Episode Transcript
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Speaker 1 (00:00):
Good morning everyone, and welcome the Life Happens Radio, your
weekly radio broadcast bringing you ideas, thoughts, things to plan for,
things to do to help yourself, protect your retirement, protect
your family, protect your hard earned assets. Today we're going
to talk about one particular category of asset and for
a lot of people, this becomes a very important asset
(00:22):
for the family because they tend to gather there. And
whether it be a primary residence, your home, or a
secondary residence, a vacation home, home is where the heart
is and very often where your family is and that's
where memories are made. So protecting your home, and in particular,
what's even sometimes harder, protecting a second home or a
(00:46):
vacation property. So we're going to cover the home ownership.
We're going to talk about how to protect and preserve
the home, how to make sure that next generations are
taken into account. Is someone going to move into the home,
do you have a particular purpose for it, do you
want one of your children to be able to buy
the others out? And then with regard to the vacation home,
(01:08):
unlike the primary residence, which for a lot of parents
is going to go and be sold and proceeds divided.
That vacation home is where the kids grew up. It's
where they had their summer experiences. They're swimming in the
lake or at the beach or at the ocean, and
it's where they want their kids to make memories like
they did when they were younger. So how do we
(01:29):
make sense of that ownership? How do we make sense
of now instead of one family with three kids, three
families with nine kids owning a vacation home and being
able to coexist peacefully, mutually, beneficially and in a way
that they all benefit equally, or at least close to equally,
(01:50):
but with good rules and rules of the road. And
for that, I'm very thrilled to have with me in
studio today one of our associates who is very well
versed in this area. She's been doing trust in the
States for quite some time, and we'll get into that
in a moment. And her name is Samantha Bryant. Good morning, Sam,
Good morning, and welcome to the show once again. You've
(02:12):
been here before, and Sam is one of our associate
attorneys that works virtually with the firm.
Speaker 2 (02:19):
That's right, and this is my second time doing life happens.
So it's very exciting.
Speaker 1 (02:25):
So now you're a veteran of life Happens radio, and
all of this is just going to be second nature,
absolutely so, and I know that you have worked with clients,
so just talk a little bit about your experience. Even
though you joined us from South Carolina, one of the
reasons you joined us is because your peeps are here.
Speaker 2 (02:43):
That's right, that's right. I originally from New York and
from the Albany area and practiced here for several years
and fourteen.
Speaker 3 (02:53):
Years to be exactly what you remember the number correctly.
Speaker 2 (02:55):
Yeah, that's correct, and then decided to move down south
and I gather some other experience doing a few other things,
working in house, and then decided that my true love
is trust and estates and so made my found my
way back home up to this area.
Speaker 1 (03:15):
So and right now you're here in studio with me
in Latham, New York. So you kind of split time
and come up on a regular basis because you have
a client base here. I do.
Speaker 2 (03:28):
I have family here too, so client base and my
family brings me back to the Albany area.
Speaker 1 (03:34):
Yes, So I know that you've been doing trust in
the estates for a period of time. You also have
an expertise in business and business entities and business organizations,
and we're going to talk a little bit about that,
because you may not think about it now, but we're
going to show you how business entities and vacation properties
can fit very nicely together, like peanut butter and jelly
(03:56):
in a sandwich. So we're going to talk about that,
and your business experience and background and acumen really comes
into play there. But talk a little bit about your
experience because you've been dealing with clients in your legal
career fourteen years with one firm here in Albany and
beyond that. Now, what have you seen in terms of
families that want to take property and perpetuate it, to
(04:20):
have it used and used well and wisely within that
family into multiple generations.
Speaker 2 (04:29):
Yes, so that's this topic. Real estate comes up often.
Families want to either retain their parents' primary residence or
as we mentioned earlier, vacation home second homes, and it's
a very important and sometimes also a primary asset that
(04:51):
families own and that they want to protect, want to
make sure next generations can enjoy the property. And so
I think it comes up regularly when we meet with.
Speaker 1 (05:02):
Clients, and a lot of times our clients and tell
me if this is your experience as well in your
past firm, our clients say, well, I'm going to do
it really simple. I'm just going to put my kid's
name on the deed and that's it. I just they
can worry about it, they can take care of it.
I'm just going to put their names on the deed.
What does that have in the way of consequences for
(05:24):
that family.
Speaker 2 (05:25):
Well, of course with that comes a slew of problems
if they're more than if there's one more than one child,
you have obviously issues when you have to own property
as tenants in common or jointly with other family members.
(05:45):
And of course, as you can anticipate, there are always
disputes about the use of property, who gets to use
it when you know who's responsible for the expenses, taxes, maintenance,
So there are so many issues that come up when
you have property that's being conveyed outright to the next
(06:08):
generation without any other support or guidance.
Speaker 3 (06:11):
Yeah, let's get to the t word. Taxes.
Speaker 1 (06:16):
There are multiple tax consequences when you just put the
kids' names on the deed and have you made a gift. No,
I didn't make a gift. I just put my children's
name on the deed to the house. Well, yes you have,
that's right.
Speaker 2 (06:29):
So you have gift tax implications.
Speaker 3 (06:31):
Not that you'll have to pay gift tax, not necessarily.
Speaker 1 (06:34):
But you have to file a return because we have
very high exemptions right now. New York State doesn't have
a gift tax. We can put that right out there.
Other states do, so if you're in Massachusetts, very different rules, Connecticut, Jersey, Vermont.
If you're listening to us in any of those states
or have properties in any of those states, especially Massachusetts,
(06:55):
we have serious issues that you have to deal with there.
Speaker 3 (06:58):
But in New York there is no gift tax.
Speaker 1 (07:00):
There's a federal gift tax, but your exemption is going
up due to the One Big Beautiful Bill Act OBBBA
to fifteen million dollars. So unless this is a very
expensive home or townhouse in you know, somewhere in Manhattan,
we're gonna have no tax payable, but we're gonna have
(07:22):
to file a tax gift tax return. But the more
serious consequences when you give real property are number one
property taxes, because now those are in the kids' names
and number two capital gains taxes. And for those that
are unfamiliar with capital gains taxes, if you buy a
home vacation home, and you pay five hundred thousand dollars
(07:45):
for it and it appreciates to one million dollars, you
now have embedded in that asset five hundred thousand dollars.
Speaker 3 (07:54):
Of capital gain.
Speaker 1 (07:56):
And if you sell the property, sam that's tax exactly.
Speaker 2 (08:01):
There's no what we refer to as step up in
basis if you go ahead and complete that transfer during
your lifetime as a gift.
Speaker 1 (08:12):
So what that boils down to is when you hold
a property and leave it to your heirs, either in
a will or a trust, then those errors inherit it.
Speaker 3 (08:25):
With a new cost basis.
Speaker 1 (08:26):
So instead of a five hundred thousand dollars cost basis,
which is what you paid for it, their new basis
is a million dollars, and if they sell it for
that million dollars, they pay zero tax. So a lifetime
gift of real estate or any asset that has capital
appreciation is giving a gift with a little kicker saying okay,
(08:49):
when you sell this, you have to pay all the
capital gains tax on that asset, and with the estate
tax threshold so high now seven point one six million
in New York fifteen million soon to be federally, not
many people have an estate taxeshue. We just did a case,
and I'll go to this just to illustrate the tax point.
(09:12):
We did a case for a client who had a
lawyer back you know, fifteen maybe twenty years ago that
took their property happens to be on Lake George and
put it into something called qualified personal residence trusts. It
was a sophisticated way to gift that asset get a
reduction in value because back then the estate tax exemption
(09:35):
was one million dollars that was it. Now it's seven
point one six each per per spouse. So this trust
held the property. The trust term ran. It was a
term of years, and at the end of the trust,
the property sat in trust in the name of the kids. Well,
(09:56):
guess what the kids got to carry over basis and
property on Lake George over twenty years is worth ten
times what it was when they started. So what we
actually did was we had the children gift the house
back to the parents and it's going to be in
the parents revocable living trust and the kids are going
(10:17):
to get it back when mom and dad die, but
they're going to get it back with a new cost basis.
And that applies if you're going to sell it, but
it also applies if you're going to rent it, because
you get something called depreciation. And this is huge for
property owners. When someone dies with an asset that has
been fully depreciated, your capital gains tax is one hundred
(10:38):
percent of the value your gain. It's one hundred percent
of the value once you fully depreciated an asset. But
at death you get a new basis and you get
to depreciate it all over again. And for business owners
and anyone that's renting properties, that's huge, right, So for
tax purposes, having it run through the estate, getting that
(11:00):
step up in basis is a key. So a deed
to the kids has myriad problems. The one that really
is most perplexing. The tax issues are tax issues you're
gonna pay if you don't do it right. But getting
along in the management of property, who's paying the expenses,
who's managing the property, who's using the property.
Speaker 3 (11:21):
Those are the real tricky issues, Sam.
Speaker 2 (11:23):
They are, and that's where we have most of the
disputes that's where clients are calling us, you know, mentioning, Hey,
I have a brother, I have a sister. They're not
letting us use the property as often as they get
to use it. They're not paying or.
Speaker 1 (11:40):
I just got a tax for closure. Notice the real
estate taxes aren't paid. I'm the only one that's paying them.
My siblings are taking a ride on me, and we
don't want to lose the property, so I have to
pay the property taxes, right.
Speaker 2 (11:52):
And it's unfair we own it jointly. Exactly. Those are
the issues.
Speaker 1 (11:57):
Yep. And my brother's kids come to the lake house
and they bring their friends and they're smoking pot and
they're drinking alcohol, and they're making a mess of the
place and when they leave, they just leave that mess
for the next person to come.
Speaker 3 (12:11):
Never heard that before, h never, never.
Speaker 2 (12:15):
Right, Yeah, this is exactly the problems and but can't
be avoided for sure.
Speaker 1 (12:21):
So let's use that as our pause. We're going to
take a short break, and we're very happy to be here.
Lou Piro, Samantha Bryant in studio. We're with you with
Life Happens Radio. Are you prepared. We'll be back after
this short break, and thank you for staying with us,
(12:42):
Thank you for tuning in to Life Happens. I'm Lou
Piro again, your host for this morning with Samantha Bryant.
We're here on Life Happens from the firm of Pier
O'Connor and Strauss, and we're a law firm here in Latham.
We have offices in Manhattan, New York's, Garden City, Long Island,
New York, Lake Placid, New York, and we practice in
(13:02):
several states contiguous to New York in addition to Florida.
And these are the kinds of issues that our firm handles, wills, trusts, estates,
property issues, and in this case, we're talking about real estate,
both primary residents, which we'll get to in the second half,
and a vacation home and that problems with a vacation
home are many. And one of the things we're going
(13:24):
to talk about in the second half, and I'm going
to give you a heads up right now, is the
use of trusts. Can we use a trust to make
the ownership palatable and to coordinate all of the different
things that we're going to talk about, And we happen
to have a workshop coming up. There are a couple
seats left. I think we're near capacity. But it's this Wednesday,
(13:46):
the thirtieth, excuse me, Tuesday, the thirtieth of September.
Speaker 3 (13:52):
It's that Tuesday, Yes, yes.
Speaker 1 (13:56):
Okay, So the thirtieth of September, we're going to be
at the Capital Region Chamber of Commerce from twelve to
one point thirty with a Trust Administration Workshop. If you're
thinking about doing a trust, if you have a trust
and you have questions, if you want to learn about
the taxation of a trust, the basis issues that I
talked about earlier, the step up in basis, all of
(14:17):
the things that go along with trust. The Trust Administration
Workshop is a ninety minute very technical presentation. It is
not a sales pit pitch. It is looking at trusts,
opening the hood and seeing how does this trust really work? Revocable, irrevocable,
all the different types of trusts. You can join me
(14:39):
and we have special guest speaker Dave Woojeski who's a
CPA and founder and managing director of Wojeskian Company CPAs
and Michael Bates from Trustco which is a trust company.
So sometimes you need a professional manager. Trust Go fills
that role. So Mike's going to talk about that, Dave's
going to talk about the tax aspects. I'm going to
talk about the legal aspects. And you can sign up
(15:00):
for the Trust Administration Workshop Tuesday, September thirtieth, from noon
to one thirty. Go to the website at pyrolaw dot com.
That's pie rrlaw dot com. Go to the events tab
and sign up for this Tuesday's Trust Administration Workshop. We
run these once a quarter, so the next one is
(15:21):
likely to be December or January, and probably January because
we roll over to holidays. So if you want to
learn about trusts, come see us Tuesday. Register now. You
can always call also five one eight four or five
nine twenty one hundred and sam. Owning real estate and
trust is common. We'll talk about that later. But let's
talk about that vacation home, whether it's Lake George, the
(15:45):
Jersey Shore, Nantucket. We have clients with properties all over
the world that they have used to really bring their
family together for family vacations, make those memories, create that
family unity and on sharing experiences, and they want to
perpetuate them.
Speaker 3 (16:04):
But what are the pitfalls?
Speaker 1 (16:07):
How do families do this and what are the things
that they need to be thinking about that could go wrong,
as they say, hey, what could go wrong?
Speaker 3 (16:16):
Yeah?
Speaker 2 (16:16):
Absolutely, There are so many issues that parents need to
consider when they have vacation property that they want to
leave to their children. Are their children going to be
concerned with who's going to pay the taxes on the property,
how are those going to be paid with what funds,
Who's going to take care of the property, maintenance, repairs,
(16:38):
general upkeep, Who gets to use the property and when?
And does it just extend to the immediate family or
you know, friends, other relatives. Are they permitted to use
the property?
Speaker 3 (16:50):
You know?
Speaker 2 (16:51):
And then when the property is not being used, there
might be disputes that come up regarding what should the
property be generating some income posts and be rented while
it's not being used by the family. So there are
several issues that parents need to take into consideration when
they're deciding how to address the vacation property and how
(17:12):
to best leave it to their children.
Speaker 1 (17:15):
And I have seen this so many times in my
forty two year legal career, where families get pulled apart
and there are a lot of hard feelings and a
lot of resentment because you have this gem of the family,
this asset that mom and dad have taken care of
for their lifetimes, and now they want to pass it on.
(17:37):
They want to protect it, they want to pass it on,
and they want a way that their family can deal
with things in a controlled environment, if you will, but
with rules, and with rules that everybody is subject. So
what is one way that families can take that property,
that vacation home, that second home and lay out the
(18:01):
pattern and I say, write the script for how this
property is going to be used.
Speaker 2 (18:06):
Yeah, I speak from personal experience when I say that
good planning really makes a difference. I actually have this
exact scenario in my family where my grandparents left a
beautiful vacation home that my grandfather had built on the
(18:27):
ocean to family members and it's just been sitting there
now because nobody can agree as to exactly these issues
that we just discussed, repairs and primarily also use and
what should be done with the property, whether it should
be sold or not. There are family members who would
(18:48):
like to just sell and take the funds, and others
who want to keep it, whether some are using it,
some want to keep it for sentimental purposes, and so
it's it's difficult to come to arrangements without impacting the
family dynamic negatively. So I had I wish that my
(19:12):
grandparents had used a very common tool, which is to
set up an LC, for example, and that is a
limited liability company.
Speaker 3 (19:22):
Okay, tell us about that. Yeah, a little bit.
Speaker 2 (19:24):
Little limited liability company allows you to have basically an
operating agreement that goes along with this entity, that sets
forth management rules and the outlines who can make decisions
regarding the assets that are held by this particular company,
(19:47):
whether it's real estate or anything else. And it just
provides for a roadmap as to what individuals can do
with the assets that are held in this limited liability company,
and in particular in regards to property, the manager or
managers of the LLC can go ahead and make decisions
that are important for and relevant to the vacation home.
(20:10):
And that just avoids all of the problems that we
just discussed.
Speaker 1 (20:15):
So let's go through them one a time and we'll
talk talk about how the LLC solves the problem.
Speaker 3 (20:20):
What are the top problems?
Speaker 2 (20:22):
Well, top problem is use right, So the operating agreement
of the company can address how and when somebody can
use the property and for what purpose. If there are
several family members that can take advantage of the property,
you can outline whether dates, dates and timeframes when every
(20:46):
family unit may use the property. You can get extremely detailed,
or you can be more general, of course, but you
can address that issue.
Speaker 1 (20:56):
So the more detailed, folks, the better. The more you
can date into these issues before the lid comes off,
because once the parents die and the properties in the
hands of the kids, everything changes. And folks, if you
don't believe this, trust me, because we do a state
litigation trust litigation, and people change when a parent passes away.
(21:22):
What happened when they were five, all of a sudden resurfaces,
and you know mom didn't treat me the same way
she treated you, so all of those emotions come out.
Let alone. Well, I have six kids, you don't have any.
How do we balance that out. I'm going to control
this property because I have the most forceful personality. So
(21:45):
I think we have three of us. We should each
get eight weeks in the vacation home. I'm taking July
and August exactly.
Speaker 2 (21:52):
Those are common issues and it's best to be detailed
or as detailed as practical. And you're absolutely right Lou.
You know, I've done this for over twenty years now.
Usually it's as soon as mom dies, that's when the
gloves come off, and suddenly these harmonious children are no
(22:14):
longer seeing eye to eye.
Speaker 3 (22:16):
So it's best just to be as detailed.
Speaker 2 (22:20):
As one can. And to your point, you know, sometimes
there are people have families, maybe proximity plays a role
to the property, and somebody feels more entitled to more
time than others. So this is a great opportunity to
just address those issues. The next issue is what to
(22:41):
do when it's not being used. May the property be
used as a rental property or not? That is a
huge issue of contention.
Speaker 3 (22:50):
For a lot of fans.
Speaker 1 (22:51):
If it's a Cape Cod property or Martha's vineyard or
Nantucket property.
Speaker 3 (22:55):
You know, the rentals are huge.
Speaker 1 (22:57):
Yeah a week and that property can pay for a
year's worth of taxes exactly.
Speaker 2 (23:02):
So you have an opportunity for the property to possibly
be self sufficient, generate income via rents and then take
care of some of the maintenance and the taxes that
accre annually. But at the same time, a lot of
people don't want to rent it's a family home. It's
very which is fine, and they don't want to go
(23:24):
that route. And then, of course renting leads to other issues.
Who's going to be managing the renting, who's going to
take care of damages to the property, et cetera.
Speaker 1 (23:34):
So let's get to the next issue, who's managing, and
then who's paying. Yeah, two big issues. We need to
take a break for the news. We're going to come back,
and when we do, Samantha Bryant, myself, Lupiro, we're going
to talk about how to protect these properties, the valuable properties,
vacation homes, how to protect your main home, and how
(23:55):
to do it right so that your family benefits the most.
Speaker 3 (23:59):
Stay with us.
Speaker 1 (24:00):
We'll be back right after the news and welcome back.
Hope you're enjoying your Saturday morning. We're here on the
radio at Life Happens in WGY. Great to be here,
Great to be with you. We love our listeners, we
love to hear from you, and we love meeting with
you in person. So if you ever want to come
(24:20):
in and see us, if you ever have questions, you
want to get your state plan reviewed, or you don't
have one and you need to get an estate plan done,
give us a call and we can always take that
call and we'll get your scheduled at five one eight
four or five nine twenty one hundred and again a
reminder if you're interested in trusts, in how they work,
if you have one and you have questions or you
(24:41):
want to find out what's in them before you get one.
The Trust Administration Workshop.
Speaker 3 (24:46):
Is this Tuesday, so call.
Speaker 1 (24:48):
Only a few seats left September thirtieth and it's at
the Capital Region Chamber of Commerce twelve to one thirty
and you can register at pyrolaw dot com or again
and call our number five one eight four or five
nine twenty one hundred. Love to see you at the
seminar Tuesday at noon. And I'm here with Samantha Bryant
(25:09):
talking about a valuable asset in any family and that
is your primary home. But many families are lucky enough
to have a vacation home. And I love hearing the
stories of the families that bought the Lake George property
fifty years ago for fifty thousand dollars on the lake
front with one hundred feet of lake front, and now
(25:30):
it's worth five million dollars. It's it's crazy what God
only made so much property as they say, and he
ain't making it anymore.
Speaker 3 (25:38):
So when you.
Speaker 1 (25:39):
Have that valuable piece of property, you want to preserve
it and the memories that go along with it. So
a lot of problems come up when property passes from
one generation to the next. So mom and dad or
just mom and just dad, or whoever it may be,
owns that property, maintains that property, and you think of
(26:00):
about all the things that they have done for the
past fifty years, in paying property taxes, in putting a
new roof on the house, in maintaining the docks, in
doing all the things you need to do to keep
that property vibrant. And now Mom, dad or whoever is
no longer there, and that's when the real problems starts.
(26:21):
And so, Sam, you're talking about a limited liability company,
which most people say, well, that's a business, But for
this that business entity works really well.
Speaker 2 (26:32):
It does it. We were just talking about how it
will help with the management of the property both during
the parents' lifetime and then especially afterwards. You know, when
pent mom and dad are gone, they have the opportunity
via the operating agreements to then indicate who's going to
(26:53):
take over management. If there are multiple children, will they
rotate the management duties. Well, well, is one of them
particularly more inclined to do it than the others were
more interested.
Speaker 1 (27:05):
In doing it?
Speaker 2 (27:07):
Will that child old children who are managing be able
to be compensated for their time. Yeah, you know, all
of those sort of details can be addressed. And as
we talked about the details and use of the property,
you should be as detailed with the management of the
property as well.
Speaker 3 (27:26):
Yeah.
Speaker 1 (27:26):
What we like to do, what I like to do
is get to a point where we can have a
conversation with all of the stakeholders mom, dad, the kids.
We can include the grandkids, but that gets a little
messy sometimes, but all the people who are going to
have to be making these decisions now and in the future.
(27:47):
And then we go through a very detailed checklist of
all the things, and that people sit there and say, God,
I never thought about any of these things. Do these
things really happen?
Speaker 3 (27:57):
Yes, yes they do. They happen to you personally, and
you can be you can avoid.
Speaker 2 (28:02):
It, absolutely absolutely. It's such a shame when they're when
that doesn't take place. And you know, something as really
as simple as an entity like the limited liability company
that can be easily established where we can easily help
clients go through this operating agreement to help with the
(28:23):
details regarding the management and the just the longetivity of
the of the property and also of the family harmony
and unit.
Speaker 1 (28:33):
So in an LLC, the limited liability company, how does
management work?
Speaker 3 (28:37):
Is there flexibility?
Speaker 1 (28:38):
Is it just one way or can you kind of
modify it to your needs?
Speaker 2 (28:42):
Well, typically you have a manager managed LLC. In this
case it can be one or more managers. Uh, And
you have the parents typically who are the initial managers
of the LLC, and then as I mentioned, they can
go ahead and name their successors for management purposes.
Speaker 1 (29:02):
Right, And the kids don't really think about all the
time and money that mom and dad had pumped into
that property, and then when it flips to them, they say,
oh my god, that's right. There is work to be
done here. Somebody has to take on the mantle of
the manager and take this property and say, okay, I'm
going to make sure that the doc is right, that
(29:22):
the sidewalk gets fixed, the driveway is good, the.
Speaker 3 (29:25):
Roof isn't going to leak.
Speaker 1 (29:26):
All the things that you need to do, and oh,
you know that kitchen is forty years old, time to
remodel the kitchen. Are we all in And it's difficult
unless you have a structure to manage.
Speaker 3 (29:37):
Those decisions exactly.
Speaker 2 (29:39):
And you bring up a good point as the repairs
and improvements too, Updating things are typically less of an
issue in my experience, children typically agree when the kitchen
is forty years old that it's probably time for a facelift.
But sometimes you can set a cap or certain expenditures
(30:02):
and then also improvements. You know, maybe maybe the property
of it was ripe to have a DOC and it
didn't have one. You know, do we go ahead? Can
everybody agree that we're going to make this, you know,
go ahead and spend extra money to improve the property
because we're we want to use it, or maybe we're
renting it. So all of those issues need to be
(30:24):
accounted for.
Speaker 1 (30:25):
So during mom and dad's lifetime, how are we owning
that limited liability company?
Speaker 2 (30:29):
Typically, well, typically we like to have the LLC interest
in a trust.
Speaker 1 (30:38):
Right and that could be an irrevocable trust if they
want to do Medicaid planning, our long term care planning,
mapped Medicaid ass protection trust, or could be simply a
revocable living trust. But any asset like this, whether it's
land or an LLC, becomes a probate asset, and you
want to avoid probate because otherwise this gets tied up
(30:58):
for months sometimes years in court.
Speaker 2 (31:00):
Right, Yes, that is correct. I do a lot of
estate administration for the firm, so I know all too
well sometimes the assets that end up as probate assets
because they are not tied to an instrument such as
a revocable or irrevocable trust. And we have to go
(31:25):
through the circuits court in order to get an executor
appointed so that he or she has the power to
go ahead and transfer assets to the next generation. That
can take a very long time, especially if there are
disputes among the beneficiaries.
Speaker 1 (31:43):
Yeah, what if the real estate taxes come do? And
what if the roof is collapsing and all those things.
Speaker 2 (31:48):
No one has authority exactly, So in the meantime, what
do you do. It's just sitting there, and we really
try to avoid that, and it can be avoided.
Speaker 1 (31:57):
And an LLC inside of a trust is, folks, a
great structure because putting it in the trust, even an
irrevocable trust where mom and Dad aren't the trustees anymore.
We use LLCs to manage not just rental or real
estate primary residences, secondary residences, rental properties. We put investment
(32:18):
portfolios in there because we can get the asset protection
of the trust during mom and dad's lifetime with the
ultimate control as the manager of that LLC, and then
the management at some point is going to flip. So
the LLCs are useful for vacation homes, they're useful for
rental properties, they're useful for other types of investments, and
(32:38):
they provide a tremendous management tool and some asset protection
as well.
Speaker 2 (32:43):
Yeah, exactly, So not just the management, but also the
fact that the owners and members of the LC are
protected from personal liabilities, especially if that's houses being rented
or otherwise. You know, that's huge being used, absolutely huge.
Speaker 1 (33:00):
Someone sues the property on Lake George, they may get
the property in Lake George, but if their judgment is
more than the value of the property and the insurance
on the property, they can come back and get.
Speaker 3 (33:10):
Your assets personally.
Speaker 1 (33:11):
So if those three kids are just on the deed,
very innocuous, then they're gonna have personal liability in addition
to all the other problems that you have. So I
want to point out another thing, and that is I
mentioned earlier. Well, you have three kids, and each of
the three kids has three kids. I have a property
client and Vermont from New York that has property in
Vermont's of family property and several of the owners have died.
(33:34):
There are twenty seven owners on one deed, each with
a sliver of that property.
Speaker 3 (33:41):
It is a bloody mess.
Speaker 1 (33:44):
But you can have twenty seven owners of a limited
liability company and have tight management of that property.
Speaker 3 (33:52):
Yeah.
Speaker 2 (33:52):
Even I have an even worse scenario former matter where
the children were under the impression that the vacation lake
property was owned by their parents, and it turned out
that it was actually owned by their parents and their
(34:17):
aunt aunts and uncles. But they had no idea because
their parents were the ones who were taking care and
maintaining the property, paying the taxes for years and years
and years, nobody had ever expressed interest really in using
or visiting the lake property. So they were under the impression,
once mom and dad were gone, that this was their
(34:38):
lake property. And it turns out they had not quite
twenty seven other owners, but several others that they had.
Speaker 1 (34:47):
To That's like the Griswold family vacation, right, Spam Clark,
you took good care of that property.
Speaker 2 (34:52):
Yes exactly, and you know, had ten other owners suddenly,
and we had to do a quiet Title Act in
order to even be able to boil down who exactly
owned the property and ultimately was responsible for.
Speaker 1 (35:09):
When you sit around the table with three kids, the
parents think about the three kids, Okay, I think this
one could manage it, this one could pay the bills,
and it's you know, they see that they don't think
to the next generation and having a structure for the
three kids, which then goes on to the next generation.
And what we typically do in that scenario is we
have one voting member from each family.
Speaker 3 (35:32):
So they could have twenty two kids.
Speaker 1 (35:34):
One of them gets to vote so that it stays
within that three child circle, so they each have a
third of the voting control in managing it going forward.
So a lot of things that you may not think about, folks,
that we do. And that's why you use a thorough
checklist to cover all of these details. And what if
(35:56):
mom and dad say, well, I have three kids, they're
not all equal, and very often, almost always that's the case.
One has a great job, he's doing extremely well, and
he's set for life. One really can't put two and
two together. Has been in and out of jobs, doesn't
have any of the savings, doesn't have any money. And
(36:17):
then we have one who's a teacher and makes a
good living and we'll have a pension. But you have
very disparate financial situations. One thing that parents can do
if they have some other liquid assets is fund the
LLC beyond the property.
Speaker 2 (36:33):
That's true, yes, and then those funds will be available
so that the three children don't have to get into
an argument about who's responsible for what and what proportion.
Speaker 1 (36:47):
Let's talk about money, because that's what a lot of
people think about, especially when mom and dad are going
and who's paying the bills, who's collecting the rents.
Speaker 3 (36:56):
That's an easy problem.
Speaker 1 (36:56):
You got income, you can pay for the maintenance, pay
for the expenses, pay for the taxes. But what if
it's just family use property, you don't want to rent it,
and the bills come up and you have these expenses taxes,
and not everybody is either able or willing to pay.
Speaker 2 (37:13):
Yeah, Well, hopefully you have an account that's associated with
and held in the trust that can help with all
of the expenses that relate to the assets that are
held by the trust being the property.
Speaker 1 (37:28):
Right and even when they go on to the next generation,
that money can either go in the LLC or if
the kids are getting trusts, which we sometimes do after
their mom and dad passed, it stays in trust for
the kids. Then you can put the money in a
trust account. So thinking about that future, who's going to
pay the bills? How are they going to get paid?
And what if it comes down to one child or
(37:51):
two children that have the money that decide, okay, we'll
pay for now. How do you deal with that in
an entity like an LLC.
Speaker 2 (38:01):
Yeah, you know, you just have to break that down
similarly to the management and the use provisions. You break
down the payments, what's resources there for the payments for
expenses and then who's responsible for that?
Speaker 3 (38:17):
Okay?
Speaker 1 (38:18):
And in any business when you have partners, because an
LLC is typically a partnership, partners in a business get
something called a capital account, So how can you track
that in the LLC? So there's some equity long term?
So typically an accountant does this, right, the accountants do
(38:42):
the capital accounts for any business, but in this case,
the kids are probably going to have to do it.
So if I put in the five thousand dollars to
pay the property taxes and everybody else has put an
equal amounts up till now, my capital account goes up.
Speaker 3 (38:56):
By five thousand dollars.
Speaker 1 (38:58):
So if the property ever gets sold, I get paid
back for the money that I have put in. So
you can track children paying disproportionately and get them compensated
at some point down the road. Clearly, if mom and
dad have left other money, that money should be tied
(39:19):
into this to be used to maintain the property. But
if not, if one child is putting it up, then
they can do that. And what if their children sam
that don't want to be in the LLC? How do
you deal with that?
Speaker 2 (39:32):
Yeah, they can certainly have the option. Hopefully if the
LC operating your agreement provides for this to be bought out,
their interests can be bought out by the remaining siblings
who do want to have an interest in the LLC
and in the property, and then walk away with the
(39:53):
monetary share instead.
Speaker 1 (39:54):
Sure that always happens. We put those provisions in. It's
kind of automatic. If if you have three kids and
two don't what the property. One does, it's easy for
them to buy out the other two. You get an appraisal.
They simply paid them a third or thirdy third, and
hopefully there's enough money in the estate or in the
trust rather to make that payment. If not, they had
(40:15):
to come out of pocket, or they could get a
mortgage and pay their siblings out.
Speaker 2 (40:18):
That's right. And often parents will put in a provision
regarding if there is a buy out, what the purchase
price will be or should be, and sometimes possibly a
smidge at a discount or a fairly reasonable price. And
so that's already set forth.
Speaker 1 (40:40):
So as they say, folks, the devil is in the
details and when you see when and we do the
litigation on the back end of these things, and when
we see fit families siblings fighting, sometimes over very little money,
but very often it's financial fighting. We don't want to
have families put into that situation. So with good planning
(41:02):
with an LLC, the family vacation property can be extremely
well protected. The family members can enjoy it. They have
clear rights and responsibilities in the operating agreement, and that
will last for generations to come. As time passes, things change.
That LLC holds up and they can always modify the
(41:23):
LLC by agreement, so if they want to change provisions
and they all agree, and we even put voting provisions
in for.
Speaker 3 (41:28):
Those kinds of things.
Speaker 1 (41:29):
So if you have three or four or five people
and there's one holdout, you typically want it to be
by a majority, So a majority of the members can
all through, and all that goes into this operating agreement
through a very thorough conversation, nuanced conversation about the ownership,
the use, the payment of bills, all of those things
go in. When we come back, we're going to turn
(41:52):
the discussion from a vacation home to a primary residence
and look at maybe not an LLC, but a trust
the premiere vehicles to own property and pass it on
to the next generations. As always, you're listening at nine
am every Saturday morning on WGUHY to Life Happens Radio,
and we hope that you will be prepared. We'll be
(42:15):
right back and we are back. Thanks for joining us
this morning, Saturday morning. Here we are running through September. Salmon,
I can't believe we're almost into October, and you know
what that means, how much daylight, Halloween, snow soon colder temperatures.
Get ready, folks, it's coming. It's coming. We've had some
(42:37):
great weather in September and hopefully we get some more.
But it's a time you just have to kind of
get ready for the transition. Good time to do your
estate plan as you head into the winter before you
go to Florida like a snowbird, or to South Carolina,
which is where Samantha is from. So we're happy to
(42:59):
be with you today and we're talking about owning property.
What's the best way to own it. We started with
a vacation home, which is a little family jewel. How
do you protect it, preserve it, make it useful to
your kids, your grandkids. How can they make memories for
generations to come? And the LLC is definitely the premier
vehicle for that. But we're going to flip to a
(43:21):
home which is your primary residence, which has a little
different planning and a little different consideration in terms of
taxes and ownership and succession. And this gets very personal.
Do you have a child living with you, sam that
becomes a factor in some estate plans.
Speaker 3 (43:41):
Yep, for sure.
Speaker 2 (43:42):
We have increasingly, i would say clients that have multiple
generations in their home.
Speaker 3 (43:49):
The boomerangers. Yes, you thought you got rid of them,
but here they come.
Speaker 1 (43:54):
And a lot of families have a child that maybe
isn't working, maybe there's a disability there, maybe they have
some type of special need, and they may be living
with the parents. So we want to take that into consideration.
But generally, we want to make sure that our clients
have the absolute protected right to live in their home
(44:17):
and that no one can interfere with that right to
live in the home. The home is going to get
to the next generation with the least amount of cost,
tax probate, all of those factors, and if we want
to sell the home, we want to preserve the wonderful
benefits that we have from the tax code in the
(44:39):
sale of a primary residence. So when we look at homes,
and again I can't tell you if I had to
dye for every client that came in and said, well,
I didn't give anything away. I just put my kids'
names on the deed. And we talked about that right
at the beginning.
Speaker 2 (44:53):
What is that, Yeah, that's just a recipe for disaster.
You'd mentioned control. You mentioned somebody retaining the absolute right
to reside in their residence. For as long as they
like having the assurance that nobody can, you know, kick
(45:17):
them out of their own residence. So to convey the
property outright to the children while the parents are living
is just causes a lot of issues.
Speaker 1 (45:27):
Yeah, so tax issues, let's start with that number one.
You have in many cases a property tax exemption. In
New York they call it the star exemption. If you
happen to be a veteran, thank you for your service,
but you get a veterans exemption. And if you just
put the kids' names on the deed, that deed is
(45:49):
not just a deed. There are two tax forms that
go to the state and the county and it all
gets reregistered and for tax purposes, your children become the
property taxpayers and your star exemptions and veterans exemptions go away.
So that's one tax. There's another tax that if you
choose to sell the house and you want to go
(46:10):
into one of those wonderful senior living arrangements at the
Beverwick or the Avila or some of the other ones
around the Capital region, you have a capital gain on
and we talked about this earlier, the appreciation in your home. Well,
you get each spouse if it's a married couple, or
each individual gets two hundred and fifty thousand dollars in
(46:32):
exemption from capital gains tax. If it's a married couple,
five hundred thousand dollars of exemption from capital gains tax.
Speaker 3 (46:39):
And if you give it to your kids, how much.
Speaker 1 (46:40):
Do they get DERA None, They get no exemption because
it's not their home, it's not their primary residence, so
they don't get the capital gains tax exemption, and so
you lose that benefit. And there are solutions to this
that are very good solutions. If you want to pretend
the home and we say protect the home from what
(47:03):
from long term care costs? If you need home health care,
nursing home care, you want to make sure you protect
the home.
Speaker 3 (47:10):
Sam, what's our.
Speaker 2 (47:12):
Vehicle for that, Well, we have the Medicaid Asset Protection
trusts and those are wonderful vehicles to use where we
can transfer the property into those trusts.
Speaker 1 (47:25):
And that protects it long term. It avoids probate. As
we said earlier, Medicaid can't touch it. You have the
right to live there, and it keeps your property tax
exemption star veterans, it keeps your capital gains exclusion of
two hundred and fifty or five hundred thousand if you're
a married couple, all of those tax benefits stay with it,
and we have it going ultimately to the kids upon
(47:47):
your death. And remember that step up in basis folks,
where if they inherit it, all of that capital gain
washes away. That applies to this trust as well. So
your primary residence in a trust works really really well.
There's another trust we use SAM or revocable trust, and
just talk a little bit about that.
Speaker 3 (48:07):
It's simpler.
Speaker 2 (48:08):
Yeah, the revocable trust is definitely simpler. It allows the
same type of uh you know, opportunity for the property
to be transferred into the trust while the owner still
maintains the same benefits as before, except that the revocable
(48:29):
trust has the ability to be amended, revoked, revised. It's
a little bit more flexible of a tool, but as
far as the benefits of putting the real property into
the trust, it's similar to the MAPP.
Speaker 1 (48:44):
So we we do the revocable trust for a lot
of clients. It's what I happen to have personally for
my plan me as well, and then when I pass
and my wife passes, because it's a trust for the
two of us. It goes on to our kids and
I have a further trust for them so that the
assets can be protected for my children. And that's really
(49:04):
good because divorce protection is very important to parents. So
we have about a minute left and I just want
to wrap it Sam by saying thank you for coming
up from South Carolina to be with us today.
Speaker 3 (49:18):
Thank you for having me.
Speaker 2 (49:19):
It's always really exciting to be here.
Speaker 1 (49:22):
And in terms of the seminar coming up, don't forget
the Trust Administration Workshop is this Tuesday, September thirtieth at
twelve noon at the Capital Region Chamber of Commerce, twelve
to one pint thirty. Learn all about trusts inside and out,
and you can sign up at purolaw dot com. You
can always call us at five one eight four or
(49:43):
five nine twenty one hundred. And we look forward to
having you back here on the radio, and we hope
that we can do this on a repeat basis because
we love having loyal listeners and we hope to see
you very soon here on the radio. Care have a
great weekend and prepare for the fall.
Good morning everyone, and welcome the Life Happens Radio, your
weekly radio broadcast bringing you ideas, thoughts, things to plan for,
things to do to help yourself, protect your retirement, protect
your family, protect your hard earned assets. Today we're going
to talk about one particular category of asset and for
a lot of people, this becomes a very important asset
(00:22):
for the family because they tend to gather there. And
whether it be a primary residence, your home, or a
secondary residence, a vacation home, home is where the heart
is and very often where your family is and that's
where memories are made. So protecting your home, and in particular,
what's even sometimes harder, protecting a second home or a
(00:46):
vacation property. So we're going to cover the home ownership.
We're going to talk about how to protect and preserve
the home, how to make sure that next generations are
taken into account. Is someone going to move into the home,
do you have a particular purpose for it, do you
want one of your children to be able to buy
the others out? And then with regard to the vacation home,
(01:08):
unlike the primary residence, which for a lot of parents
is going to go and be sold and proceeds divided.
That vacation home is where the kids grew up. It's
where they had their summer experiences. They're swimming in the
lake or at the beach or at the ocean, and
it's where they want their kids to make memories like
they did when they were younger. So how do we
(01:29):
make sense of that ownership? How do we make sense
of now instead of one family with three kids, three
families with nine kids owning a vacation home and being
able to coexist peacefully, mutually, beneficially and in a way
that they all benefit equally, or at least close to equally,
(01:50):
but with good rules and rules of the road. And
for that, I'm very thrilled to have with me in
studio today one of our associates who is very well
versed in this area. She's been doing trust in the
States for quite some time, and we'll get into that
in a moment. And her name is Samantha Bryant. Good morning, Sam,
Good morning, and welcome to the show once again. You've
(02:12):
been here before, and Sam is one of our associate
attorneys that works virtually with the firm.
Speaker 2 (02:19):
That's right, and this is my second time doing life happens.
So it's very exciting.
Speaker 1 (02:25):
So now you're a veteran of life Happens radio, and
all of this is just going to be second nature,
absolutely so, and I know that you have worked with clients,
so just talk a little bit about your experience. Even
though you joined us from South Carolina, one of the
reasons you joined us is because your peeps are here.
Speaker 2 (02:43):
That's right, that's right. I originally from New York and
from the Albany area and practiced here for several years
and fourteen.
Speaker 3 (02:53):
Years to be exactly what you remember the number correctly.
Speaker 2 (02:55):
Yeah, that's correct, and then decided to move down south
and I gather some other experience doing a few other things,
working in house, and then decided that my true love
is trust and estates and so made my found my
way back home up to this area.
Speaker 1 (03:15):
So and right now you're here in studio with me
in Latham, New York. So you kind of split time
and come up on a regular basis because you have
a client base here. I do.
Speaker 2 (03:28):
I have family here too, so client base and my
family brings me back to the Albany area.
Speaker 1 (03:34):
Yes, So I know that you've been doing trust in
the estates for a period of time. You also have
an expertise in business and business entities and business organizations,
and we're going to talk a little bit about that,
because you may not think about it now, but we're
going to show you how business entities and vacation properties
can fit very nicely together, like peanut butter and jelly
(03:56):
in a sandwich. So we're going to talk about that,
and your business experience and background and acumen really comes
into play there. But talk a little bit about your
experience because you've been dealing with clients in your legal
career fourteen years with one firm here in Albany and
beyond that. Now, what have you seen in terms of
families that want to take property and perpetuate it, to
(04:20):
have it used and used well and wisely within that
family into multiple generations.
Speaker 2 (04:29):
Yes, so that's this topic. Real estate comes up often.
Families want to either retain their parents' primary residence or
as we mentioned earlier, vacation home second homes, and it's
a very important and sometimes also a primary asset that
(04:51):
families own and that they want to protect, want to
make sure next generations can enjoy the property. And so
I think it comes up regularly when we meet with.
Speaker 1 (05:02):
Clients, and a lot of times our clients and tell
me if this is your experience as well in your
past firm, our clients say, well, I'm going to do
it really simple. I'm just going to put my kid's
name on the deed and that's it. I just they
can worry about it, they can take care of it.
I'm just going to put their names on the deed.
What does that have in the way of consequences for
(05:24):
that family.
Speaker 2 (05:25):
Well, of course with that comes a slew of problems
if they're more than if there's one more than one child,
you have obviously issues when you have to own property
as tenants in common or jointly with other family members.
(05:45):
And of course, as you can anticipate, there are always
disputes about the use of property, who gets to use
it when you know who's responsible for the expenses, taxes, maintenance,
So there are so many issues that come up when
you have property that's being conveyed outright to the next
(06:08):
generation without any other support or guidance.
Speaker 3 (06:11):
Yeah, let's get to the t word. Taxes.
Speaker 1 (06:16):
There are multiple tax consequences when you just put the
kids' names on the deed and have you made a gift. No,
I didn't make a gift. I just put my children's
name on the deed to the house. Well, yes you have,
that's right.
Speaker 2 (06:29):
So you have gift tax implications.
Speaker 3 (06:31):
Not that you'll have to pay gift tax, not necessarily.
Speaker 1 (06:34):
But you have to file a return because we have
very high exemptions right now. New York State doesn't have
a gift tax. We can put that right out there.
Other states do, so if you're in Massachusetts, very different rules, Connecticut, Jersey, Vermont.
If you're listening to us in any of those states
or have properties in any of those states, especially Massachusetts,
(06:55):
we have serious issues that you have to deal with there.
Speaker 3 (06:58):
But in New York there is no gift tax.
Speaker 1 (07:00):
There's a federal gift tax, but your exemption is going
up due to the One Big Beautiful Bill Act OBBBA
to fifteen million dollars. So unless this is a very
expensive home or townhouse in you know, somewhere in Manhattan,
we're gonna have no tax payable, but we're gonna have
(07:22):
to file a tax gift tax return. But the more
serious consequences when you give real property are number one
property taxes, because now those are in the kids' names
and number two capital gains taxes. And for those that
are unfamiliar with capital gains taxes, if you buy a
home vacation home, and you pay five hundred thousand dollars
(07:45):
for it and it appreciates to one million dollars, you
now have embedded in that asset five hundred thousand dollars.
Speaker 3 (07:54):
Of capital gain.
Speaker 1 (07:56):
And if you sell the property, sam that's tax exactly.
Speaker 2 (08:01):
There's no what we refer to as step up in
basis if you go ahead and complete that transfer during
your lifetime as a gift.
Speaker 1 (08:12):
So what that boils down to is when you hold
a property and leave it to your heirs, either in
a will or a trust, then those errors inherit it.
Speaker 3 (08:25):
With a new cost basis.
Speaker 1 (08:26):
So instead of a five hundred thousand dollars cost basis,
which is what you paid for it, their new basis
is a million dollars, and if they sell it for
that million dollars, they pay zero tax. So a lifetime
gift of real estate or any asset that has capital
appreciation is giving a gift with a little kicker saying okay,
(08:49):
when you sell this, you have to pay all the
capital gains tax on that asset, and with the estate
tax threshold so high now seven point one six million
in New York fifteen million soon to be federally, not
many people have an estate taxeshue. We just did a case,
and I'll go to this just to illustrate the tax point.
(09:12):
We did a case for a client who had a
lawyer back you know, fifteen maybe twenty years ago that
took their property happens to be on Lake George and
put it into something called qualified personal residence trusts. It
was a sophisticated way to gift that asset get a
reduction in value because back then the estate tax exemption
(09:35):
was one million dollars that was it. Now it's seven
point one six each per per spouse. So this trust
held the property. The trust term ran. It was a
term of years, and at the end of the trust,
the property sat in trust in the name of the kids. Well,
(09:56):
guess what the kids got to carry over basis and
property on Lake George over twenty years is worth ten
times what it was when they started. So what we
actually did was we had the children gift the house
back to the parents and it's going to be in
the parents revocable living trust and the kids are going
(10:17):
to get it back when mom and dad die, but
they're going to get it back with a new cost basis.
And that applies if you're going to sell it, but
it also applies if you're going to rent it, because
you get something called depreciation. And this is huge for
property owners. When someone dies with an asset that has
been fully depreciated, your capital gains tax is one hundred
(10:38):
percent of the value your gain. It's one hundred percent
of the value once you fully depreciated an asset. But
at death you get a new basis and you get
to depreciate it all over again. And for business owners
and anyone that's renting properties, that's huge, right, So for
tax purposes, having it run through the estate, getting that
(11:00):
step up in basis is a key. So a deed
to the kids has myriad problems. The one that really
is most perplexing. The tax issues are tax issues you're
gonna pay if you don't do it right. But getting
along in the management of property, who's paying the expenses,
who's managing the property, who's using the property.
Speaker 3 (11:21):
Those are the real tricky issues, Sam.
Speaker 2 (11:23):
They are, and that's where we have most of the
disputes that's where clients are calling us, you know, mentioning, Hey,
I have a brother, I have a sister. They're not
letting us use the property as often as they get
to use it. They're not paying or.
Speaker 1 (11:40):
I just got a tax for closure. Notice the real
estate taxes aren't paid. I'm the only one that's paying them.
My siblings are taking a ride on me, and we
don't want to lose the property, so I have to
pay the property taxes, right.
Speaker 2 (11:52):
And it's unfair we own it jointly. Exactly. Those are
the issues.
Speaker 1 (11:57):
Yep. And my brother's kids come to the lake house
and they bring their friends and they're smoking pot and
they're drinking alcohol, and they're making a mess of the
place and when they leave, they just leave that mess
for the next person to come.
Speaker 3 (12:11):
Never heard that before, h never, never.
Speaker 2 (12:15):
Right, Yeah, this is exactly the problems and but can't
be avoided for sure.
Speaker 1 (12:21):
So let's use that as our pause. We're going to
take a short break, and we're very happy to be here.
Lou Piro, Samantha Bryant in studio. We're with you with
Life Happens Radio. Are you prepared. We'll be back after
this short break, and thank you for staying with us,
(12:42):
Thank you for tuning in to Life Happens. I'm Lou
Piro again, your host for this morning with Samantha Bryant.
We're here on Life Happens from the firm of Pier
O'Connor and Strauss, and we're a law firm here in Latham.
We have offices in Manhattan, New York's, Garden City, Long Island,
New York, Lake Placid, New York, and we practice in
(13:02):
several states contiguous to New York in addition to Florida.
And these are the kinds of issues that our firm handles, wills, trusts, estates,
property issues, and in this case, we're talking about real estate,
both primary residents, which we'll get to in the second half,
and a vacation home and that problems with a vacation
home are many. And one of the things we're going
(13:24):
to talk about in the second half, and I'm going
to give you a heads up right now, is the
use of trusts. Can we use a trust to make
the ownership palatable and to coordinate all of the different
things that we're going to talk about, And we happen
to have a workshop coming up. There are a couple
seats left. I think we're near capacity. But it's this Wednesday,
(13:46):
the thirtieth, excuse me, Tuesday, the thirtieth of September.
Speaker 3 (13:52):
It's that Tuesday, Yes, yes.
Speaker 1 (13:56):
Okay, So the thirtieth of September, we're going to be
at the Capital Region Chamber of Commerce from twelve to
one point thirty with a Trust Administration Workshop. If you're
thinking about doing a trust, if you have a trust
and you have questions, if you want to learn about
the taxation of a trust, the basis issues that I
talked about earlier, the step up in basis, all of
(14:17):
the things that go along with trust. The Trust Administration
Workshop is a ninety minute very technical presentation. It is
not a sales pit pitch. It is looking at trusts,
opening the hood and seeing how does this trust really work? Revocable, irrevocable,
all the different types of trusts. You can join me
(14:39):
and we have special guest speaker Dave Woojeski who's a
CPA and founder and managing director of Wojeskian Company CPAs
and Michael Bates from Trustco which is a trust company.
So sometimes you need a professional manager. Trust Go fills
that role. So Mike's going to talk about that, Dave's
going to talk about the tax aspects. I'm going to
talk about the legal aspects. And you can sign up
(15:00):
for the Trust Administration Workshop Tuesday, September thirtieth, from noon
to one thirty. Go to the website at pyrolaw dot com.
That's pie rrlaw dot com. Go to the events tab
and sign up for this Tuesday's Trust Administration Workshop. We
run these once a quarter, so the next one is
(15:21):
likely to be December or January, and probably January because
we roll over to holidays. So if you want to
learn about trusts, come see us Tuesday. Register now. You
can always call also five one eight four or five
nine twenty one hundred and sam. Owning real estate and
trust is common. We'll talk about that later. But let's
talk about that vacation home, whether it's Lake George, the
(15:45):
Jersey Shore, Nantucket. We have clients with properties all over
the world that they have used to really bring their
family together for family vacations, make those memories, create that
family unity and on sharing experiences, and they want to
perpetuate them.
Speaker 3 (16:04):
But what are the pitfalls?
Speaker 1 (16:07):
How do families do this and what are the things
that they need to be thinking about that could go wrong,
as they say, hey, what could go wrong?
Speaker 3 (16:16):
Yeah?
Speaker 2 (16:16):
Absolutely, There are so many issues that parents need to
consider when they have vacation property that they want to
leave to their children. Are their children going to be
concerned with who's going to pay the taxes on the property,
how are those going to be paid with what funds,
Who's going to take care of the property, maintenance, repairs,
(16:38):
general upkeep, Who gets to use the property and when?
And does it just extend to the immediate family or
you know, friends, other relatives. Are they permitted to use
the property?
Speaker 3 (16:50):
You know?
Speaker 2 (16:51):
And then when the property is not being used, there
might be disputes that come up regarding what should the
property be generating some income posts and be rented while
it's not being used by the family. So there are
several issues that parents need to take into consideration when
they're deciding how to address the vacation property and how
(17:12):
to best leave it to their children.
Speaker 1 (17:15):
And I have seen this so many times in my
forty two year legal career, where families get pulled apart
and there are a lot of hard feelings and a
lot of resentment because you have this gem of the family,
this asset that mom and dad have taken care of
for their lifetimes, and now they want to pass it on.
(17:37):
They want to protect it, they want to pass it on,
and they want a way that their family can deal
with things in a controlled environment, if you will, but
with rules, and with rules that everybody is subject. So
what is one way that families can take that property,
that vacation home, that second home and lay out the
(18:01):
pattern and I say, write the script for how this
property is going to be used.
Speaker 2 (18:06):
Yeah, I speak from personal experience when I say that
good planning really makes a difference. I actually have this
exact scenario in my family where my grandparents left a
beautiful vacation home that my grandfather had built on the
(18:27):
ocean to family members and it's just been sitting there
now because nobody can agree as to exactly these issues
that we just discussed, repairs and primarily also use and
what should be done with the property, whether it should
be sold or not. There are family members who would
(18:48):
like to just sell and take the funds, and others
who want to keep it, whether some are using it,
some want to keep it for sentimental purposes, and so
it's it's difficult to come to arrangements without impacting the
family dynamic negatively. So I had I wish that my
(19:12):
grandparents had used a very common tool, which is to
set up an LC, for example, and that is a
limited liability company.
Speaker 3 (19:22):
Okay, tell us about that. Yeah, a little bit.
Speaker 2 (19:24):
Little limited liability company allows you to have basically an
operating agreement that goes along with this entity, that sets
forth management rules and the outlines who can make decisions
regarding the assets that are held by this particular company,
(19:47):
whether it's real estate or anything else. And it just
provides for a roadmap as to what individuals can do
with the assets that are held in this limited liability company,
and in particular in regards to property, the manager or
managers of the LLC can go ahead and make decisions
that are important for and relevant to the vacation home.
(20:10):
And that just avoids all of the problems that we
just discussed.
Speaker 1 (20:15):
So let's go through them one a time and we'll
talk talk about how the LLC solves the problem.
Speaker 3 (20:20):
What are the top problems?
Speaker 2 (20:22):
Well, top problem is use right, So the operating agreement
of the company can address how and when somebody can
use the property and for what purpose. If there are
several family members that can take advantage of the property,
you can outline whether dates, dates and timeframes when every
(20:46):
family unit may use the property. You can get extremely detailed,
or you can be more general, of course, but you
can address that issue.
Speaker 1 (20:56):
So the more detailed, folks, the better. The more you
can date into these issues before the lid comes off,
because once the parents die and the properties in the
hands of the kids, everything changes. And folks, if you
don't believe this, trust me, because we do a state
litigation trust litigation, and people change when a parent passes away.
(21:22):
What happened when they were five, all of a sudden resurfaces,
and you know mom didn't treat me the same way
she treated you, so all of those emotions come out.
Let alone. Well, I have six kids, you don't have any.
How do we balance that out. I'm going to control
this property because I have the most forceful personality. So
(21:45):
I think we have three of us. We should each
get eight weeks in the vacation home. I'm taking July
and August exactly.
Speaker 2 (21:52):
Those are common issues and it's best to be detailed
or as detailed as practical. And you're absolutely right Lou.
You know, I've done this for over twenty years now.
Usually it's as soon as mom dies, that's when the
gloves come off, and suddenly these harmonious children are no
(22:14):
longer seeing eye to eye.
Speaker 3 (22:16):
So it's best just to be as detailed.
Speaker 2 (22:20):
As one can. And to your point, you know, sometimes
there are people have families, maybe proximity plays a role
to the property, and somebody feels more entitled to more
time than others. So this is a great opportunity to
just address those issues. The next issue is what to
(22:41):
do when it's not being used. May the property be
used as a rental property or not? That is a
huge issue of contention.
Speaker 3 (22:50):
For a lot of fans.
Speaker 1 (22:51):
If it's a Cape Cod property or Martha's vineyard or
Nantucket property.
Speaker 3 (22:55):
You know, the rentals are huge.
Speaker 1 (22:57):
Yeah a week and that property can pay for a
year's worth of taxes exactly.
Speaker 2 (23:02):
So you have an opportunity for the property to possibly
be self sufficient, generate income via rents and then take
care of some of the maintenance and the taxes that
accre annually. But at the same time, a lot of
people don't want to rent it's a family home. It's
very which is fine, and they don't want to go
(23:24):
that route. And then, of course renting leads to other issues.
Who's going to be managing the renting, who's going to
take care of damages to the property, et cetera.
Speaker 1 (23:34):
So let's get to the next issue, who's managing, and
then who's paying. Yeah, two big issues. We need to
take a break for the news. We're going to come back,
and when we do, Samantha Bryant, myself, Lupiro, we're going
to talk about how to protect these properties, the valuable properties,
vacation homes, how to protect your main home, and how
(23:55):
to do it right so that your family benefits the most.
Speaker 3 (23:59):
Stay with us.
Speaker 1 (24:00):
We'll be back right after the news and welcome back.
Hope you're enjoying your Saturday morning. We're here on the
radio at Life Happens in WGY. Great to be here,
Great to be with you. We love our listeners, we
love to hear from you, and we love meeting with
you in person. So if you ever want to come
(24:20):
in and see us, if you ever have questions, you
want to get your state plan reviewed, or you don't
have one and you need to get an estate plan done,
give us a call and we can always take that
call and we'll get your scheduled at five one eight
four or five nine twenty one hundred and again a
reminder if you're interested in trusts, in how they work,
if you have one and you have questions or you
(24:41):
want to find out what's in them before you get one.
The Trust Administration Workshop.
Speaker 3 (24:46):
Is this Tuesday, so call.
Speaker 1 (24:48):
Only a few seats left September thirtieth and it's at
the Capital Region Chamber of Commerce twelve to one thirty
and you can register at pyrolaw dot com or again
and call our number five one eight four or five
nine twenty one hundred. Love to see you at the
seminar Tuesday at noon. And I'm here with Samantha Bryant
(25:09):
talking about a valuable asset in any family and that
is your primary home. But many families are lucky enough
to have a vacation home. And I love hearing the
stories of the families that bought the Lake George property
fifty years ago for fifty thousand dollars on the lake
front with one hundred feet of lake front, and now
(25:30):
it's worth five million dollars. It's it's crazy what God
only made so much property as they say, and he
ain't making it anymore.
Speaker 3 (25:38):
So when you.
Speaker 1 (25:39):
Have that valuable piece of property, you want to preserve
it and the memories that go along with it. So
a lot of problems come up when property passes from
one generation to the next. So mom and dad or
just mom and just dad, or whoever it may be,
owns that property, maintains that property, and you think of
(26:00):
about all the things that they have done for the
past fifty years, in paying property taxes, in putting a
new roof on the house, in maintaining the docks, in
doing all the things you need to do to keep
that property vibrant. And now Mom, dad or whoever is
no longer there, and that's when the real problems starts.
(26:21):
And so, Sam, you're talking about a limited liability company,
which most people say, well, that's a business, But for
this that business entity works really well.
Speaker 2 (26:32):
It does it. We were just talking about how it
will help with the management of the property both during
the parents' lifetime and then especially afterwards. You know, when
pent mom and dad are gone, they have the opportunity
via the operating agreements to then indicate who's going to
(26:53):
take over management. If there are multiple children, will they
rotate the management duties. Well, well, is one of them
particularly more inclined to do it than the others were
more interested.
Speaker 1 (27:05):
In doing it?
Speaker 2 (27:07):
Will that child old children who are managing be able
to be compensated for their time. Yeah, you know, all
of those sort of details can be addressed. And as
we talked about the details and use of the property,
you should be as detailed with the management of the
property as well.
Speaker 3 (27:26):
Yeah.
Speaker 1 (27:26):
What we like to do, what I like to do
is get to a point where we can have a
conversation with all of the stakeholders mom, dad, the kids.
We can include the grandkids, but that gets a little
messy sometimes, but all the people who are going to
have to be making these decisions now and in the future.
(27:47):
And then we go through a very detailed checklist of
all the things, and that people sit there and say, God,
I never thought about any of these things. Do these
things really happen?
Speaker 3 (27:57):
Yes, yes they do. They happen to you personally, and
you can be you can avoid.
Speaker 2 (28:02):
It, absolutely absolutely. It's such a shame when they're when
that doesn't take place. And you know, something as really
as simple as an entity like the limited liability company
that can be easily established where we can easily help
clients go through this operating agreement to help with the
(28:23):
details regarding the management and the just the longetivity of
the of the property and also of the family harmony
and unit.
Speaker 1 (28:33):
So in an LLC, the limited liability company, how does
management work?
Speaker 3 (28:37):
Is there flexibility?
Speaker 1 (28:38):
Is it just one way or can you kind of
modify it to your needs?
Speaker 2 (28:42):
Well, typically you have a manager managed LLC. In this
case it can be one or more managers. Uh, And
you have the parents typically who are the initial managers
of the LLC, and then as I mentioned, they can
go ahead and name their successors for management purposes.
Speaker 1 (29:02):
Right, And the kids don't really think about all the
time and money that mom and dad had pumped into
that property, and then when it flips to them, they say,
oh my god, that's right. There is work to be
done here. Somebody has to take on the mantle of
the manager and take this property and say, okay, I'm
going to make sure that the doc is right, that
(29:22):
the sidewalk gets fixed, the driveway is good, the.
Speaker 3 (29:25):
Roof isn't going to leak.
Speaker 1 (29:26):
All the things that you need to do, and oh,
you know that kitchen is forty years old, time to
remodel the kitchen. Are we all in And it's difficult
unless you have a structure to manage.
Speaker 3 (29:37):
Those decisions exactly.
Speaker 2 (29:39):
And you bring up a good point as the repairs
and improvements too, Updating things are typically less of an
issue in my experience, children typically agree when the kitchen
is forty years old that it's probably time for a facelift.
But sometimes you can set a cap or certain expenditures
(30:02):
and then also improvements. You know, maybe maybe the property
of it was ripe to have a DOC and it
didn't have one. You know, do we go ahead? Can
everybody agree that we're going to make this, you know,
go ahead and spend extra money to improve the property
because we're we want to use it, or maybe we're
renting it. So all of those issues need to be
(30:24):
accounted for.
Speaker 1 (30:25):
So during mom and dad's lifetime, how are we owning
that limited liability company?
Speaker 2 (30:29):
Typically, well, typically we like to have the LLC interest
in a trust.
Speaker 1 (30:38):
Right and that could be an irrevocable trust if they
want to do Medicaid planning, our long term care planning,
mapped Medicaid ass protection trust, or could be simply a
revocable living trust. But any asset like this, whether it's
land or an LLC, becomes a probate asset, and you
want to avoid probate because otherwise this gets tied up
(30:58):
for months sometimes years in court.
Speaker 2 (31:00):
Right, Yes, that is correct. I do a lot of
estate administration for the firm, so I know all too
well sometimes the assets that end up as probate assets
because they are not tied to an instrument such as
a revocable or irrevocable trust. And we have to go
(31:25):
through the circuits court in order to get an executor
appointed so that he or she has the power to
go ahead and transfer assets to the next generation. That
can take a very long time, especially if there are
disputes among the beneficiaries.
Speaker 1 (31:43):
Yeah, what if the real estate taxes come do? And
what if the roof is collapsing and all those things.
Speaker 2 (31:48):
No one has authority exactly, So in the meantime, what
do you do. It's just sitting there, and we really
try to avoid that, and it can be avoided.
Speaker 1 (31:57):
And an LLC inside of a trust is, folks, a
great structure because putting it in the trust, even an
irrevocable trust where mom and Dad aren't the trustees anymore.
We use LLCs to manage not just rental or real
estate primary residences, secondary residences, rental properties. We put investment
(32:18):
portfolios in there because we can get the asset protection
of the trust during mom and dad's lifetime with the
ultimate control as the manager of that LLC, and then
the management at some point is going to flip. So
the LLCs are useful for vacation homes, they're useful for
rental properties, they're useful for other types of investments, and
(32:38):
they provide a tremendous management tool and some asset protection
as well.
Speaker 2 (32:43):
Yeah, exactly, So not just the management, but also the
fact that the owners and members of the LC are
protected from personal liabilities, especially if that's houses being rented
or otherwise. You know, that's huge being used, absolutely huge.
Speaker 1 (33:00):
Someone sues the property on Lake George, they may get
the property in Lake George, but if their judgment is
more than the value of the property and the insurance
on the property, they can come back and get.
Speaker 3 (33:10):
Your assets personally.
Speaker 1 (33:11):
So if those three kids are just on the deed,
very innocuous, then they're gonna have personal liability in addition
to all the other problems that you have. So I
want to point out another thing, and that is I
mentioned earlier. Well, you have three kids, and each of
the three kids has three kids. I have a property
client and Vermont from New York that has property in
Vermont's of family property and several of the owners have died.
(33:34):
There are twenty seven owners on one deed, each with
a sliver of that property.
Speaker 3 (33:41):
It is a bloody mess.
Speaker 1 (33:44):
But you can have twenty seven owners of a limited
liability company and have tight management of that property.
Speaker 3 (33:52):
Yeah.
Speaker 2 (33:52):
Even I have an even worse scenario former matter where
the children were under the impression that the vacation lake
property was owned by their parents, and it turned out
that it was actually owned by their parents and their
(34:17):
aunt aunts and uncles. But they had no idea because
their parents were the ones who were taking care and
maintaining the property, paying the taxes for years and years
and years, nobody had ever expressed interest really in using
or visiting the lake property. So they were under the impression,
once mom and dad were gone, that this was their
(34:38):
lake property. And it turns out they had not quite
twenty seven other owners, but several others that they had.
Speaker 1 (34:47):
To That's like the Griswold family vacation, right, Spam Clark,
you took good care of that property.
Speaker 2 (34:52):
Yes exactly, and you know, had ten other owners suddenly,
and we had to do a quiet Title Act in
order to even be able to boil down who exactly
owned the property and ultimately was responsible for.
Speaker 1 (35:09):
When you sit around the table with three kids, the
parents think about the three kids, Okay, I think this
one could manage it, this one could pay the bills,
and it's you know, they see that they don't think
to the next generation and having a structure for the
three kids, which then goes on to the next generation.
And what we typically do in that scenario is we
have one voting member from each family.
Speaker 3 (35:32):
So they could have twenty two kids.
Speaker 1 (35:34):
One of them gets to vote so that it stays
within that three child circle, so they each have a
third of the voting control in managing it going forward.
So a lot of things that you may not think about, folks,
that we do. And that's why you use a thorough
checklist to cover all of these details. And what if
(35:56):
mom and dad say, well, I have three kids, they're
not all equal, and very often, almost always that's the case.
One has a great job, he's doing extremely well, and
he's set for life. One really can't put two and
two together. Has been in and out of jobs, doesn't
have any of the savings, doesn't have any money. And
(36:17):
then we have one who's a teacher and makes a
good living and we'll have a pension. But you have
very disparate financial situations. One thing that parents can do
if they have some other liquid assets is fund the
LLC beyond the property.
Speaker 2 (36:33):
That's true, yes, and then those funds will be available
so that the three children don't have to get into
an argument about who's responsible for what and what proportion.
Speaker 1 (36:47):
Let's talk about money, because that's what a lot of
people think about, especially when mom and dad are going
and who's paying the bills, who's collecting the rents.
Speaker 3 (36:56):
That's an easy problem.
Speaker 1 (36:56):
You got income, you can pay for the maintenance, pay
for the expenses, pay for the taxes. But what if
it's just family use property, you don't want to rent it,
and the bills come up and you have these expenses taxes,
and not everybody is either able or willing to pay.
Speaker 2 (37:13):
Yeah, Well, hopefully you have an account that's associated with
and held in the trust that can help with all
of the expenses that relate to the assets that are
held by the trust being the property.
Speaker 1 (37:28):
Right and even when they go on to the next generation,
that money can either go in the LLC or if
the kids are getting trusts, which we sometimes do after
their mom and dad passed, it stays in trust for
the kids. Then you can put the money in a
trust account. So thinking about that future, who's going to
pay the bills? How are they going to get paid?
And what if it comes down to one child or
(37:51):
two children that have the money that decide, okay, we'll
pay for now. How do you deal with that in
an entity like an LLC.
Speaker 2 (38:01):
Yeah, you know, you just have to break that down
similarly to the management and the use provisions. You break
down the payments, what's resources there for the payments for
expenses and then who's responsible for that?
Speaker 3 (38:17):
Okay?
Speaker 1 (38:18):
And in any business when you have partners, because an
LLC is typically a partnership, partners in a business get
something called a capital account, So how can you track
that in the LLC? So there's some equity long term?
So typically an accountant does this, right, the accountants do
(38:42):
the capital accounts for any business, but in this case,
the kids are probably going to have to do it.
So if I put in the five thousand dollars to
pay the property taxes and everybody else has put an
equal amounts up till now, my capital account goes up.
Speaker 3 (38:56):
By five thousand dollars.
Speaker 1 (38:58):
So if the property ever gets sold, I get paid
back for the money that I have put in. So
you can track children paying disproportionately and get them compensated
at some point down the road. Clearly, if mom and
dad have left other money, that money should be tied
(39:19):
into this to be used to maintain the property. But
if not, if one child is putting it up, then
they can do that. And what if their children sam
that don't want to be in the LLC? How do
you deal with that?
Speaker 2 (39:32):
Yeah, they can certainly have the option. Hopefully if the
LC operating your agreement provides for this to be bought out,
their interests can be bought out by the remaining siblings
who do want to have an interest in the LLC
and in the property, and then walk away with the
(39:53):
monetary share instead.
Speaker 1 (39:54):
Sure that always happens. We put those provisions in. It's
kind of automatic. If if you have three kids and
two don't what the property. One does, it's easy for
them to buy out the other two. You get an appraisal.
They simply paid them a third or thirdy third, and
hopefully there's enough money in the estate or in the
trust rather to make that payment. If not, they had
(40:15):
to come out of pocket, or they could get a
mortgage and pay their siblings out.
Speaker 2 (40:18):
That's right. And often parents will put in a provision
regarding if there is a buy out, what the purchase
price will be or should be, and sometimes possibly a
smidge at a discount or a fairly reasonable price. And
so that's already set forth.
Speaker 1 (40:40):
So as they say, folks, the devil is in the
details and when you see when and we do the
litigation on the back end of these things, and when
we see fit families siblings fighting, sometimes over very little money,
but very often it's financial fighting. We don't want to
have families put into that situation. So with good planning
(41:02):
with an LLC, the family vacation property can be extremely
well protected. The family members can enjoy it. They have
clear rights and responsibilities in the operating agreement, and that
will last for generations to come. As time passes, things change.
That LLC holds up and they can always modify the
(41:23):
LLC by agreement, so if they want to change provisions
and they all agree, and we even put voting provisions
in for.
Speaker 3 (41:28):
Those kinds of things.
Speaker 1 (41:29):
So if you have three or four or five people
and there's one holdout, you typically want it to be
by a majority, So a majority of the members can
all through, and all that goes into this operating agreement
through a very thorough conversation, nuanced conversation about the ownership,
the use, the payment of bills, all of those things
go in. When we come back, we're going to turn
(41:52):
the discussion from a vacation home to a primary residence
and look at maybe not an LLC, but a trust
the premiere vehicles to own property and pass it on
to the next generations. As always, you're listening at nine
am every Saturday morning on WGUHY to Life Happens Radio,
and we hope that you will be prepared. We'll be
(42:15):
right back and we are back. Thanks for joining us
this morning, Saturday morning. Here we are running through September. Salmon,
I can't believe we're almost into October, and you know
what that means, how much daylight, Halloween, snow soon colder temperatures.
Get ready, folks, it's coming. It's coming. We've had some
(42:37):
great weather in September and hopefully we get some more.
But it's a time you just have to kind of
get ready for the transition. Good time to do your
estate plan as you head into the winter before you
go to Florida like a snowbird, or to South Carolina,
which is where Samantha is from. So we're happy to
(42:59):
be with you today and we're talking about owning property.
What's the best way to own it. We started with
a vacation home, which is a little family jewel. How
do you protect it, preserve it, make it useful to
your kids, your grandkids. How can they make memories for
generations to come? And the LLC is definitely the premier
vehicle for that. But we're going to flip to a
(43:21):
home which is your primary residence, which has a little
different planning and a little different consideration in terms of
taxes and ownership and succession. And this gets very personal.
Do you have a child living with you, sam that
becomes a factor in some estate plans.
Speaker 3 (43:41):
Yep, for sure.
Speaker 2 (43:42):
We have increasingly, i would say clients that have multiple
generations in their home.
Speaker 3 (43:49):
The boomerangers. Yes, you thought you got rid of them,
but here they come.
Speaker 1 (43:54):
And a lot of families have a child that maybe
isn't working, maybe there's a disability there, maybe they have
some type of special need, and they may be living
with the parents. So we want to take that into consideration.
But generally, we want to make sure that our clients
have the absolute protected right to live in their home
(44:17):
and that no one can interfere with that right to
live in the home. The home is going to get
to the next generation with the least amount of cost,
tax probate, all of those factors, and if we want
to sell the home, we want to preserve the wonderful
benefits that we have from the tax code in the
(44:39):
sale of a primary residence. So when we look at homes,
and again I can't tell you if I had to
dye for every client that came in and said, well,
I didn't give anything away. I just put my kids'
names on the deed. And we talked about that right
at the beginning.
Speaker 2 (44:53):
What is that, Yeah, that's just a recipe for disaster.
You'd mentioned control. You mentioned somebody retaining the absolute right
to reside in their residence. For as long as they
like having the assurance that nobody can, you know, kick
(45:17):
them out of their own residence. So to convey the
property outright to the children while the parents are living
is just causes a lot of issues.
Speaker 1 (45:27):
Yeah, so tax issues, let's start with that number one.
You have in many cases a property tax exemption. In
New York they call it the star exemption. If you
happen to be a veteran, thank you for your service,
but you get a veterans exemption. And if you just
put the kids' names on the deed, that deed is
(45:49):
not just a deed. There are two tax forms that
go to the state and the county and it all
gets reregistered and for tax purposes, your children become the
property taxpayers and your star exemptions and veterans exemptions go away.
So that's one tax. There's another tax that if you
choose to sell the house and you want to go
(46:10):
into one of those wonderful senior living arrangements at the
Beverwick or the Avila or some of the other ones
around the Capital region, you have a capital gain on
and we talked about this earlier, the appreciation in your home. Well,
you get each spouse if it's a married couple, or
each individual gets two hundred and fifty thousand dollars in
(46:32):
exemption from capital gains tax. If it's a married couple,
five hundred thousand dollars of exemption from capital gains tax.
Speaker 3 (46:39):
And if you give it to your kids, how much.
Speaker 1 (46:40):
Do they get DERA None, They get no exemption because
it's not their home, it's not their primary residence, so
they don't get the capital gains tax exemption, and so
you lose that benefit. And there are solutions to this
that are very good solutions. If you want to pretend
the home and we say protect the home from what
(47:03):
from long term care costs? If you need home health care,
nursing home care, you want to make sure you protect
the home.
Speaker 3 (47:10):
Sam, what's our.
Speaker 2 (47:12):
Vehicle for that, Well, we have the Medicaid Asset Protection
trusts and those are wonderful vehicles to use where we
can transfer the property into those trusts.
Speaker 1 (47:25):
And that protects it long term. It avoids probate. As
we said earlier, Medicaid can't touch it. You have the
right to live there, and it keeps your property tax
exemption star veterans, it keeps your capital gains exclusion of
two hundred and fifty or five hundred thousand if you're
a married couple, all of those tax benefits stay with it,
and we have it going ultimately to the kids upon
(47:47):
your death. And remember that step up in basis folks,
where if they inherit it, all of that capital gain
washes away. That applies to this trust as well. So
your primary residence in a trust works really really well.
There's another trust we use SAM or revocable trust, and
just talk a little bit about that.
Speaker 3 (48:07):
It's simpler.
Speaker 2 (48:08):
Yeah, the revocable trust is definitely simpler. It allows the
same type of uh you know, opportunity for the property
to be transferred into the trust while the owner still
maintains the same benefits as before, except that the revocable
(48:29):
trust has the ability to be amended, revoked, revised. It's
a little bit more flexible of a tool, but as
far as the benefits of putting the real property into
the trust, it's similar to the MAPP.
Speaker 1 (48:44):
So we we do the revocable trust for a lot
of clients. It's what I happen to have personally for
my plan me as well, and then when I pass
and my wife passes, because it's a trust for the
two of us. It goes on to our kids and
I have a further trust for them so that the
assets can be protected for my children. And that's really
(49:04):
good because divorce protection is very important to parents. So
we have about a minute left and I just want
to wrap it Sam by saying thank you for coming
up from South Carolina to be with us today.
Speaker 3 (49:18):
Thank you for having me.
Speaker 2 (49:19):
It's always really exciting to be here.
Speaker 1 (49:22):
And in terms of the seminar coming up, don't forget
the Trust Administration Workshop is this Tuesday, September thirtieth at
twelve noon at the Capital Region Chamber of Commerce, twelve
to one pint thirty. Learn all about trusts inside and out,
and you can sign up at purolaw dot com. You
can always call us at five one eight four or
(49:43):
five nine twenty one hundred. And we look forward to
having you back here on the radio, and we hope
that we can do this on a repeat basis because
we love having loyal listeners and we hope to see
you very soon here on the radio. Care have a
great weekend and prepare for the fall.
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