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Special needs trusts · The Legal Exchange

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Speaker 1: This is the Legal Exchange with Todd Lutsky from the
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Speaker 1: law firm of Cushing and Dolan and Susan Powers of
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Speaker 1: the Armstrong Advisory Group. Each week, Todd and Susan will
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Speaker 1: discuss many topics, including estate planning, how to avoid probate,
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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
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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
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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
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Speaker 1: Here are your hosts, Todd Lutsky and Susan Powers.
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Speaker 2: Welcome into the Legal Exchange with Todd Lutsky. I'm Susan Powers,
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Speaker 2: a financial advisor the Armstrong Advisory Group, and I'm joined
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Speaker 2: by Todd Lutsky, a partner with the law firm of
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Speaker 2: Cushing and Dolan with a master's in taxation. Welcome Todd.
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Speaker 2: How are you today?
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Speaker 3: I'm never better in you.
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Speaker 2: I'm great?
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Speaker 4: Thank you.
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Speaker 2: What do you have for us this week?
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Speaker 5: You got a couple of cases. I got one out
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Speaker 5: of Michigan am Pellet Court case. There which is really
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Speaker 5: going to be interesting. It's how best to set up
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Speaker 5: your special needs trust. This whole case is about how
1:06
Speaker 5: they set up a special needs trust for somebody who
1:10
Speaker 5: had a medical malpractice event and got a settlement, but
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Speaker 5: they decided not to give notice to all the protected
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Speaker 5: heirs and how that could be a problem. Things you
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Speaker 5: don't think about. But we're really going to show you
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Speaker 5: really how all these special needs trusts work in case
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Speaker 5: you've got somebody who's a special needs individual, and not
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Speaker 5: just the third party trusts, but self settled trust as well,
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Speaker 5: because there are two kinds. So I want to explain
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Speaker 5: those and how they work to folks, and we can
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Speaker 5: do that with that case. Also in Utah, we're gonna
1:38
Speaker 5: head over there where there's an appellate court case there
1:40
Speaker 5: where we're going to find out something very interesting about
1:43
Speaker 5: significant others. When you're not married and you're a significant other,
1:48
Speaker 5: you may not have the rights you think you have,
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Speaker 5: even though they try to say they were holding themselves
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Speaker 5: out as married, you know, the old common law married thing.
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Speaker 3: So it'll be interesting to see.
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Speaker 5: And I think it's interesting because a lot of folks
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Speaker 5: wonder all the time that if you're happily married die
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Speaker 5: and then your spouse remarries or doesn't remarry but has
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Speaker 5: a significant other. Do we worry about that in your
2:12
Speaker 5: estate planning? I think we're going to answer a lot
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Speaker 5: of those questions with this Utah Appellate Court case. But folks,
2:18
Speaker 5: like anything else, these are all new cases. We have
2:20
Speaker 5: a new guide for the new month, and it's called
2:23
Speaker 5: well it's that time.
2:24
Speaker 3: It's Thanksgiving? Can you believe it? We're in that month?
2:28
Speaker 3: I cannot well with Thanksgiving.
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Speaker 5: We give out the guide about making the most of
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Speaker 5: gifting your assets.
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Speaker 3: One.
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Speaker 5: Does it make sense to gift right? It's not always
2:37
Speaker 5: as easy as you think. You don't just give away
2:40
Speaker 5: an asset. You should think about the basis. Am I
2:43
Speaker 5: going to give away a high basis asset versus a
2:46
Speaker 5: low basis asset? Be careful when you set up a
2:48
Speaker 5: joint account. Did you make a gift when you create
2:51
Speaker 5: the joint account or only later after it's separated into
2:55
Speaker 5: no longer being a joint account? What about giving away
2:57
Speaker 5: a home or a rental property might not be the
3:00
Speaker 5: best thing to do because there's all kinds of tax
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Speaker 5: issues that go with it. You can use small gifts,
3:05
Speaker 5: large gifts. We can talk about discounting, whether you give
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Speaker 5: it away to a kid or hold it in a trust,
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Speaker 5: a gifting trust for a kid. Folks, there's so much
3:15
Speaker 5: to think about all in all, maybe no gifting at
3:18
Speaker 5: all is even needed. Get the guide learn how to
3:22
Speaker 5: make the most of your gifting of assets brand new
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Speaker 5: for the month eight six six eight four eight five
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Speaker 5: six nine nine or Legal Exchange Show dot com again
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Speaker 5: eight sixty six eight four eight five six nine nine
3:37
Speaker 5: or Legal Exchange Show dot com. Let's head back to
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Speaker 5: uh Michigan? Shall we here we go? In twenty fourteen,
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Speaker 5: Hector had a stroke, leaving him a quadriplegic, and it
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Speaker 5: was mainly due to medical malpractice during that procedure, and
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Speaker 5: he had a two million dollar settlement. So the court
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Speaker 5: ordered the creation of a special need trust.
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Speaker 3: Makes sense. It's one of the.
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Speaker 5: Ways you can create it. By the way, if the
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Speaker 5: individual cannot create it, the court can order it.
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Speaker 3: There's a few other ways. We'll get to it.
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Speaker 5: Louisa now, his sister and guardian, hired the attorney to
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Speaker 5: prepare the trust, and she was the trustee. Okay, the
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Speaker 5: residuary clause said pay back the state first yep, which
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Speaker 5: you got to have a payback in there.
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Speaker 3: And then the balance, interestingly.
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Speaker 5: Enough, goes to Luisa, well unless Hector directs otherwise in
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Speaker 5: a will. So that tells me, folks, that there probably
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Speaker 5: was a limited power of appointment built in to the
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Speaker 5: trust that he could exercise in his will to change
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Speaker 5: the language of the trust giving it to somebody else
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Speaker 5: again within the confines of the limited power of appointment.
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Speaker 5: And that just means that, you know, he's he could
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Speaker 5: have had a stroke, but he could still be competent.
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Speaker 2: Sure, and he can change his mind.
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Speaker 3: Right.
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Speaker 5: So on June twenty twenty one, Hector died. December twenty
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Speaker 5: twenty one, the trustee issued an accounting, a final accounting
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Speaker 5: for the trust funds. The court approved it, and the
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Speaker 5: court ordered a distribution of the balance of the trust
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Speaker 5: to Luisa, because that's what the trust said. Well, Hector
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Speaker 5: and his other sister petitioned, or Hector's other sister petitioned
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Speaker 5: the court to reform the trust. The trustee in this case,
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Speaker 5: Luisa objected, and the kids, so apparently there were kids.
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Speaker 2: Hector had kids, kids.
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Speaker 5: Sister kids finally get notice of all these proceedings which
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Speaker 5: they never had notice of before and they filed a
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Speaker 5: stop the distribution of the trust assets. The kids argue
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Speaker 5: that the special needs Trust is not properly formed because
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Speaker 5: no notice was provided to them as presumptive heirs or
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Speaker 5: what they call presumptive heirs, and the probate court agreed. Well,
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Speaker 5: guess who appealed, Louisa. Louisa she not happy about that.
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Speaker 5: So she appeals in the appellate Court of Firms and says,
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Speaker 5: even though that hector was not a protected individual, the
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Speaker 5: preceding regarding distributing assets from the trust was a protective
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Speaker 5: proceeding and you did need to give notice. Now why
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Speaker 5: is this important?
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Speaker 3: Right?
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Speaker 5: This is important because if there is no trust and
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Speaker 5: there is no will, then under the intestate succession statute,
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Speaker 5: sister is lower on the pecking order than kids. Yeah,
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Speaker 5: it would stop at the kids, it would not find
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Speaker 5: its way to siblings, So.
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Speaker 3: So she will be out in this case.
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Speaker 5: So, folks, I think it's just it's important to understand
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Speaker 5: how that all plays out and how it's all connected. Right,
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Speaker 5: and that's the whole result. But think about this.
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Speaker 3: For a minute.
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Speaker 5: There's a lot of people that have special needs situations
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Speaker 5: and they come about in different ways. So let's review
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Speaker 5: special needs situations, self settled trusts and third party trusts.
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Speaker 5: This case was a self settled trust. Right for anyone
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Speaker 5: who has a family member injured in an accident, disabled
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Speaker 5: somehow by malpractice like this case, and then get a settlement. Well,
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Speaker 5: those are the individual's money, right, and that's the individual's assets,
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Speaker 5: and so it's a self settled trust, and those dollars
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Speaker 5: can be placed in a self settled special needs trust.
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Speaker 3: The purpose of that.
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Speaker 5: Is simply to make sure that the money is not
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Speaker 5: going to disqualify them from any governmental benefits they might
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Speaker 5: be entitled to now that they're disabled. And that works,
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Speaker 5: and there's no waiting period. However, as we might imagine,
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Speaker 5: there is a payback. So, like anything else, if you
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Speaker 5: live a while and that money is in there being
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Speaker 5: used for your benefit and you're receiving governmental benefits, if
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Speaker 5: there's anything left, you got to pay back the state
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Speaker 5: for what they paid you before it can pass on
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Speaker 5: to family members. Many ways to create these special needs trusts, right,
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Speaker 5: these self settled trusts. The individual can do it, a
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Speaker 5: parent can do it. If the individual doesn't have the capacity,
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Speaker 5: a court.
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Speaker 3: Can order it done.
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Speaker 5: So there's many ways in which it can be prepared. Now,
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Speaker 5: that's how it works for self settled. Third party is
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Speaker 5: a different story. You might have a child born with
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Speaker 5: a disability. You might have a special needs child from
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Speaker 5: the get go right you want to make sure or
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Speaker 5: injured later. But your assets you want to provide for
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Speaker 5: that special needs child, you do not have to dis
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Speaker 5: inherit them.
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Speaker 3: A third party trust.
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Speaker 5: Is usually a share built into your family revocable or
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Speaker 5: irrevocable trust, and in there it has the special needs
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Speaker 5: language so that that dollars you leave to that child
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Speaker 5: can be used to benefit that child, but not owned
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Speaker 5: by the child, therefore not losing governmental benefits.
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Speaker 2: And then that's different because if it's not theirs, how
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Speaker 2: is that payback treated?
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Speaker 5: Biggest difference between these and self settled trust is there
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Speaker 5: is no payback provision because it was never their money
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Speaker 5: to begin with. It's an especial needs trust, no payback provision, so, folks,
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Speaker 5: and that works whether you are doing your own estate planning,
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Speaker 5: whether revocable or an irrevocable trust. So understand the difference
9:50
Speaker 5: between the two. They can be very helpful and you
9:53
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9:57
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Speaker 2: You've been listening to Todd Lutsky, a partner with the
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Speaker 2: law firm of Cushing and Dolan. I'm Susan Powers, a
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Speaker 2: financial advisor with the Armstrong Advisory Group. We've got much
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Speaker 2: Welcome back into the Legal Exchange with Todd Lutsky. I'm
14:25
Speaker 2: Susan Powers of financial Advice with the Armstrong Advisory Group,
14:29
Speaker 2: and I'm joined by Todd Lutsky, a partner with the
14:31
Speaker 2: law firm of Cushing and Dolan with a master's in taxation.
14:35
Speaker 2: Where we headed now, Todd, we are headed to Utah, Utah.
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Speaker 5: That's not close dealing with significant others?
14:44
Speaker 3: Right?
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Speaker 1: So?
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Speaker 5: And what we think a significant other? You know, rights
14:50
Speaker 5: do they have? They usually don't.
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Speaker 3: So.
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Speaker 5: Sheila and her husband Gary created the Right Family Trust
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Speaker 5: in twenty eleven Gary died in twenty fourteen. Shila then
15:04
Speaker 5: appointed her sister Gabrielle as personal representative on the will
15:09
Speaker 5: and trustee on the trust, and beneficiary of the trust.
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Speaker 5: So I'll pause there. That was done in twenty eighteen.
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Speaker 5: That makes me think that there must have been some
15:19
Speaker 5: limited power of appointment given to the surviving spouse, right
15:23
Speaker 5: because this was a joint trust that became irrevocable when
15:27
Speaker 5: the husband died.
15:28
Speaker 3: Yep, doesn't mean it's not allowed.
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Speaker 5: You could easily have had a limited power of appointment
15:33
Speaker 5: that allowed siblings, so they might not have had kids,
15:37
Speaker 5: siblings to be appointed, and so she did that well.
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Speaker 5: In twenty eighteen. Also, Sheila meets Ahmad. He moved in
15:46
Speaker 5: two months later, and two years later she adds him
15:50
Speaker 5: as the sole beneficiary on her IRA, listing the relationship
15:54
Speaker 5: as quote significant other.
15:57
Speaker 3: Okay.
15:58
Speaker 5: March twenty twenty one dies while Ahmad decides to file
16:02
Speaker 5: a petition to recognize them as married under the un
16:07
Speaker 5: I guess it's the unsolemnized marriage statute in Utah. That's
16:12
Speaker 5: probably similar to maybe a common law marriage that you
16:15
Speaker 5: might hear maybe in our state. Well, Gabrielle, Gabrielle, remember
16:21
Speaker 5: is the personal representative and the sister and the beneficiary
16:27
Speaker 5: of the trust. Well, she files notice to him to
16:31
Speaker 5: have him vacate the home because the home is an
16:34
Speaker 5: asset of the trust and he's not a beneficiary of
16:37
Speaker 5: the trust. So he fights a little bit, but then loses,
16:42
Speaker 5: and he eventually leaves the house. Well, then a bench
16:46
Speaker 5: trial follows and he argues that, hey, we held ourselves
16:50
Speaker 5: out as married, and in addition to that, she orally
16:53
Speaker 5: promised me the house. Well, the problem is, there was
16:58
Speaker 5: no evidence presented, no witnesses, no written agreement, no evidence
17:04
Speaker 5: maintaining joint bank accounts. They didn't even have any evidence
17:07
Speaker 5: filing joint bank joint tax returns. Didn't seem like there
17:12
Speaker 5: was anything they were really doing that held themselves out
17:15
Speaker 5: as if they were married. Again, I don't know what
17:18
Speaker 5: the unsolemnized the statute is in Utah, but apparently they
17:23
Speaker 5: didn't meet it. And then they get to this oral promise. Remember, oh,
17:27
Speaker 5: this is an oral promise to give you a house. Well, unfortunately,
17:30
Speaker 5: there's something called the Statute of Frauds. The Statute of
17:33
Speaker 5: Frauds governs all real estate transactions, which means they need
17:37
Speaker 5: to be in writing if you're going to have a
17:40
Speaker 5: real estate transaction, it can't just be I promise you
17:43
Speaker 5: my house. That doesn't work. And so, because there was
17:46
Speaker 5: nothing in writing, the oral promise fails the Statute of
17:51
Speaker 5: Fraud's tests and so, ahmad, you have no standing to
17:56
Speaker 5: even file acclaim here. You're not married, you're not an
18:01
Speaker 5: air at law, You're really nothing.
18:04
Speaker 2: Be lucky you got the IRA.
18:05
Speaker 3: Under the law.
18:06
Speaker 5: Interesting a good point, Susan to bring that up. Be
18:09
Speaker 5: lucky you got the IRA, because I guess she's allowed
18:12
Speaker 5: to put anybody she wants on as beneficiary of her IRA. So, folks,
18:18
Speaker 5: this is important to understand what a significant other has.
18:22
Speaker 5: The guide is important to understand how to make your gifts,
18:26
Speaker 5: making the most of gifting assets now and here, I'm
18:30
Speaker 5: glad there were no gifts made. But folks, how do
18:33
Speaker 5: you make gifts? When do you make gifts? It's not
18:35
Speaker 5: so easy. The government does allow us to give away
18:38
Speaker 5: currently thirteen million, six hundred and ten thousand dollars of
18:42
Speaker 5: assets free of a state of gift tax. Most states,
18:47
Speaker 5: I don't think there's really I think only Connecticut has
18:49
Speaker 5: a gift tax. So states don't have gift taxes. So
18:52
Speaker 5: you don't have to worry about a gift tax in
18:54
Speaker 5: the state, and you're allowed to give away currently eighteen
18:58
Speaker 5: thousand dollars per year or person without paying a gift tax.
19:02
Speaker 5: But there's so much else to consider. Do you give
19:04
Speaker 5: it outright? Do you give it to the kids? Do
19:06
Speaker 5: you put it in a special into a gifting trust?
19:09
Speaker 5: Watch out gifting high basis assets versus low basis assets. Folks,
19:15
Speaker 5: get the guide how to make the most of gifting
19:18
Speaker 5: your assets or not gift at all eight six six
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Speaker 5: eight four eight five six nine nine or Legal Exchange
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Speaker 5: Show dot com again eight sixty six eight four eight
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Speaker 5: five six nine nine or Legal Exchange Show dot com.
19:34
Speaker 3: What do we learn from this? Tips and lessons?
19:37
Speaker 2: Don't move them in after two months.
19:39
Speaker 3: Don't move them in after two months.
19:41
Speaker 2: That's what I learned.
19:44
Speaker 5: But what I get from this is we think about
19:47
Speaker 5: the operations of a trust right. So many benefits beyond
19:52
Speaker 5: planning right, beyond just avoiding probate, beyond reducing your estate
19:58
Speaker 5: tax liability. In in this case, it really was all
20:02
Speaker 5: about the family behind the estate plan. This protected the
20:05
Speaker 5: family from a third party in reality by having this
20:12
Speaker 5: trust put together right, Because remember the trust became irrevocable
20:17
Speaker 5: when the husband died and left the spouse as trustee
20:23
Speaker 5: in charge. Now, she ultimately appointed that the sister as
20:27
Speaker 5: a successor trustee, which is beneficiary and a beneficiary.
20:32
Speaker 2: So who knows if the both had children of his own.
20:35
Speaker 5: Or Yeah, I mean, I'm assuming that they wouldn't have
20:38
Speaker 5: given a limited power of appointment to include her spout
20:41
Speaker 5: her siblings if there were actually kids.
20:44
Speaker 2: Right, so we'll give her the benefit of the doubt.
20:47
Speaker 5: Yeah, but again, if maybe he didn't have they didn't
20:50
Speaker 5: have any kids together, and he didn't have anybody to
20:53
Speaker 5: leave it to, and yeah she said, he said, yeah,
20:55
Speaker 5: you're okay to leave it to whoever.
20:57
Speaker 2: Well, he certainly wouldn't have wanted to go to a mod.
21:00
Speaker 5: No, a mod's out. And that's really the big protection here, right.
21:04
Speaker 5: So you know, and many clients always ask, right, well,
21:08
Speaker 5: after I die, and so and so meet somebody else,
21:12
Speaker 5: and either they meet and don't remarry, or they remarry,
21:18
Speaker 5: can that person get the assets in the trust? Which
21:21
Speaker 5: is exactly what happened here. They did a trust together,
21:25
Speaker 5: one died and now the survivor moved on. Well, the
21:30
Speaker 5: first answer is if you're not remarried, then that person,
21:36
Speaker 5: as you saw here, cannot even bring an action to
21:39
Speaker 5: challenge the trust, which is great, and.
21:42
Speaker 2: There's a lot of people that don't get remarried. They
21:44
Speaker 2: just they live with their partners, you know.
21:46
Speaker 5: I agree, And there's reasons for them to do that,
21:50
Speaker 5: both medicaid and tax reasons to do that, and so
21:54
Speaker 5: that's really good news. You need to know that that
21:56
Speaker 5: just a significant other when you have a trust, really
21:59
Speaker 5: provides a barrier because they can't challenge, they can't.
22:02
Speaker 3: Just run in and access it.
22:03
Speaker 5: Whereas if you just left everything in the surviving spouse's name,
22:07
Speaker 5: it's clearly a lot easier to either be taken advantage
22:11
Speaker 5: of or to have the asset you know, taken period. Second,
22:16
Speaker 5: if the individual remarries, then there's usually language in the
22:20
Speaker 5: trust that still offers protection against you know, someone else
22:25
Speaker 5: coming in, because the language now would say the assets
22:28
Speaker 5: in the trust are held for the spouse, limited you know,
22:32
Speaker 5: to health, education, standard of living. So the surviving spouse
22:36
Speaker 5: could be trustee but should only be taking the assets
22:39
Speaker 5: as needed to maintain their standard of living.
22:41
Speaker 2: Which was the same before.
22:43
Speaker 3: They're same as before.
22:44
Speaker 5: And who could be the check and balance, well, the
22:47
Speaker 5: kids could be you know, if you violate the standard,
22:49
Speaker 5: the kids could at least say hey, what are you
22:51
Speaker 5: doing here?
22:52
Speaker 3: Right? We can see it.
22:53
Speaker 5: Or if you really want protection, you can have if
22:58
Speaker 5: especially if it's a second marriage, but even if it's not,
23:01
Speaker 5: you can have a child serve as trustee with the spouse.
23:05
Speaker 5: And now it's coming out according to the standard for
23:08
Speaker 5: sure yep. And that really provides some additional protection from
23:13
Speaker 5: even a remarried situation because these assets would be would
23:17
Speaker 5: be protected. So again just food for thought when you
23:21
Speaker 5: think about how to set these things up. They're more
23:24
Speaker 5: than just avoiding probate, more than just taxes. They are
23:27
Speaker 5: really protecting assets, especially from significant others that could come along.
23:32
Speaker 5: And lastly, as you mentioned, it was interesting to see
23:36
Speaker 5: that this power of appointment, the ability to change trusts
23:40
Speaker 5: do exist even after one spouse dies. And that's what
23:43
Speaker 5: they did here. Folks learn how to gift though, that's
23:46
Speaker 5: what this guide's all about. We're in that season. Don't
23:49
Speaker 5: just make gifts outright, think about how to do it,
23:51
Speaker 5: and the new masses choose sets of state tax law
23:54
Speaker 5: without the Cliff rule does allow for gifting to reduce
23:58
Speaker 5: assets to reduce massive state tax eight six six eight
24:02
Speaker 5: four eight five six nine nine or Legal Exchange show
24:06
Speaker 5: dot com.
24:07
Speaker 2: You've been listening to Todd Lutsky, a partner with the
24:09
Speaker 2: law firm of Cushing and Dolan. I'm Susan Powers, a
24:12
Speaker 2: financial advisor with the Armstrong Advisory Group, and Todd will
24:16
Speaker 2: be answering your listener questions when we return to the
24:19
Speaker 2: Legal Exchange with Toddlutsky.
24:22
Speaker 1: Legacy planning is incredibly important, but if it isn't done properly,
24:26
Speaker 1: you can create significant problems for your estate. Cushing and
24:29
Speaker 1: Dolan are expert to know their law, and their new
24:31
Speaker 1: guide out this month is called Making the Most of
24:33
Speaker 1: Gifting Assets. In it, you'll learn that while some gifts
24:36
Speaker 1: to your children can be beneficial, others may not be,
24:39
Speaker 1: especially if they're financial difficulties or a divorce proceeding. Learn
24:43
Speaker 1: how to protect yourself and your family by calling Cushing
24:45
Speaker 1: and Dolan right now at eight sixty six, eight four,
24:48
Speaker 1: eight five six ninety nine ask for their brand new
24:51
Speaker 1: guide called Making the Most of Gifting Assets. It contains
24:54
Speaker 1: a wealth of information about the gifting process, including important
24:57
Speaker 1: details about what tax issues may arise from a major
25:00
Speaker 1: your gift like a home or a vacation property and
25:02
Speaker 1: what happens to the iset up. The child has creditor issues,
25:05
Speaker 1: call eight sixty six eight four eight five six ninety
25:08
Speaker 1: nine or request it online from their website Legal exchange
25:11
Speaker 1: show dot com. The proceeding was paid for in the
25:13
Speaker 1: music expressed sole. Leaders of Chushingan Dolan, Cushing and Dolan
25:16
Speaker 1: and or Armstrong Advisory may contact you offering legal investment services.
25:19
Speaker 1: Chrishiingan Dolan at Armstrong Advisory do not endorse each other
25:21
Speaker 1: and are not affiliated.
25:23
Speaker 7: Last year we introduced you to Mark Fodder, CEO of
25:26
Speaker 7: Veterans Development Corporation. Mark is a career military man and
25:29
Speaker 7: we're proud to have him back as the presenting sponsor
25:31
Speaker 7: of the twenty twenty four dav five K Boston.
25:34
Speaker 8: I joined the Marine Corps when I was eighteen and
25:36
Speaker 8: served probably from nineteen eighty one to nineteen eighty four.
25:39
Speaker 8: As CEO of Veterans Development Corporation, my goal is to
25:43
Speaker 8: give back to the veteran community, many of whom are
25:45
Speaker 8: employees of this company. This is one of the reasons
25:48
Speaker 8: I am so excited to be partnering with the Disabled
25:50
Speaker 8: American Veterans Department of Massachusetts on this year's DAV five
25:54
Speaker 8: k Boston. The DAV works tiresly to support many of
25:57
Speaker 8: our disabled veterans and provide them access to critical services
26:02
Speaker 8: that help them live comfortably every day. I hope to
26:04
Speaker 8: be part of many more success stories of our vets
26:07
Speaker 8: being able to achieve their goals and dreams when their
26:09
Speaker 8: service ends.
26:10
Speaker 7: Veterans Development Corporation is proud to be the presenting sponsor
26:13
Speaker 7: of this year's DAV five k, taking place on Saturday
26:16
Speaker 7: November ninth at Fort Independence in South Boston. To register
26:20
Speaker 7: for this year's race, visit DAV five k dot Boston.
26:23
Speaker 3: Hi.
26:23
Speaker 4: This is Mike Armstrong from the Armstrong Advisory Group. Fine
26:26
Speaker 4: Tuning your financial strategy as the year comes to a
26:29
Speaker 4: close is very important, so this month we're sharing what
26:32
Speaker 4: we believe are the most critical year end financial tips
26:35
Speaker 4: As twenty twenty four winds down. There are several opportunities
26:39
Speaker 4: for you to consider that may help you end this
26:41
Speaker 4: year without worrying about your overall planning strategy, such as
26:44
Speaker 4: contributing the maximum amount of money to your IRA or
26:47
Speaker 4: four oh one K plan, offsetting your capital gains, and
26:49
Speaker 4: maximizing your charitable giving. We'll walk you through these issues
26:53
Speaker 4: and more in our new free guide called the Top
26:56
Speaker 4: Year End Financial Tips. Get yours today by calling eight
26:58
Speaker 4: hundred three nine three four zero zero one. Again, it's
27:02
Speaker 4: the Top Year End Planning Tips from the Armstrong Advisory
27:05
Speaker 4: Group and you can request it by calling eight hundred
27:07
Speaker 4: three nine three four zero zero one.
27:10
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:12
Speaker 1: registered investment advisor. Nothing in the ad or in any
27:14
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
27:17
Speaker 1: your own financial, tax into state planning advisors before making
27:19
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
27:22
Speaker 1: advisory services. You're listening to the Legal Exchange and it's
27:28
Speaker 1: time for Ask Todd, the segment where Todd will answer
27:31
Speaker 1: your questions about anything and everything that's included in the
27:34
Speaker 1: estate planning process. Once again, here's Todd Lutsky and Susan Powers.
27:41
Speaker 2: Welcome back, Todd. We have a few questions from listeners
27:44
Speaker 2: for you. First question comes from Ed in Milton Mass
27:48
Speaker 2: and Ed Wrights. I set up several LLCs for my
27:52
Speaker 2: rental properties with your firm. I'm considering selling one of
27:55
Speaker 2: the properties. How should this be handled if the properties
27:59
Speaker 2: are in an ll.
28:01
Speaker 3: So this is great.
28:02
Speaker 5: So first of all, I want to just expand on
28:03
Speaker 5: it a little and tell people that you know, rental
28:07
Speaker 5: properties should be in LLC's right. It does provide tremendous
28:11
Speaker 5: credit or protection, and that's really why ED did this. Okay,
28:15
Speaker 5: so that's just one big reason to do it now. Flexibility.
28:19
Speaker 3: Right.
28:20
Speaker 5: I've had a client that came in that said I've
28:24
Speaker 5: knocked on LLCs because I hate the administrative burden. He
28:29
Speaker 5: had like nine properties. I said, well, first of all,
28:32
Speaker 5: we don't need nine LLC's, right. You know, we can
28:34
Speaker 5: group the LLC's. You don't have to spend that kind
28:36
Speaker 5: of money. So we could put like three and three
28:38
Speaker 5: and three in each LLC, and then we can do
28:41
Speaker 5: a holding company and have these subs. These be subsidiary
28:45
Speaker 5: LLCs to the holding company. So those are all single
28:49
Speaker 5: member LLC's owned by the holding company. And now you
28:52
Speaker 5: only have one holding company that's owned fifty to fifty
28:55
Speaker 5: by you and your wife. And I said, and now
28:58
Speaker 5: you only need to file one income to actually turn
29:00
Speaker 5: not four, and there's no annual meetings. The administration is
29:04
Speaker 5: super easy. In fact, you can even run all the
29:07
Speaker 5: rents through one holding company account, keep separate quickbook records
29:11
Speaker 5: for your buildings. I get it, but absolutely you could
29:15
Speaker 5: do that. And he's like, oh, well that's much easier.
29:20
Speaker 5: That's much easier, and you know, and I think that's important.
29:23
Speaker 5: People do get caught up thinking there's all this administrative
29:26
Speaker 5: headache that has to be done, and so no, there
29:29
Speaker 5: doesn't have to be And now I can finally get
29:32
Speaker 5: to your question, which is more flexibility. LLC's are so
29:36
Speaker 5: different than escorps. Right, You're allowed to move real estate
29:40
Speaker 5: in and out of an LLC hmm without any adverse
29:43
Speaker 5: capital gains tax consequences. If you try to take property
29:47
Speaker 5: out of this escorp back into your name as a shareholder,
29:51
Speaker 5: it's a capital gain, it's a it's considered a sale,
29:55
Speaker 5: whereas out of an LLC you could say I'm tired
29:58
Speaker 5: of this LLC. I'm going to move it into my name.
30:01
Speaker 5: It's a non taxable event. So not only is it
30:04
Speaker 5: flexible that way, let's say you want to go to
30:06
Speaker 5: sell it. And I think that's finally his question. Right,
30:09
Speaker 5: So he's going to sell property out of the LLC.
30:12
Speaker 5: What will happen is you can just set up their
30:15
Speaker 5: regular purchase and sale agreement, the manager will sign as
30:20
Speaker 5: the seller manager of the LLC, the property will be
30:24
Speaker 5: deded out to the buyer, and the money will come
30:28
Speaker 5: into the LLC bank account.
30:31
Speaker 3: Simple.
30:32
Speaker 5: Again, LLC's don't pay tax their flow through entities. So
30:35
Speaker 5: whatever the capital gains tax liability is, it is individually
30:41
Speaker 5: because it just flows through exactly tax neutral, just going
30:47
Speaker 5: to be picked up on their personal return, so you're
30:49
Speaker 5: not going to pay any more capital gains tax or
30:52
Speaker 5: any lesser.
30:53
Speaker 2: Same with this person here. They have several LLC's, a
30:57
Speaker 2: lot of people that have a lot of rental property.
30:58
Speaker 2: They do ten thirty one ecs changes, Yeah, for taxes.
31:01
Speaker 2: Is there any limitation to them doing continuing to do
31:04
Speaker 2: two thirty one when it's owned by an LLC?
31:07
Speaker 3: Fair question, great question. The answer is no.
31:10
Speaker 5: You are allowed to do a ten thirty one exchange
31:14
Speaker 5: right from the LLC. But remember the selling entity needs
31:18
Speaker 5: to be the buying entity. So if I sell it
31:21
Speaker 5: out of the LLC, I should buy the new ten
31:24
Speaker 5: thirty one exchange into that same LLC perfectly okay, And
31:28
Speaker 5: you can just hold it and go on and do
31:31
Speaker 5: your ten thirty one exchange.
31:32
Speaker 3: Folks, great way to own real estate.
31:36
Speaker 5: And now, although I answered way more than was asked,
31:39
Speaker 5: I think you see the flexibility not only from a
31:41
Speaker 5: tax perspective, but from a selling and buying perspective as well,
31:46
Speaker 5: and an administrative perspective. So lots of good stuff there.
31:50
Speaker 5: And you know what, folks, when we talk about making gifts,
31:52
Speaker 5: that's what this guide is all about. There are people
31:55
Speaker 5: who use LLCs to gift non voting shares. High net
31:59
Speaker 5: worth people put in investment portfolios into LLCs and then
32:04
Speaker 5: gift away the non voting shares at a discount to
32:07
Speaker 5: gifting trust. So for high networks people, that's a great
32:11
Speaker 5: way to do it. So, but folks, gifting isn't always
32:15
Speaker 5: the answer. Please learn about how to gift high basis
32:19
Speaker 5: assets versus low basis assets. Understand the new mass of
32:22
Speaker 5: state tax law also helps you give away assets because
32:27
Speaker 5: there's no Cliff rule anymore. Remember the Cliff rule where
32:29
Speaker 5: you paid taxes on the amount over So now, folks,
32:33
Speaker 5: get the guide. Learn the most effective way to make
32:36
Speaker 5: your gifts this year eight six six eight four eight
32:40
Speaker 5: five six nine nine or Legal Exchange Show dot Com
32:44
Speaker 5: again eight six six eight four eight five six nine
32:48
Speaker 5: nine or Legal Exchange Show dot com.
32:52
Speaker 2: Our last question comes from Debbie and born mass and
32:54
Speaker 2: Debbie Rights. Now that Massachusetts has increased the estate tax
32:58
Speaker 2: exemption to two million, couldn't I just give my largest
33:01
Speaker 2: asset away while I'm living and die owning less than
33:04
Speaker 2: two million, I'm worth around three and a half million,
33:07
Speaker 2: and could gift a one million dollar vacation home and
33:10
Speaker 2: a one million dollar rental property to each of my
33:13
Speaker 2: two children.
33:14
Speaker 3: Well, the answer, the quick answer is yes, you could
33:19
Speaker 3: do that.
33:20
Speaker 5: But but is it the smart play? I'm gonna say,
33:25
Speaker 5: you know, probably not the smart play, because if the
33:29
Speaker 5: entire estate is worth what three five three five, yeah,
33:33
Speaker 5: and one million in a vacation home, and what was
33:37
Speaker 5: the other home.
33:37
Speaker 2: Is one million in rental property.
33:40
Speaker 5: One million in vacation home and one million in a
33:42
Speaker 5: rental property, both of those could have very low bass.
33:47
Speaker 5: I mean, they could have bottom a long time ago.
33:49
Speaker 2: And the rental could have no basis now because it's
33:52
Speaker 2: been depreciated. She's owned it a long time.
33:54
Speaker 5: And that's probably the point, right, So let's let's pick
33:56
Speaker 5: on the rental. If I gave away the rental and
33:58
Speaker 5: it's a million dollars and I have zero basis, you
34:01
Speaker 5: gave away a million dollars of gain, not factoring in
34:05
Speaker 5: all depreciation recapture as ordinary income. Just hit that at
34:09
Speaker 5: thirty percent. That's three hundred thousand dollars of capital gains
34:13
Speaker 5: tax that you've given to your child.
34:16
Speaker 2: So when you give it away the property, you also
34:18
Speaker 2: give away your cost basis.
34:20
Speaker 5: Right, and that's a huge problem. So now if I'm
34:24
Speaker 5: if I'm only worth three point five million in Massachusetts,
34:27
Speaker 5: and I give away that million, I've incurred or will
34:30
Speaker 5: incur a three hundred thousand dollars capital gain tax to
34:34
Speaker 5: somebody when and the kids sell.
34:36
Speaker 3: Right.
34:37
Speaker 5: Meanwhile, if I died owning it, I have three point
34:39
Speaker 5: five million minus two million dollar exemption. Yep, the tax
34:45
Speaker 5: is roughly about one hundred and fifty thousand. So I'm
34:48
Speaker 5: better off keeaping the asset, getting a step up in
34:52
Speaker 5: basis on both properties, the vacation and the rental.
34:58
Speaker 2: Because it would only be worse if she'd given away both.
35:01
Speaker 5: Oh my god, worse. I mean we're talking about savings
35:04
Speaker 5: of hundreds of thousands of dollars in capital gains tax
35:08
Speaker 5: to pay one hundred and fifty thousand mass tax.
35:11
Speaker 2: What would be a good asset. You know, if she
35:13
Speaker 2: had you know, one and a half million dollars sitting
35:16
Speaker 2: in cash like that kind of like, would it be
35:18
Speaker 2: appropriate for her if she had that?
35:20
Speaker 7: Yeah.
35:20
Speaker 5: So if you know someone is passing right and and
35:23
Speaker 5: they come in and they say, geez, you know, I've
35:25
Speaker 5: got stage four cancer or something and I have to
35:29
Speaker 5: but you know what, I got a million dollars sitting
35:31
Speaker 5: in CDs. Oh that's cash. Give away a million dollars. Now,
35:36
Speaker 5: your estate is two million dollars when you die, right, Well,
35:40
Speaker 5: isn't that the Massachusetts exemption?
35:42
Speaker 3: Well, yeah it is. Oh but wait a minute.
35:44
Speaker 5: We had to reduce the Massachusetts exemption by the taxable
35:48
Speaker 5: gift of a million. So our mass exemption is not
35:50
Speaker 5: two million. It's one million. That's correct, but only for
35:55
Speaker 5: filing purposes. So now I know that if I have
35:58
Speaker 5: a two million dollar estate and one million dollar threshold
36:01
Speaker 5: I have to file, we'll go ahead and file. We'll
36:04
Speaker 5: file it under the new Mass law. Well, we'll put
36:07
Speaker 5: two million dollars because that's.
36:09
Speaker 3: What we're worth.
36:09
Speaker 5: Now we gave away a million, there's no ad back
36:12
Speaker 5: in mass You put two million dollars on the mass
36:15
Speaker 5: estate tax return.
36:17
Speaker 3: Because I have to file calculate the tax. It's ninety
36:20
Speaker 3: nine six hundred dollars on two million. I know the number.
36:24
Speaker 5: Oh, but under the new mass law, we get a
36:26
Speaker 5: ninety nine six hundred dollars credit.
36:29
Speaker 2: Right, even though you gave away a million bucks?
36:31
Speaker 3: Correct?
36:32
Speaker 5: Huh, I get a ninety nine thousand, six hundred dollars credit.
36:35
Speaker 5: My tax is zero.
36:37
Speaker 2: Sounds like somebody screwed this up when they put the
36:39
Speaker 2: new laws in plates.
36:40
Speaker 5: It's basically gifting. It's basically the elimination of the cliff roll.
36:45
Speaker 3: Folks.
36:46
Speaker 5: It works much better now, but still get the guide
36:49
Speaker 5: and learn how to gift. Like we just showed you,
36:52
Speaker 5: Gifting isn't always the answer, but it can be. Get
36:56
Speaker 5: the guide eight six six eight four eight five nine nine,
37:01
Speaker 5: or go to our website Legal Exchange Show dot com.
37:04
Speaker 3: You can download it there. Making the most of gifting assets.
37:08
Speaker 2: If you have a question you would like to ask Todd,
37:11
Speaker 2: visit his website Legal Exchange Show dot com and click
37:15
Speaker 2: on the ask Tod tab. Maybe I'll be able to
37:17
Speaker 2: read your question on the air, and hopefully his answer
37:20
Speaker 2: will stop you from becoming one of his next real
37:23
Speaker 2: life stories. You've been listening to Todd Lutsky, a partner
37:26
Speaker 2: with the law firm of Cushing and Dolan. I'm Susan Powers,
37:30
Speaker 2: a financial advisor with the Armstrong Advisory Group. We'll be
37:34
Speaker 2: back with more after this quick break on the legal
37:37
Speaker 2: exchange with Todd Lutsky.
37:39
Speaker 1: Legacy planning is incredibly important, but if it isn't done properly,
37:43
Speaker 1: you can create significant problems for your estate. Cushing and
37:46
Speaker 1: Dolan are expert to know their law, and their new
37:48
Speaker 1: guide out this month is called Making the Most of
37:51
Speaker 1: Gifting Assets. In it, you'll learn that while some gifts
37:53
Speaker 1: to your children can be beneficial, others may not be,
37:56
Speaker 1: especially if they're financial difficulties or a divorce proceeding. Learn
38:00
Speaker 1: how to protect yourself and your family by calling Cushing
38:03
Speaker 1: and Dolan right now at eight six six, eight four,
38:05
Speaker 1: eight five, six nine nine ask for their brand new
38:08
Speaker 1: guide called Making the Most of Gifting Assets. It contains
38:11
Speaker 1: a wealth of information about the gifting process, including important
38:14
Speaker 1: details about what tax issues may arise from a major
38:17
Speaker 1: gift like a home or a vacation property, and what
38:19
Speaker 1: happens to the asset up the child has creditor issues.
38:22
Speaker 1: Call eight sixty six eight four eight five six ninety nine,
38:25
Speaker 1: or request it online from their website Legal exchange show
38:28
Speaker 1: dot com. The proceeding was paid for in the US.
38:30
Speaker 1: Expressed or sole leaders of Cushing and Dolan. Cushing and
38:32
Speaker 1: Dolan and Armstrong Advisory may contact you offering legal or
38:35
Speaker 1: investment services. Cushing and Dolan and Armstrong Advisory do not
38:38
Speaker 1: endorse each other and are not affiliated.
38:40
Speaker 3: HI.
38:40
Speaker 4: This is Mike Armstrong from the Armstrong Advisory Group. Fine
38:43
Speaker 4: Tuning your financial strategy as the year comes to a
38:46
Speaker 4: close is very important, so this month we're sharing what
38:49
Speaker 4: we believe are the most critical year end financial tips.
38:52
Speaker 4: As twenty twenty four winds down. There are several opportunities
38:56
Speaker 4: for you to consider that may help you end this
38:58
Speaker 4: year without worrying about your own for all planning strategy,
39:01
Speaker 4: such as contributing the maximum amount of money to your
39:03
Speaker 4: IRA or four oh one K plan, offsetting your capital gains,
39:06
Speaker 4: and maximizing your charitable giving. We'll walk you through these
39:09
Speaker 4: issues and more in our new free guide called the
39:12
Speaker 4: Top Year end Financial Tips. Get yours today by calling
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Speaker 1: six six eight four eight five six nine nine and
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Speaker 1: six six eight four eight five six nine nine, or
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Speaker 1: visit him online at Legal Exchange show dot com.
41:02
Speaker 2: Welcome back into the Legal Exchange with Todd Lutsky. I'm
41:05
Speaker 2: Susan Powers, a financial advisor with the Armstrong Advisory Group,
41:09
Speaker 2: and I've joined, of course with Todd Lutsky, a partner
41:11
Speaker 2: with the law firm of Cushian Dolan with a master's
41:15
Speaker 2: in taxation. So Todd, I want to dive into the
41:18
Speaker 2: details of this guide. But before I do that, and
41:21
Speaker 2: I know this is part of the guide. I need
41:24
Speaker 2: you to explain the Cliff rule to everybody and why
41:27
Speaker 2: it's so great that it doesn't exist anymore in Massachusetts.
41:32
Speaker 3: Yeah.
41:32
Speaker 2: So, oh, and we're because you've referenced it a couple times.
41:35
Speaker 5: Yeah, we're assuming it seems to not exist based on
41:39
Speaker 5: our reading of the statue, right, and so basically in
41:43
Speaker 5: the old days, and it's kind of like the example
41:45
Speaker 5: we just did when we had a two million dollar
41:48
Speaker 5: estate yep, and we only had a one million dollar
41:52
Speaker 5: exemption for a long time, ye people would come in
41:55
Speaker 5: and say, oh, I'm worth two, I'll give away one,
42:00
Speaker 5: and now I only have to pay tax on one million. Oh,
42:04
Speaker 5: but I have a one million dollar exemption, so therefore
42:10
Speaker 5: I'm not going to pay any tax in mass But
42:13
Speaker 5: under the old rule, the way it worked is you
42:17
Speaker 5: you would take your million dollar exemption and reduce it
42:20
Speaker 5: by a million because you gave away a million. So
42:23
Speaker 5: now your filing threshold is zero and your estate is
42:29
Speaker 5: a million yep to minus one. And so because my
42:33
Speaker 5: filing threshold is zero, I still have to file and
42:38
Speaker 5: I'm worth a million. The tax on a million is
42:42
Speaker 5: thirty three thousand six hundred dollars. No credit, I have
42:47
Speaker 5: to pay thirty three thousand, six hundred dollars. Now, if
42:50
Speaker 5: I didn't give it away, I would have had to
42:53
Speaker 5: pay tax on two million, which is ninety nine thousand,
42:56
Speaker 5: six hundred. So you're saving sixty six dollars by making
43:01
Speaker 5: the gift. I get it under the old rule. But
43:04
Speaker 5: that's how it worked. It wasn't that zeroed out effect
43:07
Speaker 5: that people in their mind think right have happened. Right today,
43:13
Speaker 5: I'll use the same I can use the same two
43:16
Speaker 5: million dollar example if you want, but it wouldn't matter.
43:18
Speaker 5: Let's make it a three million dollar example. Now I
43:22
Speaker 5: have three million in the same but I can shelter too.
43:25
Speaker 5: So your client comes in and says, oh, why don't
43:28
Speaker 5: I give away one just like I did in the
43:31
Speaker 5: old rule, And now I'll bring my Massachusetts to state
43:35
Speaker 5: tax down to two and then I can file and
43:39
Speaker 5: I'll pay no tax.
43:41
Speaker 3: Well, luckily the law has changed.
43:43
Speaker 5: So now the answer is, yes, you have a two
43:47
Speaker 5: million dollar exemption, but because you gave away a million,
43:50
Speaker 5: you have to reduce the two million. Just like in
43:53
Speaker 5: the old day, buy a million, you got to reduce
43:56
Speaker 5: the exemption. So my filing threshold is now one million,
44:01
Speaker 5: and I'm worth two yep.
44:03
Speaker 3: So again like the old day, I have to file.
44:07
Speaker 5: So I file with two million dollars on my gross estate,
44:12
Speaker 5: and I now have to calculate the tax on two million.
44:16
Speaker 5: It's ninety nine six hundred dollars on two million. Oh,
44:20
Speaker 5: but I have a credit that I didn't have before
44:23
Speaker 5: of ninety nine thousand, six hundred dollars, so I have
44:25
Speaker 5: zero tax too. So it does work out that you
44:29
Speaker 5: can get to zero on a three million dollar estate
44:33
Speaker 5: by giving away two.
44:34
Speaker 3: Whereas under the.
44:35
Speaker 5: Old rule, when it was a one million dollar exemption,
44:38
Speaker 5: if I had to and gave away one, I still
44:40
Speaker 5: paid tax.
44:41
Speaker 2: Right, And even if you weren't giving away assets, if
44:45
Speaker 2: you were over the exemption amount by a buck, they
44:48
Speaker 2: went back to dollar number one and started to tax you,
44:50
Speaker 2: right right, yeah, So so they actually give you the.
44:54
Speaker 3: They give your credit you deserve. You get the credit
44:57
Speaker 3: you deserve.
44:57
Speaker 5: Yeah, yeah, so folks, that's it's just one example of
45:01
Speaker 5: thinking about gifting assets, right, be careful, right, don't gift
45:05
Speaker 5: away rental properties, don't gift away your home.
45:09
Speaker 3: Now, think about what.
45:10
Speaker 5: Happens when you create joint accounts or throw a name
45:13
Speaker 5: on a child's Like, what if you have a name
45:15
Speaker 5: that you add to a child's you put your child's
45:18
Speaker 5: name on your house, Well, that's a completed gift. Think
45:21
Speaker 5: about life estates, whether they're completed gifts or not.
45:25
Speaker 3: Think about whether or not you want to.
45:27
Speaker 5: Gift away assets directly to kids, or set up gifting
45:30
Speaker 5: trusts and protect them, folks. There's so many things to
45:33
Speaker 5: think about. Get the guide eight six six eight four
45:37
Speaker 5: eight five six nine nine or Legal Exchange Show dot
45:41
Speaker 5: com again eight sixty six eight four eight five six
45:45
Speaker 5: nine nine or Legal Exchange Show dot com.
45:49
Speaker 2: So Todd. Part of this guide addresses higher net worth
45:52
Speaker 2: individuals and how to reduce federal estate taxes by gifting. So, yes,
46:00
Speaker 2: what's that threshold for you of who should consider using
46:05
Speaker 2: some of these tactics that you have in here, Like,
46:07
Speaker 2: what's the net worth that you would consider using these for?
46:11
Speaker 5: Well, I think when we're talking about and this is
46:14
Speaker 5: all because the federal exemption is going to drop, right,
46:17
Speaker 5: So if the federal exemption drops to say seven million,
46:22
Speaker 5: that's the adjusted for inflation number that we expect in
46:27
Speaker 5: twenty twenty six, and today you're worth twenty million, I'd
46:35
Speaker 5: be thinking about this, right if I'm worth ten million,
46:41
Speaker 5: twelve million, maybe not so much. Why, I'd like to
46:46
Speaker 5: define the moderate estate as a married couple as the
46:52
Speaker 5: federal exemption times two. So if I can shelter fourteen
46:57
Speaker 5: million with basic estate planning, come twenty twenty six, when
47:02
Speaker 5: the federal exemption falls to seven and I'm married and
47:07
Speaker 5: I'm only worth ten or twelve million, I'm not jumping
47:11
Speaker 5: up and down about giving why.
47:13
Speaker 3: Because I can pay no taxes and keep all.
47:17
Speaker 5: My assets at least federally, which by the way, is
47:21
Speaker 5: the forty percent haircut that's chunk, get a step up
47:26
Speaker 5: in basis, and still provide for the family. Yes, there
47:30
Speaker 5: might be a state death tax depending on where you
47:33
Speaker 5: live to consider, but that might not be enough reason
47:39
Speaker 5: to make the gift. So that would at least make
47:41
Speaker 5: me pause. However, if I'm worth twenty million, and I
47:45
Speaker 5: know I'm only going to be able to shelter fourteen
47:48
Speaker 5: million come January one, twenty twenty six, we're talking about
47:52
Speaker 5: what's that six million dollars without a penny of growth
47:57
Speaker 5: over the exemption. So if I do nothing and now
48:01
Speaker 5: all of a sudden, I can only do my basic
48:03
Speaker 5: estate planning, and I leave it that way and.
48:06
Speaker 3: Then I die.
48:08
Speaker 5: Six times four is two point four million dollars in
48:13
Speaker 5: tax that you are giving away by not thinking about planning.
48:19
Speaker 5: Now through some type of gifting, right, that doesn't count.
48:23
Speaker 5: The state throw another ten in there, So you're talking
48:26
Speaker 5: about at least three million, ten percent, three million dollars
48:32
Speaker 5: of tax that is just being thrown. Actually, no, it's
48:37
Speaker 5: actually more than that because the two point four million
48:41
Speaker 5: would be the FED. But in Mass you can only
48:44
Speaker 5: shelter four as a married couple. So now if you're
48:48
Speaker 5: at twenty minus the four, you're at sixteen million. That's
48:52
Speaker 5: another one point six million in tax to Mass. So
48:55
Speaker 5: you're looking at two three four million dollars in tax up.
49:01
Speaker 5: I think there's four million reasons to think about how
49:05
Speaker 5: to make that go away.
49:06
Speaker 2: So how do you go about doing this? Do you
49:08
Speaker 2: create a new trust?
49:09
Speaker 5: You you probably get oh no, no, bite your tongue, right,
49:14
Speaker 5: we're not going to give it to the kids.
49:15
Speaker 3: Too much money.
49:16
Speaker 5: Plus, you know, you can't convince people to give away
49:18
Speaker 5: that kind of money. They're going to say, yeah, it
49:19
Speaker 5: sounds great that I'm saving all this money, but you
49:21
Speaker 5: know what I want to live and work for this,
49:24
Speaker 5: I'd like to have some fun. So you set it
49:27
Speaker 5: up in a way where they can continue to control
49:29
Speaker 5: it and enjoy it at the same time, but not
49:34
Speaker 5: own it. And that's where these investment LLCs come in.
49:38
Speaker 5: If we're talking about an investment portfolio, could be real estate.
49:41
Speaker 5: You put these items in an investment LLC. Their husband
49:46
Speaker 5: and wife are the managers, so they run it. They
49:49
Speaker 5: keep ten percent of the stock, which is all the
49:51
Speaker 5: controlling stock, right, one hundred percent control, and they gift
49:55
Speaker 5: away non voting shares to these items.
49:58
Speaker 3: People have heard them.
50:00
Speaker 5: They're called spousal lifetime access trusts trust in which are
50:04
Speaker 5: completed gifts, but each other can enjoy the assets in
50:10
Speaker 5: the other one's trust, just to keep it simple for
50:13
Speaker 5: the radio, right. And it's an amazing way of not
50:16
Speaker 5: only getting the asset out of the estate, but leveraging
50:20
Speaker 5: your exemption because it's only you know, it's discounted. So, folks,
50:25
Speaker 5: that's just one little idea that you can get from
50:29
Speaker 5: I say it's a little idea. It's a really big
50:30
Speaker 5: idea that you can get from this from this guide,
50:33
Speaker 5: call and get it eight sixty six eight four eight
50:38
Speaker 5: five six nine nine or Legal Exchange show dot com
50:42
Speaker 5: Making the Most of Gifting Assets.
50:44
Speaker 2: Todd Lutsky from the law firm of 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 Powers, a financial advisor with the Armstrong Advisory Group.
50:53
Speaker 2: We thank you for joining us today and we'll be
50:55
Speaker 2: back again next week on the Legal Exchange with Todd Lutsky.
51:00
Speaker 1: Legacy planning is incredibly important, but if it isn't done properly,
51:04
Speaker 1: you can create significant problems for your estate. Cushing and
51:07
Speaker 1: Dolan are expert to know their law, and their new
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Speaker 1: guide out this month is called Making the Most of
51:11
Speaker 1: Gifting Assets. In it, you'll learn that while some gifts
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Speaker 1: especially if they're financial difficulties or a divorce proceeding. Learn
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Speaker 1: gift like a home or a vacation property and what
51:40
Speaker 1: happens to the asset. If the child has creditor issues,
51:43
Speaker 1: call eight sixty six eight four eight five six ninety
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Speaker 1: nine or request it online from their website Legal exchange
51:49
Speaker 1: show dot com. The proceeding was paid for in the
51:51
Speaker 1: music expressed just sole lea. Those of Cushing and Dolan.
51:53
Speaker 1: Cushing and Dolan and or Armstrong Advisory may contact you
51:55
Speaker 1: offering legal or investment services. Cushing and Dolan and Armstrong
51:58
Speaker 1: Advisory do not endorse each other and are not a few.
52:00
Speaker 4: Hi, this is Mike Armstrong from the Armstrong Advisory Group.
52:03
Speaker 4: Fine Tuning your financial strategy as the year comes to
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Speaker 4: a close is very important, so this month we're sharing
52:09
Speaker 4: what we believe are the most critical year end financial tips.
52:13
Speaker 4: As twenty twenty four winds down. There are several opportunities
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Speaker 4: year without worrying about your overall planning strategy, such as
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Speaker 4: contributing the maximum amount of money to your IRA or
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Speaker 4: Year end financial tips. Get yours today by calling eight
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Speaker 4: Group and you can request it by calling eight hundred
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Speaker 4: three to nine three four zero zero one.
52:47
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
52:49
Speaker 1: registered investment advisor. Nothing in the ad or in any
52:51
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
52:54
Speaker 1: your own financial, tax into state planning advisors before making
52:57
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
52:59
Speaker 1: in services.
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