August 21, 2024 • 15 mins
On this week's edition of Ask Todd, Todd Lutsky explains what the five-year lookback period is and why it is an important factor to account for when planning your estate. Todd also answers questions from listeners about leaving a home in a trust, who is on the hook for debt in a trust, and how an inherited house should be split up between siblings.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
This is Ask Todd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Todd Lutsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, Medicaid planning, and probate law.
(00:22):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (00:27):
And we are now joined by Todd Lutsky from the
law firm of Cushing and Dolan. We call the segment
Ask Todd cause you get to ask Todd your questions.
We've got the studio lines open at eight eight eight
two zero five two two six three. Todd Lutsky is
here and so again this is your chance to ask
him your questions about your estate plan or maybe your
(00:51):
lack thereof. And hey, how do you get moving in
the right direction? That phone number again is eight eight
eight two zero five two two six three. Almost got
through everyone last week, but didn't quite so again, if
you do have a question, get calling to make sure
that you get an early spot in line here. That
phone number again is eight eight eight two zero five
(01:11):
two two sixty three, and we'll get to your calls
in just a little bit. Mister Latsky, how are you today?
I am never better on you.
Speaker 3 (01:19):
Uh, things will looking up? Actually good.
Speaker 2 (01:22):
I found a book yesterday and it's it's called How
to Solve Fifty Percent of Life's Problems.
Speaker 3 (01:28):
Oh yeah, I bought two that'll help you. You're all set.
Speaker 2 (01:32):
I thought I figured i'd be good. So tod I
want to talk a little bit about medicaid irrevocable trusts
and people hear the idea of hey, there's this five
year look back. A couple questions on that. Can you
just define that term for people who aren't familiar with it?
And the second question is when does that look back
period actually start?
Speaker 3 (01:53):
Yeah? Great point.
Speaker 4 (01:54):
A couple of things on the on the five year
rule many people I know you mentioned it in Connect
with the Trust, Chuck, But I just want to clarify
one thing before I define it. That some people think that, oh, well,
if it's five years, if I put my assets into
this irrevocable trust, I'll just give it to my kids instead.
Speaker 3 (02:12):
Well, the five year rule applies regardless.
Speaker 4 (02:16):
Of who you give it to. You could give it
to your kids, which nothing good comes from that. Never
mind the fact that it takes five years to protect
it from the nursing home. There's a lot of other negatives,
but whether you give it to a child, whether you
give it to a trust, whether The answer is that
any time you take an asset and dispose of it
and receive less than fair market value in exchange for
(02:40):
what you did, then you made a disqualifying transfer. And
that is the definition of what triggers the five year
waiting period. So that's a disqualifying transfer.
Speaker 3 (02:52):
What is it?
Speaker 4 (02:53):
It means that if you've transferred that asset and received
less than fair market value in exchange for that, then
you get sick in the next five years and go
to a nursing home, you'll be denied Medicaid benefits. It's
that simple. It's a hard and fast stop. So if
you're going to do your planning, try to think about
that's why we do it now, right, We do it
(03:14):
when we're feeling good, not when we're not feeling good,
and we can make the transfer and get beyond our
five year waiting period. Has nothing to do with any
other part of your estate plan. Your trust will still
avoid probate, reduce the state taxes, provide a bloodline plan.
Speaker 3 (03:27):
You could die the next day.
Speaker 4 (03:29):
I jokingly you say, the dying part isn't the problem
that works immediately. It's only the nursing home that takes
five years in order to get there. When does it start.
It starts the day you create the trust. Let's say
the day you make the disqualifying transfer. But since I'm
talking more about a state planning, let's focus on the trust.
(03:51):
A client comes in and says, let's do medicaid planning. Fine,
I explain the whole process, we get started. They leaving
the meeting, they'll say, okay, so did the five year
clock start to run? Yet, No, when does it start
to run. It starts to run the day they come
back in, after we review the documents and actually transfer
(04:13):
the asset into the trust. They need to sign the
document and fund the document. It's the funding of the
trust that triggers the five year waiting period in the
clock beginning to run. So hopefully that was a good
definition all the way around.
Speaker 3 (04:31):
Talk with Todd.
Speaker 2 (04:32):
Lotski from the law firm of Cushing and Dolan if
you've got a question for Todd, this is your chance
to ask him. Studio lines are open at eight eight
eight two zero five two two six three. Still got
space from maybe one or two more people at most
again eight eight eight two zero five two two sixty three.
We're gonna take a quick break here, but when we
(04:53):
come back, it's right to your questions with Todd. Then
that phone number again is eight eight eight two zero
row five two two six three, and we're taking your
calls when we return.
Speaker 1 (05:05):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (05:24):
All right, we got some questions for you, Todd. Let's
go first to Eric in Long Meadow. Eric, what's your
question for Todd Lutsky?
Speaker 5 (05:32):
Gory, gentlemen, My question is I'm in charge of the
family Members trust. I'm the trustee of his trust. Now
I pay his bills, this credit card and whatnot.
Speaker 3 (05:46):
Uh oh, I don't think we can hear.
Speaker 6 (05:48):
Him, So yeah, Tucker, why don't we put Eric on
hold for a second and see if we can get
him back, and why don't we go instead to let's
go to nan and nor would just while we get
Eric back on the line there, Nancy, what's your question
for Todd Lutsky?
Speaker 7 (06:05):
Good morning, Thank you for taking my call. Fifteen years ago,
my father died and a year later my mother signed
the house over to me. We lived together. I've been
taking care of her, but I have three other siblings.
What happens to the house when she passes away?
Speaker 4 (06:21):
Well, you said, I if I understand this, Nancy, you
said that after your dad died, your mom gifted the
entire house to you.
Speaker 3 (06:30):
Is that correct?
Speaker 7 (06:31):
Right?
Speaker 3 (06:32):
So only your name is on the deed?
Speaker 7 (06:34):
Correct?
Speaker 3 (06:35):
All right?
Speaker 4 (06:35):
So when you say what happens to the house after
she dies? Nothing, because she doesn't own it. Her estate
doesn't own it. It's not part of her estate. It's
a completed gift that she made to you years ago.
I'm guessing she probably didn't file a gift tax return,
not that it necessarily would have mattered. You now are
the fee simple title holder of the property, so if
(06:57):
it's been more than five years ago, it's protected from
the home. Unfortunately, you lost the step up in basis
because she won't die owning it, and ultimately you have
no obligation to do anything with it when your mom dies. Now,
if your mom's wishes are I'd like to leave this
to three all three of my children then, or however
(07:19):
many children she has, then the answer is that's not
going to happen unless you decide you wanted to honor
that wish. But if you do, you simply will have
to prepare a deed transferring the property to the other siblings,
which will ultimately be a gift by you to them.
And so technically it'll be a taxable gift because I'm
(07:40):
sure it's going to exceed eighteen thousand dollars per year
per person, So in that case you would need to
file a gift tax return. But the good news is
you have a thirteen million dollar gift tax exemption thirteen
point six million dollar gift tax exemption, so it shouldn't
really matter from a state tax standpoint for you.
Speaker 3 (07:59):
I don't think.
Speaker 4 (08:01):
I don't know the numbers, but it will eat into
your Massachusetts two million dollar estate tax exemption a little.
So I don't love the idea that she gave it away,
but she did, so it is what it is. And Unfortunately,
she does run the risk of potentially disinheriting her other
other children, as well as exposing it to your creditors,
and of course not even having the right to live there.
Speaker 3 (08:22):
But I know you'll take care of her and you
won't kick her out.
Speaker 4 (08:25):
But these are all issues for the bigger listening audience, right,
These are things that I don't love. I don't love
it when houses are given away to children during life.
It's I don't think anything good really comes from it.
This is just a little example of it. But hope
that helps Nancy and folks. One of the things you
can do to prevent giving away your house, or instead
of giving away your house while you're living, is learn
(08:49):
about these Medicaid irrevocable trusts. The guide we're giving away
is unlocking the power of Medicaid irrevocable trusts in a
very simple question and answer format. It will explain to
you all the dos and don'ts of these trusts. And
if you've ever thought these weren't right for you, or
you weren't sure about how they work, or you're afraid
(09:09):
of them, this guide will clear that up for you.
I mean, it answers everything from what can I put
in the trust. What are the gift tax consequences? Can
I sell my house? Can I buy another one? What
are the taxes if I sell my house?
Speaker 3 (09:22):
What? What can I live off the income? Can I
manage my money? Folks? On and on?
Speaker 4 (09:28):
All the questions are answered in that question and answer format.
Get the guide eight six six eight four eight five
six nine nine or Legal Exchange Show dot com again
eight six six eight four eight five six nine nine
or Legal Exchange Show dot com and do that rather
(09:48):
than give away your house when you're living.
Speaker 2 (09:50):
Let's go back to Eric and Longman. I think we
got some better sound Now, Eric, what's your question for Todd?
Speaker 5 (09:57):
Hi you doing? I'm in My father passed and he
put me in charge of a state and on the
trustee of another family member. Okay, and Charger that I
pays all his bills and whatnot. Now when the money
runs out, and if he has any debt, if I
on the hook for that?
Speaker 3 (10:15):
So let me ask you this.
Speaker 4 (10:17):
You're saying your dad died, there's a trust in place,
and there's a share inside Dad's trust of which you
control that money for the benefit of your sibling. Correct, yes,
and you actually use that money to pay some of
his bills, to make distributions to him as he needs it. Correct, correct,
So he never owns this money. He doesn't own this,
(10:40):
this share, this share that's inside Dad's now your late
father's trust isn't owned by him, so it's not even
subject to his creditors. So if he has creditors, these
assets are not subject to those creditors because this isn't
his money. And no, you're absolut lutely not on the
(11:00):
hook because it's not your money either. So and it's
not your it's not You're not subject to his creditors.
You're just trustee of a bucket of money that really
it's to take care of him, but he doesn't own it.
So the quick answer is no, you're not on the
hook as trustee of that trust. If in fact this
money runs out and he runs up creditor problems and
(11:24):
bill problems.
Speaker 3 (11:25):
Not not your your worry, Todd.
Speaker 2 (11:29):
We've got another caller for you here. Let's go to
Clyde in New Hampshire. Clyde. You are on with Todd Lutsky.
Speaker 5 (11:36):
Hey, how you doing got good?
Speaker 7 (11:38):
Quick question?
Speaker 5 (11:40):
Do a house have to be paid for before he
put it into a trust.
Speaker 4 (11:45):
So you're saying, if you have a home and it's encumbered,
you have a mortgage on it, or or a home
equity line or something correct.
Speaker 7 (11:51):
Correct.
Speaker 4 (11:52):
So, if it's your primary residence and you have an
equity line or a mortgage still outstanding on your home,
when you want to put it into a medicaid I'm
guessing one of these medicaid irrevocable trusts. So I'll answer
it both ways. One, if you want to put it
into a revocable trust, because that's the kind of planning
you want to do, it does not matter. It's a
(12:15):
revocable trust. You can put encumbered property in there anytime
you want and it will not trigger the du on
sale clause.
Speaker 3 (12:23):
And that's what we're worried about, right, We're worried about.
Speaker 4 (12:25):
Transferring property and triggering the duon sale or the duon
transfer clause that I'm going to venture to say exists
in every mortgage, okay, because remember they lent the money
to you, not to who you're giving it to.
Speaker 3 (12:38):
Okay.
Speaker 4 (12:39):
So revocable trust, no problem. Irrevocable trusts. If you want
to transfer your primary residence to an irrevocable medicaid trust,
and you have either a heelock or you have a
regular mortgage outstanding. You can still do it, but you
(13:00):
need to reserve what is called a life estate. Now
many of you heard this term tossed around many times.
A life of state is simply in the deed, it'll
say I hereby reserve a legal life estate in the property.
What that means is you kept the little nugget of ownership.
That nugget of ownership means you have the right to
(13:20):
live there the rest of your life. You're entitled to
collect all the income that that property pays, and you
got to pay the expenses. Hoorray, right, that's part of
being an owner. You're still deemed the present owner of
the property because of that little nugget of ownership that
you kept, and thereby, when you transfer it to the trust,
(13:42):
you cannot trigger the do on sale clause because you
did not transfer it. Right, you kept a nugget that
allows you to continue to live there. That nugget will
also preserve that home equity line or that mortgage. So
long winded answer to yes, you can still do Medicaid
planning even though your house has a mortgage on it.
Speaker 2 (14:05):
Mister Watski. Thank you so much for joining us today.
We appreciate it.
Speaker 3 (14:09):
Always a pleasure. Thank you.
Speaker 1 (14:11):
This has been asked Odd on the Financial Exchange Radio
network Aske Todd with Todd Lutsky has been presented by
Cushing and Dolan, serving Massachusetts and New England for more
than thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(14:32):
Cushing and Dolan. Armstrong Advisory does not provide any legal
or tax advice. Please consult with your legal or tax
advisor on such matters. Cushing and Armstrong do not endorse
each other and are not affiliated. Helmer Life planning can
be overwhelming, so make sure you're prepared or you can
make costly mistakes that affect your overall plan. Irrevocable trusts
are the most common type of trust that folks use
for financial protection, and while they can be complicated to create,
(14:55):
they help keep your assets safe because they contain specific
protections that many of us need, like the possibility of
eliminating your estate taxes. Cushing and Dolan are experts in
elder lawn taxation, and they can devise a plan that
covers you in every area where issues can rise. Their
new guide is called Unlocking the Power of Irrevocable Medicaid Trusts.
Learn more about how these trusts can benefit your family
(15:17):
by calling eight sixty six eight four eight five six
ninety nine right now. That's eight sixty six eight four
eight five six nine nine, Or you can request the
guide right now by visiting legal exchange show dot com.
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Dolan and Armstrong Advisory do not endorse each
(15:39):
other and are not affiliated.
This is Ask Todd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Todd Lutsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, Medicaid planning, and probate law.
(00:22):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (00:27):
And we are now joined by Todd Lutsky from the
law firm of Cushing and Dolan. We call the segment
Ask Todd cause you get to ask Todd your questions.
We've got the studio lines open at eight eight eight
two zero five two two six three. Todd Lutsky is
here and so again this is your chance to ask
him your questions about your estate plan or maybe your
(00:51):
lack thereof. And hey, how do you get moving in
the right direction? That phone number again is eight eight
eight two zero five two two six three. Almost got
through everyone last week, but didn't quite so again, if
you do have a question, get calling to make sure
that you get an early spot in line here. That
phone number again is eight eight eight two zero five
(01:11):
two two sixty three, and we'll get to your calls
in just a little bit. Mister Latsky, how are you today?
I am never better on you.
Speaker 3 (01:19):
Uh, things will looking up? Actually good.
Speaker 2 (01:22):
I found a book yesterday and it's it's called How
to Solve Fifty Percent of Life's Problems.
Speaker 3 (01:28):
Oh yeah, I bought two that'll help you. You're all set.
Speaker 2 (01:32):
I thought I figured i'd be good. So tod I
want to talk a little bit about medicaid irrevocable trusts
and people hear the idea of hey, there's this five
year look back. A couple questions on that. Can you
just define that term for people who aren't familiar with it?
And the second question is when does that look back
period actually start?
Speaker 3 (01:53):
Yeah? Great point.
Speaker 4 (01:54):
A couple of things on the on the five year
rule many people I know you mentioned it in Connect
with the Trust, Chuck, But I just want to clarify
one thing before I define it. That some people think that, oh, well,
if it's five years, if I put my assets into
this irrevocable trust, I'll just give it to my kids instead.
Speaker 3 (02:12):
Well, the five year rule applies regardless.
Speaker 4 (02:16):
Of who you give it to. You could give it
to your kids, which nothing good comes from that. Never
mind the fact that it takes five years to protect
it from the nursing home. There's a lot of other negatives,
but whether you give it to a child, whether you
give it to a trust, whether The answer is that
any time you take an asset and dispose of it
and receive less than fair market value in exchange for
(02:40):
what you did, then you made a disqualifying transfer. And
that is the definition of what triggers the five year
waiting period. So that's a disqualifying transfer.
Speaker 3 (02:52):
What is it?
Speaker 4 (02:53):
It means that if you've transferred that asset and received
less than fair market value in exchange for that, then
you get sick in the next five years and go
to a nursing home, you'll be denied Medicaid benefits. It's
that simple. It's a hard and fast stop. So if
you're going to do your planning, try to think about
that's why we do it now, right, We do it
(03:14):
when we're feeling good, not when we're not feeling good,
and we can make the transfer and get beyond our
five year waiting period. Has nothing to do with any
other part of your estate plan. Your trust will still
avoid probate, reduce the state taxes, provide a bloodline plan.
Speaker 3 (03:27):
You could die the next day.
Speaker 4 (03:29):
I jokingly you say, the dying part isn't the problem
that works immediately. It's only the nursing home that takes
five years in order to get there. When does it start.
It starts the day you create the trust. Let's say
the day you make the disqualifying transfer. But since I'm
talking more about a state planning, let's focus on the trust.
(03:51):
A client comes in and says, let's do medicaid planning. Fine,
I explain the whole process, we get started. They leaving
the meeting, they'll say, okay, so did the five year
clock start to run? Yet, No, when does it start
to run. It starts to run the day they come
back in, after we review the documents and actually transfer
(04:13):
the asset into the trust. They need to sign the
document and fund the document. It's the funding of the
trust that triggers the five year waiting period in the
clock beginning to run. So hopefully that was a good
definition all the way around.
Speaker 3 (04:31):
Talk with Todd.
Speaker 2 (04:32):
Lotski from the law firm of Cushing and Dolan if
you've got a question for Todd, this is your chance
to ask him. Studio lines are open at eight eight
eight two zero five two two six three. Still got
space from maybe one or two more people at most
again eight eight eight two zero five two two sixty three.
We're gonna take a quick break here, but when we
(04:53):
come back, it's right to your questions with Todd. Then
that phone number again is eight eight eight two zero
row five two two six three, and we're taking your
calls when we return.
Speaker 1 (05:05):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (05:24):
All right, we got some questions for you, Todd. Let's
go first to Eric in Long Meadow. Eric, what's your
question for Todd Lutsky?
Speaker 5 (05:32):
Gory, gentlemen, My question is I'm in charge of the
family Members trust. I'm the trustee of his trust. Now
I pay his bills, this credit card and whatnot.
Speaker 3 (05:46):
Uh oh, I don't think we can hear.
Speaker 6 (05:48):
Him, So yeah, Tucker, why don't we put Eric on
hold for a second and see if we can get
him back, and why don't we go instead to let's
go to nan and nor would just while we get
Eric back on the line there, Nancy, what's your question
for Todd Lutsky?
Speaker 7 (06:05):
Good morning, Thank you for taking my call. Fifteen years ago,
my father died and a year later my mother signed
the house over to me. We lived together. I've been
taking care of her, but I have three other siblings.
What happens to the house when she passes away?
Speaker 4 (06:21):
Well, you said, I if I understand this, Nancy, you
said that after your dad died, your mom gifted the
entire house to you.
Speaker 3 (06:30):
Is that correct?
Speaker 7 (06:31):
Right?
Speaker 3 (06:32):
So only your name is on the deed?
Speaker 7 (06:34):
Correct?
Speaker 3 (06:35):
All right?
Speaker 4 (06:35):
So when you say what happens to the house after
she dies? Nothing, because she doesn't own it. Her estate
doesn't own it. It's not part of her estate. It's
a completed gift that she made to you years ago.
I'm guessing she probably didn't file a gift tax return,
not that it necessarily would have mattered. You now are
the fee simple title holder of the property, so if
(06:57):
it's been more than five years ago, it's protected from
the home. Unfortunately, you lost the step up in basis
because she won't die owning it, and ultimately you have
no obligation to do anything with it when your mom dies. Now,
if your mom's wishes are I'd like to leave this
to three all three of my children then, or however
(07:19):
many children she has, then the answer is that's not
going to happen unless you decide you wanted to honor
that wish. But if you do, you simply will have
to prepare a deed transferring the property to the other siblings,
which will ultimately be a gift by you to them.
And so technically it'll be a taxable gift because I'm
(07:40):
sure it's going to exceed eighteen thousand dollars per year
per person, So in that case you would need to
file a gift tax return. But the good news is
you have a thirteen million dollar gift tax exemption thirteen
point six million dollar gift tax exemption, so it shouldn't
really matter from a state tax standpoint for you.
Speaker 3 (07:59):
I don't think.
Speaker 4 (08:01):
I don't know the numbers, but it will eat into
your Massachusetts two million dollar estate tax exemption a little.
So I don't love the idea that she gave it away,
but she did, so it is what it is. And Unfortunately,
she does run the risk of potentially disinheriting her other
other children, as well as exposing it to your creditors,
and of course not even having the right to live there.
Speaker 3 (08:22):
But I know you'll take care of her and you
won't kick her out.
Speaker 4 (08:25):
But these are all issues for the bigger listening audience, right,
These are things that I don't love. I don't love
it when houses are given away to children during life.
It's I don't think anything good really comes from it.
This is just a little example of it. But hope
that helps Nancy and folks. One of the things you
can do to prevent giving away your house, or instead
of giving away your house while you're living, is learn
(08:49):
about these Medicaid irrevocable trusts. The guide we're giving away
is unlocking the power of Medicaid irrevocable trusts in a
very simple question and answer format. It will explain to
you all the dos and don'ts of these trusts. And
if you've ever thought these weren't right for you, or
you weren't sure about how they work, or you're afraid
(09:09):
of them, this guide will clear that up for you.
I mean, it answers everything from what can I put
in the trust. What are the gift tax consequences? Can
I sell my house? Can I buy another one? What
are the taxes if I sell my house?
Speaker 3 (09:22):
What? What can I live off the income? Can I
manage my money? Folks? On and on?
Speaker 4 (09:28):
All the questions are answered in that question and answer format.
Get the guide eight six six eight four eight five
six nine nine or Legal Exchange Show dot com again
eight six six eight four eight five six nine nine
or Legal Exchange Show dot com and do that rather
(09:48):
than give away your house when you're living.
Speaker 2 (09:50):
Let's go back to Eric and Longman. I think we
got some better sound Now, Eric, what's your question for Todd?
Speaker 5 (09:57):
Hi you doing? I'm in My father passed and he
put me in charge of a state and on the
trustee of another family member. Okay, and Charger that I
pays all his bills and whatnot. Now when the money
runs out, and if he has any debt, if I
on the hook for that?
Speaker 3 (10:15):
So let me ask you this.
Speaker 4 (10:17):
You're saying your dad died, there's a trust in place,
and there's a share inside Dad's trust of which you
control that money for the benefit of your sibling. Correct, yes,
and you actually use that money to pay some of
his bills, to make distributions to him as he needs it. Correct, correct,
So he never owns this money. He doesn't own this,
(10:40):
this share, this share that's inside Dad's now your late
father's trust isn't owned by him, so it's not even
subject to his creditors. So if he has creditors, these
assets are not subject to those creditors because this isn't
his money. And no, you're absolut lutely not on the
(11:00):
hook because it's not your money either. So and it's
not your it's not You're not subject to his creditors.
You're just trustee of a bucket of money that really
it's to take care of him, but he doesn't own it.
So the quick answer is no, you're not on the
hook as trustee of that trust. If in fact this
money runs out and he runs up creditor problems and
(11:24):
bill problems.
Speaker 3 (11:25):
Not not your your worry, Todd.
Speaker 2 (11:29):
We've got another caller for you here. Let's go to
Clyde in New Hampshire. Clyde. You are on with Todd Lutsky.
Speaker 5 (11:36):
Hey, how you doing got good?
Speaker 7 (11:38):
Quick question?
Speaker 5 (11:40):
Do a house have to be paid for before he
put it into a trust.
Speaker 4 (11:45):
So you're saying, if you have a home and it's encumbered,
you have a mortgage on it, or or a home
equity line or something correct.
Speaker 7 (11:51):
Correct.
Speaker 4 (11:52):
So, if it's your primary residence and you have an
equity line or a mortgage still outstanding on your home,
when you want to put it into a medicaid I'm
guessing one of these medicaid irrevocable trusts. So I'll answer
it both ways. One, if you want to put it
into a revocable trust, because that's the kind of planning
you want to do, it does not matter. It's a
(12:15):
revocable trust. You can put encumbered property in there anytime
you want and it will not trigger the du on
sale clause.
Speaker 3 (12:23):
And that's what we're worried about, right, We're worried about.
Speaker 4 (12:25):
Transferring property and triggering the duon sale or the duon
transfer clause that I'm going to venture to say exists
in every mortgage, okay, because remember they lent the money
to you, not to who you're giving it to.
Speaker 3 (12:38):
Okay.
Speaker 4 (12:39):
So revocable trust, no problem. Irrevocable trusts. If you want
to transfer your primary residence to an irrevocable medicaid trust,
and you have either a heelock or you have a
regular mortgage outstanding. You can still do it, but you
(13:00):
need to reserve what is called a life estate. Now
many of you heard this term tossed around many times.
A life of state is simply in the deed, it'll
say I hereby reserve a legal life estate in the property.
What that means is you kept the little nugget of ownership.
That nugget of ownership means you have the right to
(13:20):
live there the rest of your life. You're entitled to
collect all the income that that property pays, and you
got to pay the expenses. Hoorray, right, that's part of
being an owner. You're still deemed the present owner of
the property because of that little nugget of ownership that
you kept, and thereby, when you transfer it to the trust,
(13:42):
you cannot trigger the do on sale clause because you
did not transfer it. Right, you kept a nugget that
allows you to continue to live there. That nugget will
also preserve that home equity line or that mortgage. So
long winded answer to yes, you can still do Medicaid
planning even though your house has a mortgage on it.
Speaker 2 (14:05):
Mister Watski. Thank you so much for joining us today.
We appreciate it.
Speaker 3 (14:09):
Always a pleasure. Thank you.
Speaker 1 (14:11):
This has been asked Odd on the Financial Exchange Radio
network Aske Todd with Todd Lutsky has been presented by
Cushing and Dolan, serving Massachusetts and New England for more
than thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(14:32):
Cushing and Dolan. Armstrong Advisory does not provide any legal
or tax advice. Please consult with your legal or tax
advisor on such matters. Cushing and Armstrong do not endorse
each other and are not affiliated. Helmer Life planning can
be overwhelming, so make sure you're prepared or you can
make costly mistakes that affect your overall plan. Irrevocable trusts
are the most common type of trust that folks use
for financial protection, and while they can be complicated to create,
(14:55):
they help keep your assets safe because they contain specific
protections that many of us need, like the possibility of
eliminating your estate taxes. Cushing and Dolan are experts in
elder lawn taxation, and they can devise a plan that
covers you in every area where issues can rise. Their
new guide is called Unlocking the Power of Irrevocable Medicaid Trusts.
Learn more about how these trusts can benefit your family
(15:17):
by calling eight sixty six eight four eight five six
ninety nine right now. That's eight sixty six eight four
eight five six nine nine, Or you can request the
guide right now by visiting legal exchange show dot com.
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Dolan and Armstrong Advisory do not endorse each
(15:39):
other and are not affiliated.
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