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Ask Todd: Can an estate be too small to create a plan? · 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: Todd Lotsky joins us now for Ask Todd.
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Speaker 3: We got phone lines open at eight eight eight two
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Speaker 3: zero five two two six three, because that's the number
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Speaker 3: to called Ask Todd your estate planning questions.
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Speaker 2: Again.
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Speaker 3: That number is eight eight eight to zero five two
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Speaker 3: two sixty three. And the point of this segment is
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Speaker 3: for you to ask your questions live on air about
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Speaker 3: your state plan and Todd will not send you a
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Speaker 3: bill after doing so. Mister Lotski, thanks for joining us.
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Speaker 2: Thank you always a pleasure.
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Speaker 3: Again, we got phone lines open at eight eight eight
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Speaker 3: to zero five two two six three get called because
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Speaker 3: we usually only get through two or three. Last week
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Speaker 3: we did a record. I think we got we did.
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Speaker 3: We got four, which ties the record for the most
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Speaker 3: calls we've ever gotten through. But otherwise we're usually a
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Speaker 3: two to three call per show deal again eight eight
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Speaker 3: eight two zero five two two six three to Is
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Speaker 3: there any size estate that is too small to benefit
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Speaker 3: from doing trust work?
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Speaker 2: I mean, I the way I look at estate planning
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Speaker 2: is a couple of things need to be accomplished. One.
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Speaker 2: You know, obviously probates an issue.
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Speaker 1: Is it?
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Speaker 2: Is it the biggest issue? No? No, you probably don't
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Speaker 2: have to plan just to avoid probate if you don't
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Speaker 2: want to. You know, taxes always got to talk about taxes.
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Speaker 2: Taxes may be an issue. But obviously, if you're a
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Speaker 2: state small chuck, as you indicate, maybe taxes isn't a
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Speaker 2: huge deal. But you can't ignore, you know, family because
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Speaker 2: a lot of what you're doing, you know, whatever the
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Speaker 2: size of your estate, you know, how you get it
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Speaker 2: to your family or when they get it or why
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Speaker 2: they get it might be important to you. And if
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Speaker 2: it is, then then that might be a reason to plan.
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Speaker 2: And let me let me answer that by saying, what
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Speaker 2: if you're if you're younger, right, and and you have
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Speaker 2: minor children, you might not have a taxable estate yet, right,
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Speaker 2: you might not be over the Massachusetts two million dollar exemption,
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Speaker 2: so you don't need a trust to avoid the tax.
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Speaker 2: Hopefully you're going to grow if your asset, you know,
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Speaker 2: if you're younger and you're just starting out and your
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Speaker 2: assets going to grow. But if you pass away, you know,
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Speaker 2: unexpectedly at a young age and you have young children.
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Speaker 2: Whatever you do have, even if it's just your home,
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Speaker 2: you want to make sure that that asset doesn't get
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Speaker 2: controlled by somebody like a guardian. You want it to
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Speaker 2: be controlled by a trust. So I might want to
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Speaker 2: trust for my family. So and so even if I'm
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Speaker 2: older and I don't have a taxable situation, but I
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Speaker 2: have some assets that I want to leave to a
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Speaker 2: family member in a certain way, do it. If you
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Speaker 2: don't have a taxable event, but you want to protect
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Speaker 2: assets from the nursing home. So I could have a
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Speaker 2: or estate under a million, but I want to protect
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Speaker 2: my house from the nursing home and do it. So
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Speaker 2: I guess at the end of the day, Chuck, I'm
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Speaker 2: I'm probably at a point where I'm saying a lot
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Speaker 2: of it is family driven, but I also say it
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Speaker 2: does have to make economic sense. I get it. If
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Speaker 2: I can tell you a way that's less expensive than
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Speaker 2: spending the full amount to do an estate plan, I'll
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Speaker 2: tell you right. So if it doesn't make economic sense
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Speaker 2: to spend the money now to provide the family benefit
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Speaker 2: and an economic benefit to the family, well then I
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Speaker 2: say don't do it, and I will tell you like
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Speaker 2: if I just want to avoid probate and give it
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Speaker 2: all to my kids, well then maybe just name designated
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Speaker 2: beneficiaries on all your accounts and be done with it.
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Speaker 2: You might have a little probate here and there, but
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Speaker 2: they'll get it.
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Speaker 3: Talking with Todd Lotski from the law firm of Cushing
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Speaker 3: and Dolan, again we call the segment Asked Tod, because
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Speaker 3: it's your chance to ask Todd your estate planning questions.
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Speaker 3: Still got a little bit of room on the phone
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Speaker 3: lines at eight eight eight to zero five to two
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Speaker 3: six three. That is the number to call to ask
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Speaker 3: Todd your questions live on air right now again eight
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Speaker 3: eight eight to zero five two two sixty three. We're
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Speaker 3: gonna take a quick break here, but when we come back,
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Speaker 3: it's going to be right to your questions with Todd Lutsky.
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Speaker 3: That phone number one more time is eight eight eight
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Speaker 3: to zero five two two sixty three quick break. Then
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Speaker 3: your questions with Todd.
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Speaker 1: Ask Todd with Todd Letsky every Wednesday at ten thirty
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Speaker 1: only here on the Financial Exchange Radio Network. Todd Letsky
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Speaker 1: answers your questions about a state and elder life planning
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Speaker 1: every Wednesday at ten thirty right here on the Financial
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Speaker 1: Exchange Radio Network.
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Speaker 3: All right, let's get right to your questions with Todd Ltsky.
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Speaker 3: First up, we got Patrick in Ludlow. Patrick, what's your
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Speaker 3: question for Todd?
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Speaker 4: Hi, I'm a look curious as far as regards if
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Speaker 4: if there's any new loopholes for capital gains. I've seen
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Speaker 4: rumors about this administration possibly trying to get rid of
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Speaker 4: that at some point, But right now I have a
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Speaker 4: rental property which my wife and I have decided to
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Speaker 4: get rid of it, and I know we're going to
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Speaker 4: have to pay capital gains on it. Is there any
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Speaker 4: suggestions as far as any new loopholes or anything like
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Speaker 4: that where we could avoid that?
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Speaker 2: Do you want to buy another property or no?
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Speaker 4: Not at this moment.
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Speaker 5: No.
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Speaker 4: And I know that there's a.
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Speaker 2: What is it the ten thirty one exchange exactly and
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Speaker 2: we could delay, you know, and never pay the tax
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Speaker 2: if you're die owning whatever property you're die owning. Well,
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Speaker 2: so if that's out, there's still ten thirty one exchanges,
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Speaker 2: and they're called you don't have to actually buy real estate,
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Speaker 2: but you can buy these Delaware trusts or whatever they are.
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Speaker 2: There's some sort of an investment. And again I don't
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Speaker 2: want to step out of my lane here, but but
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Speaker 2: you know, check with your investment advisor and and they
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Speaker 2: might have these these Delaware trust investments that you can
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Speaker 2: buy and they hold real estate and they qualify for
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Speaker 2: a ten thirty one exchange. Without buying real estate, you're
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Speaker 2: buying an investment that qualifies. So that might be the
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Speaker 2: way to go for you. That way, you don't have
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Speaker 2: to have the property and you can delay the you know,
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Speaker 2: the taxes or whatever. And but learn more about about
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Speaker 2: how that works. And the only other issue I can
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Speaker 2: think of is, well, no, there isn't. I mean, as
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Speaker 2: far as I know, capital gains are still there and
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Speaker 2: they're here to stay, but I don't I don't know
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Speaker 2: that that's in the even in the new tax bill,
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Speaker 2: unless they get rid of the entire ir irs, which
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Speaker 2: is possible. Who knows, so hopefully that helped a little
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Speaker 2: give you some ideas on what to do. Folks. Speaking
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Speaker 2: of ideas on what to do, many people don't do
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Speaker 2: their estate planning. That's a pothole, right to me. I
6:51
Speaker 2: got a new guide here, Potholes to Avoid. We've been
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Speaker 2: talking about it all month. It basically, you know, so
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Speaker 2: many people like, someone dies and they forget that there's
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Speaker 2: tenes that need to be filed on these on these
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Speaker 2: these trusts that existed. Things change when someone dies. The
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Speaker 2: type of tax return for the trust might change. And
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Speaker 2: please don't make the mistake of taking everything out of
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Speaker 2: one trust and putting it in the surviving spouse's trust.
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Speaker 2: These are potholes that exist for people that have done
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Speaker 2: their planning, or maybe they're changing residency. What do you do, folks,
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Speaker 2: There's many things to think about. If you've done your planning,
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Speaker 2: there could still be potholes. Get the guide. If you
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Speaker 2: haven't done your planning, there's a whole list of things
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Speaker 2: in here that will help you to avoid when you're
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Speaker 2: starting out and doing your planning. So get the guide.
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Speaker 2: Potholes to Avoid eight six six eight four eight five
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Speaker 2: six nine nine or Legal Exchange show dot com again
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Speaker 2: eight six six eight four eight five six nine nine
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Speaker 2: or Legal Exchange show dot com got another one for
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Speaker 2: you here. Let's go to David on the Cape.
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Speaker 3: David, you are on with Todd Lutski.
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Speaker 5: Hi, good morning, Todd. My mother has your vocable Medicaid Trust.
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Speaker 5: I'm a trustee. She asked me to give my brother
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Speaker 5: twenty thousand dollars. So that's over the eighteen thousand dollars
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Speaker 5: limit to see or I have to file a gift
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Speaker 5: text forma DIRS.
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Speaker 2: So is this money that you plan on gifting to
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Speaker 2: the brother coming from the trust account?
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Speaker 5: It's coming from the trust. He's a lifetime beneficiary. I'm
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Speaker 5: named on the trust.
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Speaker 2: Well, I think yeah, the trust probably says income to mom, right,
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Speaker 2: principal Mom cannot have Okay, and principle, however, maybe in
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Speaker 2: your discretion as trustee, David can make distributions out to
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Speaker 2: kids of all generations. I'm just gonna that's kind of
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Speaker 2: how our trusts are drafted. So I'm going to assume
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Speaker 2: this Medicaid trust has similar language in it, which is
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Speaker 2: first of all, for everybody listening. That's why money twenty
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Speaker 2: grand can come out to the brother here that's a
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Speaker 2: child of mom. So let me ask you, this much,
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Speaker 2: is the amount of money in the trust potentially able
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Speaker 2: to generate more than twenty thousand dollars a year in
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Speaker 2: interest in dividends? Yes, okay, how much do you think
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Speaker 2: it generates and interest in dividends per year?
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Speaker 5: I think last year file taxes about fifty thousand.
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Speaker 2: So arguably, if mom doesn't need all fifty thousand dollars
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Speaker 2: you could use, you could make a distribution of twenty
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Speaker 2: thousand dollars to mom. That's not a taxable event, that's
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Speaker 2: not a gift, right, and that's technically income generated by
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Speaker 2: the trust. And so now mom got the income. If
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Speaker 2: the trust provides, Mom's entitled to the income. So now
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Speaker 2: Mom's got the income, she's got the twenty grand, she
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Speaker 2: can turn around and make a gift to her son. Yes,
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Speaker 2: she technically would need to file a gift tax return
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Speaker 2: if it goes over nineteen. So my advice might be,
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Speaker 2: you know what, take the nineteen and let's just go
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Speaker 2: on from there. No need to file a gift tax
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Speaker 2: return for the one one k. That might be easier.
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Speaker 2: So I mean that's probably the answer. If not, then
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Speaker 2: the trust makes the gift out to the brother. Again,
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Speaker 2: I'd just stick with nineteen for one grand I just wouldn't.
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Speaker 2: I wouldn't worry about it. Would I would give the
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Speaker 2: brother the nineteen there would be that's technically a gift
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Speaker 2: for mom, non reportable, non taxable, and then the brother
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Speaker 2: has it and you're all set. So that would probably
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Speaker 2: be the two options I would do. Otherwise, Yes, if
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Speaker 2: you do go over the nineteen thousand per year per
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Speaker 2: person number, you do have to file a gift tax return,
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Speaker 2: but there won't be any gift taxes do because whether
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Speaker 2: it's you or your brother or the mother, we have
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Speaker 2: a thirteen point nine million dollar gift tax exemption once
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Speaker 2: in a lifetime, so unless we exceed that, we don't
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Speaker 2: pay a tax. So if you gave twenty nineteen is
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Speaker 2: a freebie. One comes off of the thirteen point nine million. Todd,
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Speaker 2: I got another.
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Speaker 3: One here for you. Let us go to Kevin in
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Speaker 3: the car. Kevin, what's your question for Todd A Lotski?
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Speaker 6: Hi, guys, good morning, Hey Todd.
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Speaker 3: I had a question.
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Speaker 6: So I'm sixty three, I'm looking to retire and probably
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Speaker 6: in two to three years. I have a four to
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Speaker 6: one k My wife has the retirement. We own our house.
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Speaker 6: That's about it. We checked out a couple of years
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Speaker 6: ago we were thinking of maybe doing some kind of
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Speaker 6: trust and kind of got talked on a bit. Oh
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Speaker 6: some people said we should do it, other people that
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Speaker 6: make it too early to do it. We have a
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Speaker 6: will and that's really all we have right now, and
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Speaker 6: I'm just curious, is this something else we should be
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Speaker 6: looking in two fires? Uh, maybe doing the trust right
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Speaker 6: now and spending the money.
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Speaker 1: To do it.
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Speaker 2: So let me ask you this. You've got a house.
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Speaker 2: How much is that worth?
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Speaker 6: One point two million?
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Speaker 2: So you got that's a big asset. And then other
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Speaker 2: than four to oh one k type money, do you
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Speaker 2: have other money, cash investments and how much? No, No,
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Speaker 2: it's all it's all four to oh one k type money.
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Speaker 2: A little bit of money in the bank maybe, but
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Speaker 2: primarily a house and four to oh one k type money.
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Speaker 2: So how much are we looking at as a total
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Speaker 2: value of your estate you and your wife combined?
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Speaker 6: It's probably somewhere two point five.
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Speaker 2: And three million perfect, And again, one point two of
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Speaker 2: it is is the house, which is a big number.
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Speaker 2: So you're pushing close to half of your estate is
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Speaker 2: a house. So you you should do planning, which which
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Speaker 2: would involve a trust. The kind of trust still remains
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Speaker 2: to be determined, but if you did a revocable trust,
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Speaker 2: you're at least going to avoid probate. And with a
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Speaker 2: three point five million dollar estate, it will serve to
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Speaker 2: not just reduce, but eliminate your Massachusetts state tax, okay,
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Speaker 2: because we can shelter up to four million dollars on
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Speaker 2: the first death if you're married and you plan. Okay,
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Speaker 2: So that's what the trust would do. So it will
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Speaker 2: avoid probate, keep you in control, eliminate the taxes, and
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Speaker 2: provide how these assets will get to your your family. Right,
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Speaker 2: So there might be you know, kids aren't good with money.
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Speaker 2: I'm worried about future divorces of the children. So there's
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Speaker 2: a lot that can happen after you die that a
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Speaker 2: trust can also provide for. So I think that that
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Speaker 2: you have enough assets to certainly do planning from a
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Speaker 2: tax perspective and a probate perspective. And do you have children?
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Speaker 2: I didn't ask you about that.
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Speaker 6: I do, Yeah, they they're not children anymore, you know
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Speaker 6: thirty two and twenty eight.
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Speaker 2: Do you have grandkids? Not yet? Okay? See but planning
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Speaker 2: for all of that might be on your plate as well,
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Speaker 2: And that's where the trust lives on after you die,
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Speaker 2: and we can take care of them in whatever manner
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Speaker 2: you want. So that's step one. The only thing that
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Speaker 2: I didn't describe that may or may not be a
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Speaker 2: concern of yours. Again, sixty three and over or sixty
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Speaker 2: and over, I'm going to ask the question nursing homes.
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Speaker 2: You know, do I want to say, five years from now,
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Speaker 2: have certain assets, my home and any other assets I
14:30
Speaker 2: can put in the trust protected from the cost of
14:32
Speaker 2: nursing home care. If I do, then we would, you know,
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Speaker 2: address how an irrevocable trust works, which would ultimately keep
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Speaker 2: you in control of your assets ninety eight percent and
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Speaker 2: do everything the revocable trust does, but also provide after
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Speaker 2: five years protection from the cost of long term care.
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Speaker 2: So I think you're on the right track now. I
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Speaker 2: think you just need to sit down and figure out
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Speaker 2: which type of trust is right for you. But planning
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Speaker 2: certainly would be good for you.
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Speaker 3: Mister Lutsky. Thank you for joining us today.
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Speaker 2: Thanks so much.
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Speaker 1: This has been asked Todd on the Financial Exchange Radio
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Speaker 1: Cushing and Dolan, serving Massachusetts and New England for more
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Speaker 1: than thirty years, helping families with the state and tax planning,
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Speaker 1: Medicaid planning, and probate law. Call eight hundred three nine
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