The Laws of your Money with Ann-Margaret Episode 10

Episode Transcript

Speaker 1 (00:00):
The following is a paid podcast. iHeartRadio's hosting of this
podcast constitutes neither an endorsement of the products offered or
the ideas expressed. Now it's time for the Laws of
Your Money, a weekly call in show with legal tips
to help you protect your money. Here's your host and
Margaret Caroza.

Speaker 2 (00:21):
Hello and welcome to the Laws of your Money. This
is a show dedicated to protecting you from legal and
financial mayhem. What does it matter how diligently we save
and invest if there is a greater than forty percent
chance of losing assets to a long term illness, to

(00:46):
an expensive breakup. To taxes. This could be capital gains taxes,
state taxes, not to mention ordinary lawsuits. We all know
that we're being in a very litigious society, But do
you know that you are more likely to be involved

(01:07):
in a legal skirmish with a loved one than with
a stranger. This can be a divorce, it can be
a will war after the death of a loved one.
I believe we all have potential legal landminds in our lives.
Are you in a second marriage thinking about blended family

(01:31):
warfare later? Do we have a special needs child? Or
someone in our lives who is a financial black hole
looking for yet another loan. We're going to tackle all
of these issues. I am asset protection attorney and Margaret Carosa,

(01:52):
joined today by my good friend Paul Slatkus. Welcome back
to the program. Paul, Thanks Ann so last week. Before
we jump into last week, I encourage anyone with a
legal financial family question to join our conversation by calling

(02:13):
eight hundred three to one zero seven ten. Okay, last
week we had a great show. I think we talked
about real estate with our good friend Lewis Riggio giving
us some tips on maximizing the value of our real estate.
And what I failed to cover last week has to

(02:37):
do with capital gains. I think there are a lot
of questions, especially for folks within our listening area who
bought real estate decades ago. I think you can appreciate this, Paul,
for a song. Let's say I bought a house in
nineteen seventy eight for fifty thousand dollars and I'm thinking

(03:01):
about selling it today and Lewis Rogiro tells me I
can probably get eight hundred thousand for it. So how
do we deal with the capital gains taxes? If it
has been our primary residence for two out of the

(03:22):
last five years, the Internal Revenue Code Section one twenty
one allows us to have two hundred and fifty thousand
dollars of the gain forgiven. Now, there is a lot
of misinformation about what happens to that two hundred and

(03:42):
fifty thousand dollars credit upon death. So if I'm a widow,
I lost my spouse ten years ago, and do I
still get to use his two hundred and fifty thousand
dollars credit. And the answer is, when a joint owner

(04:05):
dies and the survivor receives the entire property by operation
of law, then the decedans one half of the property
gets a so called step up in basis to whatever
the fair market value is in the year of death. So,

(04:29):
if I lose my spouse this year, and we bought
the property for fifty thousand dollars back in nineteen seventy eight,
and we now think it's worth eight hundred thousand, we
say that his one half cost basis got an elevator

(04:50):
ride up to one half of the current fair market value,
which is four hundred thousand dollars. My cost basis is
still one half of the nineteen seventy eight purchase price,
so my cost basis would be twenty five thousand dollars.
We add up the two columns, we have a blended

(05:13):
cost basis of four hundred and twenty five thousand. Onto
that I can add my two hundred and fifty thousand
dollars credit, bringing us up to a blended basis of
six hundred and seventy five thousand. Now, if I bought
the house decades ago, I don't think it would be

(05:34):
beyond the pale to say that we've put in maybe
you know, one hundred thousand dollars worth of capital improvements,
which would further bring that cost basis up. So if
you have specific questions on the capital gains issues, you
can always reach out to me Instagram at my lawyer

(05:57):
ann or through the website my Asset Protection Attorney dot com.
There's a big myth out there that you can somehow
delay the capital gains on your primary residence by buying
a replacement primary residence within eighteen months. That was the

(06:19):
law way back in the eighties, and now these two
one hundred and fifty thousand dollars credits have taken the
place of that The only place where we can roll
over a profit into a new purchase has to do
with investment real estate, and that's a ten thirty one exchange.

Speaker 3 (06:43):
I'm glad I'm here.

Speaker 2 (06:45):
I didn't know that, Okay, So you know this is
an example taxes that is a threat to our wealth.
You know, I always say that these legal protections and
legal information should form the base of our personal finances,

(07:07):
because it really doesn't matter how brilliantly we invest if
there's a hole in my piggy bank and I'm losing
everything to taxes or long term care claims. So there
are a lot of external threats to our wealth, long
term care claims, taxes, crazy people trying to sue us.

(07:33):
But there's also a huge internal threat. You know, we
are all capable of sabotaging whatever we've happened to save,
and that is through over spending. I think we could
all tighten our belts a little bit and be a

(07:56):
little bit smarter with money. There is no amount of
wealth that is inexhaustible. And in the book Love and Money,
I tell the story these are real stories of lottery
winners and you know, a state recipients who have eye

(08:19):
popping amounts of wealth and they end up broke within
a couple of years. And you and I before the show,
Paul talked about the very sad case of Brandon Miller.
This was in December of twenty twenty four. Just happened.
He's a forty four year old guy living way beyond

(08:45):
his means with a fifteen million dollar house in the Hamptons,
and you know, a lifestyle that was really worthy of
envy until we learned it was all built on a
house of cards, and he felt that there was no
way out of it, and he killed himself. Yeah, you know,

(09:06):
we see this. So I with that is the backdrop,
I want to jump in and ask you, Paul, how
you go about saving money? Do you have any tips
to share? Because you happen to live in the zip

(09:27):
code that you know, the wealthiest people in the United
States live in your zip code. They are your friends
and your neighbors, and I don't get the impression that
you're really going out of your way to keep up
with the Joneses. How do you stay true to yourself

(09:49):
and avoid overspending?

Speaker 3 (09:52):
Okay, all right, well I bought nineteen eighty five, so
I moved into the upper West Side when it was
the wild wild West. At least my street was eightieth Street,
and they were selling drugs and they were shooting and
killing people across the street, and so it was not
a good area way back when. So I got a
co op that just turned co op and I just

(10:13):
really lucked into a great asset, a great buy with
a backyard and so on and so forth, and low maintenance.
So that was a good, lucky, actual break for me.
But I am I have always been money conscious. I
was brought up that way, not to overdo, to reuse,

(10:34):
reduce and recycle.

Speaker 2 (10:36):
Reuse, reduce and recycle. I love that.

Speaker 3 (10:39):
Well, then you know, I do the Earth Day Concert
in Times Square on April twenty second, so Mother Earth
is next to us. And I started a nature series
on PBS many years ago. Helped to create that, and
so I in fact, you know, a couple of years
ago in Time magazine, the cover said cheap. There's nothing

(11:00):
wrong I don't think with being considerate of how much
you have, because whatever you have, either you're possibly either
going to use it or you're going to get rid
of it. Anything you get rid of, where's it go?
Even recycled, recycle, is not a perfect scenario that uses

(11:23):
an energy to recycle. So I think lots of things
we can do. I'm a walker. I like to walk around.
I'm in Manhattan, in the city, so it's easier. There
are great opportunities, I think in every community. I just
went to the library yesterday.

Speaker 2 (11:39):
A library, Paul. I love the library because they have programming,
they have kids programming, they have activities. Your library can
give you free passes to world class museums. The library
is a terrific resource.

Speaker 3 (12:01):
I agree. My mother's a librarian here.

Speaker 2 (12:03):
I did not know Temple.

Speaker 3 (12:04):
Emanuel here on Fifth Avenue so so so I didn't
know that you could take that library card and go
to different museums in the city. So it's as good.
And New York City has another card to New York
City card. So I think you just be smart. And
I like to cook. I think even though people say

(12:25):
food prices are are are a lot, I don't think so.
I think you know you.

Speaker 2 (12:32):
Cheaper than take out right take.

Speaker 3 (12:34):
Out and or a restaurant. I mean, it's okay every
once in a while, but it's so nice to have
family meals and cook cook a meal that court right.

Speaker 2 (12:43):
So when you're cooking a meal, you are reducing the
cardboard packaging from the takeout containers that ends up in
a landfill. You're likely putting less sugar, salt, and fat
in the foods that you make in your own kitchen.

(13:04):
So it's better for you, it's better for the environment,
and you're saving money.

Speaker 3 (13:11):
And it's a potential if you have a family, if
you're fortunate to have a family. I remember I interviewed
Florence Henderson once a long time ago, the Brady Bunch Mom,
and she said one of the most concerning scenarios is
the lack of the family dinner, of the family getting
together and not sitting on the telephone or running off.

(13:32):
It's a great opportunity for the strength of a family
to stay strong and to hear the different aspects. So
I think that's very important in addition to saving money.
You know, health and wellness of a family is very
important first.

Speaker 2 (13:46):
And I think another important thing. We've gotten away from
cooking our own meals. You know, I don't know if
it's probably laziness. We're very tired at the end of
the day, but I think it's you know, some planning
is needed at the outset, you know. I hear tips

(14:07):
from people who plan all of their weekday dinners on
the weekends and they buy the needed ingredients. I think
we'd all do well to go through our kitchen cabinets, right,
what do we already have? And disorganization can cause us
to waste money by buying something that we might already have.

(14:32):
I also feel very strongly that we can all get
into the habit of repairing something rather than replacing something.
You know, in my house, I have these brown colored
furniture magic markers. If there's a scuff on furniture, I'll

(14:54):
just fill it in with a brown magic marker. It
looks good as new. I think we'd all do well
to learn a few basic sewing stitches. Right if we
had a little hole in a sweater? Do you know
how to sew?

Speaker 3 (15:09):
I do? I can't see the thread the needle.

Speaker 2 (15:12):
Okay, I can ask Ivy? Right? Yeah? Last week I
had a black sweater and I put it on going
somewhere and it had a hole in it. So I thought, oh, no,
what do I do? And do you know what I did? Paul, No,
I didn't have time to fix it, so I took

(15:34):
a black sharpie and I colored my skin below the hole.
It looked fine. I went out, I had a lovely time.
But the kicker was I forgot that I had done it.
You know, maybe I had a Chardonnay or two at dinner.
I forgot all about that I did it. And then

(15:55):
when I went to take a shower that night, I
see this big black spot on my arm, and I
thought I was dying for a minute. But yeah, anyway,
so now I will repair that sweater. And you know,
another tip is don't ignore yard sales or estate sales.
If I pass one on the weekend, I always stop.

(16:20):
And the things that I buy at the estate sales
are candles or wrapping paper. I don't think I've ever
purchased a candle in a store. You can almost always
get them at yard sales or estate sale. So it's
about being clever, planning ahead, being organized, knowing what you

(16:45):
have so you're not buying duplicates. And perhaps most important
is saying no to our kids.

Speaker 3 (16:56):
Well that is it's a tough one, but it's a
lesson to be learned for their own benefit.

Speaker 2 (17:02):
It for their own benefit. Do you remember the marshmallow experiment?
Did you ever hear about that. Okay, So there was
a psychologist decades ago who took preschoolers in a room
and there were six kids. Each of them were given

(17:25):
four marshmallows put in front of them, and the organizer
said she had to leave the room for a moment,
and she told the kids not to eat the marshmallows.
If they didn't eat the marshmallows in front of them
when she came back, they would get additional bonus marshmallows,

(17:47):
and some kids the moment she left ate the marshmallows
right away. A couple of the kids tried not to
eat the marshmallows and then gave in in the couple
of minutes that had elapsed, and three of the kids
did not look at the marshmallows. They looked up at
the ceiling, they looked out the window. And these were

(18:12):
the children who exhibited the art form in my opinion,
of delayed gratification. And they studied these kids later in life,
and they were much more successful than the people who
couldn't say no to themselves. And I think that's what

(18:33):
it is. It's delayed gratification. It's not no, it's not now.
So yesterday I had a lovely day. I spent with
my cousin Jackie, and we went to do you know
the Americana in Manhasset. It's a super high end and

(18:53):
we started at Gucci, and we went to Louis Vatan
and Prada on and on and on. But we had
a pact with each other at the outset. We were
not going to let the other one buy anything. We
had a great time and then we had lunch. And

(19:13):
I just think it was an example of not now right.
So you'd see something beautiful and say, Okay, you know,
maybe I'll think about that instead of needing it right now.

Speaker 3 (19:28):
I'm gonna just add one other thing that I know.
I'm fanatical about sales. I really just yesterday and Barnes
and Noble. I got my calendar seventy percent.

Speaker 2 (19:37):
Off for the last year's, this year's, this year's.

Speaker 3 (19:41):
Okay, se I couldn't believe how expensive it was to
begin with. But the point was, you know, and then
the food place. If you see something that you know
you eat all the time, if you have some room,
buy a bunch of it and then store it. If
you can do that, that's what I well.

Speaker 2 (19:58):
That's it. You know, you plan the meal around what
is fresh and what's on sale. So you go into
Whole Foods and eggplant is on sale, so right there
on your phone Google, you know, quick and easy recipes
with eggplant.

Speaker 3 (20:15):
Right.

Speaker 2 (20:17):
But it's possible to take savings to an extreme, right,
it's not fun to be a miser and like a
total total cheap skate. You know, my grandmother, and she
blamed a lot on the Great Depression. You know, you

(20:38):
couldn't go out to lunch with her or dinner with
her where she did not full on steal things off
of the table, like the salt and pepper shaker, all
of the you know, little packets of sugar and sweet
and low. This was before splenda. Yeah, she was a

(20:58):
full on kleptomania. That's you know, not really the best
way to save money. Or do you remember beef steak Charlie's.

Speaker 3 (21:07):
I remember it very well.

Speaker 2 (21:09):
Okay. So she would bring bags in her pocketbook. Now
these were not even ziplock bags. These were produce bags
that she would also steal at the supermarket. And into
this bag she would put they had the all you
can eat shrimp, right, magnificent, and she'd put all of

(21:32):
this shrimp into the produce bag, which is not leak proof.
She'd put it in the pocketbook and take it home
and you know, feast on it for a week. And
when they went out of business, she was so upset.
She said, do you know they they closed down Beef
Steak Charlie's. And I said to her, it was your
faults they did. Yeah. So, so we don't want to

(21:57):
be stealing and in the legislature. You know, I was
fortunate to serve in our state legislature fourteen years and
I did see a lot of folks who made liberal
use of their campaign accounts. Right, yeah, you're not supposed to.

(22:18):
You're not supposed to be buying yourself new running shoes
from your your campaign account. And you know a fun fact,
they say, and it's true, you're more likely as an
incumbent legislator to go to jail than lose an election.
Yeah wow, yeah, Well so I think, you know, we

(22:41):
want to save money, but we we don't want to steal.
We want to be clever about it and have a
plan and surround ourselves with people, you know, who think
the same way. You know, So I'm going to put
you on the spot. Paul and ask you, what would
you say to me if I said to you, which

(23:05):
I can't because I'm in the middle of writing a
book now. But if I had time this afternoon and
I suggested that we go out for brunch, and I said, Paul,
let's go to the plaza that's within walking distance here,
Let's go to the plaza for brunch, what would you
say to me?

Speaker 3 (23:25):
Well, because it's you, Ann, I would say, let's go.
But if it was somebody you know as a friend,
or some money that I and I couldn't afford the plaza,
if it was a woman too, I would say, let's
go just because I pay, because I think that's right
for a man to pay for a woman. But the
point is is that if I couldn't afford it, if
I felt I couldn't afford it because of other parts

(23:45):
of my life, I would just say, you know, I
don't think I I would probably say, I don't think
that's right now, the right thing for me. I don't
think it's my finances can handle that right now.

Speaker 2 (23:54):
Okay, So I think you circled into what I think
the key is, and it's not the right thing for
you right now, right it's not never it's right now.
So you know, with that, if anyone has any good tips,
please continue to send them into me. And you know,

(24:16):
for all of the parents out there, I think we
all need to get together and resolve to say no
to the kids and the ubers. You're beyond having kids
on your payroll, Paul, but they are going nuts. Everyone
I talk to the kids are spending crazy amounts of

(24:40):
money on the ubers. So that requires a sit down.

Speaker 3 (24:45):
Yeah, you know, I have a couple of questions that
I'm not sure that's been asked of me that people
I don't know whether they're still clear about a revocable
and irrevocable trust back to the Yeah, so.

Speaker 2 (25:00):
We talk about trusts all the time on this program,
and you know a reasonable question would be are we
talking about a revocable trust or an irrevocable trust? Well,
a revocable trust is very appealing psychologically. You know, there

(25:24):
are tons of seminars out there, and going back to
our money saving tips, you can go to the seminar
and get free refreshments. But what does a revocable trust
really do for us? I am my own trustee. I
can put the assets in, I can take the assets

(25:46):
back out. No one is the boss of me. So
that's the psychological appeal. But the question is what is
it actually doing for us? Well, A revocable trust will
avoid probate for the assets that it contains, and it's

(26:09):
very important, especially in New York State where I practice
to avoid probate because it's like an eight month minimum
process that the court has to administer the will. So
we want to avoid probate. But if I have a
revocable trust, and I have assets in this revocable trust,

(26:29):
and I have the bad luck to have a long
term illness, will the nursing home be able to get
at my assets in the revocable trust? What do you
think The answer is yes, Paul, thanks to the extent

(26:50):
that I can get my hot little hands on the
assets in the trust, so too can my nursing home.

Speaker 3 (26:58):
That's not good.

Speaker 2 (26:59):
No. On the other side of the spectrum, a totally
irrevocable trust is as rotten as it sounds. With a
totally irrevocable trust, I can't change the trustee. I can't
change the beneficiaries. If there's a curveball in my life,

(27:21):
if God forbid a child who's a named beneficiary. If
they predecease me, I am unable to put my hand
back in that trust and rearrange the moving parts. So
the only trust that most of us want to think
about to protect assets and get this federal five year

(27:47):
clock under our belts is a hybrid type of trust.
I am the grand tour I appoint you, Paul, as
my trustee, But if the trust is properly drafted, I
will clip your wings, so to speak, so that you

(28:07):
can't do anything without my written permission. But because I
have you as a third party as the trustee, I
put my real estate in there, and it will start
the running of this so called five year lookback period

(28:28):
on the other side of which the real estate is
totally invisible to long term care claims which pop up
after the one hundred days that Medicare and the Medicare
Supplement cover. So we're gonna jump a little bit more

(28:49):
into that next week. I encourage all of you to
reach out to me during the week with questions my
Asset Protection Attorney dot com on Instagram at my lawyer
Ann Paul. Thank you so much for your wise contributions
and hope to see you next week.

Speaker 1 (29:12):
Take care everyone, the proceeding was a paid podcast. iHeartRadio's
hosting of this podcast constitutes neither an endorsement of the
products offered or the ideas expressed