March 1, 2026 • 30 mins
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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. The following program is sponsored by New
York Priority Medical Care. Now it's time for the Laws
(00:21):
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 (00:29):
Hello, and welcome to the Laws of your Money. This
is a program dedicated to protecting you from legal and
financial mayhem when it comes to personal finance. I believe
the single most important thing is protecting ourselves legally, because
(00:54):
what does it matter how brilliantly I save and invest
if there is say greater than forty percent chance of
losing significant assets in the event of a long term illness,
an expensive divorce taxes. This can be capital gains taxes,
estate taxes, not to mention ordinary lawsuits. We are living
(01:21):
in the most litigious society that the world has ever known,
so we need to get some legal information to keep
other people's myths out of our pockets. I am asset
protection attorney and former New York State legislator, and Margaret
(01:45):
Caroza joined today again by my esteemed co host, the
Reverend Paul slackis Welcome to the program, Paul, I'm doing
well all. I think we're both doing better than a
guy I read about in the paper this morning. Did
you see the news about the naked cowboy?
Speaker 3 (02:07):
Oh? No, but I know that naked co.
Speaker 2 (02:09):
I figured you knew the naked cowboy.
Speaker 3 (02:11):
The cowboy on our stage in the Times Square. Yeah.
Speaker 2 (02:14):
Also, okay, well he's a little busy these days. He
is divorcing. Yeah, so sadly he is in the forty
three percent of Americans who will divorce at some point.
And do you know what the number one factor? The
(02:37):
number one reason for divorces, um, you lose interest.
Speaker 3 (02:43):
In that relationship.
Speaker 2 (02:46):
The number one reason cited by matrimonial attorney surveyed is
financial disputes.
Speaker 3 (02:55):
Well, money, by far.
Speaker 2 (02:56):
Money. When money is a problem, everything is a problem.
And I think this is very ironic. If we're divorcing
because of money problems, there's nothing that's going to crush
you financially like a knockdown, drag out divorce.
Speaker 3 (03:15):
Yeah, divorce is a very concerning scenario, and somehow it
seems to be prevalent.
Speaker 2 (03:23):
Well, I think, and you've heard me say this before,
and listeners of this show have heard me say this before.
My number one pep peeve is when young people choke
themselves financially on a big fancy wedding. The average wedding
in the United States costs more than twenty four thousand dollars, right,
(03:48):
so you're you're starting off in the hole. So you
have this big fancy wedding, a big fancy honeymoon, and
you come back to credit card bills and it's just
not a fun way to go. But the aspect of
and I'm not familiar with it personally, the Naked Cowboy divorce,
(04:10):
but the part of it that I speculate about is
that he is in a heavy cash business, right, so
does every tip dollar in that white g string make
its way onto.
Speaker 3 (04:30):
He doesn't have much place to put.
Speaker 2 (04:31):
Money exactly, but does he declare it on his ten
to forty income tax return? And this is a big
issue for folks who are in cash businesses. And maybe
not every dollar makes its way onto the tax return
(04:52):
every year, So the equitable distribution the property division become
a little dicey because there is a veiled threat there
when you have to disclose the assets to a judge
in order for an equitable distribution a ward to be made.
(05:12):
And if those assets and that standard of living are
cross referenced against a ten forty return, you could have
a big problem.
Speaker 3 (05:23):
Wow. Yeah. And there's a lot of businesses that are
cash cash related.
Speaker 2 (05:29):
Absolutely, and I think you know, the IRS has become
very very clever. And you know, in the old days,
if you had a pizzeria, if you had a bagel shop,
maybe folks could get away with not declaring every single
dollar that came in. But now when there is an audit,
(05:52):
the IRS agents will cross reference the order history. So
was this pizzeria, uh, you know, consistently under ordering or
over ordering when they compare the number of pizzas sold
and the revenue declared on the return.
Speaker 3 (06:13):
So they have people the auditors are a knowledgeable of
the how much dough well of the various Yeah, they
know the business of.
Speaker 2 (06:20):
The various businesses.
Speaker 3 (06:21):
Yeah.
Speaker 2 (06:21):
And I think there are auditors who specialize in different
businesses that are are deployed. So uh cautionary uh tip
out there. If you think a split is coming, you
might want to start flying straight and right with the
I R S.
Speaker 3 (06:40):
There you go, it's always the smartest thing to do
with the I R S. You know, there was I
had a question.
Speaker 2 (06:47):
Before we go to questions. If any listener has a question,
why don't you reach out to us, send us a
message on Instagram? And I am at my lawyer and
and Paul, what's your instagram?
Speaker 3 (07:03):
What's my instagram? Paul Slacus?
Speaker 2 (07:05):
Okay at Paul Slacks pauls Okay, So I understand you
have a question.
Speaker 3 (07:11):
I do have a question, but isn't it also people
can call us too, right?
Speaker 2 (07:17):
I think it's best to do the Instagram?
Speaker 3 (07:19):
Is that right?
Speaker 2 (07:20):
Oh?
Speaker 3 (07:20):
Okay? Alrighty, So here was my question from my account.
He recommends having a revocable trust to avoid capital gains.
Do you agree with that?
Speaker 2 (07:30):
What kind of trust?
Speaker 3 (07:33):
Revocable?
Speaker 2 (07:33):
Revocable? Okay? So it is better to have a revocable
trust than a will alone. And if there's anything that
anyone takes away from today, it should be the fact
that a simple will, ladies and gentlemen, is not enough
(07:58):
to properly protect your family. A simple will does not
protect a special needs loved one. A simple will does
not protect your family against estate taxes. And a simple
will does not protect a blended family situation. If you're
(08:22):
in a second marriage and your adult children can't stand
your spouse, you need to have something more than a
simple will. And we are of course talking about the
alternative to that miserable, little ten minute simple will is
a trust. The question is what type of trust do
(08:46):
you need. There are dozens of different trusts out there
to protect your family from taxes, from long term care claims,
from litigation, but you have to know what type of
trust to use. And I will take this moment to
(09:07):
segue to my book, The Smart Woman's Guide to Building
and Protecting Wealth, where I really spend about a third
of the book diving into the different types of trust
structure and how you can be a working partner in
(09:30):
whatever legal relationship you have. I do recommend engaging legal
counsel for the trust because there's an awful lot at stake. Okay,
so we know the basic two types of trust. We
have revocable and we have irrevocable. A revocable trust is
(09:58):
better than having no trust. A revocable trust will do
exactly one thing for us. Do you remember what that is?
Speaker 3 (10:10):
I think it pro texts our ability to our ability
to make changes no, that's a.
Speaker 2 (10:19):
No, no no. So I ask you this, Paul, not
to put you on the spot. You're a super smart guy,
and it's really just a test for uh. These concepts
are not difficult. It's not rocket science. But there are
many different concepts that interact and affect each other, and
(10:43):
it's beneficial I think, to go through the basics so
we have a full and complete understanding about how best
to protect our families with a trust, a revocable trust.
Contrary to the claims of promoters that have these seminars,
(11:04):
it will only avoid probate. Okay, that is a very
worthy goal. If you have a will alone, your beneficiaries
are going to be in a nearly year long court
process called probate. And I hear some you know, financial advisors,
(11:28):
some attorneys say probate isn't that bad, and I think,
you know, the cynic in me thinks, well, it's not
so bad for the attorney because they're making a ton
of money in the probate process, But that poor family
can't do anything. They can't sell the home, they can't
sell the condo, they can't sell the co op until
(11:50):
the court decrees that the probate is over and in
the meantime, who is paying for the co op maintenance?
Who's paying property tax? Is utilities? And then we have
to notify the insurance company that the property is vacant.
And what's going to happen to the insurance premiums? They're
(12:11):
going to skyrocket. So, yes, we want to avoid probate.
So that would be a revocable trust. There is a
huge misconception out there about ear revocable trusts. Not all
(12:31):
irrevocable trusts deprive me of my ability to make changes.
So the trust creation process, I think of it like
modeling clay, and you're going to go back and forth
and back and forth with the attorney that you're working
with until you are happy and you see all of
(12:55):
the different you know, levers and tools that are contained
in that instrument so that you can react to changes
that come down the road. Now, any accountants who may
be listening, you probably heard the advice that Paul was
(13:16):
referring to when he asked, do you have to pay
capital gains taxes when you have an irrevocable trust? And
the answer is, it depends on what type of irrevocable
trust you have. Now, there was an attorney out there
who will remain nameless for this show. And he does
(13:43):
a good business doing continuing legal education for other attorneys.
And he came up with this half baked Kakamami theory
about five years ago where he was telling attorneys that
you can have an estate tax trust. This is, you know,
(14:06):
one of the strongest types of trust you can have.
It will get the assets in the trust out of
your gross taxable estate. But the poison pill with this
type of trust is that it does not get rid
of capital gains. But when we have an estate, if
(14:27):
I'm a single person with an estate in excess of
fifteen million dollars, I need to pick my poison. And
if the estate is sixteen million undercurrent federal law, I
should want to take one million and get it out
of my gross taxable estate. And I do that by
(14:50):
putting it into a very strong, irrevocable trust. The caveat
is that upon my death, when the asset in that
trust goes to the beneficiaries, they will have carry over
basis for capital gains purposes. That is a well established principle.
(15:13):
If the asset is outside of the estate, you're going
to get banged with capital gains. That is still a
good bargain in my hypothetical example, because instead of the
beneficiaries having to pay forty percent estate taxes, they have
to pay long term capital gains taxes, which are closer
(15:36):
to twenty percent. Okay, So this yahoo chucklehead out there
is telling fellow attorneys and accountants that you can escape
as state taxes as well as the capital gains taxes,
and that is simply not true. If it sounds too
(16:00):
good to be true, it is. So if you're an
accountant out there, reach out to me. I wrote an
article on this topic. I am an accredited provider of
continuing education credits in New York State to CPAs by
the New York State Department of Education. So I'm not
(16:22):
guessing at this. I'm telling you straight up. Okay. So
when we go over fifteen million, we need to pick
our poison. If we are fifteen million or below, now
we can do a hybrid of revocable and irrevocable. And
(16:45):
in this hybrid trust I must appoint another person to
be the trustee. So I appoint you, Paul, to be
my trustee. But I definitely, because I'm a control freak,
I want to retain the ability to make a change
to that right if you move away, if we're not
(17:08):
friends anymore one day, I want to be able to
change that, or if I'm naming you today because my
kids are still too young and they don't know which
end is up right now, I will keep you in
there until they get their acts together, and then I
will swap you out for them as life unfolds. I
(17:29):
also want to say that no one, including you, Paul,
is my trustee, can do anything during my life without
my written permission. So I have veto control over everything,
and I also want to retain the ability to make
changes later to the beneficiaries. So it's a wonderful tool
(17:56):
to protect assets from probate from long term care claims,
and the beneficiaries will get a step up in basis later.
Even though as a technical matter, because I've appointed a
third party as a trustee, it is I would characterize
(18:20):
it as one percent irrevocable, but we still get the
elimination of capital gains later. This hybrid trust, in my opinion,
is like a Swiss army knife. It does everything. It's beautiful,
it solves so many problems. If you want to learn
(18:41):
more about that hybrid trust. I do recommend that you
look into the book. I think on Amazon they have
excerpts there that you can read a little bit Building
and Protecting Wealth, the Laws of your Money.
Speaker 3 (18:58):
Another question is come in, okay, what is the difference
between an LLC and a trust?
Speaker 2 (19:04):
So I think everyone knows that an LLC is used
to protect assets. Usually it's a business asset, it's an
investment property, and an LLC and a good trust have
a lot in common in that they will both protect
(19:26):
assets from liabilities. But the LLC acting alone will not
avoid probate for the underlying asset of that entity, and
it is not protected vis a V long term care claims.
(19:46):
So for those of you who have LLC's, I recommend
that you also do a trust and you transfer some
of the LLC membership units into that trust. So if
the LLC owns real estate, the deed will remain in
(20:06):
the name of the LLC. But you're gonna dust off
that black binder that you got when you set up
the LLC or the S corp or the C corp,
and you're going to recapitalize it to issue membership units
to the trust. So that's really the belt and suspenders planning.
Speaker 3 (20:29):
So I don't know why. I always thought that, like
an LLC was only for regards to business specifically, not
a personal scenario.
Speaker 2 (20:38):
Well, you should never put your primary residence in an LLC.
That's one of the missas.
Speaker 3 (20:45):
It could come after if your business veils that.
Speaker 2 (20:48):
Well, though, I think the more pervasive downside is that
you would lose your star property tax exemption. Oh yeah,
but the LLC and the trust is the way to go.
If you're looking at investment property, you want to consider
(21:08):
an LLC. And within the LLC. You can't just create
this LLC and put the binder on the shelf and
think you're protected. You need to actively, you know, manage it.
And there are annual filings that are required. And I
recommend that folks issue within the operating agreement of your LLC,
(21:33):
you should authorize the issuance of voting and non voting
membership units. Imagine a scenario where you have a family business.
You have a bagel shop, you have a laundry service,
and that is the bulk of your estate. And there's
(21:56):
one child who works in the business. There are two
children who have other jobs. They're doing other things. What
the heck do you do to achieve some form of
equity upon the death of the parent? Do you give
it all to the child who's been working in the
business for the past ten years? Do you subject them
(22:20):
to the other two children who don't know anything about
the business and say they're all now equal owners. So
having two membership classes within the LLC allows you to
give thirty three and a third voting units to the
child who's in the business and thirty three and a
(22:43):
third non voting units to each of the other two children.
And you can specify that the net profits every year
are equally split according to the number of shares. But
the two children who are not in the business have
(23:04):
no management functions.
Speaker 3 (23:07):
So when you are twenty thousand cases, So is this
like would they called real estate law or is this not?
Speaker 2 (23:15):
I mean, well, you know what you call it is subjective.
I call it asset protection law. Right, So it involves
real estate, it involves taxes, and it definitely involves trusts.
So there is one area that in all of our conversations,
(23:36):
I don't know that we've actually dug into it. And
I'll kick it off and again not to put you
on the spotfall but I'm just trying to get a
handle on what the average super smart person out there knows.
So if you were God forbid to be hospitalized, what
(24:01):
is paying that bill at the hospital?
Speaker 3 (24:04):
Well, since I'm over sixty five, well I'm going to
use sixty five. I think Medicare doesn't pay like ninety
days or on hundred and twenty days, something like that.
Speaker 2 (24:12):
So when you're in the hospital, Medicare and your supplement
are going to do a beautiful job of covering everything.
When you leave the hospital and you go to rehab,
there's a problem. Medicare and the supplement will only cover
up to one hundred days when we need help beyond that.
(24:37):
Do you know what it costs per month?
Speaker 3 (24:39):
I know it's a fortune. Should you get long term insurance?
How do you deal with that? I don't know.
Speaker 2 (24:44):
It's sixteen thousand.
Speaker 3 (24:46):
Oh yeah, I know it's very expensive.
Speaker 2 (24:48):
So I am not telling folks, you know, don't get
long term care insurance and instead protect all of your
assets with trusts because the writing is on the wall
for state budgets nationwide. In New York State, we have
the best medicaid program in the United States. It is
(25:09):
illegal in New York State for a skilled nursing facility
to discriminate between the two of us because I'm on
Medicaid and you are private pay. In neighboring New Jersey,
they are able to do that. But in New York State,
we have the absolute best Medicaid program. Because of that,
(25:32):
it is killing the state budget. It is the single
most expensive program. So for you know, the younger folks
out there, and that is you know, if you're below seventy,
you want to definitely look into long term care insurance
because the Medicaid program, as beautiful as it is, will
(25:56):
not be there, in my humble opinion, in its in
state in even five years. You know, it's breaking the
back of state budgets. But in the here and now,
the Medicaid program, you need to familiarize yourself with it
because I can't tell you how many clients, neighbors, friends
(26:18):
I here say, oh forget it, I would never qualify
for Medicaid. You need to be impoverished, well not really.
You need to have your your real estate in a
trust for five years and then they can't look at it.
Your retirement account, your IRA, your TDA, your four oh
(26:38):
one K, your four fifty seven. Those are invisible assets. Okay,
so thinking in terms of three categories of assets, retirement account,
you're good to go, real estate, put it in this
hybrid trust that I can help you work on. Your
(26:59):
third category of assets, your regular investments, your money in
the bank. Leave it in your own names so you
can enjoy your life. But please give someone a power
of attorney that if you become incapacitated, this person knows
(27:20):
where you keep this document and can follow up with
me as your attorney, and I would tell that person, Okay,
we're going to go to the B plan now, which
is transfer the CDs, transfer the investment account into that
(27:41):
hybrid trust that you did seven years ago. Are we
going to have a five year problem with this new
transfer of assets. The answer is yes. But the five
year look back, ladies and gentlemen does not apply to
community medicaid. That means that I can protect my assets
(28:08):
today and by the first of the following month, those
assets do not have to appear on the application for
community medicaid. And if you're afraid that this state program
is going to send Frankenstein to the house to take
care of your mother, you needn't worry. Because only the
(28:31):
top agencies get these Medicaid contracts and you are allowed
to hire your own person. This is the consumer directed program,
so most of us want to be at home in
the event that we require long term care. I direct
(28:51):
you to my website my lawyeran dot com. You can
download my Personal Living will make it your own, and
it says, in the event that I require care, I
wish to be in my own home unless it's medically impracticable.
With that word just about out of time, I want
(29:14):
to encourage folks reach out to me if you have
a question through the website, through Instagram at my lawyer
Ann and come make a date to visit me in
Port Jefferson, Bayside or Albany, New York. Thank you for
being here, Paul, Take care.
Speaker 3 (29:32):
Everyone a lot of stuff to know, a lot of
stuff to know.
Speaker 2 (29:35):
Take care.
Speaker 1 (29:49):
The preceding program was sponsored by New York Priority Medical Care.
The proceeding was a paid podcast. iHeartRadio's hosting of this
podcast constitutes neither endor hoursement of the products offered or
the ideas expressed.
The following is a paid podcast. iHeartRadio's hosting of this
podcast constitutes neither an endorsement of the products offered or
the ideas expressed. The following program is sponsored by New
York Priority Medical Care. Now it's time for the Laws
(00:21):
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 (00:29):
Hello, and welcome to the Laws of your Money. This
is a program dedicated to protecting you from legal and
financial mayhem when it comes to personal finance. I believe
the single most important thing is protecting ourselves legally, because
(00:54):
what does it matter how brilliantly I save and invest
if there is say greater than forty percent chance of
losing significant assets in the event of a long term illness,
an expensive divorce taxes. This can be capital gains taxes,
estate taxes, not to mention ordinary lawsuits. We are living
(01:21):
in the most litigious society that the world has ever known,
so we need to get some legal information to keep
other people's myths out of our pockets. I am asset
protection attorney and former New York State legislator, and Margaret
(01:45):
Caroza joined today again by my esteemed co host, the
Reverend Paul slackis Welcome to the program, Paul, I'm doing
well all. I think we're both doing better than a
guy I read about in the paper this morning. Did
you see the news about the naked cowboy?
Speaker 3 (02:07):
Oh? No, but I know that naked co.
Speaker 2 (02:09):
I figured you knew the naked cowboy.
Speaker 3 (02:11):
The cowboy on our stage in the Times Square. Yeah.
Speaker 2 (02:14):
Also, okay, well he's a little busy these days. He
is divorcing. Yeah, so sadly he is in the forty
three percent of Americans who will divorce at some point.
And do you know what the number one factor? The
(02:37):
number one reason for divorces, um, you lose interest.
Speaker 3 (02:43):
In that relationship.
Speaker 2 (02:46):
The number one reason cited by matrimonial attorney surveyed is
financial disputes.
Speaker 3 (02:55):
Well, money, by far.
Speaker 2 (02:56):
Money. When money is a problem, everything is a problem.
And I think this is very ironic. If we're divorcing
because of money problems, there's nothing that's going to crush
you financially like a knockdown, drag out divorce.
Speaker 3 (03:15):
Yeah, divorce is a very concerning scenario, and somehow it
seems to be prevalent.
Speaker 2 (03:23):
Well, I think, and you've heard me say this before,
and listeners of this show have heard me say this before.
My number one pep peeve is when young people choke
themselves financially on a big fancy wedding. The average wedding
in the United States costs more than twenty four thousand dollars, right,
(03:48):
so you're you're starting off in the hole. So you
have this big fancy wedding, a big fancy honeymoon, and
you come back to credit card bills and it's just
not a fun way to go. But the aspect of
and I'm not familiar with it personally, the Naked Cowboy divorce,
(04:10):
but the part of it that I speculate about is
that he is in a heavy cash business, right, so
does every tip dollar in that white g string make
its way onto.
Speaker 3 (04:30):
He doesn't have much place to put.
Speaker 2 (04:31):
Money exactly, but does he declare it on his ten
to forty income tax return? And this is a big
issue for folks who are in cash businesses. And maybe
not every dollar makes its way onto the tax return
(04:52):
every year, So the equitable distribution the property division become
a little dicey because there is a veiled threat there
when you have to disclose the assets to a judge
in order for an equitable distribution a ward to be made.
(05:12):
And if those assets and that standard of living are
cross referenced against a ten forty return, you could have
a big problem.
Speaker 3 (05:23):
Wow. Yeah. And there's a lot of businesses that are
cash cash related.
Speaker 2 (05:29):
Absolutely, and I think you know, the IRS has become
very very clever. And you know, in the old days,
if you had a pizzeria, if you had a bagel shop,
maybe folks could get away with not declaring every single
dollar that came in. But now when there is an audit,
(05:52):
the IRS agents will cross reference the order history. So
was this pizzeria, uh, you know, consistently under ordering or
over ordering when they compare the number of pizzas sold
and the revenue declared on the return.
Speaker 3 (06:13):
So they have people the auditors are a knowledgeable of
the how much dough well of the various Yeah, they
know the business of.
Speaker 2 (06:20):
The various businesses.
Speaker 3 (06:21):
Yeah.
Speaker 2 (06:21):
And I think there are auditors who specialize in different
businesses that are are deployed. So uh cautionary uh tip
out there. If you think a split is coming, you
might want to start flying straight and right with the
I R S.
Speaker 3 (06:40):
There you go, it's always the smartest thing to do
with the I R S. You know, there was I
had a question.
Speaker 2 (06:47):
Before we go to questions. If any listener has a question,
why don't you reach out to us, send us a
message on Instagram? And I am at my lawyer and
and Paul, what's your instagram?
Speaker 3 (07:03):
What's my instagram? Paul Slacus?
Speaker 2 (07:05):
Okay at Paul Slacks pauls Okay, So I understand you
have a question.
Speaker 3 (07:11):
I do have a question, but isn't it also people
can call us too, right?
Speaker 2 (07:17):
I think it's best to do the Instagram?
Speaker 3 (07:19):
Is that right?
Speaker 2 (07:20):
Oh?
Speaker 3 (07:20):
Okay? Alrighty, So here was my question from my account.
He recommends having a revocable trust to avoid capital gains.
Do you agree with that?
Speaker 2 (07:30):
What kind of trust?
Speaker 3 (07:33):
Revocable?
Speaker 2 (07:33):
Revocable? Okay? So it is better to have a revocable
trust than a will alone. And if there's anything that
anyone takes away from today, it should be the fact
that a simple will, ladies and gentlemen, is not enough
(07:58):
to properly protect your family. A simple will does not
protect a special needs loved one. A simple will does
not protect your family against estate taxes. And a simple
will does not protect a blended family situation. If you're
(08:22):
in a second marriage and your adult children can't stand
your spouse, you need to have something more than a
simple will. And we are of course talking about the
alternative to that miserable, little ten minute simple will is
a trust. The question is what type of trust do
(08:46):
you need. There are dozens of different trusts out there
to protect your family from taxes, from long term care claims,
from litigation, but you have to know what type of
trust to use. And I will take this moment to
(09:07):
segue to my book, The Smart Woman's Guide to Building
and Protecting Wealth, where I really spend about a third
of the book diving into the different types of trust
structure and how you can be a working partner in
(09:30):
whatever legal relationship you have. I do recommend engaging legal
counsel for the trust because there's an awful lot at stake. Okay,
so we know the basic two types of trust. We
have revocable and we have irrevocable. A revocable trust is
(09:58):
better than having no trust. A revocable trust will do
exactly one thing for us. Do you remember what that is?
Speaker 3 (10:10):
I think it pro texts our ability to our ability
to make changes no, that's a.
Speaker 2 (10:19):
No, no no. So I ask you this, Paul, not
to put you on the spot. You're a super smart guy,
and it's really just a test for uh. These concepts
are not difficult. It's not rocket science. But there are
many different concepts that interact and affect each other, and
(10:43):
it's beneficial I think, to go through the basics so
we have a full and complete understanding about how best
to protect our families with a trust, a revocable trust.
Contrary to the claims of promoters that have these seminars,
(11:04):
it will only avoid probate. Okay, that is a very
worthy goal. If you have a will alone, your beneficiaries
are going to be in a nearly year long court
process called probate. And I hear some you know, financial advisors,
(11:28):
some attorneys say probate isn't that bad, and I think,
you know, the cynic in me thinks, well, it's not
so bad for the attorney because they're making a ton
of money in the probate process, But that poor family
can't do anything. They can't sell the home, they can't
sell the condo, they can't sell the co op until
(11:50):
the court decrees that the probate is over and in
the meantime, who is paying for the co op maintenance?
Who's paying property tax? Is utilities? And then we have
to notify the insurance company that the property is vacant.
And what's going to happen to the insurance premiums? They're
(12:11):
going to skyrocket. So, yes, we want to avoid probate.
So that would be a revocable trust. There is a
huge misconception out there about ear revocable trusts. Not all
(12:31):
irrevocable trusts deprive me of my ability to make changes.
So the trust creation process, I think of it like
modeling clay, and you're going to go back and forth
and back and forth with the attorney that you're working
with until you are happy and you see all of
(12:55):
the different you know, levers and tools that are contained
in that instrument so that you can react to changes
that come down the road. Now, any accountants who may
be listening, you probably heard the advice that Paul was
(13:16):
referring to when he asked, do you have to pay
capital gains taxes when you have an irrevocable trust? And
the answer is, it depends on what type of irrevocable
trust you have. Now, there was an attorney out there
who will remain nameless for this show. And he does
(13:43):
a good business doing continuing legal education for other attorneys.
And he came up with this half baked Kakamami theory
about five years ago where he was telling attorneys that
you can have an estate tax trust. This is, you know,
(14:06):
one of the strongest types of trust you can have.
It will get the assets in the trust out of
your gross taxable estate. But the poison pill with this
type of trust is that it does not get rid
of capital gains. But when we have an estate, if
(14:27):
I'm a single person with an estate in excess of
fifteen million dollars, I need to pick my poison. And
if the estate is sixteen million undercurrent federal law, I
should want to take one million and get it out
of my gross taxable estate. And I do that by
(14:50):
putting it into a very strong, irrevocable trust. The caveat
is that upon my death, when the asset in that
trust goes to the beneficiaries, they will have carry over
basis for capital gains purposes. That is a well established principle.
(15:13):
If the asset is outside of the estate, you're going
to get banged with capital gains. That is still a
good bargain in my hypothetical example, because instead of the
beneficiaries having to pay forty percent estate taxes, they have
to pay long term capital gains taxes, which are closer
(15:36):
to twenty percent. Okay, So this yahoo chucklehead out there
is telling fellow attorneys and accountants that you can escape
as state taxes as well as the capital gains taxes,
and that is simply not true. If it sounds too
(16:00):
good to be true, it is. So if you're an
accountant out there, reach out to me. I wrote an
article on this topic. I am an accredited provider of
continuing education credits in New York State to CPAs by
the New York State Department of Education. So I'm not
(16:22):
guessing at this. I'm telling you straight up. Okay. So
when we go over fifteen million, we need to pick
our poison. If we are fifteen million or below, now
we can do a hybrid of revocable and irrevocable. And
(16:45):
in this hybrid trust I must appoint another person to
be the trustee. So I appoint you, Paul, to be
my trustee. But I definitely, because I'm a control freak,
I want to retain the ability to make a change
to that right if you move away, if we're not
(17:08):
friends anymore one day, I want to be able to
change that, or if I'm naming you today because my
kids are still too young and they don't know which
end is up right now, I will keep you in
there until they get their acts together, and then I
will swap you out for them as life unfolds. I
(17:29):
also want to say that no one, including you, Paul,
is my trustee, can do anything during my life without
my written permission. So I have veto control over everything,
and I also want to retain the ability to make
changes later to the beneficiaries. So it's a wonderful tool
(17:56):
to protect assets from probate from long term care claims,
and the beneficiaries will get a step up in basis later.
Even though as a technical matter, because I've appointed a
third party as a trustee, it is I would characterize
(18:20):
it as one percent irrevocable, but we still get the
elimination of capital gains later. This hybrid trust, in my opinion,
is like a Swiss army knife. It does everything. It's beautiful,
it solves so many problems. If you want to learn
(18:41):
more about that hybrid trust. I do recommend that you
look into the book. I think on Amazon they have
excerpts there that you can read a little bit Building
and Protecting Wealth, the Laws of your Money.
Speaker 3 (18:58):
Another question is come in, okay, what is the difference
between an LLC and a trust?
Speaker 2 (19:04):
So I think everyone knows that an LLC is used
to protect assets. Usually it's a business asset, it's an
investment property, and an LLC and a good trust have
a lot in common in that they will both protect
(19:26):
assets from liabilities. But the LLC acting alone will not
avoid probate for the underlying asset of that entity, and
it is not protected vis a V long term care claims.
(19:46):
So for those of you who have LLC's, I recommend
that you also do a trust and you transfer some
of the LLC membership units into that trust. So if
the LLC owns real estate, the deed will remain in
(20:06):
the name of the LLC. But you're gonna dust off
that black binder that you got when you set up
the LLC or the S corp or the C corp,
and you're going to recapitalize it to issue membership units
to the trust. So that's really the belt and suspenders planning.
Speaker 3 (20:29):
So I don't know why. I always thought that, like
an LLC was only for regards to business specifically, not
a personal scenario.
Speaker 2 (20:38):
Well, you should never put your primary residence in an LLC.
That's one of the missas.
Speaker 3 (20:45):
It could come after if your business veils that.
Speaker 2 (20:48):
Well, though, I think the more pervasive downside is that
you would lose your star property tax exemption. Oh yeah,
but the LLC and the trust is the way to go.
If you're looking at investment property, you want to consider
(21:08):
an LLC. And within the LLC. You can't just create
this LLC and put the binder on the shelf and
think you're protected. You need to actively, you know, manage it.
And there are annual filings that are required. And I
recommend that folks issue within the operating agreement of your LLC,
(21:33):
you should authorize the issuance of voting and non voting
membership units. Imagine a scenario where you have a family business.
You have a bagel shop, you have a laundry service,
and that is the bulk of your estate. And there's
(21:56):
one child who works in the business. There are two
children who have other jobs. They're doing other things. What
the heck do you do to achieve some form of
equity upon the death of the parent? Do you give
it all to the child who's been working in the
business for the past ten years? Do you subject them
(22:20):
to the other two children who don't know anything about
the business and say they're all now equal owners. So
having two membership classes within the LLC allows you to
give thirty three and a third voting units to the
child who's in the business and thirty three and a
(22:43):
third non voting units to each of the other two children.
And you can specify that the net profits every year
are equally split according to the number of shares. But
the two children who are not in the business have
(23:04):
no management functions.
Speaker 3 (23:07):
So when you are twenty thousand cases, So is this
like would they called real estate law or is this not?
Speaker 2 (23:15):
I mean, well, you know what you call it is subjective.
I call it asset protection law. Right, So it involves
real estate, it involves taxes, and it definitely involves trusts.
So there is one area that in all of our conversations,
(23:36):
I don't know that we've actually dug into it. And
I'll kick it off and again not to put you
on the spotfall but I'm just trying to get a
handle on what the average super smart person out there knows.
So if you were God forbid to be hospitalized, what
(24:01):
is paying that bill at the hospital?
Speaker 3 (24:04):
Well, since I'm over sixty five, well I'm going to
use sixty five. I think Medicare doesn't pay like ninety
days or on hundred and twenty days, something like that.
Speaker 2 (24:12):
So when you're in the hospital, Medicare and your supplement
are going to do a beautiful job of covering everything.
When you leave the hospital and you go to rehab,
there's a problem. Medicare and the supplement will only cover
up to one hundred days when we need help beyond that.
(24:37):
Do you know what it costs per month?
Speaker 3 (24:39):
I know it's a fortune. Should you get long term insurance?
How do you deal with that? I don't know.
Speaker 2 (24:44):
It's sixteen thousand.
Speaker 3 (24:46):
Oh yeah, I know it's very expensive.
Speaker 2 (24:48):
So I am not telling folks, you know, don't get
long term care insurance and instead protect all of your
assets with trusts because the writing is on the wall
for state budgets nationwide. In New York State, we have
the best medicaid program in the United States. It is
(25:09):
illegal in New York State for a skilled nursing facility
to discriminate between the two of us because I'm on
Medicaid and you are private pay. In neighboring New Jersey,
they are able to do that. But in New York State,
we have the absolute best Medicaid program. Because of that,
(25:32):
it is killing the state budget. It is the single
most expensive program. So for you know, the younger folks
out there, and that is you know, if you're below seventy,
you want to definitely look into long term care insurance
because the Medicaid program, as beautiful as it is, will
(25:56):
not be there, in my humble opinion, in its in
state in even five years. You know, it's breaking the
back of state budgets. But in the here and now,
the Medicaid program, you need to familiarize yourself with it
because I can't tell you how many clients, neighbors, friends
(26:18):
I here say, oh forget it, I would never qualify
for Medicaid. You need to be impoverished, well not really.
You need to have your your real estate in a
trust for five years and then they can't look at it.
Your retirement account, your IRA, your TDA, your four oh
(26:38):
one K, your four fifty seven. Those are invisible assets. Okay,
so thinking in terms of three categories of assets, retirement account,
you're good to go, real estate, put it in this
hybrid trust that I can help you work on. Your
(26:59):
third category of assets, your regular investments, your money in
the bank. Leave it in your own names so you
can enjoy your life. But please give someone a power
of attorney that if you become incapacitated, this person knows
(27:20):
where you keep this document and can follow up with
me as your attorney, and I would tell that person, Okay,
we're going to go to the B plan now, which
is transfer the CDs, transfer the investment account into that
(27:41):
hybrid trust that you did seven years ago. Are we
going to have a five year problem with this new
transfer of assets. The answer is yes. But the five
year look back, ladies and gentlemen does not apply to
community medicaid. That means that I can protect my assets
(28:08):
today and by the first of the following month, those
assets do not have to appear on the application for
community medicaid. And if you're afraid that this state program
is going to send Frankenstein to the house to take
care of your mother, you needn't worry. Because only the
(28:31):
top agencies get these Medicaid contracts and you are allowed
to hire your own person. This is the consumer directed program,
so most of us want to be at home in
the event that we require long term care. I direct
(28:51):
you to my website my lawyeran dot com. You can
download my Personal Living will make it your own, and
it says, in the event that I require care, I
wish to be in my own home unless it's medically impracticable.
With that word just about out of time, I want
(29:14):
to encourage folks reach out to me if you have
a question through the website, through Instagram at my lawyer
Ann and come make a date to visit me in
Port Jefferson, Bayside or Albany, New York. Thank you for
being here, Paul, Take care.
Speaker 3 (29:32):
Everyone a lot of stuff to know, a lot of
stuff to know.
Speaker 2 (29:35):
Take care.
Speaker 1 (29:49):
The preceding program was sponsored by New York Priority Medical Care.
The proceeding was a paid podcast. iHeartRadio's hosting of this
podcast constitutes neither endor hoursement of the products offered or
the ideas expressed.
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