Life Happens Radio, Hosts: Lou Pierro and Tom Marasco

August 16th, 2025. 

Episode Transcript

Speaker 1 (00:00):
Good morning everyone, Welcome to Life Happens Radio. I'm Lupiro,
your host for this morning, and we have a great
show for you. I have here live in studio, a
rare treat up from our New York City office. Tomaso
Morasco is here with me. Good morning Tom, Good morning, Lou.
Thank you for having me here in today's topic is
an interesting topic. Things are happening all around us. You know,

(00:21):
I hope you're not caught up in the twenty four
hour news cycle or twenty four minute news cycle. But
when we look at trends, and we look at global
trends and events and how things are happening in our country.
Right here in the United States, there is a transition
going on. And that's because of the population aging and

(00:41):
because of the concentration in wealth that has gone on.
And right now we have generations the greatest generation. We
have Baby Boomers, we have millennials, we have Gen Xer's,
we have gen Zer's jen wires, and I'm not sure
what comes after that, but out of wealth that is

(01:01):
due to transfer from generation to generation over the next
twenty five years is get ready for this number one
hundred and twenty four trillion dollars. That's it can't even
put that on a blackboard. That's a lot of zeros.
One hundred and twenty four trillion dollars is going to
change hands. Now, what does that mean to the average American?

(01:24):
What does wealth mean to you our listeners on Life
Happens Radio? When it means different things to different people.
We all have some form of wealth, whether it's financial wealth,
or emotional wealth, or intellectual wealth. We have things that
we bring with us in life that we want to
transfer on to our children, our grandchildren, our next generations.

(01:48):
And it may be it's your home, and we talk
about the home all the time. The home is almost
a sacred asset. It's where you grew up. It's the
house that you built, it's the house that you raise
your family in. And when it comes time for that
home which has appreciated in value, hopefully and has become
an asset that you can transfer on to your kids,

(02:11):
is it protected. Have you done the right things to
protect your home and make sure that it's right for you,
that you have the rights to it for the rest
of your life, but that it gets to the people
you love and want to benefit in the right way
and what we've seen tom over the last probably twenty years.
And this is due to law changes and economic changes.

(02:33):
When I started my career and i've been practicing law,
I admit to this, it's forty two years. And when
I started practicing law forty two years ago, many of
the clients that I serviced were General Electric people. They
were Lockheed Martin people, they were IBM people, and they
came to us with Okay, yes, I have a home,

(02:54):
I have some savings, I might have some bank accounts.
I might be you know, forty years ago, not that
many people. We're in the stock market yet. But they
had a pension and their company gave them the pension.
So you work for GE for forty years, you retire,
you get health benefits, you get a fixed pension, you
get a check in your mailbox every month, and that's

(03:15):
what you worked for. But that system disintegrated, it imploded,
and those big pension plans went away, and pensioners saw
a retrenchment of their benefits right down to the health benefits.
So people were asked to save themselves. Put your four
oh one k in play, Put as much money into
your four oh one k as you can start an IRA,

(03:38):
save for retirement, put money away tax deferred. These are
tax deferred vehicles, so you put money away, you don't
pay tax on it upfront, you pay tax when you
take it out later. Those are qualified retirement accounts IRA
four oh one, K, four oh three, B four fifty seven.
And when clients come to us, now, in most cases,

(04:00):
the major asset or the second major asset is a
retirement account, and that's a very different dynamic. And you've
been practicing law, now how long.

Speaker 2 (04:09):
I'm going on twelve years?

Speaker 1 (04:12):
Twelve years, So in twelve years you kind of grew
up in this environment with retirement accounts being one of
the major assets. But they just keep growing, and the
numbers of assets, the amount of assets inside of qualified
plans keeps growing exponentially every year because it's compounding on
a tax free basis, not tax free tax deferred. So

(04:36):
one of the things that we're going to talk about
is when you have built up this nest egg and
you have a home and you have a retirement account,
how do you make those assets work for you for
your lifetime? What are the best strategies to deal with
your home and your retirement account, and how do we
maximize the value for you and then maximize the value

(04:58):
for your beneficiaries because wealth transfer is the efficient process
of transferring wealth from one generation to the next that
takes financial planning and on WGY. We're fortunate to have
colleagues here both before and after us, Dave Kopek who

(05:18):
just left the studio, Steve Bousche, people who deal with
the financial aspect of this, and it's critical to have
a team where the financial side is covered and the
legal side is covered. So we're going to talk about that.
Then you look at the other assets, and again, every
client is different. What's your experience when a client comes in?

(05:39):
What are you seeing and you're working primarily in the
New York City and Long Island offices, Yes, I don't
know that it's that different than up here. But what
are you seeing in terms of the clients that come
in and what they bring with them in terms of assets.

Speaker 3 (05:51):
So I think the one of the biggest things does
just remain real property, right, whether that's a house, whether
it's a condo co op. That's usually the number one.
And as you said, retirement accounts are the big second.

Speaker 1 (06:06):
Yeah, you mentioned something that Upstate wouldn't resonate with ops
R cooperative apartment and Tom happens to be an expert
in co ops and deals with co op transfers all
the time. But a co op is where you own
You think you own real estate, but you really own
shares in a corporation, correct, and you have a lease
to an apartment, which is true. And this is one
of the most popular methods of ownership in New York City,

(06:28):
yes the way, not the rest of the country.

Speaker 2 (06:31):
Not definitely, not the rest of the country. New York
City for sure.

Speaker 3 (06:33):
A majority of New York City is either a condo
or cooperative apartments, and they usually fall on the sides
of cooperative apartments. But as far as the other assets go,
as you pointed out, LOU retirements are one of the
next biggest items on that asset list, and then obviously
whatever they do as far as liquid form, that varies

(06:55):
depending on how it's invested, whether that's over you know,
a stock portfolio or CD savings checkings. But the majority
of wealth other than also business interests, I would say
it would be houses, co ops, and retirement accounts.

Speaker 1 (07:13):
So if we go down the asset list and when
we meet with clients, we send them an online questionnaire,
and they have an opportunity to confidentially and securely provide
us with information. And that is all of their financial data.

Speaker 2 (07:26):
What do they have.

Speaker 1 (07:27):
We don't want to count numbers. We just want the
type of account, how it's owned, who the beneficiaries are,
what the values are. So you go through the myriad
bank accounts of checking, savings, money markets, CDs. Each of
those is a bit different, and we have clients that
try to play the CD market and get another you know,

(07:48):
percentage point tenth of a percent better over here than
they get over there, which is fine. Money markets have
some good interest rates. You can get a four plus
percent four point two four point three percent money market
great to return right now, which is pretty good. And
your checking account isn't paying a whole lot of anything.
In savings accounts pay very low rates of return. So

(08:09):
in bank accounts, you want to make sure that you're
looking at the portfolio of different banks, different accounts. Are
they the right accounts for you? Are they managed properly?
Checking accounts, you want to make sure you have your
liquidity flowing through there to pay your bills. But the
bank portfolio is one segment of this questionnaire, and then

(08:29):
you get to the retirement accounts, and then you get
to the brokerage accounts, and far fewer people have had
an opportunity to take money and put it into a
separate brokerage account. Most people are invested in the stock
market through a.

Speaker 2 (08:44):
Retirementw that's correct exactly.

Speaker 1 (08:46):
So when you have a portfolio outside of that, you
may have Schwab Fidelity, or you may have a personal
investor that's working with you. You have assets that are
being managed, that are growing, that are part of your
wealth health. And you know, I like Dave's take on this.
It isn't how you grow your assets, it's how you

(09:07):
use your assets. Are you growing them with a purpose?
What is the purpose for that stock account, for that
brokerage account? Is that the legacy asset? Is that what
you want to leave on to your children. You want
to use your ira up during your lifetime, take it out,
pay the tax, use that to live on. And then

(09:28):
when we look at investments bank accounts, you may have
a business that has to be factored in. You may
have rental real estate, you may have life insurance, you
may have annuities. All of those assets have to be
evaluated because that is your wealth. That is the definition
of wealth is those assets that you have control of,

(09:49):
ownership of access to, and that you control long term.
And Tom, I think the number one thing, and I
try to get this across the clients when they come in,
just to give them a comfort level, because when clients
come to a lawyer, very often they've heard things that
are not positive. Sure, they're fearful that you know they're

(10:10):
going to get taken advantage of, and they're a little
scared that they're going to give up control of something.
So the first thing that I do to quell that
anxiety is say, okay, my goal for your plan is
your goal? What do you want to accomplish here? And

(10:32):
I said, here, to me is the most important thing.
I want to be secure and have income to support
myself in a decent lifestyle for the rest of my
life goal number one. And if we can't get past
goal number one, then there's not a lot more that
you need to do. You need to focus on that.

(10:53):
But when you look at your social security, your pension,
your IRA required minimum distribution, your dividends and interest income,
you look annuities that you may have putting all that
income together, what are your needs, what are your expenses,
and what are the assets that you can put in
play for transfer of wealth. But it's like when you

(11:14):
get on an airplane and they go through the spiel
and the flight attendants are up there with the seatbelts
and they say, okay, when the oxygen mask drops down,
take it. Put the strap around your head, and you
breathe first before you can help anyone else. So until

(11:34):
you feel confident that you have enough income to secure
your retirement and to live for the rest of your life,
and the rest of your life, folks, could could be
a long time. I'm going to a birthday party tomorrow
for my aunt who I talk about on this show
on a regular basis, my aunt Nettie, who turned one

(11:56):
hundred and three on Thursday. So we're having a celebration
on Sunday tomorrow to talk about her life and her
one hundred and third birthday and celebrate her. But you
want to make sure that you can sustain yourself. It's
right throughout that retirement. So clients coming in tom You're
sitting now with clients and you're doing these consults on

(12:17):
the day to day basis, just like we are up
here and you're doing them down to the city on
that long island. What are the common concerns and the
common issues that clients raise with you that you then
have to work them through.

Speaker 2 (12:31):
Yeah.

Speaker 3 (12:31):
So one of the things is kind of funny because
sometimes they always they take the standpoint, well, I don't
think that I have that much or I don't really
think that there's much I need to do until we
start going over the asset list, and maybe sometimes things
don't come to mind, but then we start asking the questions, right, well,
what about this kind of account?

Speaker 2 (12:49):
What about that? And then they're like, well, yeah, you
know what, I do have this, and I do have that.

Speaker 3 (12:52):
And then by the time you put it all on paper,
they're looking at it and they take a different vantage
point and they're like, oh, wow, I didn't realize that
I have all the things and how they come and
interplay with everything.

Speaker 2 (13:02):
But speaking to what you addressed.

Speaker 3 (13:04):
Before, the biggest thing is, well, they don't want to
lose control, and the other concern is but I also
want to make sure I'm making things as easy as
possible for my family.

Speaker 2 (13:14):
I want to set them up. I don't want anybody
to have.

Speaker 3 (13:17):
To struggle or go through such a hardship when I'm
no longer here in order to get it, and I
want to make sure I'm doing the right things now
to make sure that that happens.

Speaker 1 (13:26):
So stay with us. We're gonna talk about the next step.
Once you feel comfortable and confident that you have your
assets and your income positioned for success, you're going to
be able to access them, use them as you need them,
get the income that you need to support yourself. What

(13:48):
can derail that plan? What's the number one risk that
can derail that plan? And that's my teaser. So stay
with us. We'll be right back after this short break.
You're listening to Life Happens. I'm Talkgy. We're back. I'm Lupiro,
your host for this Morning in Studio with Tom Morasco.
Tomaso Morasco are associate from New York City and Long

(14:10):
Island working in the Downstate offices, and we're going to
talk about the number one risk to your retirement in
just a moment. But this study and we've been reading
up on it, Tommy and I for this show, and
when we look at it, the wealth transfer. I mentioned
that at the top of the show, one hundred and
twenty four trillion dollars will transfer and change hands over

(14:32):
the next twenty five years. What is your slice of
the pie? You know, it varies, but whatever it is
you want, that's the most important assets in the world.
Are yours? Your assets, not what other people have, not
that one hundred and twenty four trillion, but your home,
your retirement account, your bank accounts, your brokerage accounts, your business.
Those are the assets that we deal with for you,

(14:55):
that we make sure get put in the right place,
the right way, so that you have access, control and
can use those assets for the rest of your lifetime.
But one of the phenomenons that they talk about here
is a lot of the wealth is going to be
what they call horizontal transfers, going not down to children,
but over to spouses. So and the study says women

(15:19):
are due to inherit much of the coming fortune. Widows
from the Boomer cohort are expected to receive forty trillion
dollars in horizontal transfers. Over twenty eight million women will
become chief asset managers in their families as they outlive
their spouses. The average interspousal transfer is one point four
million dollars so huge. As you're doing your planning as

(15:43):
a family, sometimes the life is the mess the asset manager,
the billpayer and in control of all the finances. And
we certainly see that on a regular basis, but more
often than not, the husband has been working and earning
and managing and it's going to be a transfer to
someone who doesn't have the same experience, doesn't have the

(16:04):
same acumen. So part of the estate plan really should
be education, absolutely and getting up to speed on how
you can put a plan in place that makes sure
the assets are properly managed during both spouses lifetime and
then ultimately for the children. And we're going to talk
a lot about that in the second half of the show,

(16:25):
But let's go back to our number one risk, Tommy,
in terms of what could derail a plan as you retire,
what could be the drain on that income that just
takes it right out of the game.

Speaker 3 (16:39):
Long term care costs absolutely without hesitation. We don't know
what kind of care we might need in the future,
and it's hard to anticipate those needs. And from our experience,
we know that whether that's home care on a twenty
four hour basis or even if it should come to
the fact that we need a facility. We were talking

(17:01):
health care costs upwards of ten, fifteen, twenty thousand dollars
per month.

Speaker 1 (17:06):
Yeah, an average nursing home even upstate now is seventeen
to eighteen thousand dollars a month. Long Island is a
little bit more. Yeah, And so twenty thousand is the
number we're talking about next year, that's right, And that's
two hundred and forty thousand dollars a year. Yeah, And
a lot of people don't have two hundred and forty
thousand dollars in life savings.

Speaker 3 (17:27):
They don't, and that's not something that they kind of
accounted for when you're saving and you're in the think
of it that those are not the kind of costs
that you're anticipating. You think of your ordinary bills, well,
what do I need on a monthly basis to sustain myself?
But you're talking about your current situation, not what is
going to happen in the future, and that that's a
completely different picture.

Speaker 1 (17:47):
Yeah, and this is a much bigger discussion than we
have time for in today's show. But healthcare and long
term care are getting nothing but worse. Right, just went
through the spill system, and it's a mess. I went
through the er at Albudy Medical Center last week, and
it was challenging for someone who is fairly cognizant of

(18:10):
what's going on and asking a lot of questions and
still just kind of going through the system without getting
a lot of information, without really knowing what's going on,
and the cost of the care. I haven't seen the
bill yet, but I can only imagine it was two
days at AMCCH what that cost is Now. I have
private health insurance and I'm hoping that covers most of it.

(18:33):
But what if instead of that, I had an accident
or an illness that put me into rehabilitation and then
put me into a nursing home totally. What do you
do when that crash happens, when life happens? What do
you do to pay for care? And there are only
three things that people can do, and one of them

(18:53):
is to buy insurance. There's long term care insurance. There's
not a lot of choice in New York State. Unfortunately,
there's only a couple of companies left selling it. We
talk about it on this show, and we have our
guests on Bob Vandy, who is the foremost expert in
this area, and Bob talks about what's out there, and
there are still viable insurance options, and you have to

(19:15):
consider these if you're appropriately aged and healthy enough. And
most of these are now life insurance based, So you
can go buy a life insurance policy which is going
to add to your estate plan, add to your legacy.
But if you need long term care, those dollars, those
same dollars. Let's say you buy a five hundred thousand

(19:37):
dollars life insurance policy, you can design it so that
that five hundred thousand dollars is available to you to
pay for your long term care during your lifetime. And this,
to me, is the premier option available today to finance
long term care. And the reason I am becoming more
and more bullish studying more and more what's available and

(19:59):
how these policies work is that Medicaid just took a
big hit, and Tom, the only other program out there
is Medicaid, That's right.

Speaker 3 (20:09):
So the only thing other than that of other than
is private pay. So, but with Medicaid, whether it's community
based or nursing home Medicaid, those are the only other
options that you have to kind of you know, kind
of curb the cost of long term care. Again, both
require requisite planning, however, and it's very important to make

(20:30):
sure that you're evaluating your situation and if we can't
afford the long term care, because that's That's the other
thing too, is that these plans are also pretty costly.
And so as lew is saying, if you're not in
that requisite field where you are prime for that type
of a product, then you need to be looking at Medicaid.
If you're not a person who's going to be able

(20:50):
to privately pay for that type of care.

Speaker 1 (20:52):
Is it are you ensurable?

Speaker 2 (20:53):
Right?

Speaker 1 (20:54):
Is it affordable?

Speaker 2 (20:55):
Correct?

Speaker 1 (20:55):
Can he gets covered? Abs? And if you can, I
recommend to clients all the time, put in your portfolio.
It will save you at the end of the day.
But one trillion dollars is being cut from Medicaid due
to the OBBBA, the Big Beautiful Bill, which is giving
tax cuts the corporations and high net worth individuals and

(21:18):
at the same time cutting benefits and benefit programs. We'll
see what the real fallout is. But you can't believe
everything you see in here. But the people that have
analyzed this, and I had Greg Wilson, the State Director
of the Office for Aging, who've done the analysis, who
ran the numbers. This will have significant impacts on healthcare

(21:38):
and long term care all the way down the line.
You don't cut a trillion dollars out of Medicaid without
some pain, of course. So what's available today in New
York State is pretty good, but it's not getting better.
It's getting tighter coverage, availability, eligibility. We're going to take
a short break for the news, and when we come back,

(21:59):
we're unpack long term care planning. So how do you
prepare yourself for this second bullet protecting yourself from long
term care costs and healthcare costs, and how to create
the plan that can make your retirement successful. Stay with us.
You're listening to Life Happens Radio, Lupiro, Tom morasco in studio,

(22:22):
and we hope that you were enjoying the show. When
we come back, I'm going to put the phone number
out there in case you have a question. We'll be
back right after the news. Welcome back to Life Happens.
We are back, fast and furious with that music, and
we're going to have a great second half of the show.
I hope you can stay with us and I'm going
to give that phone number out that I promised right now.
So if you have a question for either Tamaso Morasco

(22:44):
or myself, give us a call. Eight hundred eighty two
five five nine four nine. That's eight hundred talk WGY
eight hundred eight two five fifty nine forty nine. Be
happy to take your call. Tom. We talked about putting
your own oxygen, your mask on and making sure that
you're secure, making sure that you have enough income and

(23:06):
that you have managed your wealth properly and your retirement properly.
Next is securing that retirement, securing that income, and the
number one risk is long term care. If you have Medicare,
which everyone gets at sixty five, Medicare is an entitlement.
You don't have to spend your assets down, you don't

(23:28):
have to meet financial criteria. You get Medicare, but it
pays basic health care. It does not pay for long
term care.

Speaker 2 (23:36):
Correct.

Speaker 1 (23:36):
So when you go to the next level, you either
have enough money of your own to pay that two
hundred and forty thousand dollars a year for long term care,
or you're going to buy insurance to defray that cost,
or you're going to rely on medicaid. You know, those
are the only two financing options, private insurance and public insurance.

(23:58):
And that's what medicaid is is public insurance. But it's
not without cost. There are strict eligibility limits. Tell our
listeners how you have to arrange your assets or spend
your assets down to qualify.

Speaker 2 (24:12):
Absolutely.

Speaker 3 (24:12):
So there's two main kinds of medicaid. There's community based
medicaid where you remain in your home and you have
aids that come to and help you with your requirements
of daily living. Or there's nursing home, long term care
facility medicaid. Now, both of them have an asset requirement
of roughly thirty two thousand dollars that in individuals allowed

(24:34):
to have in their name, and that's across all assets.
Now the home up to a certain amount they'll exempt
just for purposes of qualifications. So I'll circle back to that,
that doesn't necessarily mean that it's protected. And they're going
to look at every account that you own, even if
it's jointly held. They are going to be looking at
all assets. So the number there is thirty two thousand.

(24:55):
As far as community best medicaid, they also are going
to be looking at your income levels. As an individual,
you can have up to roughly around eighteen hundred dollars
per month. That doesn't mean that if you have over
that it necessarily you will not qualify. There are other
steps that we take and implement other tools in order
to get you qualified using the income. But the main

(25:15):
point here is that a lot of this stuff should
not be left to last second, especially with nursing home Medicaid,
because there is a look back period as it comes
to that, and there's a five year lookback period. So
it's not something where we want to wait till last
second and believe that we're going to have the same
kind of flexibility and options that we would if we
were preemptive in our planning to making sure that we're

(25:37):
qualified or at least in the best situation possible if
and when that need arises.

Speaker 1 (25:42):
And again there's a balance in planning here between private
planning and public planning and getting government benefits. You know,
we're all taxpayers. We all have paid our fair share
of taxes into the system. Well some of us have,
others have escaped somehow. But when you pay your taxes,
you get Medicare, you get access to Medicaid. That Medicaid
qualification rules are somewhat complex, but that's what we do,

(26:05):
right as part of a plan. And we're going to
talk about trusts at the end. So on gets through
the next three bullets and then we'll go with the
planning and trusts. But you can structure your plan in
such a way that you still have access to all
of the income. Right, there are ways you can access
the principle you may have to have another trustee, but

(26:28):
you can control entirely who that trustee is and fire
them at any times. Right, And you can have that
trust set up and work for you have full rights
to your home. Your IRA doesn't have to go into
the trust, I mean, and this is a really big point.

Speaker 3 (26:43):
Oh yeah, So the principal value of a retirement account
is not considered or part of the qualifications for Medicaid,
and it is protected and which is huge as we
were talking earlier, as one of the biggest assets that
people have are the retirement accounts. So as far as
the income and what you need to sustain yourself, you
have access to that and that's not something that is

(27:04):
going to cause an interference with you and qualifying for Medicaid.

Speaker 1 (27:09):
So iras we put on the left side of the diagram.
The other assets that we want to protect we put
on the right side, and that's in a trust. We'll
talk about that in a minute. And at the end
of the day, you've set yourself up so that you've
protected all of your income. And this is what we
talked about step one, put the oxygen mask on. I

(27:31):
now have a plan that I haven't lost a penny
of income, so I have my retirement income and I've
been able to protect my assets at the same time exactly.
And that's the key, and that's the plan that we
talk about all the time, our long term care plan,
which is a Medicaid asset protection trust plan. We'll get
to that a little bit more as we talk about

(27:52):
the estate planning side of this. But the next bullet here,
Tom and I'm gonna give the phone number out one
more time eight hundred talk WG. Give us a call,
Tom and I are ready to answer your questions. Eight
hundred eight two five fifty nine forty nine Outliving your
next your nest egg is the next bullet. So giving

(28:13):
away assets without having an ability to get them back
is a dangerous game.

Speaker 2 (28:18):
Very dangerous.

Speaker 1 (28:19):
So when you talk to clients, Tommy, how do you
structure it so that they can move the assets as
we just talked about for asset protection or the next
bullet is tax planning. We'll get to that next, But
how do you do this in a way that you
can still have serious and significant controls and access to
those assets?

Speaker 3 (28:38):
Again, we're going back to a trust plan at that situation.
And if it's not something where it needs to be
long term care, there are other trust vehicles that we
can implement. But the trust, the way that it is designed,
allows you to have that flexibility and trusts.

Speaker 1 (28:52):
If you ask an attorney, you know, how do I
solve this problem in my estate? It's it's a trust,
that's exactly. That is the tool, the main tool in
the toolbox. And you know, think of it as a
drill with drill bits. You have a trust chassis, but
every drill bit is different, different size, different shape, different speed.
But you're going to do things a little bit differently.

(29:14):
But a trust is something that serves our clients' needs
and can be done in ways that protect not only
the client and we're going to talk more about this,
but the client's beneficiaries, the children, the grandchildren, the family,
creating that legacy so that the assets that you've accumulated,

(29:37):
you've protected for yourself, you've kept access to them, you've
kept access to your income, but you're going to now
put them into a place where they're safe, secure, and
available to your family without any creditor risk exactly. And
that's something we'll talk more about in a moment. But
let's talk about the tax side of this bullet number four,

(29:58):
minimizing tax liabilities. People who don't follow this hear about
something called the death techs. George W. Bush focused on that,
harped on that we got to eliminate the death tax,
and they did. Bush put in a ten year plan

(30:20):
started in two thousand and one and ended in twenty ten,
with a gradual ramp up. When he started, the exemption
was one million dollars and that's just George W. Bush,
one million dollars, and then it ramped up to two
and a half, three and a half. Twenty ten, it
was repealed and because of a technicality, it had to

(30:43):
be sunset in twenty ten, and it was supposed to
come back in twenty eleven, back at one million dollars,
but there was a compromise. They brought it back at
five million dollars. So in twenty ten it was zero.
In twenty eleven you had a five million dollar exemption,
and then it's grown. And then President Trump, through the

(31:04):
Trump Tax Cuts in twenty seventeen, doubled that to ten
million dollars, indexed for inflation. And then in the most
recent Big Beautiful Pact, he locked in the new exemption
at fifteen million dollars per person. So a married couple
automatically gets a thirty million dollar exemption from the death tax,

(31:26):
or what we call the estate tax. Thirty million dollar
exemption for estate tax purposes. Compare that to twenty two
thousand and one one million dollars. Huge significant, Yeah, but
married couple, it was two. But you had to do planning.
There was no portability exactly. So you had two million
dollars in two thousand, you have thirty million dollars in

(31:49):
twenty twenty five. And that's the exemption for a state tax. Federally.
Now we're in New York, most of us most of us,
and if you're a New Yorker, you know you pay
more tax ways. So the new York tax is a
little bit different. Tom's what are the differences between federal
and state estate tax?

Speaker 3 (32:06):
So the difference there is that the number obviously is
much lower, So for New York State, we're roughly around
the seven million mark. But the difference here is that
once you go over that benchmark, there are some significant
repercussions depending on how far you go over that benchmark,
and if you exceed one hundred and five percent of that,

(32:27):
which in dollars wise doesn't amount to be so seven
point seven exactly, but once you go over that, they
call it the cliff. You get taxed on the entire amount.
You don't get taxed on just the difference from the
seven million to wherever you're currently at. They go back
to dollar one and you lose that. And then also
significant in New York is that there's no portability as

(32:48):
there is with federal tax. So where a married couple
federally could have that thirty million collectively, in New York,
each spouse can have up to each seven million per person,
but that requires planning in order to utilize and make
sure you're taking advantage of the exemption. Upon the passing
of the first spouse in order to secure that.

Speaker 2 (33:07):
For the second so.

Speaker 1 (33:08):
If your wealth is approaching seven million dollars, you have
to be concerned about a state tax, and we do
plans for this, and there are good ways to do
the planning where you can double that exemption and use
trusts again to do the tax planning. You can get
up to fourteen million for a married couple gifting in
New York. There's no gift tax, correct, So whole set
of unique rules for New York. But if you're under

(33:31):
seven million dollars, the estate tax is not your main
main enemy.

Speaker 2 (33:36):
That's correct.

Speaker 1 (33:37):
Income tax and capital gains.

Speaker 2 (33:40):
Tax that those are where you are.

Speaker 1 (33:41):
Your main enemy, because that's where you can get trapped.
And the biggest asset that has income tax inherent and
it is the IRA's right. So the law changed back
in twenty twenty nineteen. The first time, yeah, the Secure
Act was passing and then you had Secure Act two
point zero after that. What is the Secure Act and

(34:02):
what was the main consequence.

Speaker 3 (34:04):
The main consequence is that it affects the way that
that payout is to the beneficiaries over time. And we
used to be able to have lifetime stretches, which basically
would minimize the tax impact on the beneficiary while also
allowing that nestick to continue to grow in compound interest.
But now it's significantly changed. So if you're a spouse

(34:27):
or you are a disabled child, then yes you can
still have that same right to a lifetime stretch. But
now any other beneficiary or a designated beneficiary, qualified beneficiary,
they is reduced that to now ten years and could
be even further depending on how things are worth it.

Speaker 1 (34:45):
So, if your main asset, folks, is that IRA four
three B that we talked out talked about at the
top of the show, you're pulling money out of that
and as you pull it out, you're paying income tax
on it, right, but you're stretching it out over a
long period of time. And the distribution that you take
in year one, because you start at age seventy three,

(35:06):
that is your required beginning date. So as you're looking
at this, if you haven't gotten there yet, that's when
you'll have to start drawing. And the first distribution from
your IRA is about three point six percent based upon
Life expectancy tables special tables, it's a joint life table.
They give you a very generous ability to continue to defer.

(35:29):
So when people start drawing their iras, they think, oh
my god, I'm going to lose the IRA. But for
many years it continues to grow if it's invested properly correct.
So if your rate of return is five percent very conservative,
and you're taking out three point six you're continuing to
grow the asset.

Speaker 2 (35:48):
You're not outpacing your money.

Speaker 1 (35:50):
Right, and then your next year contributor distribution is based
upon the new value on December thirty first. So you
have this rolling forward amount of money that I call
a ticking time bomb because upon your death, that time
bomb lands in your children's hands and they then have
to look at it and say, Okay, I have this money,

(36:10):
but I'm only going to get about maybe sixty percent
of it because I have to pull all of this
money out over the next ten years and pay tax
on it. So that has become one of the primary
planning opportunities for people is how do I maximize the
stretch on that IRA. And we have some very sophisticated

(36:32):
tools like charitable trusts, right, but things just like a
Wroth rollover and a Wroth conversion have become extremely popular.

Speaker 3 (36:40):
They have that way the at that point there's no
tax because you're going to pay the tax upon the
initial transfer into the WROTH, but then any future growth
or appreciation at that point there's no tax being paid
on it as it's being drawn at a later date.

Speaker 2 (36:56):
So huge savings.

Speaker 1 (36:58):
As you're looking at the one of Okay, this is
my oxygen, you know, my IRA is my oxygen. This
is my income, and I'm going to take income out
of this at a rate that's going to draw it down,
so it's not going to grow. I can have more
left than when I started. I'm going to use this
as my income, and so I'm not really planning on
a legacy with that asset. But if you're saying, well,

(37:21):
I'm using the IRA, but I don't really need all
of the IRA money. I just need the r m
D and it's going on to the kids, a roth
IRA gives them an opportunity upon your death, you've you've
converted it. It's now growing tax free, right differ free,
and when they inherit it, they have that same ten

(37:42):
year time period, but they can allow that account to
be deferred another ten years on a tax free growth basis.
This is extremely powerful and when you run numbers on it.
They're stounding as to what that legacy can be. So
if the IRA is a legacy asset, right, if it's
an asset that you intend to leave on to the

(38:03):
next generations, a roth conversion absolutely needs to be considered. Absolutely,
if it's your oxygen. If you're pulling the money out
of the IRA, then you just do what you're doing,
stretch it out, use it as you need it, right,
that's the money that you're gonna use. So income tax
comes from all different types of assets. Annuities, right, are

(38:23):
traps for people. Of course, how many people have you
seen ben sold annuities never told that that income trapped
in the annuity is ordinary income to the beneficiary.

Speaker 3 (38:33):
More than I can count, unfortunately, So a lot of them,
they get packaged in different ways, and they're sold in
different ways, and a lot of them, what I find
most astounding is the clients don't even really understand how
it works. They just know that, Okay, I'm supposed to
be getting a certain amount of money over time, and
then that's really where the appeal is, but without really
truly comprehending what that product is, and as you said,

(38:55):
not realizing that what that income. But the significance of
that income is to them.

Speaker 1 (38:59):
So these are assets that are very highly appreciated. In
many cases, they've been deferring income over time, and the
benefit is, well, okay, here's your check and here's your
ten ninety nine. Because all the growth is ordinary income growth.
So you have to manage your investments and the tax

(39:22):
consequences of your investments very carefully, and they intertwine. So
the other tax is capital gains tax, and a lot
of clients don't really know what that is, but basically,
if you buy a certain type of asset, your home,
other real estate, you have a business, you buy stocks.

(39:42):
Those assets appreciate in value. So a stock you bought
it ten goes to twenty. You now have a twenty
dollars value, but a ten dollars capital gain. And when
you sell that stock, you realize the capital gain and
you have to pay capital gains tax on it. Correct
and there's federal capital gains tax. And if you're in
New York, New York, the New York byte is very

(40:05):
significant because New York doesn't distinguish between ordinary income and
capital gains. So whatever your New York state income tax
rate is, that's what you pay in capital gains. Federally
it's about twenty percent top rate fifteen percent for most people,
right is the capital gains rate. But when you die,
assets get stepped up in basis.

Speaker 3 (40:26):
That's right, provided that you hold onto them. And so
what's one of the other traps that I've see client
smak into is gifting.

Speaker 1 (40:33):
Absolutely, So what happens when you gift to a home? Oh,
I just want to put my kids' names on the deal.
I can't tell you how many times, so many times
just want to put my kids' names on the deed.
What are they setting those kids.

Speaker 2 (40:44):
Up for disaster?

Speaker 3 (40:46):
Tax disaster, because what they're doing is inheriting their parents'
basis at that point. So if you purchase the home,
however many thirty forty years ago at one hundred and
fifty thousand, and now it's appreciated to eight hundred and
fifty thousand, for example, they're not going to get a
step up in basis. If you gifted to them outright,
they're going to inherit your one hundred and fifty thousand
dollars basis and then upon your doubt or whenever, that is,

(41:07):
if it continues to appreciate and they go and sell it.
They're the ones you're going to get hit with the
capital gains tax.

Speaker 1 (41:13):
So it's counterintuitive, but for tax purposes, for most clients,
we want to include all of their assets in their
taxable state one hundred percent, and we create trusts that
are trusts for Medicaid purposes. So you've gotten rid of
the assets for Medicaid asset protection, but you've kept them

(41:33):
in your state to get that step up in basis exactly.
And you can go up to seven million dollars and
still get a full step up in basis on all
of those assets without any estate tax exactly. And so
tax planning is part of all this. We're going to
take our last break of the day and wake come back.
We're going to talk about the planning phase of this.

(41:54):
What are the tools that we have available to balance
out your income, need, your desire to leave legacy, the
tax management of your assets. All of those things get
rolled into your plan and when we come back, we'll
roll it out. I am Loup Pierrow, and it's very
thankful for you to be our listeners today. It's a
Saturday morning here in the Capitol region, a little bit gloomy.

(42:17):
I hope you're having a great weekend, and I hope
things in life are going your way. We're talking today
about planning, and if you're in the phase where things
are going your way, that's the time to plan. And
I believe it was JFK who said the time to
fix a leaky roof is when the sun is shining.
And so when you're feeling good and feeling robust and

(42:39):
I can take on the world, get your plan done,
because tomorrow you may be like me up in that
hospital bed in the er saying, Okay, what's tomorrow gonna bring.
What's the diagnosis? Doc? What am I gonna get in
this roulette wheel of health? And you don't know. You
just never know. So we're talking about creating a plan

(43:00):
that protects you and your income, making sure that you've
budgeted properly, that you are maximizing your income, that you
have it all available to you, and that you're protecting
the assets that are producing that income in the event
of a healthcare crisis or a long term care crisis. Next,
we're going to turn to the trusts tom that we
use and for most of our clients, so we do

(43:23):
very sophisticated trusts when you look at our chart. I
have one slide in one of my presentations that has
twenty five different trusts, but for most clients it comes
down to two. And we think about the goals keeping control,
keeping access, keeping income, making sure assets are not run
through the court system, Avoiding probate another big goal of

(43:46):
estate planning. But when you sit down with clients, where
do most of them fall and what are the tools
you use for your clients?

Speaker 3 (43:54):
Absolutely so, the two biggest tools we use are revocable
living trusts and the Medicaid Assets action trusts that we
were referring to earlier. Now, this is obviously going to
depend on each person's situation, what their financial assets are,
and what their long term care goals are. And as
you said, Lu, the first thing that I do with
my clients is I'll read through the report. I'll see

(44:15):
what they have. The first question I asked them is
what is it that you're looking to achieve? Like what
is it that brought you into this chair today? And
a lot of them they always have similar answers, but
that's what I focus on.

Speaker 1 (44:27):
When they take the notebook out, you know you're in trouble.

Speaker 2 (44:30):
They have it right there.

Speaker 1 (44:32):
I was like, all right, twelve things exactly, which is
good though it is because they've thought about it.

Speaker 2 (44:38):
And I always appreciate that.

Speaker 3 (44:39):
I love when my clients come in and they've done
some homework and I tell them that the purpose of
our meeting today is really an education and the idea
is that I need to lay out all the tools
on the table and when we're looking at your specific situation,
which are going to be the right ones for the job.
And as you said, Lue, most of the times, as yes,
we do have very sophisticated planning. But between a revocable

(45:01):
living trust and the Medicaid Acid Protection Trust, that's where
we typically fall. Now, if we are really concerned about
the long term care, as you were discussed earlier, we're
looking at the Medicaid Acid Protection Trust. These are people
that have definitely have significant assets, but perhaps they don't
have enough liquid assets or the ability to be able
to pay right so we had mentioned earlier, do you

(45:22):
have some type of care of insurance long term care insurance?
Do you have the liquid ask to be able to
private pay? If not, if we're going to be looking
at the possibility that you would need Medicaid in the future.
Even if you're healthy now that a time to do
it would be now, and we would go into the
Medicaid Acid Protection Trust. If not, and let's just say
either you did have some good type of long term
care plan in place that does not include Medicaid, well,

(45:46):
then we can opt for the revocable living Trust. There's
a little bit more flexibility there. But to make sure
that we clear to everybody that the loss of control
is the main thing that I always get asked about,
because when we talk about Medicaid asas protection trusts, they're
irrevocable trusts. There are certain restrictions in place. You you
yourself are not allowed or to be permitted to act

(46:08):
as trustee, and you do not have direct access to principle,
but as Lou mentioned earlier, you still can have access
to all of your income and there are certain key
things that you do remain in charge of.

Speaker 1 (46:19):
And if you put it in there and we draft
it in and you have the right situation. And this
is different for all people, Like if you're an individual
that doesn't have kids, doesn't have immediate family, you want
to have a trust, but you know who you're protecting
assets for. At the end of the day, we're probably

(46:41):
going to lean to a revocable trust where you can
be in one hundred percent control and you're your own trustee.

Speaker 2 (46:46):
That's a great point, absolutely.

Speaker 1 (46:47):
But if you have three kids and nine grandkids, and
you have a home, and you have assets that you
want to protect for them, then the Medicaid Asset Protection
Trust not only becomes the appropriate vehicle, but becomes a
vehicle because you have family to work that trust, absolutely,
and you can give the trustee of that trust one, two,

(47:08):
or three of your children the power to distribute assets
from the trust to the kids. And once the kids
receive the assets, there is no restriction on what they
do with them exactly, so they can turn around and
use them back for you.

Speaker 2 (47:26):
Correct.

Speaker 1 (47:26):
So if you create this plan and ten years down
the road, you say, I want to buy a new car,
but I don't want to use my IRA, I don't
want to use the money in my bank accounts because
we leave our clients with enough money to pay all
their bills. Absolutely, but I want to use fifty grand
out of that trust. The kids can turn around, take
the fifty thousand, put it in a bank account, go
to the car dealership with mom, or Dad and they

(47:49):
can then pay for that car exactly, so creating the
trust plan revocable Medicaid Asset Protection Trust. We then tack
on something called a beneficiary contry for old trust, which
then secures the legacy so revocable or Medicaid ass Protection.
The next step is protecting the legacy for the children

(48:10):
and grandchildren, and that's the beneficiary control trust, and that's
the plan. Absolutely, we're running down on time and we
will be back next week. Tom Maso Morasco, thank you
so much for being with me, very glad. Thank you
all for being with us and listening. We have a
trust seminar if you want to learn more about the

(48:30):
Medicaid ass Protection revocable trust on September thirtieth. Just go
to pyrolaw dot com and you can get all the
information on our Trust Administration workshop. And we hope that
you can be with us once again next week. Have
a great weekend.