker 3: is he listed As you went through the question, it
28:08
Speaker 3: said that you know, he's listed as the primary beneficiary
28:12
Speaker 3: and I'm listed as the contingent when he passes. Well,
28:19
Speaker 3: you know, at the end of the day, whoever's listed
28:22
Speaker 3: as a beneficiary could be the owner right away, not
28:25
Speaker 3: waiting for someone to pass.
28:27
Speaker 2: So he's the owner of that now.
28:29
Speaker 3: Right So so in this case, when you say he so,
28:33
Speaker 3: Joan says her father is the father, the one trying
28:38
Speaker 3: to protect the house from the nursing home, or if
28:41
Speaker 3: that's what he was doing, put it into this realty
28:43
Speaker 3: trust and made himself the beneficiary, and then upon his death,
28:47
Speaker 3: I guess he put language in that says it goes
28:49
Speaker 3: to the to the daughter Joan, So he really didn't
28:55
Speaker 3: do anything right, So it's a complete flow through. So
28:58
Speaker 3: it went from Dad's name to Dad's name because he's
29:02
Speaker 3: the beneficiary. So not only is it not in the trust,
29:06
Speaker 3: really it's not avoiding probate at all, and it's certainly
29:12
Speaker 3: not protecting it from the nursing home because he it's
29:15
Speaker 3: like he owns it, right, So I guess the answer
29:18
Speaker 3: is no, it's not protected, but can we protect it? Yes?
29:21
Speaker 3: And interestingly enough, since he is the only beneficiary of
29:26
Speaker 3: the trust, would only require his direction to distribute the
29:33
Speaker 3: property out.
29:34
Speaker 2: So self to himself, this property out.
29:38
Speaker 3: But Susan, you make you made it really clear there
29:40
Speaker 3: when you said self, Because let me explain one step
29:43
Speaker 3: further what really happened here. If in fact Dad created
29:50
Speaker 3: the trust, Dad is the trustee on the trust, I'm
29:53
Speaker 3: going to assume he is, yeah, and Dad is the beneficiary,
29:58
Speaker 3: This trust merged out of existence the moment it was created.
30:02
Speaker 2: Because that beneficiary takes effect immediately. It's not an upon
30:06
Speaker 2: death thing with those.
30:07
Speaker 3: Right, right, So when the trustee and the beneficiary are
30:10
Speaker 3: the same person, the trust just merges. Not for other
30:14
Speaker 3: trusts for nominee trusts only, folks. I don't want you
30:16
Speaker 3: to hear this and say, oh my gosh, I'm trusting
30:18
Speaker 3: on my revocable trust. Now that's different with a nominee trust.
30:24
Speaker 3: The moment that happened, the trust just sort of merged
30:29
Speaker 3: out of existence there. But it's not doing anything because
30:34
Speaker 3: they don't know because they went to someone who gave
30:36
Speaker 3: them a real.
30:37
Speaker 2: Estate attorney instead of an estate planning attorney.
30:39
Speaker 3: Probably, yeah, thats just bad advice.
30:42
Speaker 2: So how did they fix it?
30:43
Speaker 3: So the good news is he can fix it because
30:45
Speaker 3: he's in complete control of the thorn thing. He can
30:47
Speaker 3: just do an authorization and direction of beneficiaries saying I
30:51
Speaker 3: direct the trustee of the trust to convey the property
30:53
Speaker 3: out to the beneficiary. Oh, I'm the beneficiary. Sign the
30:56
Speaker 3: authorization and direction. Then the trustee signs of trust the certificate,
31:00
Speaker 3: which is him.
31:01
Speaker 2: Oh, I'm the trustee too.
31:02
Speaker 3: And in the trustee certificate it says I've been told
31:05
Speaker 3: by the beneficiaries to go ahead and transfer the property
31:08
Speaker 3: to so and so and your Then once you sign
31:11
Speaker 3: the trustee certificate and the authorization and beneficiaries, then the
31:15
Speaker 3: trustee can sign the deed conveying the property out to
31:20
Speaker 3: the beneficiary, which is dead. Then Dad can set up
31:25
Speaker 3: this irrevocable trust.
31:27
Speaker 2: Which is too bad because he did this sixty years ago.
31:30
Speaker 3: Oh you bring up another good point. Yeah, so had
31:32
Speaker 3: this been done five properties has been done properly six
31:36
Speaker 3: years ago, a protected, it would be, it'd be all
31:38
Speaker 3: protected at this point. So yeah, that's a that's a problem.
31:42
Speaker 4: Yeah.
31:43
Speaker 3: So so, folks, this can be fixed, but you just
31:49
Speaker 3: need to undo it and make it, make it work.
31:53
Speaker 3: At least he tried. Sometimes people might have done this
31:56
Speaker 3: and just said I'm going to throw it into a
31:57
Speaker 3: life estate arrangement. Instead of doing this, could have conveyed
32:00
Speaker 3: it to Joan and reserved a life estate. That's one
32:04
Speaker 3: way to calculate a life That's one way to create
32:06
Speaker 3: a life estate, folks. Another way is to take it
32:09
Speaker 3: and put it into an irrevocable trust and reserve a
32:12
Speaker 3: life estate. So there's two ways to calculate a life estate.
32:15
Speaker 3: You might not have known that, and one is less
32:18
Speaker 3: bad than the other. So please learn about the different
32:23
Speaker 3: ways to calculate a life estate, along with all the
32:26
Speaker 3: pros and cons that go with having them. In my feeling,
32:31
Speaker 3: there's more cons than pros. So if you've done one,
32:34
Speaker 3: learn how to get out of it. If you haven't
32:36
Speaker 3: done one, maybe get the guide and learn whether you
32:39
Speaker 3: should do one. Eight six six eight four eight five
32:43
Speaker 3: six nine nine or Legal Exchange Show dot com again
32:47
Speaker 3: eight six six eight four eight five six nine nine
32:51
Speaker 3: or Legal Exchange Show dot Com.
32:54
Speaker 2: Last question comes from Donna in New Hampshire, and Donna writes,
32:57
Speaker 2: my mother passed away recently and how a trust that
33:00
Speaker 2: created a life estate for her. She was in the
33:03
Speaker 2: nursing home briefly, and now the nursing home wants the
33:06
Speaker 2: value of that life estate to pay off her debt.
33:10
Speaker 2: Is this allowed?
33:12
Speaker 3: All right? So she's already passed away and she's in
33:15
Speaker 3: New Hampshire.
33:17
Speaker 2: She was in the nursing home.
33:18
Speaker 3: So this is strange, first of all the way it
33:21
Speaker 3: was created a life estate, and this is important to understand.
33:25
Speaker 3: How you actually create a valid life estate. You own
33:30
Speaker 3: the property, you convey the remainder interest to a person
33:37
Speaker 3: or an entity, and you reserve the right to live here.
33:42
Speaker 2: So here got it with her trust.
33:45
Speaker 3: So Here's maybe it's just the way it's worded, and
33:48
Speaker 3: maybe I'm just being a stickler, but it says she
33:50
Speaker 3: was in a nursing home now and the nurses so
33:54
Speaker 3: she had a trust that created a life estate for her.
33:58
Speaker 2: It's probably just a wording thing. She a life estate
34:01
Speaker 2: with her trust.
34:02
Speaker 3: Okay, So, but it's important because people do this right.
34:06
Speaker 3: I've seen it happen where the trust could have owned
34:09
Speaker 3: the entire property and granted her a life estate. That's
34:14
Speaker 3: very different than owning the property, conveying it and reserving
34:19
Speaker 3: a life state, which is really the way you should
34:21
Speaker 3: do it. Otherwise you lose some of the step up
34:23
Speaker 3: in basis benefits. Okay, So very important that you don't
34:27
Speaker 3: do it that way. Now, let's assume this is how
34:32
Speaker 3: it was done.
34:32
Speaker 1: That.
34:34
Speaker 3: Mom had a house, conveyed it to this irrevocable trust,
34:39
Speaker 3: but reserve the right to live there. By the way, folks,
34:43
Speaker 3: that's the better of the ways to create a life state.
34:46
Speaker 3: So I like it. But she's in New Hampshire. Why
34:49
Speaker 3: is that a problem?
34:51
Speaker 2: Because I thought with a life estate, it just poof
34:53
Speaker 2: goes away when you die and then there's nothing of
34:56
Speaker 2: value to it.
34:57
Speaker 3: And that's true state by state. Okay, So here in Massachusetts,
35:05
Speaker 3: if you had set it up this way, and we've
35:08
Speaker 3: done this a few times, it makes There's sometimes that
35:10
Speaker 3: this makes sense when you're using a trust. When you
35:14
Speaker 3: do that and you die even though you've been in
35:17
Speaker 3: the nursing home and on medicaid, because this would have
35:20
Speaker 3: protected the house from the nursing home. The life estate
35:25
Speaker 3: is what you said, Susan poof it goes away and
35:28
Speaker 3: there's no probate in Massachusetts. The only way to recover
35:34
Speaker 3: a state recovery and get money back to the state
35:37
Speaker 3: for the benefits received by the person who was on
35:40
Speaker 3: medicaid is from the probate. To state. A life estate
35:45
Speaker 3: in Massachusetts avoids the probaya state got it, can't get it.
35:49
Speaker 3: No recovery from Massachusetts from Massachusetts. New Hampshire has something
35:52
Speaker 3: called expanded a state recovery where they look at what
35:55
Speaker 3: did you own immediately before you died and that we
36:01
Speaker 3: can recover against. So the minute before she died, she
36:05
Speaker 3: would have had a life estate, but granted the life estate,
36:09
Speaker 3: depending on how old you are based on tables, can
36:11
Speaker 3: be pretty small, so it might not be a very
36:15
Speaker 3: big amount. But yes, in New Hampshire that's legitimate. They're
36:19
Speaker 3: going to be able to pursue some little piece of that, folks,
36:23
Speaker 3: that's just one negative of a life estate. Please learn
36:25
Speaker 3: how to calculate them. Do it right, get your guide
36:28
Speaker 3: eight six six eight four eight five six nine nine
36:33
Speaker 3: or Legal Exchange Show dot com, or maybe don't do
36:35
Speaker 3: it at all? Right right.
36:38
Speaker 2: If you have a question you'd like to ask Tod,
36:41
Speaker 2: visit his website Legal Exchange Show dot com and click
36:44
Speaker 2: on the ass Tod tab. Maybe I'll be able to
36:47
Speaker 2: read your question on the air, and hopefully his answer
36:50
Speaker 2: will stop you from becoming one of his next real
36:53
Speaker 2: life stories. You've been listening to Todd Lutsky, a partner
36:56
Speaker 2: with the law firm of Cushing and Dolan. I'm Susan
36:59
Speaker 2: Powers of Financial Advice with the Armstrong Advisory Group. We'll
37:03
Speaker 2: be back with more after this quick break on the
37:05
Speaker 2: Legal Exchange with Todd Blutsky.
37:09
Speaker 1: Life estates carry a higher risk of income tax penalties
37:11
Speaker 1: and hidden gift issues, and while they can be beneficial
37:14
Speaker 1: in some cases, if you use one, you need to
37:16
Speaker 1: be aware of the pitfalls they make cause. Cushing and
37:19
Speaker 1: Dolan are experts in elder law and have nearly forty
37:22
Speaker 1: years of experience helping families with their estate planning. Their
37:25
Speaker 1: new guide called Calculating the Consequences of Life Estates can
37:28
Speaker 1: help you make the right decisions about how to protect
37:30
Speaker 1: your assets from probate and the nursing home. Life estates
37:33
Speaker 1: are not simple documents and can create the potential for
37:36
Speaker 1: you to lose control of your estate. So if you
37:38
Speaker 1: haven't done your planning yet, now's the time to learn
37:40
Speaker 1: about the effects that life estates can have when it
37:42
Speaker 1: comes to protecting your assets. Call Cushing and Dolan today
37:45
Speaker 1: at eight six six eight four eight five six ninety
37:48
Speaker 1: nine and request their new guide called Calculating the Consequences
37:51
Speaker 1: of Life Estates. That's eight six six eight four eight
37:54
Speaker 1: five six nine nine, or request the guide online at
37:57
Speaker 1: Legal exchange show dot com. The proceeding was paid for
37:59
Speaker 1: in the views expressed there solely those of Cushion Dolan.
38:01
Speaker 1: Cushing and Dolan and or Armstrong Advisory may contact you
38:04
Speaker 1: offering legal or investment services. CUSHINGA Dolan and Armstrong Advisory
38:07
Speaker 1: do not endorse each other and are not affiliated. If
38:09
Speaker 1: you're looking for the perfect place for your next vacation,
38:12
Speaker 1: look no further than the US Virgin Islands. Act fast
38:15
Speaker 1: and take advantage of a special promotion to Saint Croix,
38:18
Speaker 1: experience a vibe like no other and receive a two
38:21
Speaker 1: hundred and fifty dollars per person airfare credit and a
38:24
Speaker 1: free hotel night when you book a five night minimums
38:26
Speaker 1: day with any participating hotel before June thirtieth, twenty twenty five.
38:30
Speaker 1: Saint Croix is known for its incredible history and spectacular architecture,
38:34
Speaker 1: along with world class cuisine, incredible golf courses, and a
38:37
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40:41
Speaker 1: Your tune to the Legal Exchange with Todd Lutsky. If
40:44
Speaker 1: you were a loved one needs a nursing homestay, call
40:47
Speaker 1: Todd right now at eight six six eight four eight
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41:00
Speaker 2: Welcome back into the Legal Exchange with Todd Lutsky. I'm
41:03
Speaker 2: Susan Power as a financial advisor with the Armstrong Advisory Group,
41:06
Speaker 2: and I'm joined, of course by Todd Lutsky, a partner
41:09
Speaker 2: with the law firm of Cushing and Dolan with a
41:12
Speaker 2: master's in taxation. So, Tod, I'm thinking about that real
41:16
Speaker 2: life story you gave us where Grandma gave to the daughter,
41:20
Speaker 2: gave to the grandchilds gave to the great grandchild. So
41:24
Speaker 2: you just have this ongoing domino effect of horrible taxes
41:30
Speaker 2: if you were to create a life estate and put
41:35
Speaker 2: the remainder share to your kids.
41:38
Speaker 3: So property I give to my kids, reserving the right
41:42
Speaker 3: to live there.
41:43
Speaker 2: Okay, not that we like that way, but I just
41:45
Speaker 2: want to plan on the string here what happens from
41:49
Speaker 2: a tax perspective when you die if your kids have
41:53
Speaker 2: that remainder.
41:54
Speaker 3: But you had a life estate, and so this is
41:57
Speaker 3: one of the consequences of a life estate. And remember
42:01
Speaker 3: the way you described it, Susan, is probably the most
42:05
Speaker 3: common way that it's done. So to answer this question, folks,
42:09
Speaker 3: most of you are going to have done it this
42:11
Speaker 3: way where it's probably sitting in the hands of the children,
42:15
Speaker 3: and you have this right to live there, which is
42:19
Speaker 3: a life estate, which is fine. So this is one
42:22
Speaker 3: of the few benefits of having a life estate when
42:27
Speaker 3: you die, owning a life interest. The government says, if
42:33
Speaker 3: you give something away and reserve the right to live there,
42:39
Speaker 3: let's say, the right to live there if you give
42:41
Speaker 3: something away and retain the right to the income, which,
42:46
Speaker 3: by the way, a life estate does, which is your estate,
42:49
Speaker 3: or retain the ability to control the beneficial enjoyment of
42:55
Speaker 3: what you gave away, which certainly living in the house
42:58
Speaker 3: is beneficial enjoyment of what you gave away. The government
43:02
Speaker 3: says that you didn't effectively give it away. So what
43:06
Speaker 3: that means is the full value, not just the life
43:11
Speaker 3: estate peace. The full value of what you gave away
43:17
Speaker 3: is included in your estate. So if the house is
43:21
Speaker 3: worth a million, and my life estate piece, since I'm
43:25
Speaker 3: pretty old, is worth or two hundred thousand when I die,
43:32
Speaker 3: the full million is included in my estate for state
43:36
Speaker 3: tax purposes, not probate. You avoid probate, but it's included
43:40
Speaker 3: for estate tax purposes. Why am I stressing that the
43:44
Speaker 3: benefit is the people who get it now, the remainderman,
43:50
Speaker 3: the kids who are now one hundred percent owners automatically
43:55
Speaker 3: remember the life estate poof goes away and they become
43:58
Speaker 3: one hundred percent owners. They become one hundred percent owners
44:01
Speaker 3: with a brand new basis equal to fair market value
44:04
Speaker 3: on the date of death. So if it's worth a
44:07
Speaker 3: million and they sell it for a million because they
44:11
Speaker 3: don't want it, it's as if they paid a million.
44:15
Speaker 3: So therefore their gain is a million minus a million
44:18
Speaker 3: or zero zero, which means they get to keep the
44:22
Speaker 3: full million.
44:24
Speaker 2: So how is that different then if you don't reserve
44:27
Speaker 2: a life estat and you just put the property in
44:29
Speaker 2: the kids'.
44:29
Speaker 3: Names, like that real life story. I told yes that
44:33
Speaker 3: out of the dominos down the line. So let's use
44:37
Speaker 3: the same million dollar example. You know, you know mom
44:41
Speaker 3: has this property or that that she has and she
44:45
Speaker 3: just decides I'm just going to give it to my
44:46
Speaker 3: kids because it feels good. And let's say that that
44:50
Speaker 3: property was given to her by her mother, and so
44:53
Speaker 3: let's say the cost basis is one hundred thousand dollars
44:57
Speaker 3: just to make it easier. Well, if that's the cost basis,
45:01
Speaker 3: because it's very low and has grown a lot, Now
45:03
Speaker 3: the kids own the property one hundred percent right away,
45:07
Speaker 3: right away. Because you gave it all away, you don't
45:10
Speaker 3: own anything. And let's say you've moved out and they
45:13
Speaker 3: lived their house, but they wait and they don't sell
45:16
Speaker 3: it until you die. That doesn't matter, the dying part
45:20
Speaker 3: doesn't matter anymore. Why because they've owned it. So if
45:23
Speaker 3: they've owned it, they have the same basis that mom
45:27
Speaker 3: had when mom gave it to them. So now if
45:30
Speaker 3: they sell it for a million minus their cost basis
45:33
Speaker 3: of a carryover of one hundred thousand dollars, the gain
45:37
Speaker 3: is nine hundred thousand dollars. And if it's not their
45:39
Speaker 3: primary residence, they get to pay capital gains tax on
45:42
Speaker 3: the full nine hundred thousand dollars. That is about a
45:47
Speaker 3: two hundred and seventy thousand dollars tax bill. That's not fun, No, folks,
45:54
Speaker 3: big difference, right, And there's many other tax consequences associated
46:00
Speaker 3: with life estate arrangements. There's control issues, there's gift tax issues.
46:05
Speaker 3: There are some benefits, but folks, it may not be
46:08
Speaker 3: the best way to handle real estate in your estate plan.
46:13
Speaker 3: So if you're thinking about these or have one, get
46:16
Speaker 3: the guide eight six six eight four eight five six
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Speaker 3: nine nine or Legal Exchange Show dot com again eight
46:24
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Speaker 3: Legal Exchange Show dot com.
46:30
Speaker 2: So someone may be listening and saying, huh, so if
46:34
Speaker 2: I give my kids the home and I retain the
46:37
Speaker 2: life estate, Todd said, it starts the clock for their
46:43
Speaker 2: portion for the for the nursing.
46:45
Speaker 3: Home, the medicaid.
46:46
Speaker 2: Yes, Todd said, they're going to get a step up
46:49
Speaker 2: in cost basis. Sounds good, right, Todd said, it's going
46:54
Speaker 2: to approbate.
46:55
Speaker 3: I don't know where this is going, Susan, but I'm
46:57
Speaker 3: starting to feel okay, so good.
47:00
Speaker 2: But you are not advocating for this situation, no, because
47:06
Speaker 2: there are more cons than pro. So let's talk about
47:12
Speaker 2: you give your home to your child, okay, and they
47:15
Speaker 2: get divorced just for an easy.
47:17
Speaker 3: Yeon, And I retained a life estate and.
47:19
Speaker 2: You retained a life estate, your child gets divorced, you
47:21
Speaker 2: gave it to just one child. Yeah, what happens in
47:25
Speaker 2: that case?
47:25
Speaker 3: So you know that's really a bigger problem for the
47:29
Speaker 3: child even than it is for you. Now, So if
47:33
Speaker 3: I reserve the life estate, I do have the right
47:37
Speaker 3: to live there and the creditors won't be able.
47:41
Speaker 2: To kick me out future X daughter in law.
47:44
Speaker 3: Right, but you're right, I could end up you know,
47:49
Speaker 3: I guess for me, it's not gonna be critical. But
47:51
Speaker 3: at the end of the day, that daughter in law,
47:54
Speaker 3: that ex daughter in law, let's say, is going to
47:57
Speaker 3: be working with your son, saying, if what you've got
48:01
Speaker 3: right now, son is a remainder interest, and let's stick
48:05
Speaker 3: with our million dollar property, and let's say the value
48:08
Speaker 3: of that remainder interest, well, your parent is alive, is
48:12
Speaker 3: eight hundred thousand. I want four hundred thousand of other assets.
48:17
Speaker 2: Because that's a marital asset now right right he owns that.
48:21
Speaker 3: Either I want the house or I want another four
48:26
Speaker 3: hundred thousand of some other assets. So this is a
48:28
Speaker 3: problem for the child for sure, and I'm certain it's
48:32
Speaker 3: not making the parent happy either.
48:35
Speaker 2: In that Fortunately, mom's got a life estate so she
48:41
Speaker 2: can't be evicted. But what if she had just given
48:43
Speaker 2: it outright to the son instead of reserving a life estate,
48:47
Speaker 2: and now Sun is going through a divorce, what happens?
48:49
Speaker 3: Then that's a really so much bigger problem because now
48:52
Speaker 3: whenever you give away your house and people do this,
48:55
Speaker 3: we don't ever recommend it, nor will I ever do it.
48:58
Speaker 3: They really have no right. The parent has no rights
49:02
Speaker 3: to that house, so you legally cannot stay there if
49:06
Speaker 3: the owner, whoever that ends up being ex spouse or
49:11
Speaker 3: your son, doesn't matter either way, you still have no
49:15
Speaker 3: legal right to live there. So hopefully the sun wouldn't
49:17
Speaker 3: kick you out, but the daughter in law would.
49:19
Speaker 2: But think about if the son and the daughter in
49:21
Speaker 2: law now own it jointly and he dies, So now
49:25
Speaker 2: you've got the daughter in law that owns your home, right,
49:29
Speaker 2: and maybe you get along or not?
49:31
Speaker 3: Right, that's a problem on a dying perspective. You're absolutely
49:34
Speaker 3: never folks. That's we're talking about life estates and the
49:37
Speaker 3: two ways to calculate them. One issue that's not in
49:40
Speaker 3: this guide at all is giving away the house completely.
49:42
Speaker 3: That's not even an option, right, Just don't. We're just
49:45
Speaker 3: sharing this example with you, but just don't do it.
49:48
Speaker 3: Nothing good can come from that.
49:50
Speaker 2: And there's only a couple reasons why you would ever
49:53
Speaker 2: consider doing the life estate. Can you remind us of
49:55
Speaker 2: what that is?
49:55
Speaker 3: Todd right? I would say three times, by the way,
49:58
Speaker 3: never to the kids with a reserved life estate. Only
50:02
Speaker 3: to the irrevocable trust with a reserved LIFEKA. So that's
50:05
Speaker 3: step one. The first time I do it is if
50:08
Speaker 3: there's a abatement you're getting on your real estate tax
50:11
Speaker 3: bill discount a discount, you got to keep the life
50:13
Speaker 3: estate to keep the discount. Second time I do it
50:16
Speaker 3: is if you have a mortgage. Okay, you got to
50:18
Speaker 3: transfer it and convey keep a life state in order
50:21
Speaker 3: to prevent the bank from calling your note. Yep, you're protected.
50:24
Speaker 3: And the third time I'll do it is if you
50:26
Speaker 3: got like a multifamily and you're paying collecting rent. I
50:29
Speaker 3: might just want the rent to come directly to you
50:31
Speaker 3: and not have to run through the trust only times.
50:34
Speaker 3: Folks that I do it, learn what's when you should
50:36
Speaker 3: do it? Get the guide eight six six eight four
50:39
Speaker 3: eight five six nine nine or Legal Exchange show dot com.
50:44
Speaker 2: Todd Lutsky from the law firm A Cushing and Dolan,
50:46
Speaker 2: thank you so much.
50:47
Speaker 3: Thank you, Susan. Always a pleasure.
50:49
Speaker 2: I'm Susan Power as a financial advisor with the Armstrong
50:52
Speaker 2: Advisory Group. We thank you for joining us today and
50:54
Speaker 2: we'll be back again next week on the Legal Exchange
50:57
Speaker 2: with Todd Lutsky.
51:00
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51:50
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51:54
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