Estate planning for a dysfunctional family dynamic

Episode Transcript

Speaker 1 (00:01):
This is the Legal Exchange with Todd Lutsky from the
law firm of Cushing and Dolan and Susan Powers of
the Armstrong Advisory Group. Each week, Todd and Susan will
discuss many topics, including estate planning, how to avoid probate,
and protecting your money from a nursing home. If you
need assistance in any of these areas, or have a
question about another issue that may affect your future, call

(00:21):
eight six six eight four eight five six ninety nine
to make an appointment. That's eight sixty six eight four
eight five six ninety nine. Operators are standing by. Now
Here are your hosts, Todd Lutsky and Susan Powers.

Speaker 2 (00:37):
Welcome into legal Exchange with Todd Lutsky. I'm Susan Powers,
a financial advisor with the Armstrong Advisory Group, and I'm
joined by Todd Lutsky, a partner with the law firm
of Cushing and Dolan with a master's in taxation. Welcome Todd,
How are you today?

Speaker 3 (00:52):
I am never better in you.

Speaker 2 (00:54):
I'm great. Thank you what you have for us this week?

Speaker 3 (00:56):
Couple of good cases, actually a Supreme Court case out
of Vermont dealing with basically something you don't think about
a lot. How about we don't make allegations against folks
while they're still living that could impact your inheritance with
you're a beneficiary, sure you think, so we'll talk a
little bit about that and how this whole arrangement went,

(01:21):
and then we'll head over to Ohio where, again my
home state. We'll have an appellate court case there where
you know, if you are going to make a complaint
or if someone else is going to file a complaint
and you feel you're in the right, you might want
to actively defend your claim otherwise you aren't going to win.

(01:44):
So it seems kind of interesting there as well. But
I think this is more than just the fighting. This
is more about the relationship that existed between two people
and how how you know the trust actually does work
to accomplish your wish. In fact, in both of these cases,
you'll see how the trust can and does do what

(02:05):
it's supposed to do. But you know, planning is really
the important aspect of it. So and it actually helped
to prevent some of the fighting, but nevertheless it still
did happen. Folks, Planning is really the most important part.
And this guy this month is what we call unlocking
the power of a Medicaid eir vocable trusts. It's about

(02:28):
thirty years in the making, right. I've come up with
question answer, question answer, question answer about how these trusts
work day to day while you're living, what happens when
you die? Talks about selling a house, buying, renting, Can
I fund it with money? How can I access it? Folks,
income taxes, you name it. It's all addressed in here.

(02:49):
So if you've never done an eravocable trust before and
you think that they're not for you, get the guide.
If they think there are for you, then this will
confirm that they are or tell you that they're not.
So it should really give you the information you need
to begin your estate planning process using or not using

(03:10):
an irrevocable trust eight six six eight four eight five
six nine nine or Legal Exchange show dot com again
eight six six eight four eight five six ninety nine
or Legal Exchange Show dot Com. Let's head over to Vermont.
So what happened here? So there was an author and

(03:31):
an illustrator named Anna in a relationship with Ralph from
nineteen sixty to twenty nineteen ninety to twenty sixteen now.
Ralph also became her primary caregiver following her geo blastoma
I think diagnosis, yeah, glioblastoma diagnosis, and was her primary

(03:53):
caregiver until her death in twenty sixteen. Well, in twenty eleven,
Anna created a revocable trust kudosta her to do what
to collect the royalty income from her books and her illustrations,
and she was going to allocate forty percent to her
two daughters, so forty and forty for I think it's
Cordelia and Beryl, and then twenty percent to Ralph. Ralph

(04:18):
around the same time, created a will naming Anna's daughters
as the heirs to his estate. Okay, Well, between twenty
fifteen and twenty sixteen, which is when she died, Anna
made some amendments to her trust, basically increasing Ralph's income

(04:39):
from twenty five percent to fifty percent and reducing the
girl's income to twenty five percent each. Well, the girls
filed a claim alleging that Ralph persuaded Anna to reduce
or change the trust the way they did in exchange
for Ralph or agreeing to make the girls beneficiaries under

(05:02):
his will, and when they tried to confirm that agreement.
Ralph's attorney said, Ralph is under no obligation to leave
anything to you girls, which he's not right, And we
don't know if there was a contract or not at
this point. But nevertheless, in February of twenty twenty two,
the girls alleged a breach of anticipatory contract, believe it

(05:26):
or not, and it was based on the above statement
from Ralph's attorney saying that there's nothing there, there's no
contract there. So based on that, the girl they filed
in the court, and the court came back with a
summary judgment for Ralph because the girls could not demonstrate
there was any evidence that Ralph unequivocally repudiated or this

(05:48):
alleged contract with Anna, and in fact, and so in fact,
they went out of their way to say that Anna
the Ralph's will was still unchanged when it was filed.
When they filed this claim, I'm like, wow, let's step

(06:09):
back and look at this for a minute. So these girls,
this really needs to be looked at almost like a
second marriage, even though they weren't married. Treat it like
a second marriage. Right. So here, the trust I believe
was designed very well. It provided for her kids, right

(06:30):
gave them twenty five percent income each. It provided for
the significant other, Ralph, who was also a caregiver. Of course,
I'm scratching my head wondering where were the girls taking
care of I mean, why did they have Ralph doing
all the caregiving. But they should have been happy together
that Ralph was doing that. They should have been pleased,

(06:51):
and so it would have taken care of all of them.
And then they went on and they actually added Ralph
as a co trustee in one of the amendments. If
I forgot to mention that they did, well, that's helpful. Right.
So now by adding Ralph as a co trustee, you
really help Ralph to ensure that he gets what he's
supposed to get. But it also allows the girls to

(07:12):
still be in charge to ensure that he takes only
what he's supposed to take.

Speaker 2 (07:17):
So that's balance.

Speaker 3 (07:18):
That's a really not I mean, I'm really impressed at
the way this was drafted. Seems to have a nice
check and balance. So the drafting was was really important. Now,
I think when you look at drafting, it's really important
in the beginning. So having the trustees in place, making
sure that they actually could have held the house in

(07:40):
trust if they wanted to as well. Right, the real
estate could have been held in trust and allowed him
to live there if they wanted to. This just add
I'm trying to add to what this trust could have done.
They could have, you know, held the real estate and
trust and they didn't address that, but he could have
lived there. They could have he could have provided that
he paid for all the bills, still live there, which

(08:01):
is fine because he was getting fifty percent of the
income anyway, so that would have actually helped him to
live there and pay the bills.

Speaker 2 (08:09):
And then they could ensure that the girls would ultimately
get the real estate.

Speaker 3 (08:13):
Get the house. They could, that's right. They could absolutely
ensure that in this case the house isn't sold by Ralph,
because Ralph's not the sole trustee. You've got the girls
serving as trustee. Maybe it would have been set up
to say majority vote, although that wouldn't work if it
was two against one, so you got to be careful
when you do that. But this way you could put

(08:35):
a check in bounds and you could have said fine,
unanimous to sell. You have to all agree to sell.
And the point there is that we don't want to
force the sale if we don't have to. If he
wants to live there, he can live there as long
as he pays the bills. So you see, folks, these
trusts really can provide exactly what you want, and they

(08:56):
were doing it here. But for really any I think
greedy girls, I mean, I don't see any benefit here
for them. If you step back and see the forest
for the trees, this trust could have done everything. And
by the way, this trust did not address what was
happening to any real estate or principle. What if there

(09:17):
was money in the trust over and above the royalty
income that was coming in, maybe that paid out to
the girls right away, or maybe some piece of it
went to the girls and some you know, give them
something and not make them wait until this significant other passes.
But at the end of the day, this trust could
have done all of that, but instead these girls tried

(09:38):
to create this hell of blue. Really is what it
comes down to. And in the end, Ralph, who had
no obligation to leave them anything, was leaving them stuff.
Never even changed his will, so even when they filed
the will was still in existence. The girls would have
benefited from him. The rest of the trust. Everybody would

(09:59):
have been happy. They would have got a lot more
had they not filed a claim. Right, So folks trusts work,
learn how they work in this case, learn how the
irrevocable Medicaid trust works. Call and get the guide eight
six six eight four eight five six nine to nine
or Legal Exchange show dot com and you can download

(10:19):
it right there.

Speaker 2 (10:20):
You've been listening to Todd Lutsky, a partner with the
law firm of Cushing and Dolan. I'm Susan Powers, a
financial advisor with the Armstrong Advisory Group. We've got much
more to come when we return after this break on
the Legal Exchange with Todd Lutsky.

Speaker 1 (10:36):
Elder life planning can be overwhelming, so be sure you're
prepared or you could make costly mistakes that affect your
overall plan. Cushing and Dolan are experts in elder lawn
taxation and they can devise a plan that covers you
in every area where issues can rise. Irrevocable trust so
the most common type of trust that folks use for
financial protection, and while they can be complicated to create,

(10:57):
they help keep your assets safe because they contain specifically
detections that many of us need, like the possibility of
eliminating your estate taxes. Their new guide is called Unlocking
the Power of Irrevocable Medicaid Trusts. Learn more about how
these trusts can benefit you and your family by calling
eight six six eight four eight five six ninety nine
right now and asking for.

Speaker 4 (11:16):
Your free guide today.

Speaker 1 (11:17):
That's eight six six eight four eight five six nine nine,
Or you can request the guide right now by visiting
legal exchange.

Speaker 4 (11:23):
Show dot com.

Speaker 1 (11:25):
The proceeding was paid for and the views expressed our
solely those of Cushing and Dolan. Cushing and Dolan Indoor
Armstrong Advisory may contact you offering legal or investment services.
Cushing and Dolan in Armstrong Advisory do not endorse each
other and are not affiliated.

Speaker 5 (11:36):
This is Michael Valila, adjudant of the Disabled American Veterans
Department of Massachusetts. The DAVIA Massachusetts has helped me and
countless others adjust to civilian life through a variety of
incredible programs. Through our Local Veterans Assistance Program, we provide
necessary services to veterans in their communities, such as food, shopping, landscaping,

(11:56):
and companionship. But we need your support. You can help
by make a donation today. Please visit davfivek dot Boston.
That's davfivek dot Boston.

Speaker 1 (12:06):
Summer in New England is nearly upon us. The kids
are home from school, the sun doesn't set until after eight.
It's likely time for you to relax. Well, while you're relaxing,
take a few minutes to check out visit USVII dot
com and research your next vacation in the United States
Virgin Islands. The USVII has something for everyone, be it
the rich history of Saint Croix, the spectacular beaches of

(12:27):
Saint Thomas, or the tranquill quiet of Saint John. Visit
one island or all three and enjoy the vacation of
a lifetime. From the moment you arrive, you'll fall naturally
in rhythm with the heartbeat of the islands. There's no
money to exchange, and travel from New England could not
be easier. Whether you're looking for a romantic getaway or
a family vacation, the US Virgin Islands is the perfect

(12:49):
place for your next adventure. Go to visit USVII dot
com right now for more information and a book your trip.
The USVII is America's Caribbean paradise to visit USVII dot
com to make your reservation today. That's visit USVII dot com.

Speaker 6 (13:06):
Preparing for retirement is a time consuming and challenging process. Hi,
this is Mike Armstrong from the Armstrong Advisory Group and
if you're at the point where you can see retirement approaching,
now is the time to make sure your plan covers
all the bases. Our new guide is called your Retirement
Preparation Checklist, and it discusses a variety of important topics
as you make decisions for later life, everything from reviewing

(13:26):
your income sources so that you have a full understanding
of how much money you'll need in retirement, to addressing
any outstanding debt which may lessen your overall financial burden.
Planning for retirement takes a great deal of time and effort,
and this new guide is designed to offer you the
guidance you may need. Call us at eight hundred three
nine three for zero zero one and request your free
guide today. That's eight hundred three nine three for zero

(13:47):
zero one, or you can request it online at Armstrong
Advisory dot com.

Speaker 1 (13:51):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial, tax into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services. You're listening to the Legal Exchange with Todd Lunsky,
an expert in elder life planning and taxation. Need help

(14:12):
with your estate plan? Call Todd right now and make
an appointment. Eight sixty six eight four eight five six
ninety nine. That's eight sixty six eight four eight five
six ninety nine.

Speaker 2 (14:22):
Welcome back into the Legal Exchange with Todd Lotsky. I'm
Susan Powers, a financial advisor with the Armstrong Advisory Group,
and I'm joined by Todd Lutsky, a partner with a
law firm of Cushing and Dolan with a master's in taxation.
Where are we headed now?

Speaker 3 (14:37):
We're gonnad over to Ohio on an appellet court case.

Speaker 4 (14:39):
There.

Speaker 3 (14:40):
Look how this planning plays out. So William was in
a relationship with Laverne, and during the relationship, William designated
Laverne as a transfer on death beneficiary of his home.
I don't understand how you do that. You do that again?
This is in Ohio, So i don't know what their

(15:02):
laws are, but I'm going to take a shot at
saying that probably means a life estate and I'll explain
that got it later. And basically, all of Bill's family
members believed this designation was a result of undue influence
and that Bill was in diminished mental capacity when he

(15:23):
did this. So they basically all tried. They went to
they filed a claim, and they basically saying that all
the parties tried to resolve this matter informally. They engaged
in settlement negotiations with Laverne, they hired a lawyer. They
tried to do everything without filing an action, which is fine. However,

(15:48):
when they failed to settle, the family went ahead and
filed a claim to set aside the transfer on death deed. Well,
during the process, laverne attorney said that, oh yeah, okay,
well you know we'll give we'll waive service of process.
You don't have to file for us, and then delayed
some more and then never actually waive the service of process.

(16:11):
So the family said, fine, will try to serve her directly,
and they tried several times to serve her, but they
were not able to serve her. Laverne then filed to
file an answer to the complaint late without court approval,
finally answered the complaint. Well, the family files for default

(16:32):
judgment and a motion to strike, basically the the late
filed answer. The appropriate court actually allowed Laverne time to
respond to their motion, but untimely their untimely motion, but
they ultimately granted the motion to strike and the default judgment,
stating that Laverne that the transfer on death deed is invalid. Well,

(16:56):
LaVerne's not happy with that, sure, so she appeals and
her argument was the court aired in issuing this decision
because she actively participated in the pre trial settlement negotiations
and therefore she did actively defend her claim. Well, the

(17:17):
court said, sorry, thanks for playing, but pre trial negotiations
do not constitute actively defending a legal filing of a claim.
It was done before filing of a claim, and therefore
it does not apply. And we agree that the transfer
on death deed, whatever this is, is invalid. So and

(17:39):
I think they probably got the right result here. But
I'm going to talk to you a little bit about
that deed and about how to handle real estate when
you're doing your planning certainly, I think something a little
more elaborate could have been done here than what was done.
And folks, when I talk about something more elaborate, sometimes
you might be thinking about irrevocable trusts. And this irrevocable

(18:01):
Medicaid trust which is the guide we're giving away this month, right,
it's the Power of Irrevocable Medicaid trust Basically in a
nice question and answer format, it explains probably thirty years
worth of the most frequently asked questions I get on
these trusts. So if you've not done one of these
and you've been on the fence and you're not sure

(18:23):
if they're right for you, or if you've done one
and you'd like to brush up on how they do work,
this guide is really for you. It'll get you off
and running on the right foot regarding irrevocable medicaid trusts.
Eight six six eight four eight five six nine nine
or Legal Exchange Show dot com again eight six six
eight four eight five six nine nine or Legal Exchange

(18:46):
Show dot com to download the guide.

Speaker 2 (18:48):
Thirty years of questions. Did you pass the bar when
you were twelve?

Speaker 3 (18:52):
I'll tell you all, thank you, thank you very nuts.
That very nice view today, So let's figure out what
we could learn, you know, from.

Speaker 2 (19:03):
This, because they weren't married, right, they were just in
a relationship.

Speaker 3 (19:07):
That's what it says. Hey, we're just in a relationship
with Laverne. So it does strike me as a little
strange that you would give away your house to somebody
you're not even married to yet.

Speaker 2 (19:19):
I mean, that's I mean, I guess it depends on
how long you're in that relationship for I'm going to
use more details. Can you get the family online for me?

Speaker 4 (19:26):
Please?

Speaker 3 (19:26):
Would be nice and these cases would somehow provide a
little more insight. But yeah, we don't always have all
the facts. So so what's a transfer on death deed?
You know, I'm really not sure how in Ohio you
can do a transfer on death deed. In fact, for
real estate, generally we think of transfer on deaths as
on a bank account, right on an investment account, right

(19:50):
to the order of payable on death too. Name designated
beneficiary is and you get these forms and you fill
them out and they belong on bank accounts and that accounts.
You hear about designated beneficiaries on iras all the time. Yeah,
and what do they do?

Speaker 4 (20:05):
Well?

Speaker 3 (20:06):
They avoid probate, the asset goes directly to the beneficiary
that's listed. Well, that that makes sense, Well can I
don't love it from a planning perspective, but I'd rather
have it in a trust going where I wanted to go. Well,
what about this idea that I think this is probably
more akin to a life estate. Right now, remember that

(20:28):
would mean that that William in this case effectively transferred
the house to.

Speaker 2 (20:34):
Laverne, right gave it away during life.

Speaker 3 (20:37):
I would say, that's right, a completed gift right, but
retained this life estate, this right to live there. So
they're the current owner on the on the property. Effective
for the current present owner, well that that would effectively
mean that he did give away something, there was a

(20:58):
completed gift of that remainder interest. Well she retains the
right or well he retains the right the right to
live there. Now at his death, the life estate would
automatically terminate and the remain and the life a state
peace would kind of vest with the remainder. So in essence,

(21:23):
it's kind of like a transfer on death right.

Speaker 2 (21:26):
Solverine gets everything when.

Speaker 3 (21:28):
He dies when he dies, So to me, maybe that's
what I think, That's what they're saying it's a transfer
on death deed, which means as soon as Bill dies,
the house belongs one hundred percent to Laverne.

Speaker 2 (21:42):
So she can't kick him out. But what if they
break up?

Speaker 3 (21:44):
Yeah? See this, this is exactly the problem I have
with the life estates. You've given up way too much control.
You break up and you want to sell it, and
good luck, you're going to have to talk to her,
right because she's going to have to sign. You're gonna
have to sign, and it gets worse. Even if you
can agree that neither of you want the house, well

(22:05):
when you go to sell it. At that point, if
they both agree, you're going to now have to look
at these IRS tables that tell us, based on your age,
what percentage of the proceeds belong to the life tenant
and what percentage belongs to the remainderment.

Speaker 2 (22:23):
It's not all going to him.

Speaker 3 (22:24):
Yeah, So depending on how old you are, Remember the
older you are looking at it from a life estate perspective. Right,
the older you are, the smaller the value of the
life estate and the bigger the value of the remainder interest.

Speaker 2 (22:38):
And I think you've told this in the past, Like
if someone's like seventy five maybe you'd get like twenty
or twenty five percent.

Speaker 3 (22:44):
That's a little low, but yeah, you're right, But yeah,
I would say you probably get a little more than
that or not all. Yeah, so this is I don't
have their ages. But and then of course there's capital
gains tax problems because now you know the life tenant
would get you know, they if they live there. I guess, well,
I guess if they both live there, they would get
the capital gains of exclusion.

Speaker 2 (23:03):
But if you did this with your kids, for example, yeah,
nothing good.

Speaker 3 (23:07):
But more importantly, nothing good for Bill. What if you
needed the money to buy another house and she got
the majority of the proceeds, She's not going to give
it to them.

Speaker 2 (23:14):
What would have been a better way to handle this?

Speaker 3 (23:16):
So I think if they had put a trust together,
clearly it would have been better. They could have put
the family members on as trustees. They could have held
the trust, the house and trust for Laverne right, let
her live there, the significant others allowed to live there
her whole life. You could have set aside money for
the family. You would still have avoided probate. You know,

(23:37):
the planning really would have allowed you to do a
lot more for each other and for the family than
you otherwise could if you didn't do it. So avoid
this litigation. Get your planning in order, and in your case,
maybe the planning is the use of an irrevocable trust.
Not for everyone. But if you ever thought about learning
how they work, call and get this guide. It will

(23:59):
tell you how they work. Eight six six eight four
eight five six nine nine or Legal Exchange show dot com.

Speaker 2 (24:07):
You've been listening to Todd Lutsky, a partner with the
law firm of Cushing A. Dolan. I'm Susan Powers, a
financial advisor with the Armstrong Advisory Group. Todd will be
answering your listener questions when we return to the Legal
Exchange with Todd Lutsky.

Speaker 1 (24:23):
Elder life planning can be overwhelming, so be sure you're
prepared or you could make costly mistakes that affect your
overall plan. Cushing and Dolan are experts in elder lawn
taxation and they can devise a plan that covers you
in every area where issues can rise. Irrevocable trusts so
are the most common type of trust that folks use
for financial protection, and while they can be complicated to create.

(24:43):
They help keep your assets safe because they contain specific
protections that many of us need, like the possibility of
eliminating your estate taxes. Their new guide is called Unlocking
the Power of Irrevocable Medicaid Trusts. Learn more about how
these trusts can benefit you and your family by calling
eight six six eight four eight five six ninety nine
right now and asking for.

Speaker 4 (25:03):
Your free guide today.

Speaker 1 (25:04):
That's eight sixty six eight four eight five six nine nine,
or you can request the guide right now by visiting legal.

Speaker 4 (25:10):
Exchange show dot com.

Speaker 1 (25:11):
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan Indoor
Armstrong Advisory may contact you're offering legal or investment services.
Cushing and Dolan in Armstrong Advisory do not endorse each
other and are not affiliated.

Speaker 6 (25:23):
There are many different elements to a complete retirement plan,
and it takes time to make sure you've covered all
your bases. HI, this is Mike Armstrong from the Armstrong
Advisory Group. Our new guide is called Your Retirement Preparation Checklist,
and it may offer you the guidance you need to
make the right decisions about your retirement plan, from deciding
on a specific date to retire, to reviewing your income
sources to picking a place to live. This guide discusses

(25:45):
numerous topics that are important to your overall planning. Many
other issues need to be considered as well, like solidifying
your estate plan and establishing lifestyle goals. Call us right
now at eight hundred three nine three four zero zero
one and ask for your free guide today. That number
again is eight hundred three nine three four zero zero one,
or you can request it online at Armstrong Advisory dot com.

(26:06):
That's Armstrong Advisory dot com.

Speaker 1 (26:08):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong Guide a specific financial, legal, or tax advice. Consult
your own financial, tax, and estate planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services. Summer in New England is nearly upon us.
The kids are home from school, the sun doesn't set

(26:28):
until after eight. It's likely time for you to relax.

Speaker 4 (26:31):
Well.

Speaker 1 (26:32):
While you're relaxing, take a few minutes to check out
visit USVII dot com and research your next vacation in
the United States Virgin Islands. The USVII has something for everyone.
Be it the rich history of Saint Croix, the spectacular
beaches of Saint Thomas, or the tranquill quiet of Saint John.
Visit one island or all three and enjoy the vacation
of a lifetime. From the moment you arrive, you'll fall

(26:54):
naturally in rhythm with the heartbeat of the islands. There's
no money to exchange, and travel from New England could
not be easier. Whether you're looking for a romantic getaway
or a family vacation, the US Virgin Islands is the
perfect place for your next adventure. Go to visit USVII
dot com right now for more information and a book
your trip. The USVII is America's Caribbean paradise.

Speaker 4 (27:17):
Go to visit.

Speaker 1 (27:17):
USVII dot com to make your reservation today. That's visit
USVII dot com. You're listening to the Legal Exchange, and
it's time for Ask Todd, the segment where Todd will
answer your questions about anything and everything that's included in
the estate planning process. Once again, here's Todd Lutsky and
Susan Powers.

Speaker 2 (27:40):
Welcome back. Tod have a few questions from listeners. First
one comes from John and Plainville, Connecticut, and John writs,
I am sixty five, single and fairly healthy. Most of
my money is in my retirement accounts. Is there any
way to protect that money from the nursing home so
I can leave it to my children instead if I
don't end up in the nursing home. Is there any

(28:02):
way to protect their inheritance?

Speaker 3 (28:05):
Now, this is a weird question in the sense that
they use this word protect without telling me from what.

Speaker 2 (28:13):
Well, I think that it's safe to say that they
want to protect it from nursing homes.

Speaker 3 (28:17):
Right, But then there was a second part that says,
is there any way to protect their inheritance?

Speaker 2 (28:21):
He doesn't end up using it all in a nursing home.

Speaker 3 (28:23):
So let's the downside the unfortunately single that doesn't help.
But as a single person, unfortunately, there is not a
lot you can do. Although you're sixty five, I guess
you have some time to take some money out of
the IRA. But remember the downside with iras is we

(28:43):
cannot move it into one of these irrevocable trusts that
we are That's really the guide this month.

Speaker 2 (28:51):
As an ira.

Speaker 3 (28:52):
Yeah, you can't move it as an ira. You're right,
in order, but in order to put it in And
I don't know if it's if that's the lion's share
of his of his money. I don't know how big
a number we're talking about, but I mean, if you
had a million dollars in there, you're certainly not going
to pull a million dollars out. Even if you said, well, fine,
I only want to protect half, I'm not sure i'd

(29:12):
pull five hundred thousand dollars out because if I do that,
you figure I'm going to lose forty percent in taxes
state and federal. I mean, that's two hundred grand.

Speaker 2 (29:24):
That's basically given the irs a gift, a gift because
you don't know if you're gonna end up in a
nursing home.

Speaker 3 (29:30):
You don't, and so I wouldn't do it in advance
of going to a nursing home. Certainly, if I was
going in the nursing home, there might be something we
can do then, yeah, last minute thing, but I probably
would would stay away from that. But I would certainly
ask him, well, you know, maybe you've got a house.
He didn't mention it here, but most people have a house.

(29:52):
So I would say, well, fine, leave the IRA outside
the trust. And when we talk about protecting something from
the nursing home, how about the house? How about the rental?
How about you know, if there are other non IRA
investment accounts, all of those kinds of things for everybody else.
To try to expand this question a little bit, John,
for all the other listeners. You know, those kinds of

(30:15):
things can all go into these medicaid trusts. And yes,
now you're protecting it from probate, the nursing home, and
really the next part of your question protecting it for
your children. So if you can't do an irrevocable trust,
then maybe set up a revocable trust, especially if the
IRA is in fact a large number like you're suggesting

(30:39):
it is here, Why would I do that?

Speaker 4 (30:41):
So?

Speaker 3 (30:42):
Well, while I can't really protect it from the nursing home,
I can at least take care of the second part
of my question.

Speaker 2 (30:48):
Because the first part was protecting from the nursing home
while he's living. But he's just saying anyway to protect
their inheritance that could be after I'm dead, creditors, divorce proofing,
they might be spendthrifts. There's a lot of things here,
things he might want to protect from.

Speaker 3 (31:02):
I totally agree, and I think that's where he's going
with the second part of this question. And so I
would say to them, Yeah, why not make the designated
beneficiary on the IRA your revocable trust which will become
irrevocable when you die. But while you can't get the
IRA in there while you're alive, you certainly, I mean

(31:26):
without a big income tax, you certainly can get it
in there when you're dead.

Speaker 4 (31:31):
Yeah.

Speaker 3 (31:31):
And therefore, as long as the trust is drafted properly
to receive the IRA, yes, the minimum distributions are still
going to come out over a ten year period for
the children under the Secure Act. At least it'll be
dumped into the trust and then the trust can hold it,
protecting it, as you said, Susan, from those creditors, the divorces,

(31:54):
et cetera. And even perhaps skipping generationally a state tax
is to get it to the next generation when the
children die.

Speaker 2 (32:03):
Got it, So.

Speaker 3 (32:04):
Lots can be done. I think there's still planning folks
for you, John, and for others in that position. You
can still plan for folks that have other assets other
than iras and want to protect them from the nursing home.
Please call and get the guide Power of Irrevocable Medicaid
Trusts again. It's it's designed in a question answer format
to help you understand exactly how it works. All the

(32:28):
things you can do and the very few things you
can't do with an irrevocable medicaid trust. That'll help you
understand really how flexible they are. Call and get the
guide eight six six eight four eight five six nine
nine or Legal Exchange Show dot com again eight six
six eight four eight five six nine nine or Legal

(32:49):
Exchange Show dot com.

Speaker 2 (32:51):
Our last question comes from Pat in Orleans, mass and
Pat raids. My husband and I are in our early
eighties and we have two children. We own several rental properties,
one of which my son lives in. We'd like to
treat our son and Daughta equally, but we want to
make sure our son receives the house he lives in.
We're in failly good health, but we've put off doing
any planning and are afraid it may be too late

(33:14):
to protect our assets. Given our ages. Should we pick
two relatively equal value properties, indeed one to each of
our kids.

Speaker 3 (33:23):
Now, let me start off with the last question.

Speaker 2 (33:26):
No, no, emphatically, No, that's.

Speaker 3 (33:28):
An easy one. This is done. So we're done with this.
Can we move on now? Because the answer to is no, lot,
So we definitely at eighty years old, the last thing
you want to do, folks. And again I don't know
what they're worth, but you figure the two properties, I mean,
combine their several properties less than four million. I'm getting they've.

Speaker 2 (33:44):
Got several rental properties plus their house and Orleans. They
might be above or below.

Speaker 3 (33:48):
Somewhere four million, and they could be a little over
four million, perhaps depending but easily you know, easily more
than two. Sure, and so let's call it four or
five million, whatever it's in that range for sure. Again,
most of their assets sounds like it could be heavy
in real estate, yes, which is a generally low basis asset.

(34:11):
I've paid for these long ago. I'm eighty after all,
and I bought them when they were little in value,
and they're worth much more today. So what do we do?
Well we give those away, then you will be trapping
all this built in capital gain, right, and capital gain
is in other words, when you give them away whatever
they paid for them, not only what they paid for them.

(34:34):
If some of them are rental properties, what they paid
for them, less depreciation.

Speaker 2 (34:38):
Right, so they could easily have no cost basis left.

Speaker 3 (34:42):
If those rental properties have zero basis and you're transferring
those to the children, now you are giving the children
zero basis, which means when they either keep it and
want to rent it later, they don't get to depreciate
it anymore to offset the rental income because there's no basis,
or if they sell them, if instead they decide to

(35:04):
sell it susan, then they're all the gain. The entire
proceeds would be taxable apportion at capital gains rates and
the depreciation recapture at ordinary income rates. So it's a
really big hit. So don't do that. So we're talking
every bit of close to thirty percent capital gains tax
trying to factor in a little depreciation recapture versus keeping

(35:27):
them doing estate planning and sheltering. Up to four million
from mass taxe twenty eight million federal tax. So you
can already see if we keep the asset and we
die owning it, likely there will be no federal tax,
death tax, and maybe minimal whatever the amount is north

(35:49):
of four million, because now remember at the new law,
there's no cliff rule anymore. So you go over four million,
you only pay tax on the amount over four million,
So you know we shelter four or million from mass tax.
I don't care if I had two million subject to
mass tax, I still had to pay tax on It's
only ten percent, right, So.

Speaker 2 (36:10):
How do they ensure that their son gets the rental
property that he currently lives in.

Speaker 3 (36:14):
Put together the trusts in this case if they want
to protect them too, irrevocable medicaid trusts would be the
way to go. Now they're protected, they're avoiding probate when
they die, the asset and the trust will say property
located at XYZ goes here, property at you know, tod
goes here, and we're all done. And so that way

(36:35):
those properties go to the kids they want and a
full step up in basis eliminating all the built in
capital gain.

Speaker 2 (36:43):
So can they still do that as equal beneficiaries though
if the properties aren't worth the same or so.

Speaker 3 (36:48):
It's always tough when you start allocating assets to balance,
So you're going to have to either allocate money one
to the other for the difference in the fair market
value they're never exactly equal. Got it, but you're going
to have to do some planning to get there. Folks,
call and get the guide if you want to learn
about Medicaid, air revocable trusts eight six six eight four
eight five six nine nine or Legal Exchange Show dot com.

Speaker 2 (37:10):
If you have a question you would like to ask Todd,
visit his website Legal Exchange Show dot com and click
on the ask Tod tab. Maybe I'll be able to
read your question on the air, and hopefully his answer
will stop you from becoming one of his next real
life stories. You've been listening to Todd Lutsky, a partner
with a law firm of Cushing and Dolan. I'm Susan Powers,

(37:32):
a financial advisor with the Armstrong Advisory Group. We'll be
back with more after this quick break on the Legal
Exchange with Todd Lutski.

Speaker 1 (37:40):
Elder life planning can be overwhelming, so be sure you're
prepared or you could make costly mistakes that affect your
overall plan. Cushing and Dolan are experts in elder lawn taxation,
and they can devise a plan that covers you in
every area where issues can rise. Irrevocable trust so the
most common type of trust that folks use for financial protection,
and while they can be complicated to create, they help

(38:01):
keep your assets safe because they contain specific protections that
many of us need, like the possibility of eliminating your
estate taxes. Their new guide is called Unlocking the Power
of Irrevocable Medicaid Trusts. Learn more about how these trusts
can benefit you and your family by calling eight six
six eight four eight five six ninety nine right now
and asking for.

Speaker 4 (38:20):
Your free guide today.

Speaker 1 (38:21):
That's eight six six eight four eight five six nine nine,
or you can request the guide right now by visiting legal.

Speaker 4 (38:27):
Exchangshow dot com.

Speaker 1 (38:29):
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan ind
or Armstrong Advisory may contact you're offering legal or investment services.
Cushing and Dolan in Armstrong Advisory do not endorse each
other and are not affiliated. Summer in New England is
nearly upon us. The kids are home from school, the
sun doesn't set until after eight. It's likely time for
you to relax.

Speaker 4 (38:48):
Well.

Speaker 1 (38:48):
While you're relaxing, take a few minutes to check out
visit USVII dot com and research your next vacation in
the United States Virgin Islands. The USVII has something for everyone.
Be it the rich history of Sane, the spectacular beaches
of Saint Thomas, or the tranquil quiet of Saint John.
Visit one island or all three and enjoy the vacation
of a lifetime. From the moment you arrive, you'll fall

(39:10):
naturally in rhythm with the heartbeat of the islands. There's
no money to exchange, and travel from New England could
not be easier. Whether you're looking for a romantic getaway
or a family vacation, the US Virgin Islands is the
perfect place for your next adventure. Go to visit USVII
dot com right now for more information and a book
your trip. The USVII is America's Caribbean paradise. Go to

(39:34):
visit USVII dot com to make your reservation today. That's
visit usvii dot com.

Speaker 7 (39:40):
Planning for retirement is much like cramming for a final exam,
and no stone should be left unturned before you're ready
to take that step. Hi, this is Chuck Zada from
the Armstrong Advisory Group and we help folks, just like you,
plan for retirement every day. Our new guide is called
your Retirement Planning Checklist, and in it will remind you
of the various issues that may be most important to
your planning process. Start with the date you choose to retire.

(40:01):
That'll depend on a variety of factors, including your income
and your health. You may also want to modify your
investment portfolio to create ways to maintain the wealth you've
already earned. And you'll also want to make sure that
you're prepared for major unexpected expenses. Life moves quickly, and
you'll need to know if you can cover that cost.
Call us today at eight hundred three nine three four
zero zero one. That's eight hundred three nine three four

(40:23):
zero zero one. Are requested online at Armstrong Advisory dot com.

Speaker 1 (40:27):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal, or tax advice. Consult
your own financial, tax, intestate planning advisors before making any
investment decisions. Armstrong make contact you to offer investment advisory services.
Your tune to the legal exchange with Todd Lutsky. If
you are a loved one needs a nursing homestay, call
Todd right now at eight six six eight four eight

(40:49):
five six nine nine and let him make sure your
assets are protected. That's eight six six eight for eight
five six nine nine, or visit him online at Legal
Exchange show dot com.

Speaker 2 (41:01):
Welcome back into the Legal Exchange with Todd Lutsky. I'm
Susan Powers, a financial advisor with the Armstrong Advisory Group,
and I'm joined, of course by Todd Lutsky, a partner
with the law firm of Cushing and Dolan with a
master's in taxation. So we're talking about your irvocable medicaid
trusts and the questions that you've accumulated that are included

(41:23):
in this guide over decades, really the most frequently ones.
So you put your plan together, you need to put
some assets in there to make it work, type of
old paper weight or some kindling. If you've done.

Speaker 3 (41:38):
Nothing, I totally agree.

Speaker 2 (41:40):
What type of assets should someone actually retitle or transfer
into one of these irrevocable medicaid trusts?

Speaker 3 (41:47):
You know, great question. We had a segment or the
segment earlier, we had a question that sort of dealt
with this, right, what's the one thing we said we
cannot put.

Speaker 2 (41:57):
In no retirement account, right, and that's a big.

Speaker 3 (41:59):
Asset for a lot of people, just like the caller
had when when the question the listener rather with the
question that they that they post. Yeah, absolutely, an IRA
is one thing you don't put in. But that's okay
because we're going to live on that. We're going to
enjoy that. And and many financial advisors will never tell
you this. Their goal is, oh, spend that last, spend

(42:21):
that last. I get it. It's taxball and I get it.
But they saved already. Now leaving it to the kids.
Two problems. It comes out over ten years, which could
put them in a higher income tax bracket than the
older person living there. I mean the older person enjoying it,
living off of that asset. And it's not protected from

(42:44):
the nursing home. So why not shift our thinking and
spend that first and take IR or take non IRA money,
put it in the trust and nice investment portfolio, put
it in the trust. Why not take your rental property
put it in, take your home put it in. They
caation home put it in. So all these kinds of
things can go in.

Speaker 2 (43:04):
Yep.

Speaker 3 (43:05):
So there's really no limit, And there's really no difference
between a revocable or an irrevocable in terms of funding.
It either just not the IRA.

Speaker 2 (43:14):
Okay, so you are restricted from like with a revocable
you can reach in and take something back, right, But
with an irrevocable, you can't reach back into that bucket
and put it back in your pocket directly. Correct.

Speaker 3 (43:25):
Well, it depends what we're talking about, right. You know,
for real estate that's really not an issue. But for money,
you get all the income.

Speaker 2 (43:33):
So if that real estate is rental property, right, then
you're still getting all your income.

Speaker 4 (43:38):
Right.

Speaker 3 (43:39):
So you say I can't take it, but I can, right,
because if I throw my rental property in there and
it's kicking out, you know, three grand a month for
grand a month, and I want it, it's coming to you.
And if you actually had a multi family and you
live in one and you have a rental property in there,
and you live in one of the units and you
keep a life estate, the rent can come to correctly

(44:00):
to you.

Speaker 2 (44:00):
So you don't even have to do a separate thing.

Speaker 3 (44:02):
You don't even have to do a separate thing. And
you know in your investment portfolio, right, how many folks
when they put their investment portfolio anywhere, they sit back
and they collect what income. Their goal is not to
take the principle and that's just practical financial planning living.

Speaker 2 (44:18):
So what ideas how is it handled if someone puts
investments in there, whether it's rental or or you know,
stock investments, things like that. What if they don't, they've
never taken the income. Who pays the taxes on that?
Once those investments are owned by their irrevocable trust.

Speaker 3 (44:36):
Yeah, so taxes are always a big concern. So many
people think that, you know, if I have an irrevocable trust,
I'm going to pay taxes at a higher rate. And
it's a It's true in some cases, not in this case.
So these particular trusts are designed as grand or trust
for income tax purposes. So in English, that means even

(44:57):
though you don't own the asset anymore, you are treated
as the owner for income tax. So any capital gains,
any interest, any dividends, any rent, any expenses all get
reported on the tax return for the trust, just for
informational purposes. Then the trust generates a letter to the

(45:24):
donor moms and dads like a ten ninety nine. The
moms and dads or more like a K one from
a company, and you then have all of that information gains, interest, dividends, expenses,
rent on that letter telling you the donor put all
that on your tax return.

Speaker 2 (45:45):
So whether you take it or not, just like when
it wasn't owned by the trust, or if you didn't
take the income, you still had to pay taxes on.

Speaker 3 (45:51):
To pay taxes. Okay, it's absolutely how it works. So
it is income tax neutral, folks. And that's just a
few of the items of dos and don'ts that you'll
find in this guide. Power of Irrevocable Medicaid Trust. It
really is that it's a question and answer guide, but
it's really full of all the things that you can
do and the few things you can't do, and it'll

(46:13):
help you understand exactly how they work while you're living,
what happens when one dies. As Susan talked about the
income tax side of things, what you can put in,
what you can't, how you can operate it. I think
if you've ever wondered how the trust works, this guide
is for you. Call and get it eight sixty six
eight four eight five six ninety nine or Legal Exchange

(46:36):
Show dot com again eight sixty six eight four eight
five six nine nine or Legal Exchange show dot com.

Speaker 2 (46:44):
So I know the word arievocable can be scary and
intimidating to some people, and they may not want to
start right out of the gate putting everything in their
areevocable trust, the home, easypasy goes in. Nothing happens with that.
What if they finally come up around to putting other
stuff into their trust, you know, years after they created

(47:05):
the trust.

Speaker 3 (47:07):
So going back to the well if you will.

Speaker 2 (47:09):
Yeah exactly to say, okay, you know what, we're getting
older now and I see that my life hasn't really changed.
I want to add more savings or investments to this
irrevocable trust. How does that work? Do you restart your
five year clock completely? Do you sneak it under the
gate to kind of go with the original five year clock?

(47:30):
How's that handled?

Speaker 3 (47:31):
And it's a really really great question because the way
you come about this is many times clients will say,
you know what, I'm comfortable with. I'm comfortable with this
idea of putting my house in I like it, I
get it right, I'm okay with my vacation home. Let's
put it in there, and let's start that. That's a
good chunk of my assets. Let's get this clock running.

(47:52):
But you know, I'm a little worried about putting money in.
I think I'll wait, right, and they do, and they
come back after a year or two and they say, hey,
you know what, You're right. My life really hasn't changed
at all. This trust is not causing me any grief.
I'm not feeling like i'm limited. I'm not feeling like
my life has been changed in some way because I
have this trust. You know what, I'm ready to dump

(48:15):
half a million dollar investment portfolio in or whatever the
number is, Go right ahead. Two caveats One, Yes, you
can do it. To take a look at how old
you are at the time, what your health is like.
Because when you do do it, it will start a
new five year waiting period for Medicaid eligibility protection. But

(48:39):
only on the new addition.

Speaker 2 (48:42):
Okay, so a new clock just for that new money.

Speaker 3 (48:44):
Right, And it's easy to keep track of the clocks
because you'll have a statement from the broker or whatever
showing the deposit.

Speaker 4 (48:51):
Right.

Speaker 3 (48:52):
And so let's say you to make that perfectly clear,
let's say you put those two properties and they were
worth a million bucks. And five years has gone by, yep,
And now you add money, the two properties are already protected.
You don't have to worry at all, yep. Just the
new five hundred thousand you have to deal with if

(49:15):
you get sick in the next five years.

Speaker 2 (49:19):
What about folks that you know, maybe they're not taking
the income, but maybe they give gifts to their family
every year. Can they still gift if they put their
investment portfolio into or their bank accounts or whatever they're
putting into the trust. Are they still able to do
those annual gifts to their family if they've put it
into the trust, or should they hold money back to

(49:41):
do their gifting.

Speaker 3 (49:42):
So remember, these trusts are designed to cause the assets
to be included in the estate when you die, so
we're not gifting anything out of the estate, which is
exactly what we want. So if I'm going to make
gifts just because I want to, I would probably advise
gifting from the assets in the trust already in the

(50:05):
trust right, and it'd be great if it was after
five years. But it doesn't create a new five year
waiting period when you gift out to the kids. But
it would if you reached into your eye run and
gave it to the kids, then you have a new
five year waiting period even though you didn't add it
to the trust. But I think that's a great distinction
you're making between the trust and otherwise you mean putting
it in the trust versus giving it outright to kids. Folks.

(50:27):
Those are just a few of the dos and don'ts
that you will learn when you get this guy the
power of irrevocable Medicaid Trust unlocking all the doues and
don'ts for you. Please call and get it eight six
six eight four eight five six nine nine or Legal
Exchange show dot com.

Speaker 2 (50:44):
Todd Letsky from the law firm of Cushing and Dolan,
thank you so much.

Speaker 3 (50:47):
Thank you, Susan, always a pleasure.

Speaker 2 (50:49):
I'm Susan Powers, a financial advisor with the Armstrong Advisory Group.
We thank you for joining us today and we'll be
back again next week on the Legal Exchange with Todd Leutski.

Speaker 1 (51:00):
Elder life planning can be overwhelming, so be sure you're
prepared or you could make costly mistakes that affect your
overall plan. Cushing and Dolan are experts in elder lawn taxation,
and they can devise a plan that covers you in
every area where issues can arise. Irrevocable trust so the
most common type of trust that folks use for financial protection,
and while they can be complicated to create, they help

(51:21):
keep your assets safe because they contain specific protections that
many of us need, like the possibility of eliminating your
estate taxes. Their new guide is called Unlocking the Power
of Irrevocable Medicaid Trusts. Learn more about how these trusts
can benefit you and your family by calling eight six
six eight four eight five six ninety nine right now
and asking for.

Speaker 4 (51:40):
Your free guide today.

Speaker 1 (51:41):
That's eight six six eight four eight five six nine nine,
or you can request the guide right now by visiting legal.

Speaker 4 (51:47):
Exchangshow dot com.

Speaker 1 (51:49):
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan INDO
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Dolan in Armstrong Advisory do not endorse each
other and are not affiliated.

Speaker 6 (52:00):
Preparing for retirement is a time consuming and challenging process.

Speaker 4 (52:03):
HI.

Speaker 6 (52:03):
This is Mike Armstrong from the Armstrong Advisory Group, and
if you're at the point where you can see retirement approaching,
now is the time to make sure your plan covers
all the bases. Our new guide is called your Retirement
Preparation Checklists, and it discusses a variety of important topics
as you make decisions for later life, everything from reviewing
your income sources so that you have a full understanding
of how much money you'll need in retirement, to addressing

(52:25):
any outstanding debt which may lessen your overall financial burden.
Planning for retirement takes a great deal of time and effort,
and this new guide is designed to offer you the
guidance you may need. Call us at eight hundred three
nine three for zero zero one and request your free
guide today. That's eight hundred three nine three for zero
zero one, or you can request it online at Armstrong
Advisory dot com.

Speaker 1 (52:45):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide is specific financial, legal or tax advice. Consult
your own financial, tax, and estate planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services summer in New England is nearly upon us.
The kids are home from school, the sun doesn't set

(53:05):
until after eight. It's likely time for you to relax.

Speaker 4 (53:08):
Well.

Speaker 1 (53:08):
While you're relaxing, take a few minutes to check out
visit USVII dot com and research your next vacation in
the United States Virgin Islands. The USVII has something for everyone.
Be it the rich history of Saint Croix, the spectacular
beaches of Saint Thomas, or the tranquill quiet of Saint John.
Visit one island or all three and enjoy the vacation
of a lifetime. From the moment you arrive, you'll fall

(53:30):
naturally in rhythm with the heartbeat of the islands. There's
no money to exchange, and travel from New England.

Speaker 4 (53:36):
Could not be easier.

Speaker 1 (53:37):
Whether you're looking for a romantic getaway or a family vacation,
the US Virgin Islands is the perfect place for your
next adventure. Go to visit USVII dot com right now
for more information and to book your trip. The USVII
is America's Caribbean paradise.

Speaker 4 (53:53):
Go to visit.

Speaker 1 (53:54):
USVII dot com to make your reservation today. That's visit
USVII dot com, it