Episode Transcript
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Speaker 1 (00:00):
Good good morning, and welcome to Life Happens Radio. Are
You Prepared? I will be your host this morning. My
name is Tom Morasco. I am with the firm of
Pierre O'Connor and Strauss. I am joined by my esteemed
colleague Anthony Kachewi. Good morning, Anthony, Good morning, Tommy, Good
morning New York. Thanks for being here so here on
(00:22):
Life Happens Radio. Are You Prepared? It's exactly that we
want to help you be prepared, and our job is
to provide education and some tools that can help prepare
you for such events as retirement, long term care needs,
or perhaps taking care of loved ones with special needs,
and a whole host of scenarios that we all face
in our day to day lives. And the point being
(00:44):
is to making sure that there is a tailored plan
fit for your needs to take care of you, your
loved ones, and the generations to come. So today we
have a very I think insightful show for you that
we're going to be focusing and diving in a little
bit more about trusts. You've heard us talk about them
(01:05):
before on our show. We've stressed the importance of them,
but today we really want to focus on exactly kind
of different aspects that trusts can help us with, but
also the common pitfalls and a lot of the mistakes
that we've seen as attorneys that people make that even
though we have the best intentions of creating a great plan,
(01:28):
it sometimes can get sidelines just because certain steps were
and followed through with or of various other scenarios. So
that is what we plan to help you with today,
understanding what kind of assets can be put into a trust,
because a trust is only good as it is funded.
And I cannot tell you how surprised I am sometimes
(01:48):
when clients have come to me with pre existing trusts
that they had drafted previously, and when I ask them
what's in your trust? They look at me with that
blank stare and they say, what do you mean? Is
in everything in the trust? And unfortunately it does not
work that way. So the point being is we're going
(02:09):
to go over the importance of trust funding, certain mistakes
that we think that you can avoid, and what a
well crafted plan looks like and how that could benefit
your family. So to start, for people that may be
tuning in for the first time or haven't been in
a while, Anthony, why don't we talk about exactly what
a trust is and some of the advantages and why
(02:31):
we use them as a state planning attorneys in our
arsenal of documents.
Speaker 2 (02:38):
Sure, Tommy, thank you for giving me this opportunity to
speak to everyone. I like to think of a trust
as a sort of a relationship between different parties, between
the grants or the creator of the trust, the trustee,
the one who has legal title to the assets, that's
the control investments and distributions from the trust, and the
beneficiary who are those trust assets for Typically we recommend
(03:00):
the client, but they form revocable or revocable living trust
in which the client is going to be the grants
or the creator of the trust. The client is going
to be the trustee, and the client is doing it
for himself initially during his lifetime. The client is the beneficiary,
has complete control and power over the trust and the
trust assets. Can amend it, restate it, revoke it, make contributions,
(03:23):
take withdrawals, just like they would with their own bank accounts.
The revocable trust could be beneficial to clients during their
lifetime because number one, it's a way to consolidate your
assets to make sure that in the event you're incapacitated,
you have an incapacity management system. In effect, you can
name success or trustees so that they could quickly step
(03:46):
in rather than having to go through a time consuming
and costly guardianship. And also upon your death, it could
avoid probate. Probate is a time consuming and expensive process
the proving of the will, in which you have to
file a petition, submit the debt certificate, submit the will
to a surrogates court, notify beneficiaries, and while this is happening,
(04:10):
the decedents assets are frozen unless there are beneficiaries on
bank accounts or assets are held jointly. But for all
assets that are held solely in the decedent's name without
beneficiary designations, those assets now are frozen. So you have
real estate, you have a co op, and those assets
are now incurring expenses that the estate has to pay for,
(04:34):
and the beneficiaries are tied up because legal titles in
the decedents name. So we could avoid that public process,
that time consuming, an expensive process by putting assets into
a revocable living trust where the beneficiary excuse me, whether
the grants or puts the assets into that trust, so
that when the grantswear is deceased, the beneficiaries don't have
(04:55):
to go through that process, making life simpler, less of
a hassle, and less expensive ultimately for beneficiaries.
Speaker 1 (05:05):
Thank you for that, Anthony. That was very thorough. And
just to circle back on a couple of things that
Anthony had said. In a will, as Anthony pointed out,
that covers any and all assets that is owned by
an individual solely in their name at the time of passing.
And I have questions from clients that say, well, can't
(05:25):
we incorporate a trust into the will, because I may
not be prepared to do that now. And sometimes people
have this fear that if they put an asset into
a trust that they're going to lose control of that asset.
And now, listen, there are several types of trusts that
can be implemented. Categorically, they can be broken down into
(05:47):
two different kinds, revocable irrevocable, and when we use those
trusts depend on what our goal is. So if we
were more concerned with some type of long term care planning,
potentially the need for Medicaid assistance in the future with
those long term care needs, then we would be looking
(06:07):
at an irrevocable trust. But there are always mechanisms that
are put in place into each of these trusts to
safeguard the creator of the trust. So it doesn't mean
that once we make the deposit into this trust that
there could be a runaway train or somehow that we're
going to lose our ability or complete control over these assets.
(06:29):
And what I think is one of the most useful
tools and what people often overlook when we talk about
estate planning, because most people think of what happens to
us after we die or when we're no longer here,
But a lot of people fail to appreciate that things
can happen to us during our lifetime where we're still here,
but we may not be in that position where we
(06:49):
are able to make sound judgments or even be able
to manage our affairs alone. So, as Anthony pointed out,
there is a incapacity manager system. It makes it a
lot easier to transition the power from the grand tour
creator of the trust to a successor whom you want
(07:10):
to name. It's not going to be someone random, It's
going to be someone in accordance that you trust and
that you believe is the best person to step into
that job for you in that situation where it becomes needed.
So again this doesn't have to just necessarily take effect
upon death, but in the event that should God forbid,
someone becoming capacitated, suffer from a stroke, or just be
(07:34):
in a situation where they cannot act as a trustee
or meaningfully able to handle their assets and affairs. We
have a system in place for people to step in
to help you, and the trust is a very thorough
document that has a lot of contingency plans that are
built in. So a will should always be a part
(08:01):
of your estate planning tool. But we just don't want
to rely on the will alone. There are certain situations
that money could come to us after we die. For example,
let's just say someone's a part of a lawsuit or
litigation prior to passing passes before there's a settlement, and
a settlement is reached after the fact, and now money
is coming into that individual that's going to pass through
(08:23):
in a state. Sometimes we cannot have control over everything,
even as diligent as we are, and with a will,
when we have a trust that we work with a
companion to that trust, we can still get the asset
into the trust eventually. But the important thing is is
that for the majority of our assets, for all of
(08:44):
the things over which we do have control, we want
to make sure that we implement a plan today. And
so that is the focus of our show. That's always
been the premise. It's are you prepared? And how do
we be best prepared? That's by making sure that we
have a sound plan in place that is going to
(09:04):
not only help us at the end, but will help
us during our lifetime and making sure that we can
keep up with our wishes and be able to kind
of confront any life changes and obstacles that occur as
they occur. So we're going to be taking a short
break and when we come back, we're going to dive
(09:24):
into the particulars of trust funding. Stay tuned and we're back.
You are with Pierre O'Connor and Strauss here on Life
Happens Radio Again. I am your host, Tom Morasco, joined
by my colleague Anthony Kachuwi. We are talking about trusts today,
the importance, what we need to do, how do we
fund them, what mistakes we need to avoid to be
(09:46):
able to make sure we're protecting ourselves and our loved ones.
Now listen. We understand that it's hard to kind of,
you know, condense such a such an important topic with
incredible nuance in to roughly an hour's show, but we
just wanted to let you know that Pierre O'connoran and
Shows does have an upcoming seminar that we'd like to
(10:07):
invite you to attend. It's our popular Trust Administration Workshop,
and that is where you can learn what to do
once you trust is up and running. Our next workshop
is going to be on Tuesday, January twentieth in Albany
at the Capitol Region Chamber. It's going to be hosted
by our founding partner, Lou Pierro, along with an accountant
and financial advisor. Also keep in mind it is a
(10:29):
free lunch program and it does go from twelve to
one thirty, So to reserve your seat, you can head
over to our website at Perolaw dot com, pi Erro
law dot com, click on the events tab for Trust
Administration Workshop and we hope to see you there. So
in the beginning of the show, we kind of mind
(10:49):
over simply what a trust is, some of the advantages
in perks and why we like to implement them, namely,
number one, In the event something should happen us, we
have a way of passing on management and also upon passing.
It's a means of avoiding probate, which we're going to
dive into a little bit more as to exactly why
we might want to do that. But then we get
(11:11):
a lot of questions about, well, what sort of things
go into a trust and how do we do it?
Does my house go into a trust? Do all my
bank accounts, school and my trust? What about retirement accounts?
I have shares, I have CDs? What kind of things
go into a trust? So Anthony, don't why don't you
(11:33):
lead us in that discussion? And as far as what
sort of assets do we typically recommend our clients to
place and trust?
Speaker 2 (11:42):
Sure you don't tell me before I discuss the specific assets.
I want to say that often we have clients come
to our firm and they'll say, I have a trust.
I did this, And I'll say, like you mentioned earlier
in the show, what's in your trust? And they look
sort of confused, And I want the listener understand that
you could have the ferrari of trust, but if you
(12:03):
don't have assets in that trust, it's like the Ferrari
has no gas and it's going nowhere. So having a
trust is important, but you actually have to put things
into the trust. And I've seen people that have these
sort of do it yourself, these DIY trusts, and they'll
have a piece of paper on the back that'll list
all their accounts and say, okay, these assets are in
my trust.
Speaker 3 (12:23):
And then when I discussed.
Speaker 2 (12:24):
With the client, I say, did you go to the
bank and actually transfer these accounts And they say, oh, no,
I just wrote the accounts on this piece of paper.
Doesn't that transfer the accounts to my trust? And the
answer is no. If you want to have a fully
functional trust, a fully integrated plan, you have to weave
all the assets into the trust. So if you have
bank accounts or investment accounts, you have to go to
(12:46):
the financial institution and provide them with the trust document
or a certification of trust and a certification of trust.
It's just simply a one or two page document that
lists the name of the trust, the grants for the trust,
thee that the taxpayer identification number of the trust is
the client's social Security number, and that should have enough
(13:08):
information for the financial advisor or the financial institution to
transfer your accounts to your trust.
Speaker 1 (13:14):
Yeah, Anthony, I think just to add to that, I
think where the misconception comes is that when people think
of a state planning, most of our minds would go
to a will like our last will and testament, and
there it's just simply a recital of who do we
want to be in charge and where do we want
our assets to go to whom and in what quantities.
(13:34):
But that would not require us to specifically move assets around.
And we liken a trust to a will in that
it covers similar topics and it is a similar sort
of document. But what people fail to understand is that
a trust is a standalone document. It is its own entity,
and if you were to form a corporation, you would
(13:56):
need to actually put shares. There has to be something
that the entity holds. And so you actively, as Anthony
was pointing out, have to move assets physically into the trust,
or as I'm sure Anthony's going to cover as well,
update account beneficiary designations to be the trust so that
upon passing it makes its way into the trust. But
(14:19):
one way or another, we have to get the assets
from your name into your trust's name.
Speaker 3 (14:25):
Yeah, and I think you made an important point there, Tommy.
Speaker 2 (14:27):
If you have a will and you say all my
assets are then to go to my spouse, But your
bank accounts that you opened up thirty years ago lists
your parents or your sibling, the beneficiary designation is in
a control who gets the money in those bank accounts,
So your will will not control the bank accounts if
you have a different beneficiary. So in this scenario, your
(14:50):
will says your wife is getting everything, but your bank
accounts have your parents or sibling. Then the parents of
the sibling are getting all that money in those accounts.
And unfortunately, clients and most people, they'll know every dollar
they have in their accounts, but when you ask them
who are the beneficiary on this account, often they don't
know the answer.
Speaker 3 (15:09):
The account's been open for twenty five or.
Speaker 2 (15:11):
Thirty years, they probably did fill out a beneficiary and
if they did, it could have been before they were
married or had kids or other major life events. So
it will is great, but it won't control the assets
in your bank account. If you have a beneficiary name,
and usually bank accounts retirement accounts, those are significant portions
(15:32):
of clients estates along with real estate. Real estate is
another asset Tommy that we like to encourage clients to
transfer to their revicable living trust, and we could do that.
Speaker 3 (15:42):
By a deed. Why don't you go into.
Speaker 2 (15:45):
The advantages of having the properties owned by arevoicable living trust,
especially when clients own property in multiple states, and the
pitfalls that they can encounter with having to go through
probate in various jurisdictions. If they don't have a retical
living trust effect that's probably London.
Speaker 1 (16:02):
So a lot of the times we have couples that
will come in and they'll say, hey, well, we jointly
own the property, so we don't need to do anything
with it because they think, okay, well, upon the first
of us to pass rightfully, our surviving spouse or whoever
your partner is would inherit the property and they would
become one hundred percent owner of that property. But what
(16:22):
happens is then what happens when that surviving partner spouse
love one passes away. That's gonna end up in their
estate if it hasn't been accounted for through a state planning.
So by putting it in a trust, we can still
assure ensure that it's available two our partner during our
(16:43):
after our our our passing, but then we have a
means of passing it on to the ultimate beneficiaries, all
while avoiding probate. Now, a lot of questions I get are, well,
what implications does that have, perhaps, let's say on my
property tax exemptions, I'm collecting STAR, I'm collecting enhanced AR,
I'm collecting veterans benefits. What does that do to me?
(17:06):
And the way that we structure the trust as what's
called a grand tour trust for tax purposes, it actually
enables you to keep those property exemptions and also even
if you chose to sell it, every individual in New
York State has tax an exemption provided that the home
that we're selling is our primary residence and we've lived
(17:28):
there for two of the last five years leading up
to the sale. We're afforded a two hundred and fifty
thousand dollars exemption towards capital gains, which is huge. But
the biggest benefit is that once we put the property
into the trust, and we have not sacrificed any of
the benefits that we currently have, the biggest benefits going
(17:49):
to be gained upon our passing, because once it passes
down to our loved ones, they're going to get what's
called a full step up in basis. So what does
that mean? So if I purchased a proper for two
hundred thousand dollars and it appreciated to a million dollars
in my lifetime, if I were to sell it, that
eight hundred thousand dollars profit would be subject to capital
(18:10):
gains tax. Yes, there are ways of offsetting that amount
the two hundred and fifty thousand exemption I mentioned earlier.
If you're a couple, that could be up to five
hundred thousand. But nonetheless, upon passing, if we still own
that real estate at the time of our death, it
then the basis and rather than being that two hundred
thousand for which you purchased it for, becomes whatever the
(18:33):
fair market value is at the time of your death.
So if the property's worth a million at the time
of your passing and your beneficiary is there, then go
and sell it for a million. There is no capital
gains tax. Now does this hold true if you were
to simply hold it out right and it went through
your estate or through a will that went through the
probate process. The answer is yes, you still get your
(18:55):
full step up and basis The difference, however, is that
you're going to be required to go to court, you're
going to have to pay fees, you're going to have
an attorney as syste, and the probate process can take
an extremely long time. Down in the downstate regions and
the city and on Long Island, that probate process can
be upward of a year or longer. And that's just
(19:16):
that's even regarding without considering if there's any other type
of issues like a contest or if somebody doesn't agree.
So while that process is going on, as Anthony said,
that asset is locked, so you're still incurring your carrying costs,
the utilities, the real property taxes, and we know how
expensive that that can get. So now, yeah, we've gotten
(19:38):
the full step up in basis, but now we have
a full year of expenses that we've had to spend
down out of the estate assets in order to fund
before we get the approval from court in order to
then go ahead and sell it. So it's it's certainly
a very useful tool and what we think is a
very strong tool for property because and listen, guys, trusts
(20:02):
are not just for individuals with high networks, because a
lot of the time. That's another misconception, right, people think, well,
I'm not a multimillionaire, why do I need a trust?
They just think of trusts as belonging to as a
tool to people who are rich or really considerable means.
But that's not true. Most people their biggest asset is
(20:23):
a home. Okay, what it doesn't matter what you have
in the bank account, but it does matter what you
do with it and how you want to get it
passed on to your loved ones. So, and we've talked
about bank accounts, right, So other things are any appreciable assets,
even stock accounts, right, They will similarly get a step
up in basis at the time of passing, as it
(20:43):
would in real estate. So and again, even if I
had stocks in my name now, and I wanted to
open up an account of the name of the trust
and transfer the stocks, it is not a sale, so
it's not a taxable event. It is an in kind transfer.
So you are able to do that without having to
worry about whether it's going to be considered a sale. Okay, Anthony,
(21:04):
what about retirement accounts.
Speaker 2 (21:06):
Retirement accounts are an asset that we can't transfer directly
into the trust that would be an income taxable event.
But what we try to do is weave the retirement
account beneficiary designations into the trust plan. So typically we'll
have this spouse name as a primary beneficiary because they
can get a stretch. A spouse is which referred to
as an eligible designated beneficiary. Thanks to the Secure Act,
(21:30):
it created tiers of beneficiaris, or in the past, all
beneficiaris would get a stretch, and you would see wealthy
clients or clients whose children were successful and didn't necessarily
need to inherit that asset. The client would name the
grandchildren as a beneficiary, and by doing so, the grandchild
(21:52):
spend a lifetime or life expectancy would be very long,
seventy or eighty.
Speaker 3 (21:57):
Years, so they would have seventy or.
Speaker 2 (21:59):
Eighty years to drain out that money from the retirement accounts.
And while it's in the retirement accounts, it's growing tax deferred.
And what happened was the government thought that it would
be better if the assets came out of the retirement
accounts quicker so that it can get tax revenues. So
that came up with a nice acronym secure makes people
(22:20):
feel good. Setting up every community for retirement. But in reality,
what it did was it said that that special benefit,
that stretch is not going to be permitted now for
all beneficiaries own For a handful of beneficiaries, the surviving spouse,
a minor child of the decedent, disabled people, chronically ill,
(22:40):
or beneficiary that's not more than ten years younger than
the principle, those are the only ones.
Speaker 3 (22:45):
Who are now able to still get the stretch.
Speaker 2 (22:48):
The rest of the beneficiaries, your children, your grandchildren, they're
subject to the ten year rule unless they're in one
of those classes that defined as an designated beneficiary. So
the retirement accounts you can transfer directly to your trust
what we name the surviving spouse as the primary beneficiary.
(23:09):
And then what you can do is you can name
trust that you form for your children as beneficiaries of
those retirement accounts, so you have a revocable trust which
during your lifetime you're the grants or of trustee beneficiary.
Upon your death, you could have trusts that are then
formed for your spouse and for your children so that
(23:32):
the trust assets remain in trust outside of their taxable
states and protective credators.
Speaker 1 (23:39):
Anthony, that's a good point. I think we're going to
leave it off here. We're going to coming up. We're
going to be taking a break for the news. When
we get back, we will wrap up our discussion on
funding our trusts and move into common mistakes to avoid
in order to save your family thousands of dollars. So
stay with us, stay tuned, we'll be back soon. I
(24:00):
am your host, Tom Morasco, Pierre O'Connor, and Strauss again
joined by my colleague Anthony Kachewi. Today's discussion involves trusts,
how to fund them, the important mistakes to avoid, and
what benefits they have to you and your loved ones.
So we've talked about what a trust is, we've talked
(24:21):
about funding and what sort of assets go into the trust.
Now what we want to do is kind of give
some attention to certain mistakes to avoid. And what we've
seen is common mistakes. And I want to point out
that the biggest mistake that any of us can make
is by not having a plan. A lot of us
(24:43):
are plagued with the notion that hey, I have time,
I'll be able to do this, I can't do this today,
or I don't want to think about this right now
I will get to it. And we believe that that
is the biggest mistake because life happens, right, that's the
name of our show, and we don't know how it's
going to unfold, what's going to happen when, So it's
(25:06):
best to be prepared and we don't wait for an
event or something bad to happen, because that's not the
ideal time to try and put in a plan. The
opportunity is while we are still able, minded and healthy,
or at least relatively healthy. So I have a lot
of clients who've come after the fact, unfortunately, where they've
(25:27):
had no planning. And then a spouse suffers from a stroke,
and now that you know that spouse doesn't have capacity
any longer, but they never executed something such as the
power of attorney to grant the spouse the authority over
their financial and legal affairs. And now I'm wrapped up
in court trying to get guardianships to try and catch
(25:47):
up to even be able to take the reins and
assist families to move forward. So the biggest thing that
you can do for your famili is making sure that
you have a plan in place, making sure that in
such a chaotic time where everybody's going to have a
high level of emotions, stress, anxiety, grief, that there is
(26:09):
a roadmap for them to follow. Now, do they have
to be well versed in all of a state planning
techniques and tools, And no they don't. They need to
be able to be resourceful, they need to be trustworthy,
and they have to have the plan right. We prepare
a plan. That is your guide. It is your guidebook.
(26:32):
How do I do it? It's my how to anything
I need. I can revert to this plan and it
tells me what I need. I might need assistance and
maybe interpreting or saying, hey, which steps should I take first?
And what's next? That's what we're here for and that's
what we hope to establish with our clients. It's long
lasting relationships so that you know and you have the
security of knowing that in addition to the plan that
(26:52):
I put in place, I have a team of support
behind me who can help implement that plan and help
and guide my loved ones when I am not here
or I am able to communicate myself and making sure
that everyone is aware where are things situated, Who is
going to be in charge, what sort of responsibilities are
they going to bear, And that is the purpose of planning.
(27:14):
So aside from not having a plan, one of the
other big mistakes is by putting in a plant, by
putting a plan into place but not fully executing it.
So Anthony, tell us some common things that you've seen
when it comes to properly executing the plan.
Speaker 2 (27:34):
Sure, one thing I just want to touch on before
we get to that is that if a client doesn't
implement a plan, this state has implemented a plan for them.
So by creating your own plan, you're taking autonomy over
your assets and over your life and identifying who you
want to inherit those assets. But if you don't, this
state has a plan for you. And if you're married
(27:57):
and have children, your spouse is going to get the
fifty thousand dollars and half of your remaining assets, and
your children will split the other half. So the intensity
laws will already outline who's going to receive your property,
and most people who are married probably wouldn't want their
children to inherit their property and then have to have
a guardian of the property and have assets in an
(28:19):
account that the spouse can't touch because they are designated
for the children. Most people who are married would probably
want their spouse to inherit all the assets because they
know that the spouse is going to be a good
steward for their children.
Speaker 3 (28:33):
So I want to just.
Speaker 2 (28:34):
Address that sort of misconception that clients think that you
know that there's not a plan out there for them,
because it is, but the problem is it may not
be the plan that they want. So I always advocate
clients that take autonomy over their life, over their assets,
and to put a plant that they want.
Speaker 3 (28:50):
In effect.
Speaker 2 (28:51):
Some of the mistakes that I see for clients when
they come to the office, one is not reviewing their
plan when they have one. In effect, Often clients will say, oh,
I have a will, but it's my will is ancient
fifteen years old when my kids were minors, and at
that time, the kids couldn't serve as agents, right because
they were ten years old. But now fifteen years later,
(29:12):
your children are twenty five, and besides, for your spouse,
maybe you want.
Speaker 3 (29:18):
Your children to serve as agents.
Speaker 2 (29:19):
Maybe you want them to be the success or agents
and the friends or the siblings that you named before.
Maybe they're sick, maybe they moved, Maybe you don't have
a close relationship with them anymore.
Speaker 3 (29:29):
Maybe you picked one of.
Speaker 2 (29:31):
Your friends to serve as an agent under your power
of attorney and that friend became bankrupt and probably not
the best choice. So life happens, things changed. You always
want to give a fresh review of your plan. See
who your agents are, the ones who you're entrusting to
make decisions in the event you're unable to do for yourself.
To make sure that those people are still the appropriate
(29:54):
choices for you at this portion of your life. Fifteen
years ago. The people who were we trusted at that
time may not be the same people fifteen years later.
So I would say one is reviewing the plan and
then making sure that the plan is part of a
comprehensive approach, meaning that if you have a will, and
(30:15):
let should say certain clients don't want to trust or
don't think a trust is appropriate for them, do the
beneficiary designations.
Speaker 3 (30:22):
On your other assets match up? Do you know what
those assets are?
Speaker 1 (30:27):
And Anthony, that goes back to kind of what I
was saying earlier about we look to establish relationships with
our clients. It's not a transaction. We're not here to
just turn documents for you. That's not the point. The
point is that there is a relationship and it's an
ongoing one. And as there are major life changes, and
we hope that most of them are positive, such as
(30:49):
marriages or children or grandchildren, or the acquirement of new assets,
it's important to be updated and having periodic check ins
so that we understand the changes that are going on
and also allow us to revisit the plan review it.
Does it still meet your needs as Anthony was saying,
(31:11):
or do we still have the same cast of characters?
Has there been any changes there? And it allows us
to have your plan evolved with you as your life grows.
So most people they just think, I want to scramble,
get it something in place, They put it in place,
they feel assured in that moment, and then they're like, okay,
I said it, I forget it, I know it's there,
I'm good. I did everything that the lawyers told me
(31:33):
to do. And then they fail to account for all
the different changes that happen in their lives and they
forget the particulars of what the documents said, as Anthony
pointed out, and then all of a sudden we end
up with the plan that's kind of you know, obsolete,
or it doesn't really serve the original purpose or what
it was that you had intended, or at least maybe
(31:54):
didn't account for certain circumstances and changes that have occurred
since the time you put that place in place. So
number one is making sure you have a plan. Second
is make sure you keep that plan up to date. Okay,
And now, Anthony, you know I usually tell my clients right,
(32:15):
So obviously, in the event of any kind of a
major change, as I was alluding to earlier, how frequently
do you, you know, advise your clients that they should
be looking at their plan to update it.
Speaker 2 (32:27):
Sure, Just as a general matter, I would say it's
good to review your plan every couple of years, every
two or three years, especially if there's a major life event,
like you said, a divorce, death, birth of a child,
getting married. You also want to review your plan because
you want to see how your beneficiary's lives have changed
over time. So maybe you have an outright distribution going
to a loved one and now that person is on Medicaid.
(32:49):
That would not be great. If a beneficiary is on
a means based program and now you're giving them an
outright distribution, that may kick them off of benefits instead
of having a asets going out right, you're going to
want to put a supplemental trust in your documents so
that way they could actually benefit from those assets.
Speaker 3 (33:07):
So part of the plan is, you know, part of
having a a.
Speaker 2 (33:11):
Comprehensive plan is not just reviewing your own life, but
looking at the lives of your beneficiars and seeing how
could they best benefit from the structure that you're implementing.
Speaker 3 (33:21):
You don't want to.
Speaker 2 (33:22):
Work your whole life or assets and then force the
beneficiars who are inheriting to waste those assets when it
could have been kept to make their lives even.
Speaker 1 (33:30):
Better, right, And I think that's another key difference in
what we've seen in certain documents that have come before us.
It might superficially state what should happen and upon our death,
who is going to be in charge and whom it
should go too, but there are a lot of contingencies
in place. Well, what happens if someone's a minor, what
(33:53):
happens if you know, someone's become disabled, or as Anthony
was saying, is applying for or currently receiving government based benefits.
What happens if we just don't believe that a person
is suitable to be able to handle certain aspects of
management on their own, managing money or you know, being
(34:14):
able to make those distributions. Now, what's the most important
thing then is making sure as we were alluding to
in our previous segment, about funding the trust properly and
making sure that you coordinate amongst all of your assets.
So for those that we're putting in the trust, great,
(34:34):
we understand that the trust is in place, it accounts
for everything that we want, it has the assets in
there currently, But then there are other assets that will
not be going into the trust per se right now.
Right So for example, we have a daily checking account
where we have bills that come in and out of
we have direct deposits, and sometimes we don't want to
(34:57):
make a change across the fifty different subscriptions that we
have or bills that we're paying, So then we have
to make sure that we coordinate our beneficiary designations. Now,
we encourage that when we have the trust in place,
that we name the trust as the beneficiary, because remember,
in the trust, we've accounted for all the different contingencies.
(35:18):
Whereas if you name an individual as the beneficiary on
an account, we don't get the benefit of all those
different contingency plans that we put in place. So, as
Anthony said, if I had my spouse named as the
first one, and my spouse is receiving some type of
long term care assistance through Medicaid, and now they're specific
(35:41):
and strict asset requirements in which someone's allowed to have
and I pass, and now this asset goes directly to them.
It doesn't account for the fact that they're on Medicaid.
It doesn't account for perhaps multi generational passing down. What
if I had a child that was on my account
as the beneficiary, but they predeceased me, but they left
behind a child, but there was two children, right, I
(36:04):
had a son and a daughter and one unfortunately predeceased.
Doesn't matter that they had surviving grandchildren in a situation
where we name them as beneficiaries, because it's not going
to pass down that line. It's going to go to
the surviving beneficiary named on that backup plan. Whereas with
a trust, we can build in that generational plan where
it can go on to grandchildren, great grandchildren even and
(36:28):
we can do so in a way that could even
be more advantageous to them by leaving to them in trust,
and this was something that Anthony started to allude to earlier.
We can leave it to them in a trust that
they could have control over. We called them beneficiary controlled trusts,
where the beneficiary can also act at trust as a trustee,
and you can dictate at what point in life, at
(36:48):
what age you believe that they would be suitable to
do so. But by doing that, they inherit this property
in an asset protected way, whereas with an outright distribution
it would be subject to any and all the different
issues that one can encounter in their lives. One obviously
we talked about with was government benefits. But what about
if they get sued, somebody tries to collect a judgment
(37:10):
against them. What happens if they get divorced, right, what
happens if they need to file for bankruptcy. If that
money's in their personal account because you gave them an
outright distribution, well it's exposed for all of those things.
But if we pass it to them in further trust,
well now they have access to it as they need it,
but while it's sitting in that trust, it's completely asset
(37:31):
protected from all of those various scenarios. So trusts are
extremely powerful and it's all down to how it's structured,
how it's funded, and making sure that it is carefully
coordinated amongst all of your assets and accounting for all
different contingencies. We're going to take one last break and
when we come back, we're going to wrap around our
(37:52):
discussion around trusts and the different benefits in what a
thoughtful plan would look like. Stay tuned. Thank you again.
This is Tom morasco of Pier O'Connor and Strauss. You're
on Life Happens Radio here again with my colleague Anthony Kachuwi.
We're talking about trusts today and in our you know,
in our in our last remaining time, I would like
to invite that obviously, if you have any questions, please
(38:15):
give us a call at one eight hundred talk WGY.
That's one eight hundred eighty two five five nine four nine. Also,
if this topic has intrigued you you want to have
more information, please keep in mind we have our our
Trust Administration Workshop coming up on Tuesday, January twentieth and
all been at the Capitol Region Chamber again. That's going
to be hosted by our founding partner Lou Pierre of
(38:36):
PI O'Connor and Strauss. The lunch program will go from
twelve to one thirty. You can go to our website
at pierolaw dot com, click on events and sign up
for the Trust Administration Workshop. So we've talked about what
a trust is. We've talked about what sort of assets
and the importance of funding our trust. We've talked about
(38:56):
a certain common mistakes. So let's talk about the pop Okay,
let's talk about what we accomplish when we have a
trust as part of our estate plan. All right, We've
alluded to a lot of them, but one of the
ones that I wanted to give a little bit more
attention to was this issue of probate. Now, a lot
(39:18):
of people, not just in New York, but a lot
of people in multiple regions have property in various states.
Maybe they grew up in a different state, maybe they
like to vacation in another state. Obviously, here in New
York we have a lot of snowbirds. We have a
lot of people that have property down in Florida or
in the other Northeastern or again anywhere throughout the United States.
(39:41):
But what people don't understand is that if we do
nothing as far as a plan goes, we have to
bring a probate proceeding in each one of the jurisdictions
in which we have property. So if we die resident
of New York, I'm starting my process here, and we've
already talked about the length and time and what that
could entail. But then if I have property in Florida,
(40:03):
well now I have to go down to Florida and
I have to do something called an ancillary probate. And
if I have property in other states, similarly, I have
to do the same thing in each one of those states.
What Anthony mentioned earlier was one of the positives about
a trust is that you can consolidate your assets, so
it is possible to deed real estate from other states
(40:27):
into your trust, and again, it would avoid probate. It
would avoid that process of having to go to court
in each one of those jurisdictions and just allow your
beneficiaries to just follow your wishes, whatever that might be,
whether it's keeping it, renting it, selling it, whatever it
might be. They are able to do so immediately, so
(40:48):
avoiding probate. When I say that, yes, we don't have
to go to court, but for people that have property
and multiple jurisdictions. Just keep in mind how valuable a
tool that trust could be just for that purposeal.
Speaker 2 (40:59):
Life, right absolutely, I mean, and you know, one of
the mistakes that people often make is they'll form a
trust and for the clients that actually go through the
funding process, they transfer their assets into the trust, transfer
their the real estate that co.
Speaker 3 (41:14):
Op shares, but years later they'll.
Speaker 2 (41:18):
Sell it, they'll sell them home.
Speaker 3 (41:21):
They're excited.
Speaker 2 (41:22):
Sometimes they don't involve their estate planning attorneys. They have
another real estate attorney, and the real estate attorney doesn't
know about the trust or is not thinking about it.
It's not what they do primarily, and they just put
the deed in the name of the clients.
Speaker 3 (41:38):
And what happened is is that you've.
Speaker 2 (41:40):
Transferred the asset that was in a trust that was
going to go based on the instructions that you provided
to the trustee that could have beneficial trusts that you
were just mentioning the beneficiary control trust for the benefit
of your descendants. That's ass a protected out of their states.
And now you put that asset back into your names
where it could be a probate asset. So one of
(42:03):
the common mistakes is when clients purchase assets in the future,
that they don't.
Speaker 3 (42:08):
Purchase it in the name of the trust.
Speaker 2 (42:10):
So it's important that not only do the clients complete
the initial funding, but that they are also being mindful
that in the future the assets have to be held
in that trust as well, not that you then purchase
a home or condod excuse me, a co op in
your own name and then potentially have a probate asset.
Speaker 3 (42:31):
So that's why our.
Speaker 2 (42:33):
Firm recommends the clients to come in every couple of years.
We have the PALMS program, the Professional Advocates Life Maintenance
system where we meet with clients annually review their assets,
have a meeting with not only the client but their
financial advisor, and the accounts will show so that way
we could see what are the assets now. Yes, we
(42:54):
completed the funding process ten years ago, but now the
client's been living for the last ten years and they're
not always thinking about putting assets into their trust. They
open up new bank accounts. Do they have new assets?
Are those assets in the name of the trust? Do
we need to update beneficiary designations? Do we think there's
a more effective way to implement our state plan? Is
(43:15):
there a beneficiary that perhaps is disabled, that we could
have the retirement accounts go to a supplemental needs trust
for their benefit to get the lifetime stretched, rather than
having those assets go to a beneficiary who is not
that's going to be income tax over the ten year period.
So all these nuances require constant attention, and we don't
(43:35):
have to do it every day, but certainly on a
yearly or every few year basis. We want to just
be looking at everything. How has our life changed, how
have our assets changed, how have our thoughts changed? Do
we want to still have these people as their beneficiary?
Is there a way to make it even more advantageous
for them? And one of the things that you just
(43:56):
mentioned was the beneficiary control trust.
Speaker 3 (43:58):
That's a very power. Two will be called when you
speak to clients and say that you could.
Speaker 2 (44:04):
Have the assets inherited by your children in an ass
to protect a vehicle. Sometimes they'll say, well, my kids
are responsible, they're not going to do anything where they
get to they're you know, they're not gonna be a
derelict of their of their responsibilities. They're good kids. But
what they don't realize is that the number one creditor
is a divorcing spouse, and no one knows who's going
(44:25):
to get divorced unfortunately. So is an inheritance set property, Yes,
but typically what will happen is your children will inherit
an asset. You get five hundred thousand dollars or whatever
that amount of money may be from your parents, and
as probably most of our listeners would agree.
Speaker 3 (44:44):
Along, you're almost single.
Speaker 2 (44:47):
Individual accounts starts to merge and you only have joint accounts.
So you get inherents from mom and dad. You throw
that money into a joint account, and five years later
there's a divorce, and what's going to happen is that
about them? Say that's my that's a joint account, And
now you've co mingled that asset and the separate property
nature of it has been painted. So a trust makes
(45:09):
it very easy to segregate that asset. And as Tommy
alludes to before, you could have other people service trustees
if you think your children are not at that level
for the time being, and you could have them gradually
step in. You could have them service co trustee at
a certain age, maybe at twenty five and then at
(45:30):
thirty years old. If you're deceased and they're inheriting this asset,
then they could be the sole trustee of their trust.
So there's steps that we can take to not overwhelm
the children, to not give them all this money at once,
where maybe they wouldn't make the best decisions because they're young.
We can give them some time and guidance with other
(45:51):
family members serving as trustees, serving as a responsible person
who's going to oversee those assets and make sure that
they're used in the best way for your children.
Speaker 1 (46:00):
Yeah, and especially another important aspect there, especially as it
comes to couples too, is or even in any individual
is about being cognizant of the possibility for having to
pay a state taxes. So currently exemptions in the New
York state. I know people have seen recently, Oh well,
the federal is going up to fifteen and that's great,
and that's a great sum of money. But New York
(46:23):
is different. New York is currently around the seven million mark.
So some people might be listening to this and say, oh, well,
I'm not in that realm right now, But okay, maybe
you're young. You have assets that can continue to appreciate.
And what we happen to see is that sometimes people
don't realize that over time they've created this plan and
things have continued to grow, they're not paying attention to
(46:44):
the numbers, and then all of a sudden they've exceeded
the exemption limit. And if you go over one hundred
and five percent of that limit in New York, there's
a cliff. And that clip says that not only are
you going to get taxed on the amount which you've
gone over the exemption, they tax you on the entirety
(47:05):
of your assets, the whole amount, and that's hundreds of
thousands of dollars that you could potentially be losing by
not planning properly. So for married couples, there are marital
deduction planning. There's ways that we can go about to
either minimize, mitigate, or eliminate estate taxes altogether, which is
(47:28):
another powerful tool that we could utilize trusts for. So
as you can see, this is a trust that can
cater to a multitude of people, whether it's I have
you know of small means, but I want to make
sure that I preserve that legacy for my children or
grandchildren or my other loved ones because I worked really
(47:51):
hard to acquire whatever it is that I have and
I don't want to just have to kind of waste
that I want to be able to, let's say, take
advantage of different resources that I have available to me
while preserving what I have been able to accumulate from
my loved ones. A trust could be used for those people.
And the other extreme is the scenario that I had
just mentioned, where we have clients that are extremely wealthy
(48:15):
and a way of Okay, well, how can I minimize
negative tax implications to my loved ones that I worked
so hard to get that I don't just have to
give it away to the government, that I can actually
make sure that it passes down to the generations to
come and to the people that I care for. And again,
you have a system in place. And what I cannot
(48:35):
stress enough is that it's about having that roadmap. When
things go sideways, When things occur, especially when they are unexpected,
you are going to be faced with chaos. And we've
all been in that situation. That's scramble, that gut clenching
feeling where, oh my goodness, what do I do now?
(48:58):
How do I do it right? And it's really hard
to think clearly in those type of situations. And I
don't care if you're the most poised person in the world,
when you are faced with a situation that is an emergency,
something that we didn't account for, we all freeze at
one point. But what's good is that even while we
get ourselves collected, even if we need to get the
(49:20):
help from the people that we care for, we have
the plan in place. We have a team that we
can rely on, and we also have strategies for our
clients too, of where we can keep a database of
all of your documents, the list of all your assets,
so that your loved ones are not left scrambling looking
where do I go, where is everything? How do I
(49:42):
find it? What do I do with it? Everything is
put in place so if nothing else, we hope that
what you were able to take away from today is
making sure that you do have a plan in place,
that you make sure that you follow through with that plan,
that it's executed properly, and that you update it and
keep it maintained as your life progresses, so that it
(50:02):
changes with you. We want to thank you again for
spending your Saturday morning with us. Again. This is Tom
Morasco and Anthony Kucchui of Pier O'Connor and shouse on
Life Happens Radio. We hope you have a beautiful weekend.
Speaker 3 (50:13):
Thank you, by New York
Good good morning, and welcome to Life Happens Radio. Are
You Prepared? I will be your host this morning. My
name is Tom Morasco. I am with the firm of
Pierre O'Connor and Strauss. I am joined by my esteemed
colleague Anthony Kachewi. Good morning, Anthony, Good morning, Tommy, Good
morning New York. Thanks for being here so here on
(00:22):
Life Happens Radio. Are You Prepared? It's exactly that we
want to help you be prepared, and our job is
to provide education and some tools that can help prepare
you for such events as retirement, long term care needs,
or perhaps taking care of loved ones with special needs,
and a whole host of scenarios that we all face
in our day to day lives. And the point being
(00:44):
is to making sure that there is a tailored plan
fit for your needs to take care of you, your
loved ones, and the generations to come. So today we
have a very I think insightful show for you that
we're going to be focusing and diving in a little
bit more about trusts. You've heard us talk about them
(01:05):
before on our show. We've stressed the importance of them,
but today we really want to focus on exactly kind
of different aspects that trusts can help us with, but
also the common pitfalls and a lot of the mistakes
that we've seen as attorneys that people make that even
though we have the best intentions of creating a great plan,
(01:28):
it sometimes can get sidelines just because certain steps were
and followed through with or of various other scenarios. So
that is what we plan to help you with today,
understanding what kind of assets can be put into a trust,
because a trust is only good as it is funded.
And I cannot tell you how surprised I am sometimes
(01:48):
when clients have come to me with pre existing trusts
that they had drafted previously, and when I ask them
what's in your trust? They look at me with that
blank stare and they say, what do you mean? Is
in everything in the trust? And unfortunately it does not
work that way. So the point being is we're going
(02:09):
to go over the importance of trust funding, certain mistakes
that we think that you can avoid, and what a
well crafted plan looks like and how that could benefit
your family. So to start, for people that may be
tuning in for the first time or haven't been in
a while, Anthony, why don't we talk about exactly what
a trust is and some of the advantages and why
(02:31):
we use them as a state planning attorneys in our
arsenal of documents.
Speaker 2 (02:38):
Sure, Tommy, thank you for giving me this opportunity to
speak to everyone. I like to think of a trust
as a sort of a relationship between different parties, between
the grants or the creator of the trust, the trustee,
the one who has legal title to the assets, that's
the control investments and distributions from the trust, and the
beneficiary who are those trust assets for Typically we recommend
(03:00):
the client, but they form revocable or revocable living trust
in which the client is going to be the grants
or the creator of the trust. The client is going
to be the trustee, and the client is doing it
for himself initially during his lifetime. The client is the beneficiary,
has complete control and power over the trust and the
trust assets. Can amend it, restate it, revoke it, make contributions,
(03:23):
take withdrawals, just like they would with their own bank accounts.
The revocable trust could be beneficial to clients during their
lifetime because number one, it's a way to consolidate your
assets to make sure that in the event you're incapacitated,
you have an incapacity management system. In effect, you can
name success or trustees so that they could quickly step
(03:46):
in rather than having to go through a time consuming
and costly guardianship. And also upon your death, it could
avoid probate. Probate is a time consuming and expensive process
the proving of the will, in which you have to
file a petition, submit the debt certificate, submit the will
to a surrogates court, notify beneficiaries, and while this is happening,
(04:10):
the decedents assets are frozen unless there are beneficiaries on
bank accounts or assets are held jointly. But for all
assets that are held solely in the decedent's name without
beneficiary designations, those assets now are frozen. So you have
real estate, you have a co op, and those assets
are now incurring expenses that the estate has to pay for,
(04:34):
and the beneficiaries are tied up because legal titles in
the decedents name. So we could avoid that public process,
that time consuming, an expensive process by putting assets into
a revocable living trust where the beneficiary excuse me, whether
the grants or puts the assets into that trust, so
that when the grantswear is deceased, the beneficiaries don't have
(04:55):
to go through that process, making life simpler, less of
a hassle, and less expensive ultimately for beneficiaries.
Speaker 1 (05:05):
Thank you for that, Anthony. That was very thorough. And
just to circle back on a couple of things that
Anthony had said. In a will, as Anthony pointed out,
that covers any and all assets that is owned by
an individual solely in their name at the time of passing.
And I have questions from clients that say, well, can't
(05:25):
we incorporate a trust into the will, because I may
not be prepared to do that now. And sometimes people
have this fear that if they put an asset into
a trust that they're going to lose control of that asset.
And now, listen, there are several types of trusts that
can be implemented. Categorically, they can be broken down into
(05:47):
two different kinds, revocable irrevocable, and when we use those
trusts depend on what our goal is. So if we
were more concerned with some type of long term care planning,
potentially the need for Medicaid assistance in the future with
those long term care needs, then we would be looking
(06:07):
at an irrevocable trust. But there are always mechanisms that
are put in place into each of these trusts to
safeguard the creator of the trust. So it doesn't mean
that once we make the deposit into this trust that
there could be a runaway train or somehow that we're
going to lose our ability or complete control over these assets.
(06:29):
And what I think is one of the most useful
tools and what people often overlook when we talk about
estate planning, because most people think of what happens to
us after we die or when we're no longer here,
But a lot of people fail to appreciate that things
can happen to us during our lifetime where we're still here,
but we may not be in that position where we
(06:49):
are able to make sound judgments or even be able
to manage our affairs alone. So, as Anthony pointed out,
there is a incapacity manager system. It makes it a
lot easier to transition the power from the grand tour
creator of the trust to a successor whom you want
(07:10):
to name. It's not going to be someone random, It's
going to be someone in accordance that you trust and
that you believe is the best person to step into
that job for you in that situation where it becomes needed.
So again this doesn't have to just necessarily take effect
upon death, but in the event that should God forbid,
someone becoming capacitated, suffer from a stroke, or just be
(07:34):
in a situation where they cannot act as a trustee
or meaningfully able to handle their assets and affairs. We
have a system in place for people to step in
to help you, and the trust is a very thorough
document that has a lot of contingency plans that are
built in. So a will should always be a part
(08:01):
of your estate planning tool. But we just don't want
to rely on the will alone. There are certain situations
that money could come to us after we die. For example,
let's just say someone's a part of a lawsuit or
litigation prior to passing passes before there's a settlement, and
a settlement is reached after the fact, and now money
is coming into that individual that's going to pass through
(08:23):
in a state. Sometimes we cannot have control over everything,
even as diligent as we are, and with a will,
when we have a trust that we work with a
companion to that trust, we can still get the asset
into the trust eventually. But the important thing is is
that for the majority of our assets, for all of
(08:44):
the things over which we do have control, we want
to make sure that we implement a plan today. And
so that is the focus of our show. That's always
been the premise. It's are you prepared? And how do
we be best prepared? That's by making sure that we
have a sound plan in place that is going to
(09:04):
not only help us at the end, but will help
us during our lifetime and making sure that we can
keep up with our wishes and be able to kind
of confront any life changes and obstacles that occur as
they occur. So we're going to be taking a short
break and when we come back, we're going to dive
(09:24):
into the particulars of trust funding. Stay tuned and we're back.
You are with Pierre O'Connor and Strauss here on Life
Happens Radio Again. I am your host, Tom Morasco, joined
by my colleague Anthony Kachuwi. We are talking about trusts today,
the importance, what we need to do, how do we
fund them, what mistakes we need to avoid to be
(09:46):
able to make sure we're protecting ourselves and our loved ones.
Now listen. We understand that it's hard to kind of,
you know, condense such a such an important topic with
incredible nuance in to roughly an hour's show, but we
just wanted to let you know that Pierre O'connoran and
Shows does have an upcoming seminar that we'd like to
(10:07):
invite you to attend. It's our popular Trust Administration Workshop,
and that is where you can learn what to do
once you trust is up and running. Our next workshop
is going to be on Tuesday, January twentieth in Albany
at the Capitol Region Chamber. It's going to be hosted
by our founding partner, Lou Pierro, along with an accountant
and financial advisor. Also keep in mind it is a
(10:29):
free lunch program and it does go from twelve to
one thirty, So to reserve your seat, you can head
over to our website at Perolaw dot com, pi Erro
law dot com, click on the events tab for Trust
Administration Workshop and we hope to see you there. So
in the beginning of the show, we kind of mind
(10:49):
over simply what a trust is, some of the advantages
in perks and why we like to implement them, namely,
number one, In the event something should happen us, we
have a way of passing on management and also upon passing.
It's a means of avoiding probate, which we're going to
dive into a little bit more as to exactly why
we might want to do that. But then we get
(11:11):
a lot of questions about, well, what sort of things
go into a trust and how do we do it?
Does my house go into a trust? Do all my
bank accounts, school and my trust? What about retirement accounts?
I have shares, I have CDs? What kind of things
go into a trust? So Anthony, don't why don't you
(11:33):
lead us in that discussion? And as far as what
sort of assets do we typically recommend our clients to
place and trust?
Speaker 2 (11:42):
Sure you don't tell me before I discuss the specific assets.
I want to say that often we have clients come
to our firm and they'll say, I have a trust.
I did this, And I'll say, like you mentioned earlier
in the show, what's in your trust? And they look
sort of confused, And I want the listener understand that
you could have the ferrari of trust, but if you
(12:03):
don't have assets in that trust, it's like the Ferrari
has no gas and it's going nowhere. So having a
trust is important, but you actually have to put things
into the trust. And I've seen people that have these
sort of do it yourself, these DIY trusts, and they'll
have a piece of paper on the back that'll list
all their accounts and say, okay, these assets are in
my trust.
Speaker 3 (12:23):
And then when I discussed.
Speaker 2 (12:24):
With the client, I say, did you go to the
bank and actually transfer these accounts And they say, oh, no,
I just wrote the accounts on this piece of paper.
Doesn't that transfer the accounts to my trust? And the
answer is no. If you want to have a fully
functional trust, a fully integrated plan, you have to weave
all the assets into the trust. So if you have
bank accounts or investment accounts, you have to go to
(12:46):
the financial institution and provide them with the trust document
or a certification of trust and a certification of trust.
It's just simply a one or two page document that
lists the name of the trust, the grants for the trust,
thee that the taxpayer identification number of the trust is
the client's social Security number, and that should have enough
(13:08):
information for the financial advisor or the financial institution to
transfer your accounts to your trust.
Speaker 1 (13:14):
Yeah, Anthony, I think just to add to that, I
think where the misconception comes is that when people think
of a state planning, most of our minds would go
to a will like our last will and testament, and
there it's just simply a recital of who do we
want to be in charge and where do we want
our assets to go to whom and in what quantities.
(13:34):
But that would not require us to specifically move assets around.
And we liken a trust to a will in that
it covers similar topics and it is a similar sort
of document. But what people fail to understand is that
a trust is a standalone document. It is its own entity,
and if you were to form a corporation, you would
(13:56):
need to actually put shares. There has to be something
that the entity holds. And so you actively, as Anthony
was pointing out, have to move assets physically into the trust,
or as I'm sure Anthony's going to cover as well,
update account beneficiary designations to be the trust so that
upon passing it makes its way into the trust. But
(14:19):
one way or another, we have to get the assets
from your name into your trust's name.
Speaker 3 (14:25):
Yeah, and I think you made an important point there, Tommy.
Speaker 2 (14:27):
If you have a will and you say all my
assets are then to go to my spouse, But your
bank accounts that you opened up thirty years ago lists
your parents or your sibling, the beneficiary designation is in
a control who gets the money in those bank accounts,
So your will will not control the bank accounts if
you have a different beneficiary. So in this scenario, your
(14:50):
will says your wife is getting everything, but your bank
accounts have your parents or sibling. Then the parents of
the sibling are getting all that money in those accounts.
And unfortunately, clients and most people, they'll know every dollar
they have in their accounts, but when you ask them
who are the beneficiary on this account, often they don't
know the answer.
Speaker 3 (15:09):
The account's been open for twenty five or.
Speaker 2 (15:11):
Thirty years, they probably did fill out a beneficiary and
if they did, it could have been before they were
married or had kids or other major life events. So
it will is great, but it won't control the assets
in your bank account. If you have a beneficiary name,
and usually bank accounts retirement accounts, those are significant portions
(15:32):
of clients estates along with real estate. Real estate is
another asset Tommy that we like to encourage clients to
transfer to their revicable living trust, and we could do that.
Speaker 3 (15:42):
By a deed. Why don't you go into.
Speaker 2 (15:45):
The advantages of having the properties owned by arevoicable living trust,
especially when clients own property in multiple states, and the
pitfalls that they can encounter with having to go through
probate in various jurisdictions. If they don't have a retical
living trust effect that's probably London.
Speaker 1 (16:02):
So a lot of the times we have couples that
will come in and they'll say, hey, well, we jointly
own the property, so we don't need to do anything
with it because they think, okay, well, upon the first
of us to pass rightfully, our surviving spouse or whoever
your partner is would inherit the property and they would
become one hundred percent owner of that property. But what
(16:22):
happens is then what happens when that surviving partner spouse
love one passes away. That's gonna end up in their
estate if it hasn't been accounted for through a state planning.
So by putting it in a trust, we can still
assure ensure that it's available two our partner during our
(16:43):
after our our our passing, but then we have a
means of passing it on to the ultimate beneficiaries, all
while avoiding probate. Now, a lot of questions I get are, well,
what implications does that have, perhaps, let's say on my
property tax exemptions, I'm collecting STAR, I'm collecting enhanced AR,
I'm collecting veterans benefits. What does that do to me?
(17:06):
And the way that we structure the trust as what's
called a grand tour trust for tax purposes, it actually
enables you to keep those property exemptions and also even
if you chose to sell it, every individual in New
York State has tax an exemption provided that the home
that we're selling is our primary residence and we've lived
(17:28):
there for two of the last five years leading up
to the sale. We're afforded a two hundred and fifty
thousand dollars exemption towards capital gains, which is huge. But
the biggest benefit is that once we put the property
into the trust, and we have not sacrificed any of
the benefits that we currently have, the biggest benefits going
(17:49):
to be gained upon our passing, because once it passes
down to our loved ones, they're going to get what's
called a full step up in basis. So what does
that mean? So if I purchased a proper for two
hundred thousand dollars and it appreciated to a million dollars
in my lifetime, if I were to sell it, that
eight hundred thousand dollars profit would be subject to capital
(18:10):
gains tax. Yes, there are ways of offsetting that amount
the two hundred and fifty thousand exemption I mentioned earlier.
If you're a couple, that could be up to five
hundred thousand. But nonetheless, upon passing, if we still own
that real estate at the time of our death, it
then the basis and rather than being that two hundred
thousand for which you purchased it for, becomes whatever the
(18:33):
fair market value is at the time of your death.
So if the property's worth a million at the time
of your passing and your beneficiary is there, then go
and sell it for a million. There is no capital
gains tax. Now does this hold true if you were
to simply hold it out right and it went through
your estate or through a will that went through the
probate process. The answer is yes, you still get your
(18:55):
full step up and basis The difference, however, is that
you're going to be required to go to court, you're
going to have to pay fees, you're going to have
an attorney as syste, and the probate process can take
an extremely long time. Down in the downstate regions and
the city and on Long Island, that probate process can
be upward of a year or longer. And that's just
(19:16):
that's even regarding without considering if there's any other type
of issues like a contest or if somebody doesn't agree.
So while that process is going on, as Anthony said,
that asset is locked, so you're still incurring your carrying costs,
the utilities, the real property taxes, and we know how
expensive that that can get. So now, yeah, we've gotten
(19:38):
the full step up in basis, but now we have
a full year of expenses that we've had to spend
down out of the estate assets in order to fund
before we get the approval from court in order to
then go ahead and sell it. So it's it's certainly
a very useful tool and what we think is a
very strong tool for property because and listen, guys, trusts
(20:02):
are not just for individuals with high networks, because a
lot of the time. That's another misconception, right, people think, well,
I'm not a multimillionaire, why do I need a trust?
They just think of trusts as belonging to as a
tool to people who are rich or really considerable means.
But that's not true. Most people their biggest asset is
(20:23):
a home. Okay, what it doesn't matter what you have
in the bank account, but it does matter what you
do with it and how you want to get it
passed on to your loved ones. So, and we've talked
about bank accounts, right, So other things are any appreciable assets,
even stock accounts, right, They will similarly get a step
up in basis at the time of passing, as it
(20:43):
would in real estate. So and again, even if I
had stocks in my name now, and I wanted to
open up an account of the name of the trust
and transfer the stocks, it is not a sale, so
it's not a taxable event. It is an in kind transfer.
So you are able to do that without having to
worry about whether it's going to be considered a sale. Okay, Anthony,
(21:04):
what about retirement accounts.
Speaker 2 (21:06):
Retirement accounts are an asset that we can't transfer directly
into the trust that would be an income taxable event.
But what we try to do is weave the retirement
account beneficiary designations into the trust plan. So typically we'll
have this spouse name as a primary beneficiary because they
can get a stretch. A spouse is which referred to
as an eligible designated beneficiary. Thanks to the Secure Act,
(21:30):
it created tiers of beneficiaris, or in the past, all
beneficiaris would get a stretch, and you would see wealthy
clients or clients whose children were successful and didn't necessarily
need to inherit that asset. The client would name the
grandchildren as a beneficiary, and by doing so, the grandchild
(21:52):
spend a lifetime or life expectancy would be very long,
seventy or eighty.
Speaker 3 (21:57):
Years, so they would have seventy or.
Speaker 2 (21:59):
Eighty years to drain out that money from the retirement accounts.
And while it's in the retirement accounts, it's growing tax deferred.
And what happened was the government thought that it would
be better if the assets came out of the retirement
accounts quicker so that it can get tax revenues. So
that came up with a nice acronym secure makes people
(22:20):
feel good. Setting up every community for retirement. But in reality,
what it did was it said that that special benefit,
that stretch is not going to be permitted now for
all beneficiaries own For a handful of beneficiaries, the surviving spouse,
a minor child of the decedent, disabled people, chronically ill,
(22:40):
or beneficiary that's not more than ten years younger than
the principle, those are the only ones.
Speaker 3 (22:45):
Who are now able to still get the stretch.
Speaker 2 (22:48):
The rest of the beneficiaries, your children, your grandchildren, they're
subject to the ten year rule unless they're in one
of those classes that defined as an designated beneficiary. So
the retirement accounts you can transfer directly to your trust
what we name the surviving spouse as the primary beneficiary.
(23:09):
And then what you can do is you can name
trust that you form for your children as beneficiaries of
those retirement accounts, so you have a revocable trust which
during your lifetime you're the grants or of trustee beneficiary.
Upon your death, you could have trusts that are then
formed for your spouse and for your children so that
(23:32):
the trust assets remain in trust outside of their taxable
states and protective credators.
Speaker 1 (23:39):
Anthony, that's a good point. I think we're going to
leave it off here. We're going to coming up. We're
going to be taking a break for the news. When
we get back, we will wrap up our discussion on
funding our trusts and move into common mistakes to avoid
in order to save your family thousands of dollars. So
stay with us, stay tuned, we'll be back soon. I
(24:00):
am your host, Tom Morasco, Pierre O'Connor, and Strauss again
joined by my colleague Anthony Kachewi. Today's discussion involves trusts,
how to fund them, the important mistakes to avoid, and
what benefits they have to you and your loved ones.
So we've talked about what a trust is, we've talked
(24:21):
about funding and what sort of assets go into the trust.
Now what we want to do is kind of give
some attention to certain mistakes to avoid. And what we've
seen is common mistakes. And I want to point out
that the biggest mistake that any of us can make
is by not having a plan. A lot of us
(24:43):
are plagued with the notion that hey, I have time,
I'll be able to do this, I can't do this today,
or I don't want to think about this right now
I will get to it. And we believe that that
is the biggest mistake because life happens, right, that's the
name of our show, and we don't know how it's
going to unfold, what's going to happen when, So it's
(25:06):
best to be prepared and we don't wait for an
event or something bad to happen, because that's not the
ideal time to try and put in a plan. The
opportunity is while we are still able, minded and healthy,
or at least relatively healthy. So I have a lot
of clients who've come after the fact, unfortunately, where they've
(25:27):
had no planning. And then a spouse suffers from a stroke,
and now that you know that spouse doesn't have capacity
any longer, but they never executed something such as the
power of attorney to grant the spouse the authority over
their financial and legal affairs. And now I'm wrapped up
in court trying to get guardianships to try and catch
(25:47):
up to even be able to take the reins and
assist families to move forward. So the biggest thing that
you can do for your famili is making sure that
you have a plan in place, making sure that in
such a chaotic time where everybody's going to have a
high level of emotions, stress, anxiety, grief, that there is
(26:09):
a roadmap for them to follow. Now, do they have
to be well versed in all of a state planning
techniques and tools, And no they don't. They need to
be able to be resourceful, they need to be trustworthy,
and they have to have the plan right. We prepare
a plan. That is your guide. It is your guidebook.
(26:32):
How do I do it? It's my how to anything
I need. I can revert to this plan and it
tells me what I need. I might need assistance and
maybe interpreting or saying, hey, which steps should I take first?
And what's next? That's what we're here for and that's
what we hope to establish with our clients. It's long
lasting relationships so that you know and you have the
security of knowing that in addition to the plan that
(26:52):
I put in place, I have a team of support
behind me who can help implement that plan and help
and guide my loved ones when I am not here
or I am able to communicate myself and making sure
that everyone is aware where are things situated, Who is
going to be in charge, what sort of responsibilities are
they going to bear, And that is the purpose of planning.
(27:14):
So aside from not having a plan, one of the
other big mistakes is by putting in a plant, by
putting a plan into place but not fully executing it.
So Anthony, tell us some common things that you've seen
when it comes to properly executing the plan.
Speaker 2 (27:34):
Sure, one thing I just want to touch on before
we get to that is that if a client doesn't
implement a plan, this state has implemented a plan for them.
So by creating your own plan, you're taking autonomy over
your assets and over your life and identifying who you
want to inherit those assets. But if you don't, this
state has a plan for you. And if you're married
(27:57):
and have children, your spouse is going to get the
fifty thousand dollars and half of your remaining assets, and
your children will split the other half. So the intensity
laws will already outline who's going to receive your property,
and most people who are married probably wouldn't want their
children to inherit their property and then have to have
a guardian of the property and have assets in an
(28:19):
account that the spouse can't touch because they are designated
for the children. Most people who are married would probably
want their spouse to inherit all the assets because they
know that the spouse is going to be a good
steward for their children.
Speaker 3 (28:33):
So I want to just.
Speaker 2 (28:34):
Address that sort of misconception that clients think that you
know that there's not a plan out there for them,
because it is, but the problem is it may not
be the plan that they want. So I always advocate
clients that take autonomy over their life, over their assets,
and to put a plant that they want.
Speaker 3 (28:50):
In effect.
Speaker 2 (28:51):
Some of the mistakes that I see for clients when
they come to the office, one is not reviewing their
plan when they have one. In effect, Often clients will say, oh,
I have a will, but it's my will is ancient
fifteen years old when my kids were minors, and at
that time, the kids couldn't serve as agents, right because
they were ten years old. But now fifteen years later,
(29:12):
your children are twenty five, and besides, for your spouse,
maybe you want.
Speaker 3 (29:18):
Your children to serve as agents.
Speaker 2 (29:19):
Maybe you want them to be the success or agents
and the friends or the siblings that you named before.
Maybe they're sick, maybe they moved, Maybe you don't have
a close relationship with them anymore.
Speaker 3 (29:29):
Maybe you picked one of.
Speaker 2 (29:31):
Your friends to serve as an agent under your power
of attorney and that friend became bankrupt and probably not
the best choice. So life happens, things changed. You always
want to give a fresh review of your plan. See
who your agents are, the ones who you're entrusting to
make decisions in the event you're unable to do for yourself.
To make sure that those people are still the appropriate
(29:54):
choices for you at this portion of your life. Fifteen
years ago. The people who were we trusted at that
time may not be the same people fifteen years later.
So I would say one is reviewing the plan and
then making sure that the plan is part of a
comprehensive approach, meaning that if you have a will, and
(30:15):
let should say certain clients don't want to trust or
don't think a trust is appropriate for them, do the
beneficiary designations.
Speaker 3 (30:22):
On your other assets match up? Do you know what
those assets are?
Speaker 1 (30:27):
And Anthony, that goes back to kind of what I
was saying earlier about we look to establish relationships with
our clients. It's not a transaction. We're not here to
just turn documents for you. That's not the point. The
point is that there is a relationship and it's an
ongoing one. And as there are major life changes, and
we hope that most of them are positive, such as
(30:49):
marriages or children or grandchildren, or the acquirement of new assets,
it's important to be updated and having periodic check ins
so that we understand the changes that are going on
and also allow us to revisit the plan review it.
Does it still meet your needs as Anthony was saying,
(31:11):
or do we still have the same cast of characters?
Has there been any changes there? And it allows us
to have your plan evolved with you as your life grows.
So most people they just think, I want to scramble,
get it something in place, They put it in place,
they feel assured in that moment, and then they're like, okay,
I said it, I forget it, I know it's there,
I'm good. I did everything that the lawyers told me
(31:33):
to do. And then they fail to account for all
the different changes that happen in their lives and they
forget the particulars of what the documents said, as Anthony
pointed out, and then all of a sudden we end
up with the plan that's kind of you know, obsolete,
or it doesn't really serve the original purpose or what
it was that you had intended, or at least maybe
(31:54):
didn't account for certain circumstances and changes that have occurred
since the time you put that place in place. So
number one is making sure you have a plan. Second
is make sure you keep that plan up to date. Okay,
And now, Anthony, you know I usually tell my clients right,
(32:15):
So obviously, in the event of any kind of a
major change, as I was alluding to earlier, how frequently
do you, you know, advise your clients that they should
be looking at their plan to update it.
Speaker 2 (32:27):
Sure, Just as a general matter, I would say it's
good to review your plan every couple of years, every
two or three years, especially if there's a major life event,
like you said, a divorce, death, birth of a child,
getting married. You also want to review your plan because
you want to see how your beneficiary's lives have changed
over time. So maybe you have an outright distribution going
to a loved one and now that person is on Medicaid.
(32:49):
That would not be great. If a beneficiary is on
a means based program and now you're giving them an
outright distribution, that may kick them off of benefits instead
of having a asets going out right, you're going to
want to put a supplemental trust in your documents so
that way they could actually benefit from those assets.
Speaker 3 (33:07):
So part of the plan is, you know, part of
having a a.
Speaker 2 (33:11):
Comprehensive plan is not just reviewing your own life, but
looking at the lives of your beneficiars and seeing how
could they best benefit from the structure that you're implementing.
Speaker 3 (33:21):
You don't want to.
Speaker 2 (33:22):
Work your whole life or assets and then force the
beneficiars who are inheriting to waste those assets when it
could have been kept to make their lives even.
Speaker 1 (33:30):
Better, right, And I think that's another key difference in
what we've seen in certain documents that have come before us.
It might superficially state what should happen and upon our death,
who is going to be in charge and whom it
should go too, but there are a lot of contingencies
in place. Well, what happens if someone's a minor, what
(33:53):
happens if you know, someone's become disabled, or as Anthony
was saying, is applying for or currently receiving government based benefits.
What happens if we just don't believe that a person
is suitable to be able to handle certain aspects of
management on their own, managing money or you know, being
(34:14):
able to make those distributions. Now, what's the most important
thing then is making sure as we were alluding to
in our previous segment, about funding the trust properly and
making sure that you coordinate amongst all of your assets.
So for those that we're putting in the trust, great,
(34:34):
we understand that the trust is in place, it accounts
for everything that we want, it has the assets in
there currently, But then there are other assets that will
not be going into the trust per se right now.
Right So for example, we have a daily checking account
where we have bills that come in and out of
we have direct deposits, and sometimes we don't want to
(34:57):
make a change across the fifty different subscriptions that we
have or bills that we're paying, So then we have
to make sure that we coordinate our beneficiary designations. Now,
we encourage that when we have the trust in place,
that we name the trust as the beneficiary, because remember,
in the trust, we've accounted for all the different contingencies.
(35:18):
Whereas if you name an individual as the beneficiary on
an account, we don't get the benefit of all those
different contingency plans that we put in place. So, as
Anthony said, if I had my spouse named as the
first one, and my spouse is receiving some type of
long term care assistance through Medicaid, and now they're specific
(35:41):
and strict asset requirements in which someone's allowed to have
and I pass, and now this asset goes directly to them.
It doesn't account for the fact that they're on Medicaid.
It doesn't account for perhaps multi generational passing down. What
if I had a child that was on my account
as the beneficiary, but they predeceased me, but they left
behind a child, but there was two children, right, I
(36:04):
had a son and a daughter and one unfortunately predeceased.
Doesn't matter that they had surviving grandchildren in a situation
where we name them as beneficiaries, because it's not going
to pass down that line. It's going to go to
the surviving beneficiary named on that backup plan. Whereas with
a trust, we can build in that generational plan where
it can go on to grandchildren, great grandchildren even and
(36:28):
we can do so in a way that could even
be more advantageous to them by leaving to them in trust,
and this was something that Anthony started to allude to earlier.
We can leave it to them in a trust that
they could have control over. We called them beneficiary controlled trusts,
where the beneficiary can also act at trust as a trustee,
and you can dictate at what point in life, at
(36:48):
what age you believe that they would be suitable to
do so. But by doing that, they inherit this property
in an asset protected way, whereas with an outright distribution
it would be subject to any and all the different
issues that one can encounter in their lives. One obviously
we talked about with was government benefits. But what about
if they get sued, somebody tries to collect a judgment
(37:10):
against them. What happens if they get divorced, right, what
happens if they need to file for bankruptcy. If that
money's in their personal account because you gave them an
outright distribution, well it's exposed for all of those things.
But if we pass it to them in further trust,
well now they have access to it as they need it,
but while it's sitting in that trust, it's completely asset
(37:31):
protected from all of those various scenarios. So trusts are
extremely powerful and it's all down to how it's structured,
how it's funded, and making sure that it is carefully
coordinated amongst all of your assets and accounting for all
different contingencies. We're going to take one last break and
when we come back, we're going to wrap around our
(37:52):
discussion around trusts and the different benefits in what a
thoughtful plan would look like. Stay tuned. Thank you again.
This is Tom morasco of Pier O'Connor and Strauss. You're
on Life Happens Radio here again with my colleague Anthony Kachuwi.
We're talking about trusts today and in our you know,
in our in our last remaining time, I would like
to invite that obviously, if you have any questions, please
(38:15):
give us a call at one eight hundred talk WGY.
That's one eight hundred eighty two five five nine four nine. Also,
if this topic has intrigued you you want to have
more information, please keep in mind we have our our
Trust Administration Workshop coming up on Tuesday, January twentieth and
all been at the Capitol Region Chamber again. That's going
to be hosted by our founding partner Lou Pierre of
(38:36):
PI O'Connor and Strauss. The lunch program will go from
twelve to one thirty. You can go to our website
at pierolaw dot com, click on events and sign up
for the Trust Administration Workshop. So we've talked about what
a trust is. We've talked about what sort of assets
and the importance of funding our trust. We've talked about
(38:56):
a certain common mistakes. So let's talk about the pop Okay,
let's talk about what we accomplish when we have a
trust as part of our estate plan. All right, We've
alluded to a lot of them, but one of the
ones that I wanted to give a little bit more
attention to was this issue of probate. Now, a lot
(39:18):
of people, not just in New York, but a lot
of people in multiple regions have property in various states.
Maybe they grew up in a different state, maybe they
like to vacation in another state. Obviously, here in New
York we have a lot of snowbirds. We have a
lot of people that have property down in Florida or
in the other Northeastern or again anywhere throughout the United States.
(39:41):
But what people don't understand is that if we do
nothing as far as a plan goes, we have to
bring a probate proceeding in each one of the jurisdictions
in which we have property. So if we die resident
of New York, I'm starting my process here, and we've
already talked about the length and time and what that
could entail. But then if I have property in Florida,
(40:03):
well now I have to go down to Florida and
I have to do something called an ancillary probate. And
if I have property in other states, similarly, I have
to do the same thing in each one of those states.
What Anthony mentioned earlier was one of the positives about
a trust is that you can consolidate your assets, so
it is possible to deed real estate from other states
(40:27):
into your trust, and again, it would avoid probate. It
would avoid that process of having to go to court
in each one of those jurisdictions and just allow your
beneficiaries to just follow your wishes, whatever that might be,
whether it's keeping it, renting it, selling it, whatever it
might be. They are able to do so immediately, so
(40:48):
avoiding probate. When I say that, yes, we don't have
to go to court, but for people that have property
and multiple jurisdictions. Just keep in mind how valuable a
tool that trust could be just for that purposeal.
Speaker 2 (40:59):
Life, right absolutely, I mean, and you know, one of
the mistakes that people often make is they'll form a
trust and for the clients that actually go through the
funding process, they transfer their assets into the trust, transfer
their the real estate that co.
Speaker 3 (41:14):
Op shares, but years later they'll.
Speaker 2 (41:18):
Sell it, they'll sell them home.
Speaker 3 (41:21):
They're excited.
Speaker 2 (41:22):
Sometimes they don't involve their estate planning attorneys. They have
another real estate attorney, and the real estate attorney doesn't
know about the trust or is not thinking about it.
It's not what they do primarily, and they just put
the deed in the name of the clients.
Speaker 3 (41:38):
And what happened is is that you've.
Speaker 2 (41:40):
Transferred the asset that was in a trust that was
going to go based on the instructions that you provided
to the trustee that could have beneficial trusts that you
were just mentioning the beneficiary control trust for the benefit
of your descendants. That's ass a protected out of their states.
And now you put that asset back into your names
where it could be a probate asset. So one of
(42:03):
the common mistakes is when clients purchase assets in the future,
that they don't.
Speaker 3 (42:08):
Purchase it in the name of the trust.
Speaker 2 (42:10):
So it's important that not only do the clients complete
the initial funding, but that they are also being mindful
that in the future the assets have to be held
in that trust as well, not that you then purchase
a home or condod excuse me, a co op in
your own name and then potentially have a probate asset.
Speaker 3 (42:31):
So that's why our.
Speaker 2 (42:33):
Firm recommends the clients to come in every couple of years.
We have the PALMS program, the Professional Advocates Life Maintenance
system where we meet with clients annually review their assets,
have a meeting with not only the client but their
financial advisor, and the accounts will show so that way
we could see what are the assets now. Yes, we
(42:54):
completed the funding process ten years ago, but now the
client's been living for the last ten years and they're
not always thinking about putting assets into their trust. They
open up new bank accounts. Do they have new assets?
Are those assets in the name of the trust? Do
we need to update beneficiary designations? Do we think there's
a more effective way to implement our state plan? Is
(43:15):
there a beneficiary that perhaps is disabled, that we could
have the retirement accounts go to a supplemental needs trust
for their benefit to get the lifetime stretched, rather than
having those assets go to a beneficiary who is not
that's going to be income tax over the ten year period.
So all these nuances require constant attention, and we don't
(43:35):
have to do it every day, but certainly on a
yearly or every few year basis. We want to just
be looking at everything. How has our life changed, how
have our assets changed, how have our thoughts changed? Do
we want to still have these people as their beneficiary?
Is there a way to make it even more advantageous
for them? And one of the things that you just
(43:56):
mentioned was the beneficiary control trust.
Speaker 3 (43:58):
That's a very power. Two will be called when you
speak to clients and say that you could.
Speaker 2 (44:04):
Have the assets inherited by your children in an ass
to protect a vehicle. Sometimes they'll say, well, my kids
are responsible, they're not going to do anything where they
get to they're you know, they're not gonna be a
derelict of their of their responsibilities. They're good kids. But
what they don't realize is that the number one creditor
is a divorcing spouse, and no one knows who's going
(44:25):
to get divorced unfortunately. So is an inheritance set property, Yes,
but typically what will happen is your children will inherit
an asset. You get five hundred thousand dollars or whatever
that amount of money may be from your parents, and
as probably most of our listeners would agree.
Speaker 3 (44:44):
Along, you're almost single.
Speaker 2 (44:47):
Individual accounts starts to merge and you only have joint accounts.
So you get inherents from mom and dad. You throw
that money into a joint account, and five years later
there's a divorce, and what's going to happen is that
about them? Say that's my that's a joint account, And
now you've co mingled that asset and the separate property
nature of it has been painted. So a trust makes
(45:09):
it very easy to segregate that asset. And as Tommy
alludes to before, you could have other people service trustees
if you think your children are not at that level
for the time being, and you could have them gradually
step in. You could have them service co trustee at
a certain age, maybe at twenty five and then at
(45:30):
thirty years old. If you're deceased and they're inheriting this asset,
then they could be the sole trustee of their trust.
So there's steps that we can take to not overwhelm
the children, to not give them all this money at once,
where maybe they wouldn't make the best decisions because they're young.
We can give them some time and guidance with other
(45:51):
family members serving as trustees, serving as a responsible person
who's going to oversee those assets and make sure that
they're used in the best way for your children.
Speaker 1 (46:00):
Yeah, and especially another important aspect there, especially as it
comes to couples too, is or even in any individual
is about being cognizant of the possibility for having to
pay a state taxes. So currently exemptions in the New
York state. I know people have seen recently, Oh well,
the federal is going up to fifteen and that's great,
and that's a great sum of money. But New York
(46:23):
is different. New York is currently around the seven million mark.
So some people might be listening to this and say, oh, well,
I'm not in that realm right now, But okay, maybe
you're young. You have assets that can continue to appreciate.
And what we happen to see is that sometimes people
don't realize that over time they've created this plan and
things have continued to grow, they're not paying attention to
(46:44):
the numbers, and then all of a sudden they've exceeded
the exemption limit. And if you go over one hundred
and five percent of that limit in New York, there's
a cliff. And that clip says that not only are
you going to get taxed on the amount which you've
gone over the exemption, they tax you on the entirety
(47:05):
of your assets, the whole amount, and that's hundreds of
thousands of dollars that you could potentially be losing by
not planning properly. So for married couples, there are marital
deduction planning. There's ways that we can go about to
either minimize, mitigate, or eliminate estate taxes altogether, which is
(47:28):
another powerful tool that we could utilize trusts for. So
as you can see, this is a trust that can
cater to a multitude of people, whether it's I have
you know of small means, but I want to make
sure that I preserve that legacy for my children or
grandchildren or my other loved ones because I worked really
(47:51):
hard to acquire whatever it is that I have and
I don't want to just have to kind of waste
that I want to be able to, let's say, take
advantage of different resources that I have available to me
while preserving what I have been able to accumulate from
my loved ones. A trust could be used for those people.
And the other extreme is the scenario that I had
just mentioned, where we have clients that are extremely wealthy
(48:15):
and a way of Okay, well, how can I minimize
negative tax implications to my loved ones that I worked
so hard to get that I don't just have to
give it away to the government, that I can actually
make sure that it passes down to the generations to
come and to the people that I care for. And again,
you have a system in place. And what I cannot
(48:35):
stress enough is that it's about having that roadmap. When
things go sideways, When things occur, especially when they are unexpected,
you are going to be faced with chaos. And we've
all been in that situation. That's scramble, that gut clenching
feeling where, oh my goodness, what do I do now?
(48:58):
How do I do it right? And it's really hard
to think clearly in those type of situations. And I
don't care if you're the most poised person in the world,
when you are faced with a situation that is an emergency,
something that we didn't account for, we all freeze at
one point. But what's good is that even while we
get ourselves collected, even if we need to get the
(49:20):
help from the people that we care for, we have
the plan in place. We have a team that we
can rely on, and we also have strategies for our
clients too, of where we can keep a database of
all of your documents, the list of all your assets,
so that your loved ones are not left scrambling looking
where do I go, where is everything? How do I
(49:42):
find it? What do I do with it? Everything is
put in place so if nothing else, we hope that
what you were able to take away from today is
making sure that you do have a plan in place,
that you make sure that you follow through with that plan,
that it's executed properly, and that you update it and
keep it maintained as your life progresses, so that it
(50:02):
changes with you. We want to thank you again for
spending your Saturday morning with us. Again. This is Tom
Morasco and Anthony Kucchui of Pier O'Connor and shouse on
Life Happens Radio. We hope you have a beautiful weekend.
Speaker 3 (50:13):
Thank you, by New York
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