How to allocate real estate in your trust

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, Tod Lutsky and Susan Powers.

Speaker 2 (00:37):
Welcome into the Legal Exchange with Toddltsky. 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 am great. Thank you already have for us this week.

Speaker 3 (00:56):
A couple of things. I've got a Basically it's just
a Supreme Court case but ends up being an appellate
court case. It's strange out of Tennessee dealing with an
irrevocable life insurance trust and divorce agreements. It doesn't seem
like those two should go together, well, but they do.
They do, and it's a way of equalizing in a state.
So I'll show you that. But I'll also show you

(01:16):
what went wrong with this plan and we'll try to
figure that out. So stuff we don't talk about a lot,
but life insurance is tricky, and I think it's important
to know how to deal with it in your state
because many people have it. And then we head over
to Georgia where we have an appellate court case, and
it's basically, you know who should be the trustees of

(01:37):
your trust? Is what it comes down to here. When
they created this trust arrangement, the trustee they picked perhaps
wasn't the best trust, but it's nice because it deals
with it's not so much a trustee issue. It deals
more with how the trust allocated real estate amongst four kids,
which is to me, the way to go. If you
want to do it, you use a trust to do this,

(01:58):
and you can accomplish it. And I think we're going
to show you how it works here and how that
kind of planning, especially with real estate is important. But
before we get to all that, I want to remind
you about our our guide this month right making the
most of gifting assets? And by the way, should we gift?
Get the guide? Don't know? Is it the right thing
to do? Not sure? How do we do it? Do

(02:19):
we want to give it away out right? Or do
we want to give it to irrevocable trust for the
benefit of kids? Do we want to use spousal lifetime
access trusting? Give it away so we can enjoy it.
I can tell you one of the items we probably
don't want to give away as real estate. In fact,
if it's got a low basis, you might have a
capital gains tax to deal with. Folks, so much to
think about when to gift and how to gift and

(02:41):
the tax ramifications associated with it. Make sure you make
the most of gifting. Get this guide eight six six
eight four eight five six nine nine or Legal Exchange
Show dot com again eight six six eight four eight
five six nine nine or Legal Exchange Show dot com

(03:01):
and you can download it right there. Where are we going, Tennessee?
It's big, big October break for kids in fact in
Tennessee right now. So in this case, William and Lillian
are divorced in May of nineteen seventy five. Well, Elizabeth

(03:26):
and they both William. So William and Lillilian got divorced
in nineteen seventy five, but they established a marital dissolution
agreement that required Bill to create an irrevocable life insurance
trust to hold life insurance for the sun Buck to
equalize the inheritance because of what the other four kids

(03:49):
have gotten or will get, and Buck was not yet born,
so we had to take care of Buck. Okay, well,
a little strange, but the amount of life insurance was
to be the average of the after tax funds received
from the other four kids trusts.

Speaker 2 (04:07):
How would you manage that through life?

Speaker 3 (04:10):
Okay, well, let's see. Huh, this is the issue, exactly
the issue, Susan So. September twenty twenty, long time later,
Buck decides to sue Bill Dad. Dad not necessarily a
good idea for breach of contract because Dad failed to
create the islet that was in September of twenty twenty.

(04:32):
Well must have killed Dad, because Bill died during that litigation.
Now you've done so, Buck, should feel really bad. Okay, Well,
the substitute for Bill became the co trustees of his
revocable trust and the personal representative. They were substituted parties

(04:52):
for this ongoing litigation, right, and and they ended up
filing motion for summary judgment. Well, the estate against summary
judgment means there's so easy yet it's so obvious on
the facts that we don't even need to go to court. Well,
the estate argued that the marital Dissolution Agreement, the MDA

(05:17):
was too vague and valuation is too vague to enforce,
and the amount to hold in the trust was too
hard to calculate. Therefore it was unenforceable. So you said, Susan, Yeah, Well,
the trial court agreed with you and granted the estate's motion.
So Buck loses.

Speaker 2 (05:33):
I'm not an attorney. I just play one of the radios.

Speaker 3 (05:36):
Yeah, but stay tuned because the appellate court then a
Buck appealed and the appellate court affirmed the trial court.
So Buck still loses.

Speaker 2 (05:47):
Yeah.

Speaker 3 (05:48):
So Buck went to the Supreme Court and the Supreme
Court decided to remand the case, which is.

Speaker 2 (05:55):
Go back and think about what you've done.

Speaker 3 (05:56):
Well, because of recent cases that had come down, and
then on appeal or on remand excuse me, okay, the
appellate court reversed.

Speaker 2 (06:07):
Ah, you actually have an answer for.

Speaker 3 (06:09):
This and no, and remanded the case as the amount
of life insurance needed to be calculated could actually be
computed and should have been allowed, and they should have
allowed evidence in as to the amount of distributions of
assets that Bill made to those revocable trusts for the
other four kids, and they should have created the islet,

(06:33):
and therefore he's in breach of contract. So they believe
all that evidence should come in and you should check
this out because he could be in breach of contract.

Speaker 2 (06:40):
It sounds like that's the right decision that it would be.

Speaker 3 (06:44):
I think it is. I think you could figure out
how much to buy, right, But.

Speaker 2 (06:47):
Why would you draft your documents like this?

Speaker 3 (06:50):
Yeah, so I think the confusion is let's try and
see what we can learn from this. So remember first,
my first confusion is, and it would be this, there
were these revocable trusts that they mentioned that were in place. Apparently, well,
if the trust was revocable and Bill was still alive,
since clearly he was and he was being sued, why

(07:11):
didn't Buck just ask Bill to amend his trust to
equalize the payout to all the kids.

Speaker 2 (07:17):
Right, whatever's in there, right, one fifth to everybody. I mean,
that's how your documents typically work, right, if they're leaving
things equally.

Speaker 3 (07:25):
People always say that about me, They go, you just
get right to the point. I'm like, well, isn't that
the point. Wouldn't that be the easiest thing to do?

Speaker 2 (07:33):
Well?

Speaker 3 (07:33):
Secondly, folks, I think you know that we need to
understand that when we draft trusts, you know, like revocable
trusts or irrevocable trust we have language in there that
generally says equally to the kids then living right, or
kids then deceased, leaving.

Speaker 2 (07:50):
Kids, send the grandkids basically grandkids.

Speaker 1 (07:53):
Right.

Speaker 3 (07:53):
So if that's the case, and that's how trusts are
generally drafted, then it doesn't matter that Buck was later born,
but Buck would have been included, right. And so folks,
I please don't call and say, oh my gosh, Todd,
I got to call you because I had some afterborn grandchildren.
Since we did our trust, well, well they're.

Speaker 2 (08:13):
Included, they're covered.

Speaker 3 (08:15):
You're good, you know, unless you've decided you want to
actually leave something directly to a grandchild instead of after
a kid dies, well then you have to change it. Yeah,
but they're all included in the language. You don't have
to run around and do this. So that's less than
number two.

Speaker 2 (08:31):
Maybe they set up trust for the kids, like funded
revocable trusts while they were living. Well maybe I don't know.
Maybe sounds strange, strange.

Speaker 3 (08:41):
So now having said all this, the islet can be
used to help equalize. So if we want, if you
are ever treating kids differently, you know, like certain parcels
of real estate to a certain child, and you want
to make up that difference. Sometimes it's hard to do
that with your regular assets. So you could put together
an islet. In the islet, the assets inside the islet

(09:03):
can remember these are a state tax free and income
tax free and grow a state tax free. So you
could say, then allocate the amount of assets from the
trust that equals the fair market value of the assets
that you gave to a particular child. So if I'm
giving parcel A to a certain child, well then I

(09:24):
need to know the value of that on the date
of death, and I'm going to allocate that amount of
the assets to child. Be right, How fine? You can
do that, and again I think it's also important that
if you ever wanted to, like let's say, you know,
one child needs a place to live and the other
kids don't, it's a way of you know, equalizing them.

(09:45):
So just remember and after you after you've equalized, you
can then say whatever else is left just goes equally
to the kids. So it is, it is a mechanism
to equalize the estate, and it can be done, but
it's got to be drafted right and so not a
bad case overall. But folks, sometimes gifting away assets while
you're alive isn't always the best answer, especially with our

(10:09):
high estate tax exemptions today. So learn whether you should
even make a gift and how to make them by
getting the guide eight six six eight four eight five
six nine nine or Legal Exchange show dot com.

Speaker 2 (10:23):
You've been listening to Todd Lutski, a partner with a
law firm of Cushing and Dolan. I'm Susan Power as
a financial advisor with the Armstrong Advisory Group. We've got
much more to come when we return to the Legal
Exchange with Todd Lutsky.

Speaker 1 (10:37):
Cushing and Dolan want to help you avoid costly mistakes
when it comes to gifting assets to your children. Their
brand new guide Making the Most of Gifting Assets shares
crucial strategies to help you protect your legacy and your family.
Many people think gifting is always a good thing, but
if it's done the wrong way, they can create real headaches.
Even well intentioned gifts can cause complications if your children

(10:57):
are dealing with financial pressure or legal issues like divorce.
The guide also explains how a major gift like a
home or vacation property could come with hidden tax consequences
that may impact your entire estate plan. Before you make
any big moves, arm yourself with the facts and this
new guide from Cushing and Dolan. Call eight sixty six
eight four eight five six ninety nine right now to
get your copy. That's eight sixty six eight four eight

(11:20):
five six nine nine, or request it online at Legal
exchainshow dot com. That's Legal exchange show dot com. The
proceeding is paid for in The views expressed are solely
those of Cushing and Dolan. Cushing and Dolan and or
Armstrong Advisory may contact you offering legal investment services. Cushing
and Dolan Armstrong Advisory do not endorse each other and
are not affiliated.

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Speaker 5 (12:37):
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Speaker 1 (13:24):
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 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
with your estate plan? Comp Todd right now and make

(13:47):
an appointment. Eight six six eight four eight five six
ninety nine. That's eight six six eight four eight five
six ninety nine.

Speaker 2 (13:56):
Welcome back into the Legal Exchange with Todd Lutsky. I'm
Susan Powers financial advice with the Armstrong Advisory Group, and
I'm joined by Todd Letsky, a partner with the law
firm of Cushing and Dolan with a master's in taxation.
Where are we headed down, Todd?

Speaker 3 (14:10):
Good to Georgia. See what's going down there? Georgia on
my mind. So in this case, we've got Bob and Judy.
They had four kids, James, Jason, Jeremy, and Christy. Bob
died in April of twenty twenty. This is going to
be a very traumatic year, so stay tuned. Fairly certain

(14:31):
there was no estate planning done. Everything went to the wife. Okay, well.
In August of twenty twenty, not too much later, Judy
decides to create an irrevocable trust. Oh okay, good for her,
and she names Christy as the trustee of the trust,
and the trust gave six acres of real estate to
Jason and Jeremy, and knives and equipment and tractors and

(14:54):
things went to Jason, Jeremy and James. Okay, everything else
goes to Christy. Okay, so be it. Judy then dies
on November twenty twenty. It's a busy year. Yeah, okay, Well,
of course in my head, capacity issues come to mind,
but let's just assume there was none. Christy then petitions

(15:16):
the court files the will, and the boys objected, and
the court found that Christy was unfit to serve as
personal representative. Okay. Now, remember the trust had all the assets,
so I really don't care what happens with the will.
Remember the will only deals with probate assets, right, Okay,

(15:37):
so all right, so be it. So Jason then decides
to so remember she's still trustee of the trust.

Speaker 6 (15:42):
Right.

Speaker 3 (15:44):
Jason then takes the equipment from the property because it
was left to him in the trust. Christie says it's unauthorized,
you can't do that, but she didn't pursue any recovery.
Christy then decides to transfer all of the real estate
in the trust, including the six acres that was left
to the boys all to herself, Christie. The Boys sued

(16:09):
for breach of fiduciary duty, and sure, you know, obviously
they should say you can't do this. Well, there was
a lot of jurisdictional questions. I'm not going to bore
you with that. You know, whether they've got subject matter
jurisdiction or they can actually hear the case. So a
lot of those jurisdictional issues arose. So the case was

(16:31):
sent back to make sure it goes to the correct
court to resolve the issue. So I'm not going to
give you the answer.

Speaker 2 (16:38):
Have you not learned anything from my feedback of your
your hanging Chad story? You know, come on, we like answers,
We like nice little bows on these cases.

Speaker 3 (16:49):
I'm going to give it to you because I'm fairly
certain that Christy's he's in trouble. Yeah, Christie's going to
lose here. It just was a jurisdictional issue that they
had to send back. But there's no way if you
have a tr trust that leaves six acres to those
kids that they don't get it. So they're going to
get it, and I'm pretty sure they're that Christie's going
to you know, be in trouble here and going to
have to put back the assets. So there you go.

(17:11):
At least I think I can give you the answer.
But the reason I like the case is not necessarily
whether that's the result or not, because I think we
can learn a lot about how to take care of
real estate, right, how do we take care of real
estate when we're doing our estate planning? And that's what
I think this is really all about. Before I get there, though,
I want to remind you about the guide we're giving

(17:33):
away again, the making the most of gifting assets, and
here real estate. I'm glad they didn't give it away, right,
That's one of the items if you're thinking about gifting
that you might not want to because it might have
appreciated in value significantly if it does, or stocks that
have appreciated. Right. When you give away those kinds of gifts,
you could be giving up the carryover basis, which traps

(17:55):
thirty percent capital gains, and you might only be saving
you know, ten twelve percent and let's say Massachusetts state tax.
So be careful when you think about what to gift
and then how to gift it, either outright or to
a gifting trust for kids, or if I'm giving large
amounts away because I'm very wealthy and I want to
then make sure I can enjoy what I gave away. Well,

(18:16):
that's where spousal lifetime access trusts come in. And even
think about how you make how gifts occur from jointly
owned property. From a medicaid perspective, is it a completed
gift or is it not? Folks, there's many taxes to
consider and control issues and how to gift all needs
to be determined. Get the guide, figure out what and

(18:39):
if you should gift anything at all. Making the most
of gifting assets eight sixty six eight four eight five
six nine nine or Legal Exchange Show dot com again
eight six six eight four eight five six nine nine
or Legal Exchange Show dot com.

Speaker 2 (18:57):
So this case is interesting, Todd, because a lot of
people think who I pick is trustee. I need to
make sure they're fair because they're going to be distributing
these things. They don't get to just willing nearly decide
how things are going. They're there to follow your orders
and your wishes, and it's really more orders than wishes
because it's a legal document.

Speaker 3 (19:19):
You're absolutely right, I mean to jump to the end
of what I was going to say here is absolutely right. Yeah,
I do care about who I pick. You do want
to pick somebody who you feel is at least good
with this kind of capable job. But in reality, even
if they're not and they become rogue trustees, perhaps like
Christy did here, you're going to lose because, as you said,

(19:42):
they don't get to decide. That's why I tell people
you don't need three kids necessarily serving as trustee, because
they can only do what you said to do, and
so it's not like you're favoring one over another. So
very good point there, Susan. Now that's let's analyze what
was done here because I kind of like it. I

(20:04):
kind of liked the idea of the irrevocable trust, right,
This was a great way to handle the estate plan.
She's alive, she's single, she lost her husband. You know, fine,
what do I do? Ire rev The real estate in
this trust would likely have avoided probate, so all the
wheel changes don't even matter. The assets will likely be

(20:24):
protected from the nursing home, assuming that's the kind of
trust that was established because it was irrevocable. I'm just
going to make that leap and if so, if that
ever became a problem, we'd at least have that covered.
And you know, I'm not sure about the estate taxes,
but you know, have have they been would have been
more helpful obviously if they'd done the planning before Bob died,

(20:45):
because then you would have been able to certainly reduce
the estate tax liability if any.

Speaker 2 (20:50):
Right, because if you don't do any planning when both
spouses are living, then you give up the deceased spouses
exemptions federally in state.

Speaker 3 (20:57):
Right, exactly right, And that was total to lesson learned
here would be folks, don't wait to plan he died, right,
get it done, because if that happened, then the estate
taxes here would have either been significantly reduced or eliminated.
For what you said, Susan, you would have been able
to shelter some assets on the first death and for

(21:19):
mass purposes at least up to two million. So if
the estate was four million, you could have eliminated eliminated
estate taxes. And I did with these every day. I
deal with people who come in when someone died and
didn't do planning, and I explained to them, was there
any planning done when your spouse died, I didn't know
you then, no, okay, so you just got everything. Yeah right,

(21:40):
that's the problem.

Speaker 2 (21:41):
And if you had a trust, was it funded.

Speaker 3 (21:43):
Oh it's a whole other kettle of fish, all right,
So then let's talk about the dispositive provisions. Now we
kind of understand I'd like this, right, So the trust
also allowed for certain parcels of real estate. Remember they
were give six acres or something to the boys and
then everything else else to Christy. So might not have
been unfair. But nevertheless, when you give certain kids certain assets,

(22:07):
it can be done without fighting. That's what you do
in the trust. So this would likely, however, result in inequality.
Generally it does, right, so you know, but that's okay.
If that's what the donor wants, you can do it
all right. Now, example, what what I see a lot
is in this case, you know the farm went to

(22:29):
the boys. Well, they maybe worked it, maybe they earned it,
maybe they needed but maybe the daughter needed a place
to live, so they gave the house, the primary residence
to the daughter. Ye not perfectly good, I mean that
could be what's happening here. And again, trusts work, right,
But if you do this put a no contest closet

(22:50):
that would have been something helpful.

Speaker 2 (22:51):
Nothing.

Speaker 3 (22:51):
They can't complain right because I said, obviously it still
might not equalize everything, but at least you got accomplished
what you wanted accomplished, and you have no fighting because
you put a no contest clause. So it just it
just really enhances things. But you know, at the end
of the day, this kind of planning can be helpful.
So folks, if you want, get the guide learn how

(23:15):
planning sometimes is better than gifting, but sometimes gifting can
also work eight six six eight four eight five six
nine to nine or Legal Exchange show dot com to
get making the most of gifting assets and decide whether
or not you should even make the gift.

Speaker 2 (23:37):
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, and Todd will
be answering your listener questions next when we return to
the Legal Exchange with Todd Lutsky.

Speaker 1 (23:53):
Cushing and Dolan want to help you avoid costly mistakes
when it comes to gifting assets to your children. They're
brand new guide, Making the most of Gifting Assets shares
crucial strategies to help you protect your legacy and your family.
Many people think gifting is always a good thing, but
if it's done the wrong way, they can create real headaches.
Even well intentioned gifts can cause complications if your children

(24:14):
are dealing with financial pressure or legal issues like a divorce.
The guide also explains how a major gift like a
home or vacation property could come with hidden tax consequences
that may impact your entire estate plan. Before you make
any big moves, arm yourself with the facts and this
new guide from Cushing and Dolan. Call eight sixty six
eight four eight five six ninety nine right now to
get your copy. That's eight sixty six eight four eight

(24:36):
five six nine nine, or request it online at Legal
exchange Show dot com. That's Legal exchange show dot com.
The proceeding was paid for. The views expressed are solely
those of Cushing and Dolan. Cushing and Dolan and or
Armstrong Advisory may contact you offering legal investment services. Cushing
and Dolan Armstrong Advisory do not endorse each other and
are not affiliated HI.

Speaker 5 (24:54):
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(25:37):
you can request the guide from our website Armstrong Advisory
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Speaker 1 (25:41):
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 make contact you to offer investment
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Speaker 1 (27:25):
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 talk. We have a few questions from listeners
for you. First one is from Marylyn and Hyennas mass
And Marylyn writes, I have three children and five grandchildren.
I'd like to leave a little extra to one of
my granddaughters when I pass because she has some health concerns.
Am I able to do this without my other beneficiaries?

(28:00):
Out would it be better to revise my trust with
you or just name her as a beneficiary on an account.
This is a mutual client. This is one of your trusts.

Speaker 3 (28:09):
Okay, thank you. That's important to know. Now, a couple
of things. There's multiple questions here, so let's try to
walk through them. So, first of all, we have an
irrevocable medicaid trust. Correct, And we're wondering, as Marilyn is wondering,
how much control did I keep over who can get

(28:30):
my assets? Yeah, well, Marilynd, good news. A lot of control.
So you have something called a limited power of appointment
that allows you to change the beneficiaries in equal or
unequal amounts among a class consisting of your children of
all generations.

Speaker 2 (28:47):
So that would include grandchildren, great grandchildren and so forth.

Speaker 3 (28:50):
And not cousin Vinnie right in the group. So okay,
that's good, Todd. I don't care about cousin Vinnie. I
want to leave more to one of my grandchildren. Absolutely allowable. Okay,
So that's the first question. The next question is can
I do this without my other beneficiaries finding out? Again,

(29:11):
an affirmative. Absolutely, you can. Now just remember, and this
is something I tell all clients and then their kids think, oh,
that isn't what you told them, but we always put
it in the engagement letter. When you do this change,
you do it by changing your will. So the power
of appointment is listed in the trust, but it says

(29:31):
you can change the trust as appointed through your will.
So you have to through the will exercise the trust
power to change the language and the trust, and that
new language ends up in your will. So I replace
article five with a new article five. Yeah, in your will.

(29:52):
That makes you go to probate. All right, well everyone said, oh,
oh that's crazy. Well, none of the assets of the
trust go to probate. One of the other assets that
are designed to avoid probate avoid they still avoid probate.
So you're not going to probate with all that. You
just have to open up to probate, file the will
to effectuate the change and the trust that you wanted done.

(30:14):
So it's it's probate, but it's not.

Speaker 2 (30:16):
Let's call it regular probate. It's less bad, less bad,
an extra step, but it accomplishes what you want.

Speaker 3 (30:24):
Exactly, you know. It's it's a small price to pay
to accomplish what you want. But you have to do that,
and everybody always gets been out of shape until I
tell them, but look, you're better off because of this change,
and it's okay. So so yes, you can do it.
You can do it without anyone finding out. You got
to go to probate. Now, the last question was would

(30:46):
it be better just to change a beneficiary on an account? Well,
this of course assumes the fact that you've left assets
outside the trust, which is, I agree what happens.

Speaker 2 (30:56):
In this case she has Yeah.

Speaker 3 (30:57):
And we would do it generally with a irrevocable trust anyway.
So then the question becomes, yes, you could do that,
But if you really want that particular money, or that
amount of money that's in that account that you're designating
the grandchild as the beneficiary of to go to that grandchild,

(31:21):
well then I wouldn't do that. Why because you could
get sick and go to the nursing home and then
that money gets all spent on the nursing home and
now that account's empty, right, and then you did not
get what you wanted to go to your grandchild. And
the other issue with that is, let's say nothing bad happened,
then I left it to my grandchild. Well, maybe she's
little or he's little and I don't want him to

(31:43):
have it out right. Well, if you just named the beneficiary,
it's going out right. Whereas if it's in the trust,
you don't have to worry about it being taken because
of the nursing home. So it's there. You can rest
assured that it's there and how the child or grandchild
in this case gets it. It is laid out in
the terms of the trust controlled. So I hope that

(32:06):
answers all the questions, and certainly they're all positive and
favorable answers. But again, it don't do it alone. Call
always call your estate planning attorney once you've got your
plan in place and you think there might be a
change of some kind to it. Now that goes without
say with terms of planning. I also, if you are

(32:26):
thinking about making a gift, you might want to reach
out to your state planning attorney as well, but you
can always get the guide first, so you're armed with
what should I make a gift? How do I make
a gift? Do I give it outright to kids? Do
I put it in a gifting trust? What kind of
assets should I gift high basis assets, low basis assets?
What are the capital gains tax on gifting. What if

(32:47):
I want to give away big assets and I want
to still retain control over what I give away? Can
I even do that? Yes? Spousal Lifetime Access trust would
be the answer there. Folks, These are all the kinds
of questions that are built into this guide. Decide whether
or not and how you should make gifts by getting
the guide eight six six eight four eight five six

(33:11):
ninety nine or Legal Exchange Show dot com again eight
sixty six eight four eight five six ninety nine or
Legal Exchange Show dot Com.

Speaker 2 (33:21):
Our last question comes from Jonathan in Springfield, mass And
Jonathan writes what happens when a beneficiary designation differs from
what is in a will. My mother's intention was to
divide all of her assets equally between myself and my sister,
as was stated in her will. However, I've learned that
she had several accounts that listed just my sister as

(33:44):
a beneficiary. Does the will supersede these designations to honor
her wishes? What happens to accounts owned jointly between my
mother and my sister?

Speaker 1 (33:55):
Yeah?

Speaker 3 (33:55):
So again, this all comes back to the drafting atturn right.
Make sure you draft things that don't have open ended items.
You know, you don't want things with an open end,
and you also don't want a dead end. You don't
want something to end up going nowhere, right, So that's
what's important. So what do I mean by that? Well, obviously,

(34:18):
first and foremost, she's talking about a will, and I'm saying, well,
why do we only have a will? I can't not
mention that, right, you know, thirty years of doing this
and I don't think we really ever do will based plans.
You need the trust. So the will then would only
be dealing with hopefully a small amount of assets that
didn't find.

Speaker 2 (34:37):
Their way ideally nothing, right, I deeally nothing.

Speaker 3 (34:40):
If anything didn't find its way into the trust. Yeah, good,
so get that out of the way. But in this case,
it is a will, So what are we doing a
couple of things? If there is a designated beneficiary on
the account transfer on death or designated beneficiary, actually, yeah,

(35:02):
then it's tough for the will generally to catch it.
You can't stop it. It's going to go to that
designated beneficiary. And remember, even when you're drafting, you know
your will, it's tough to draft for that. You can't
that's where it's going to go. So even though the

(35:26):
will says equally to kids, if I left it the
way she said with beneficiaries to one particular child, then
that particular child's going to get it hard stop. Okay,
But a lot of times that's not how banks are
set up. Banks could be set up where they say, oh,
I just you know, Sally lives near me and all

(35:49):
my other kids live further away, so I'm going to
put Sally on like these three bank accounts.

Speaker 2 (35:54):
Yeah, the checking accounts, so you can write checks and
just have someone else on there.

Speaker 3 (35:58):
And so when I say put on, I mean add
as a joint owner, right, not a designated beneficiary, a
joint owner. And so how that works is if you
die with those assets jointly held, then you can look
to the will. But before we look to the will,

(36:18):
it would be normally avoiding probate, so not the will
and automatically going to that joint owner, you walk in,
take out all the money. Doesn't matter whether she's alive
or dead. You get the money, yep. So you walk
in and take it out. So that would disinherit other
children yep, because it all went to this one child,
but oftentimes when you add joint names to the account,

(36:41):
it's by accident. So we put language in our will
that says jointly owned accounts will be disregarded and the
item will go to probate, so that at least the
will can address it and treat the kids equally. To
prevent accidental disinheritance, folks don't accidentally disinherit people by making gifts.
Learn the right way to make gifts. Get the guide

(37:03):
eight six six eight four eight five six nine to
nine or Legal Exchange Show dot com.

Speaker 2 (37:11):
If you have a question you'd like to ask Tod,
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 the law firm of Cushing and Dolan. I'm Susan Powers,

(37:31):
a financial advisor with the Armstrong Advisory Group. We'll be
back with more after this quick break on the Legal
Exchange with Todd Lutsky.

Speaker 1 (37:40):
Cushing and Dolan want to help you avoid costly mistakes
when it comes to gifting assets to your children. Their
brand new guide Making the Most of Gifting Assets shares
crucial strategies to help you protect your legacy and your family.
Many people think gifting is always a good thing, but
if it's done the wrong way, they can create real headaches.
Even well intentioned gifts can cause complications if your children

(38:00):
are dealing with financial pressure or legal issues like a divorce.
The guide also explains how a major gift like a
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that may impact your entire estate plan. Before you make
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new guide from Cushing and Dolan. Call eight six six
eight four eight five six ninety nine right now to
get your copy. That's eight sixty six eight four eight

(38:23):
five six nine nine, or request it online at Legal
Exchainshow dot com. That's Legal exchange show dot com. The
proceeding is paid for in The views expressed are solely
those of Cushing and Dolan. Cushing and Dolan and or
Armstrong Advisory may contact you offering legal investment services. Cushing
and Dolan Armstrong Advisory do not endorse each other. And
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(40:24):
eight hundred three nine three four zero zero one or
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Speaker 1 (40:28):
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 into state planning advisors before making
any investment decisions. Armstrong may 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 sixty six eight four

(40:50):
eight five six ninet nine and let him make sure
your assets are protected. That's eight six six eight four
eight five six nine nine, or visit him online at
Legal Exchange show dot com.

Speaker 2 (41:00):
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 I want to go down to
the lower level gifting.

Speaker 3 (41:18):
Lower lower gifting.

Speaker 2 (41:18):
It's in this guide, Todd. So you're allowed to give
money away every year to people late or not. I
like to call it the Mulligan gifts. Yes, where you
don't have to file any kind of paperwork of the irs.

Speaker 3 (41:33):
How much is rat so this year it's nineteen thousand
per year per person.

Speaker 2 (41:42):
So Mom, and dad could give thirty eight thousand to
a child.

Speaker 3 (41:45):
To one child, and that's what the executions give. They
each head can give to that child. Yeah, be careful
when you do the things where you also then give
to that child spouse for that child. Spouse just gives
it back to the to the sun. I mean that's step,
multi step transactions. I worry about, right one, each of you,
just son or daughter every year, no filing, no reporting,

(42:07):
no taxes.

Speaker 2 (42:08):
But it doesn't have to be a relative, right, Like
you can give to your son in law, you're you
could you could give the gift to me, yeah, yeah.

Speaker 3 (42:14):
Or anybody listening, is my care to send money in
in college? They could send money into.

Speaker 2 (42:19):
Us, right, So if you could gift to me now, yeah.

Speaker 3 (42:21):
College isn't right, right, Yes, to anybody anytime, and you
don't have to report or file anything.

Speaker 2 (42:28):
So nineteen thousand and it's.

Speaker 3 (42:31):
Confusing though because people then say to me, because I
tell them lots of times, well what if you make
a big gift, and what happens then if you make
a big gift, if you make a big gift, then
you eat into your big exemption.

Speaker 2 (42:49):
Okay, well hold on, let's back up. A second, So
we can give nineteen thousand away, right, Do you have
to file any kind of tax return for that? Do
you have to pay taxes when you give it to them?

Speaker 3 (43:01):
Yeah? No filing, no taxes, no reporting at all.

Speaker 2 (43:04):
Do they have to report it his income when you
give them money?

Speaker 3 (43:07):
No, nothing gets reported.

Speaker 2 (43:09):
So let's go down that path of doing a big
If let's say you want to give your child one
hundred and nineteen thousand.

Speaker 3 (43:15):
Oh, I'm so glad you did that for the mass
easy math.

Speaker 2 (43:17):
Yes, we're not going to strain your brain this morning.
So if you give them one hundred and nineteen thousand,
what do you have to do then in terms of taxes?

Speaker 1 (43:27):
Yeah?

Speaker 3 (43:28):
So that's where folks always say, well, wait a minute,
I could give that. How can you give more than
the nineteen Well you're allowed to give up to today,
thirteen million, nine to ninety.

Speaker 2 (43:38):
I think my check would bounce if I check.

Speaker 3 (43:41):
And by the way, that number is your federal estate
tax exemption. It also is your state. I mean it's
also your federal gift tax exemption. They mirror each other, so.

Speaker 2 (43:52):
That means you can give away that much without.

Speaker 3 (43:54):
Yeah, So come January one, twenty twenty six, it'll be
fifteen million.

Speaker 2 (44:00):
Okay.

Speaker 3 (44:01):
That's your new gift and estate tax exemption. So if
you gave away one million, or if you gave away
one hundred and nineteen thousand today, the nineteen you got
to report it. Now you've got a file who the
giver okay, has to file and the nineteen would be
the freebie, as you called it, the mulligan, the mulligan
that comes off for free. You still report the one nineteen,

(44:24):
but you get a deduction for the for the nineteen,
and the taxable gift is one hundred so that taxable gift.
Then you would file on the seven oh nine and
pay gift tax, but you won't because you'll just eat
into your soon to be fifteen million dollar exemption by
one hundred thousand.

Speaker 2 (44:43):
So you're basically sending this form into the IRS. Does
it go with your tax return?

Speaker 3 (44:48):
And I would assume it's a separate seven oh nine,
but it's due the same time.

Speaker 2 (44:51):
Same time, okay. So you fill out this form for
the IRS that says basically, hey, IRS, when I die,
instead of giving me a fifteen million dollar exemption, give
me fifteen million minus one hundred thousand. Because I just
gave Billy a gift, that's.

Speaker 3 (45:03):
Right, okay, And so that zero tax do will still
show up on the bottom of the return, right, But
you can make the gift, so.

Speaker 2 (45:09):
You just have to notify the irs of those larger gifts.

Speaker 3 (45:12):
Yes, you do, just have to file and notify, but
you ultimately won't.

Speaker 2 (45:16):
Pay if you're in that one hundred and nineteen. Now
you're giving Billy one hundred and nineteen thousand, does he
have to pay income on that?

Speaker 3 (45:22):
Great question? Regardless of the amount you give, Susan, There
is never an income tax ever for anybody on a
gift for the recipient period. It's not an income taxable
event unless you liquidate something to give it away, then

(45:43):
you got to pay capital gain SAX. But the gift
itself is not an income taxable event o period.

Speaker 2 (45:48):
So I'm gonna raise the amount of gift that you
can give to me to help cover tuition this year.

Speaker 3 (45:55):
So that's a little bit about gifting, folks. And that's
interesting because you know, this guide we're giving away does
mention that does talk about these kinds of gifts. So
this is more about the the gift and income taxation
on gifting. But there's also other income tax considerations when
you think about what you're going to gift high basis

(46:15):
assets versus low basis assets. Don't want to give away
low basis assets in trap capital gain? Maybe how do
I gift outright to kids? Put it in gifting trust
for kids? Do I want to, you know, give to myself,
give away a big chunk and still retain control over it.
I can certainly do that, you know, there's so many

(46:36):
things to think about when you're gifting to not do
it without getting the guide, and of course call your
state planning attorney too. Eight six six eight four eight
five six nine nine or Legal Exchange show dot com
again eight six six eight four eight five six nine
nine or Legal Exchange Show dot com.

Speaker 2 (46:58):
So if I have a tax bull estate todd and
I'm looking at gifting as a strategy to try and
reduce how much the size of my estate is from
a tax perspective, what if I don't want to put
a big chunk of money in the hands of my
kids because they're too young. I don't trust them. Not

(47:19):
given a big gift to a twenty year old, So
how would I go about doing that? Can I still
even accomplish that if I don't want to have them
have control over those assets.

Speaker 3 (47:28):
Yeah, and I think you can say that's good as
you speak to people with younger children. But let's expand
that and say what if I'm giving it to kids
who are fully grown, but I'm worried about future divorces,
I'm worried about creditors. So there's a whole ton of
reasons other than just age, although age is very important, Susan.
Other than just age, there's a whole ton of reasons

(47:49):
why I might not want to give large amounts of
assets outright to my children. Also, estate taxes. Maybe I
don't want it included in their estate when they die,
row as state tax free.

Speaker 2 (48:02):
All great, what magic one do we waive to do that?

Speaker 3 (48:06):
So this is what we like to call it out.
Just for lack of a better term, I'll come up
and say, these are what we call gifting trusts. You know, yes,
you know, you've heard of irrevocable life insurance trust. They're
similar to that. You put stuff in it that you
have made a completed gift of. It's really not yours anymore.
That's the one thing you need.

Speaker 2 (48:26):
To have access or control anymore.

Speaker 3 (48:29):
Right, you have some control. One, the kids don't own it,
the trust owns it. And two if I give, let's
say I give to the trust. And let's say you're
my spouse and your trustee. I can make you trustee okay,
and you can keep control, but you can't give. But

(48:50):
I can give, but I don't get to enjoy it.
Got it, okay? And that way it stays out of
my estate when I die. And that trust, even though
your trustee, you can control it. It can be set
up either so that discretionary distributions come to you, or
you could just have it set up, or you're trustee
to control it just for the kids, so then you
can sort of control how and when they did it.

(49:11):
That's it.

Speaker 2 (49:12):
Yeah.

Speaker 3 (49:12):
And the dough or can actually control removing and replacing
you as trustee, so there's some power there. There's some
limitations on who the replacement can be, but it should
not be somebody related or subordinate. Can start out that way,
but it can't once I start removing and replacing, it's
got to be someone not related and subordinate.

Speaker 2 (49:34):
So I can I can gift? Is there a limit
to what I can gift into this trust? Each year.

Speaker 3 (49:38):
So if I'm the giver, I can gift. Yeah, I
got the thirteen nine to ninety exemption of course after file.
But sometimes I might only want to gift the nineteen
but nineteen per kid per head, right and per benefit.
So if you've got three kids and three grandchildren all
beneficiaries of that trust, wow.

Speaker 2 (49:56):
Right, nineteen times six twenty at a clip at a year.

Speaker 6 (50:00):
Ye.

Speaker 3 (50:00):
See, so that's nice and a little trick. We don't
have to get into it. But even and I don't
have to file a gift tax return. But if I
wanted to file a gift tax return and I wanted
you to sign consenting to split all gifts, then you
can gift and it's not treated as a gift by you.
You just agreed to split gifts with me. Now we
can double six times six.

Speaker 1 (50:20):
Wow.

Speaker 2 (50:21):
Nice.

Speaker 3 (50:22):
We can move a lot of money. But folks, there's
so many things to think about when you're gifting. Don't
just write checks. Learn what to gift and how to gift.
Get the guide Making the Most of Gifting your Assets
eight six six eight four eight five six ninety nine
or Legal Exchange show dot com.

Speaker 2 (50:43):
Todd Lutsky from the law firm of Cushing and Dolan.
Thank you so much.

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

Speaker 2 (50:49):
I'm Susan Powers, a financial advice 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 Lutsky.

Speaker 1 (51:00):
Cushing and Dolan want to help you avoid costly mistakes
when it comes to gifting assets to your children. Their
brand new guide Making the Most of Gifting Assets shares
crucial strategies to help you protect your legacy and your family.
Many people think gifting is always a good thing, but
if it's done the wrong way, they can create real headaches.
Even well intentioned gifts can cause complications if your children

(51:20):
are dealing with financial pressure or legal issues like a divorce.
The guide also explains how a major gift like a
home or vacation property could come with hidden tax consequences
that may impact your entire estate plan. Before you make
any big moves, arm yourself with the facts and this
new guide from Cushing and Dolan. Call eight sixty six
eight four eight five six ninety nine right now to
get your copy. That's eight sixty six eight four eight

(51:43):
five six nine nine or request it online at legal
exchainshow dot com. That's legal exchange show dot com. The
proceeding was paid for in The views expressed are solely
those of Cushing and Dolan. Cushing and Dolan and or
Armstrong Advisory may contact you offering legal investment services. Cushing
and Dolan Armstrong Advisory do not endorse each other and
are not affiliated HI.

Speaker 5 (52:00):
This is Chuck Zauta from the Armstrong Advisory Group. Required
minimum distributions or rmds may seem simple, but there's a
lot more to them than just taking money out of
your IRA. Rmds impact how much you pay in taxes,
and they can push your income into higher brackets, and
if you miss one, the penalties can be steep. They
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which makes timing and strategy crucial. If you have multiple accounts,

(52:23):
it's important to know which ones you can combine and
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ahead for your legacy. Request your copy today by calling
eight hundred three nine three for zero zero one. That's
eight hundred thirty nine three for zero zero one, or

(52:44):
you can request the guide from our website Armstrong Advisory
dot com.

Speaker 1 (52:47):
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 make contact you to offer investment advisorieservices.

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