Ask Todd: Building a successful gifting strategy

Todd Lutsky, Cushing & Dolan, shares his expertise on building a successful gifting strategy in your estate plan and why your beneficiaries need you to have a plan. Todd takes questions from the audience about their personal retirement needs.

Episode Transcript

(00:00):
This is Ask Todd on the FinancialExchange Radio Network. If you have an
existing estate plan or in the marketfor one, Todd Letsky is here to
answer your questions and help you planfor a later life. Ask Todd is
presented by Cushing and Dolan, servingMassachusetts and New England for more than thirty
five years, helping families with astate and tax planning, medicaid planning,

(00:21):
and probate law. Visit Cushingdolan dotcom. Now here's Todd Lutsky. We
are now joined by Todd Lutsky fromthe law firm of Cushing and Dolan.
The segment is Ask Todd, andthis is your chance to ask Todd your
questions about your estate plan. Thephone number here in the studio is eight
eight eight to zero five two twosix three, So get all queued up

(00:42):
so that you have a chance toask Todd your question during the segment.
That number again is eight eight eightto zero five two two six three.
So if you've got a question aboutyour state plan, maybe you don't have
one and you're trying to get itformulated. Maybe you've got, you know,
just in a state situation that you'resorting through right now. Now with
a friend or family member. Thatphone number again is eight eight eight two

(01:03):
zero five two two six three.Mister Lutsky, how are you today?
I am never better in you?Uh do it? Okay? Just had
to tell the daughter not to playwith electricity yesterday. Yeah that's not it's
not safe. Yeah. Well nowshe's grounded, of course she is.
So we're getting there, Todd.I want to talk to you a little
bit more about gifting. Last weekwe were talking about some of the problems

(01:25):
that the people, some of themistakes people make in gifting assets. Yes,
I want to turn this around alittle bit and be a little more
uplifting today. Okay, how wouldsomeone build a successful gifting strategy into their
estate plan? What does that looklike to you? When employing gifting is
part of an estate plan? Youknow, I think it's it's a great

(01:46):
uh question, because the estate plandoes two things right. One, it
designs assets in terms of how youleave the assets to your beneficiaries. And
this is one that when you die, but you're saying, we can also
structure how we leave them to ourchildren. While we're living, we can
start putting assets into a gifting trust. Now this is very different than the

(02:09):
irrevocable trust. You hear us talkabout a lot when we talk about medicaid
planning. Right, there's many kindsof irrevocable trusts. This kind is more
of a gifting trust. In otherwords, when people want to give assets
to their children while they're living,which you can, of course, you
feel a lot better. You getto see it, you get to enjoy
it, whereas you don't when youpass away. And when you do that,

(02:31):
though, you oftentimes don't want tojust give it to them. You
don't want to put it in theirhands, right because that might not be
in their best interest. On itexposes it to their own creditors. I
don't know. If they're married,they might get divorced. You don't want
to expose it to the divorce.You know. The bottom line is if
they own it out right, it'salso going to be included in their state

(02:53):
first aate tax purposes. So maybethere's a way to not have them enjoy
it, but not have it taxedin their estate when when they pass.
So you set up these gifting trustsand that way you can kind of control
it. Now you can put theasset in, but you can't be the
trustee, because if you give itaway and you retain the right to control

(03:17):
the beneficial enjoyment of that asset bybeing trustee, well then you haven't really
given it away, and it's goingto be included in your estate. And
remember, part of the reason you'regiving it away is because you want to
reduce your own estate tax or yourown estate tax liability, so you want
to make sure it's not pulled backin. But you can put a kid
on as trustee even though they don'town it, and then you can retain

(03:39):
the power to remove and replace thatchild as trustee, so you're kind of
still controlling the strings here a littlebit, and that's important. Talking with
Todd Lutsky from the law firm ofCushing and Dolean, this segment is called
Ask Todd because you get to askTodd your questions about your estate plan phone
number here is eight eight eight twozero five two two six three, So

(04:01):
call that number and you get toask Todd live on air about your estate
planning questions. And it's just afantastic opportunity to get a little bit of
knowledge about your specific situation. Thatphone number again is eight eight eight to
zero five, two two six threeone more time eight eight eight to zero
five two two six three Todd whenyou talk about gifting larger assets. I

(04:26):
know we talked a little bit about, uh, you know, if you
have an investment account or if youhave a property or something like that,
and some of the issues there.Can we go into a little bit more
depth on property because I think wegot you know, we had to move
pretty quickly last week in terms ofthe problems with you know, just you
know, gifting a property to achild. Sure, just two or three

(04:46):
of the biggest things that that areproblems there. Yeah, I think quickly
just you could bullet these. Right, if you give it away, One,
you don't control it, you don'town it anymore, so you got
to be ready for that. That'sa big change, especially if it's a
rental property or you're collecting income fromit, you lose all that, so
that's a big issue. Two,once it's in their hands, it's subject
to their creditors, and then youmay not want that. You may not
want it subject to their creditors,their divorces, you may not want it

(05:09):
included in their estate. So that'sa big deal, right, And be
careful, especially if you give awayrental property, you think you've done a
great job, even if you don'tneed it anymore. You don't need the
rent and you don't mind them owningit. You've given them a huge tax
liability. You've given them all thebuilt in gain associated with that property when
there might have been a better wayto do it by dying owning it and

(05:30):
maybe giving away other assets and preservinga step up in basis so that you
can eliminate that gain. So lotsto think about, and those are just
like you say, maybe the topthree on the bullet list. Talking with
Todd Lutsky from the law firm ofCushing and Dolan. If you've got a
question you'd like to ask Todd aboutyour estate plan. The number here is
eight eight eight two zero five twotwo sixty three. That number again is

(05:56):
eight eight eight two zero five twotwo sixty three. To take a quick
break, but when we come back, it's right to your questions with Todd
Lutsky. That phone number again iseight eight eight two zero five two two
six three. Ask Todd with ToddLutsky every Wednesday at ten thirty only here
on the Financial Exchange Radio Network.You're listening to Ask Todd with Todd Lutsky

(06:21):
on the Financial Exchange Radio Network.All right, let's get right to our
callers with Todd Lutsky. First up, we've got Kevin and Dennis. Kevin,
what's your question for Todd? Yeah, I appreciate. So I just

(06:42):
the wife and I just have one. Donnis seven years ago did the will
the POV attorney the healthcare and thenI wasn't gonna do a trust, but
he said we should. So wedid a revocable trust just for a couple
hundred dollars with the donna's name onit. Now I want to put the
house into that trust. So isthat a huge process? You might have
to eliminate the trust that I havenow or at the house with her,

(07:08):
you know on that What did youmean that you you put one hundred dollars,
You put one hundred dollars into thetrust. Yeah, he just said,
he said you should do it now. So he did it with our
name, and I believe he's doingthis. I guess where the settle is
in the sense, you know,a couple of hundred dollars in the trust
to start it. Okay, Andyeah, so both of you, Yeah,

(07:28):
both of you are the donor ofthe donors of the trust. That
would be normal. Both of youare trustees. How old are you guys?
Well, I just turned sixty andthe wife's fifty two. Sixty and
fifty two, and you have onechild. Yes, so you know,
as a rule of thumb, Idon't know what what all your other assets
are. If that's your biggest assetand that's the only asset you want to

(07:49):
put in the trust, you certainlycan do it. It is not a
big problem. You're simply allowed tojust transfer the house. You have that
same lawyer, prepare a deed transferringit from your name to your trust name,
not a gift tax, is nofiling to do. It's just retitling
the account so that the house ratherso it avoids probate and gets to your
child the way the trust says itwill get to your child. So however

(08:11):
you're leaving, it is dictated inthat document. The only other thing you
might want to think about is asyou get older, if you are concerned
about nursing homes, you might wantto think about an irrevocable trust rather than
irrevocable trust, although of course youalways plan for the older spouse, even
though there seems to be a bigage difference between the two of you.
So just something to think about.But absolutely you can transfer it, and

(08:31):
the guy who or the lawyer whoeverit was that prepared the trust for you
probably could prepare the deed and putit in there, so hopefully that helps
a little. But you know what, folks, this is exactly the kind
of thing that this guide is about, and so Kevin, maybe this is
for you as well, and foranybody who hasn't done their planning. This
guide will help you understand how toleave your assets to your family. There

(08:54):
are so many ways to do itthrough these trusts. Again, whether it's
a special needs trust, whether it'sto a grandchild, whether you want to
skip a generation, whether you wantto protect it from future divorces. So
many things to think about when youleave an asset to a child, and
trusts are usually a way to doit. This guide will show you how
to do that. So again,if you haven't done your planning at all,

(09:15):
this is a great way to getyou off the dime, get you
thinking about what you might put forlanguage in your trust when you set it
up. Now, if you've alreadydone your planning. I think check it
out because you might want to amendyour document and say, oh wow,
I didn't think of that, oroh, my child's married now and I'm
not too keen on the spouse,or some other issue has happened and you

(09:37):
know, maybe there's a drug issueor something that's come up and you want
to modify your document. You cando it. This will give you some
ideas. Call and get the guidefolks, how to leave assets to Beneficiaries
eight six six eight four eight fivesix nine nine or Legal Exchange Show dot
com again eight six six eight foureight five six nine nine or Legal Exchange

(10:01):
Show dot com. Todd, I'vegot another one for you here. Let's
go to Joe in Boston. Joe, you are on with Todd Lutsky.
Hey, ten, OHI I thinksto taking my call. Sure good.
So this one's more on behalf ofmy mother in law. So she owns
a duplex in the city of Bostonwith her brother. They own it.
Her health is kind of in declinebetween probably given a time limit less than

(10:24):
five years. She you know,utilizes mass health, Medicare stuff like that.
As a couple of caveats, whereshe's separated but not divorced, and
there's a reverse mortgage on the homeas well, And I would kind of
say, is that house or assetgoing to be protected when she does pass

(10:46):
given the fact that you know,you've got mass health medicare coming after their
peace, and just kind of alot of moving parts between not being actually
divorced and with the reverse mortgage,and just is there a safe way for
her to Yeah, so I thinka couple of things here. You're saying
a lot of information, right,and that's helpful for me to answer it.

(11:07):
So the reverse mortgage is always goingto be there, so other he
and she only owns half. Rememberthe other half is with the brother,
so only half is at risk.You know, in terms of at least
avoiding probate, I would throw itinto a revocable trust and that way,
you know it will avoid probat andget to who it goes to. However,
the reverse mortgage is going to remainon there and will be called when

(11:28):
she passes. Not sure if youmentioned something about five years, does she
have five years to get you know, to get this protected from the cost
of nursing home care. It doesn'tsound like that was the problem. So
maybe just getting it in a revocabletrust. But arguably if you throw it
into an irrevocable trust now and there'sbeen no lean placed on the property yet

(11:50):
by mass Health, might be toolate later, So that might be something
to think about in terms of puttingit in there. But Community mass Health
does generally try to get paid backas well for things that they've received,
for benefits that were received over time. So yeah, tough situation. But
I would never not plan, soI would. I would put that at
least into a revocable trust and justyou get it to avoid probate and get

(12:15):
it to where you need it togo, and that way she can keep
collecting the income and so forth.So tough situation, Joe, but but
yeah, I would do something.Tod. I've got one more for you.
We're gonna see if we can getthree calls done here. Let's go
to Jeff in Florida. Jeff,what is your question for Todd Lutsky?
Hey Ton, thanks for taking mycall regarding the gift trust. Yes,

(12:37):
when there's Kapain realized games in thegiven year, we have one set up,
my parents set up and at theend of the year tax time,
my dad will go ahead and paythe tax on the realize games in that
trust. Now, let's say therewas one hundred thousand dollars worth of games.
You have four trustees, four kids. Are the kids supposed to claim

(12:58):
each one of them twenty five thousanddollars as income or is that completely separate?
So really, you know, goodquestion, and this is for a
lot of people right when you're whenyou're out there, you've got to make
sure you're going to have to goprobably back to the lawyer that drafted it
and find out whether or not itis a grand or trust for income tax
purposes. I know that we draftthem at Cushing and Dolan to be grant

(13:22):
to or trusts. In English,that means that your dad or your parents,
as the grand tours, are treatedas the owner for income tax purposes,
which means even if there is nodistribution of income, interest, dividends,
or gains, even if none ofthat is distributed out of the trust

(13:43):
to your parents, and they maynot even be entitled to it if it's
a gifting trust. Quite frankly so, even though it's not distributed out,
it's picked up on their personal incometax return. And they pay it,
none of the kids they pay it. If it is not a grant to
or trust and special language in therethat you need to ask your attorney if
they did it. If it's nota grant our trust and the distributions do

(14:07):
not come out to the kids,then the trust pays the tax. But
the trust would pay the tax ata much higher level because they're tax at
a higher rate. If it isdistributed out, then the kids will pay
the tax. So check with yourwith your creator on that one. Thanks
so much, mister Lutsky. Thankyou so much for joining us today.
Always a pleasure. This has beenasked Odd on the Financial Exchange Radio network.

(14:31):
Ask Todd with Todd. Lutsky hasbeen presented by Cushing and Dolan,
serving Massachusetts and New England for morethan thirty years, helping families with the
state and tax planning, Medicaid planning, and probate law. Call eight hundred
and three nine three four thousand andone or visit Cushingdolan dot com. The
views expressed in this segment are solelythose of Cushing and Dolan. Armstrong Advisor.
He does not provide any legal ortax advice. Please consult with your

(14:52):
legal or tax advisor on such matters. Cushing and Armstrong do not endorse each
other and are not affiliated. Leavingassets to your beneficiaries a critical piece of
any estate plan. Kushian Dolan haswritten a new guide that may help you
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