How to eliminate estate taxes for your children

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 Lusky. I'm Susan Powers
of financial Advisor 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 this week?

Speaker 3 (00:54):
I'm never better and you I am great?

Speaker 2 (00:56):
Thank you. What do you have for us today?

Speaker 4 (00:58):
I have a couple of new things. I have two
cases that we're going to deal with. One is a
new Jersey Appellate Cord case, and we don't talk about
it a lot, but it's really a state recovery How
does it work?

Speaker 3 (01:12):
And they're different in many states.

Speaker 4 (01:15):
Okay, so we don't think about it a lot, but
this is a case where we actually have a case,
an appellet cord case that dealt with a malpractice action
and whether that malpractice action proceeds are recoverable by the
decedent who was on Medicaid for a very long time
in New Jersey. So we're going to see how that
works and actually blended in with life estates because the

(01:38):
way these estate recovery statutes vary can affect whether you
do a life estate in your state.

Speaker 3 (01:43):
So stay tuned for that.

Speaker 4 (01:45):
And next we have a Kansas Appellate Court case, another
one we don't get a lot to talk about, but
we we do indirectly generation skipping tax This is it
is a wonderful It's based how you build generational wealth
right tax free, and a lot of our trusts have

(02:07):
it built in and how to do it, but we
don't always get into it that much. So I'm going
to explain it in this case because there was definitely
a generation skipping tax issue here that I want to
bring up with the grandchildren.

Speaker 3 (02:20):
So lots to.

Speaker 4 (02:21):
Talk about in terms of planning in and of itself.
But the guide, the new guide for the month is basically,
you know, avoiding estate planning potholes.

Speaker 3 (02:32):
And what that.

Speaker 4 (02:33):
Means is, you know, if you've done an estate plan,
maybe revisit it and see if it makes sense. That's
a pothole, right, I haven't looked at my plan in
a while. I don't have enough money to do in
a state plan. I don't need one. I'm going to
rely on a will. Oh, I got a nominee realty
trust for my house. That's all I need. You know,
I you know you need to think I I how

(02:53):
and what you've done might need updated. And really, if
you've never done your planning, this it's going to help
you realize all the things that you shouldn't be doing,
like relying on a will, et cetera. Folks, lots to
think about with this guide. It'll help you get started
if you haven't, and it'll help you refresh your existing
plan and figure out what you might need to do

(03:15):
if you've already done your planning. So 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 Exchange Show dot com New Jersey.

Speaker 3 (03:33):
Shall we so here are the facts.

Speaker 4 (03:37):
Eleanor Lenor was a patient in a nursing home. On
March twenty eighteen. She fell out of bed, fractured her neck,
and died ten days later. So she received Medicaid benefits
from six to twenty eighteen. Okay, it's a long time,

(03:58):
so in January of twenty nineteen, so March of twenty
eighteen is when she passed. January of twenty nineteen, Teresa,
the pr of the estate, filed a medical malpractice claim
with survivorship claims because of what happened made sense well.
In April of twenty nineteen, the dates are somewhat important,

(04:18):
New Jersey filed The Department of Medical Assistance in New
Jersey filed a claim for two hundred and fourteen thousand dollars,
which was the services that they paid for for Lenore.

Speaker 2 (04:29):
For twelve years when she was in the nursing home.

Speaker 4 (04:32):
Right, and so they want to get that money back.
That's what a state recovery is. So the claim was
against the estate assets, including proceeds from the malpractice lawsuit. Well,
the estate filed a claim right after that to show
cause as to why that claim should be extinguished as
to the malpractice proceeds. Well, the trial court denied that

(04:54):
claim and said, you know what, the malpractice claim was
in a state asset and subject to a state recovery. Well,
they didn't like that, so they appealed, and the appellate
court affirmed, basically said, look for purposes of a state recovery,
one's estate includes probate assets, and in New Jersey they're

(05:18):
all different. We're going to explore this right in New Jersey,
it said, and any other real or personal property in
which the recipient had any legal title or interest in
at the time of death, which includes any interest in
the estate might have in a malpractice claim.

Speaker 3 (05:39):
I kind of see how you could.

Speaker 4 (05:40):
Get there, Although what I was concerned with was the
claim was filed after the individual died, so on the
date of death, that action wasn't filed, but the injury
had already occurred. So I guess, I guess you get there. Yeah,

(06:04):
it is an interest. The estate has an interest in
that action if it gets brought It.

Speaker 2 (06:11):
Would be one thing if the nursing home would be
recovering these assets when they're the ones that caused that
or were responsible for that. But this is the state,
the state right benefits that they paid on their behalf.
So I kind of get that.

Speaker 4 (06:26):
I think it's probably right. So but let's let's explore
exactly what a state recovery is. I don't think we
talk about it enough, right, and it is that it's
the ability for the state to get paid back from
the assets of a decedent if they were on medicaid
and received benefits.

Speaker 3 (06:44):
Over a period of time. So let's play that out.

Speaker 4 (06:47):
Each state's a little different, right, and this rule varies,
like I said, between states, and so it can make
a big difference. So let's say, example here, they can
get probate assets in Massachusetts. No, no, this this case
the New Jersey. They can get probate assets. And any
asset you die in your name is a probate asset.

(07:08):
So that's that's what that means. Well, when you think
about it, what are the assets that you might have
in your name when you die. And by the way,
Massachusetts is also a probate estate recovery. So now we'll
bleed that in in Massachusetts you can only recover against
probate assets. Keep that in mind when I talk about

(07:30):
New Hampshire in a few minutes. Okay, so Todd, in
order to have a probate asset, it has to be
in your name with no designated beneficiary.

Speaker 2 (07:38):
And no joint owner and no joint owner.

Speaker 4 (07:40):
Okay, well fine, but Todd, if I'm going to get
on Medicaid, I have to have less than two thousand
dollars of assets.

Speaker 2 (07:46):
So what are you going?

Speaker 4 (07:47):
So how could you have a recovery? Well, remember a house,
a house might be non countable but leanable. H So
you put the house in your name, or a rental
property non countable but leanable. As long as it's in
your name, there could be these big assets. So even
in Massachusetts, right, you could have these assets in your

(08:07):
name when you die and they would be recoverable. Now, however,
of course, if you do planning and these assets are
at the home and the rental property are in a trust,
well now you've avoided.

Speaker 3 (08:20):
Probate because they're in the trust.

Speaker 4 (08:22):
If they've been in there over five years, they're not
your asset for Medicaid eligibility. And you're going to get
on Medicaid, and when you die, it's not recoverable by
the state, at least in Massachusetts and seemingly also in
New Jersey because at the time of death you would
not have had an interest in those properties. So now

(08:48):
this particular statute includes any legal title or interest at
the time of death. Let's talk about New Hampshire for
a minute. New Hampshire says any legal title at the
moment before or death. Why is that difference so important?
So in New Hampshire they can go after not only
probate assets, but any legal title you had an interest

(09:12):
in immediately prior to death. Well, if you're a life
tenant in a life estate situation, then immediately prior to
death you do have an interest in that property.

Speaker 2 (09:24):
Had a value to that it was a value to
that life.

Speaker 4 (09:27):
Estate, and they would be able to go after that right.
And so that makes a big difference. And that's why
in New Jersey and New Hampshire we don't oftentimes do
life estates. Now, remember, the amount that they can go
after is only the value of the life estate, and
if you're really old, the value of the life estate
could be very small. It might only be ten percent
or twenty fifteen percent.

Speaker 2 (09:46):
But who wants to give that away?

Speaker 4 (09:48):
It's still recoverable. So New Hampshire has that distinction between
immediately prior to death versus at the time of death.
Massachusetts only probate assets things in a trust they're not
real coverable. Folks, learn how to do your own planning.
Get the new guide Potholes to avoid in estate planning.
Learn what you can't what you should avoid if you

(10:10):
haven't done your planning by getting the guide, and if
you've done your planning, it might tell you a few
things you might want to do now to tweak it.
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 Lutsky, a partner with the
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 (10:38):
Creating an estate plan can be a difficult process if
you aren't working with an expert who can make sure
your plan is secure. Cushing and Dolan can help. Call
them today at eight six six, eight four eight five
six ninety nine. Estate planning is their business, and their
new monthly guide is called Detour a Head estate planning
blunders to avoid. Don't put your assets at risk and
open yourself up to severe tax consequence. Insis, even if

(11:00):
you already have a plan, this guide may correct an
issue that could come back to haunt you in the
years to come. Proper estate planning is crucial to you
being able to enjoy your later years, and it may
be the difference between retiring comfortably or living under incredible
financial pressure. Call Cushing and Dolan right now at eight
six six eight four eight five six ninet nine and
get your free guide today that's eight six six eight

(11:23):
four eight five six nine nine, or requested online from
their website Legal exchange show dot com. 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 are offering legal or investment services. Cushing
and Armstrong do not endorse each other and are not
affiliated the United States. Virgin Islands has consistently voted one
of the top Caribbean destinations, and recently two of their beaches,

(11:47):
Trunk Bay and Saint John and Magan's Bay and Saint Thomas,
were voted at top ten best Beach in the Caribbean
at the twenty twenty five Travelers Choice Best of the
Best awards. From the pristine Beaches to its world class dining,
rich history and edible golf and perfect weather, the USVII
has everything you need to make memories that will last
a lifetime. From the moment you arrive, you will fall

(12:08):
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 to book
your trip. The USVII is Americas Caribbean paradise. Go to

(12:32):
visit USVII dot com today. That's visit USVII dot com.

Speaker 5 (12:39):
A solid financial plan has many layers, and trusts are
often a core piece. HI This is Mike Armstrong from
the Armstrong Advisory Group. Understanding the various kinds of trusts
that exist can be extremely beneficial to your strategy. If
you're retired or nearing retirement age, a trust may help
you with a wide range of issues such as asset protection,
tax efficiency, and avoiding probate. Call us today at eight

(12:59):
hundred three nine three four zero zero one and ask
for our new guide called Trusts and your Financial Plan.
We'll discuss a number of different trusts in the areas
in which they may help, and how to determine which
one may be right for you. Even if you already
have a trust in place, this guide can provide a
description of certain issues that may arise and could help
you decide if changes are needed. Call us today at

(13:19):
eight hundred three nine three four zero zero one and
get your guide today, or you can request the guide
online at Armstrong Advisory dot com.

Speaker 1 (13:26):
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? Com Todd right now and make

(13:48):
an appointment. Eight six six eight four eight five six
nine 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, 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 masters in taxation.
Where we had it you now we're eliminating a state
taxes next, aren't we?

Speaker 4 (14:13):
Well, we're doing generation skipping even better taxes. It is
a Kansas sappelle at court, folks. So here's a situation.
So Norma in nineteen ninety six established a revocable trust
for her husband and children and a separate I think
I think it's a separate generation skipping trust for the

(14:36):
benefit of the grandkids. Well, the son Perry is trustee
of the generation skipping trust and success or trustee of
the realty trust. So definitely two trusts u seccess or trustee.
Because when Norma dies then Perry will serve Well, on
October twenty nineteenth, Norma died Peter, not Perry. Peter, the grandson,

(15:01):
decided to write a letter to Uncle Peter to discuss
family situation and petitioning and partitioning family assets. The response
comes from Perry's attorney, who wrote a letter telling the
grandkids that they were beneficiaries of a generation skipping trust
and provided them a copy of that trust.

Speaker 3 (15:20):
That's good.

Speaker 4 (15:21):
Well, Peter decided to write the attorney back and said,
you know, can I have a copy of the revocable
trust up now? It's irrevocable because Norma died, you know,
to help me better understand, you know, his interest in
his generation skipping trust and the revocable trust sort of
make sure it's funded properly.

Speaker 2 (15:42):
Uh huh.

Speaker 3 (15:43):
Got no response, Peers.

Speaker 2 (15:45):
Sounds like Peter's getting a little ahead of himself here.

Speaker 3 (15:47):
Well, I don't know.

Speaker 4 (15:48):
I mean, I think he has a right to understand
how it works. But Peter files a petition a declaratory
judgment against Perry in his role as trustee of both
the revocable trust stand the generation skipping trust. He was
basically saying he was denied information that he needed to
understand and protect his interest in the Generation Skipping Trust

(16:10):
and ensure that the Generation Skipping Trust has funded properly.
Seems like a reasonable request. Perry moved to dismiss, and
the district court dismissed the petition as to the revocable
trust for lack of standing, but denied the motion to
dismiss against Perry on the Generation's Skipping Trust, which is

(16:31):
the kid's trust to grank his trust ye. Perry also
answered the petition with a counterclaim, basically asserting that Peter
violated a no contest clause in the trust.

Speaker 2 (16:44):
By asking for this copy of the trust.

Speaker 4 (16:48):
So Perry moved for summary judgment. The district court actually
granted the summary judgment and saying you violated the no
contest clause. The appellate court reversed. Of course, Peter didn't
like that result, so Peter appealed in the appellate court
reversed and said, look, seeking information about a trust to

(17:09):
understand how it works, is not challenging the trust or
validating the trust. It's simply and it's not trying to
remove anybody as trustee. It's just saying I need to
understand what my rights are. And so this case turns
on the fact that he was allowed to ask these
questions and it didn't violate a no contest clause.

Speaker 3 (17:28):
And that's great.

Speaker 4 (17:29):
We understand how no contest clause works and all that,
but I'm more importantly concerned about this whole generation skipping
trust that was set up and how we can do
that in our estate planning world. And so, folks, before
I get there, I just want to remind you of
the guide we're giving away this month. It's called Estate
Planning Potholes to Avoid. So if you've done your planning,

(17:51):
it's got information in it to tell you what you
might still need to do, Like if you haven't looked
at it in ten or fifteen years, that's a good
idea to look at it. What if one of you
got divorced, What if you know you've had a family
situation change. There might be any number of reasons you've
changed residencies, folks. These are all things to think about
if you've done your estate plan. If you haven't done

(18:13):
your estate plan, the guide is perfect for you. Because
you might say I'm relying on a will or I've
got a nominee realty trust for my house. I'm all sad,
I don't need a trust. I don't have enough money.

Speaker 3 (18:22):
Folks.

Speaker 4 (18:23):
It gives you answers to all of these things. So
it's good for people who have done it, good for
people who haven't done their estate plan Call and get
it 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 Tips and Lessons. What can we

(18:47):
learn from this, Well, let's talk about what generation skipping
tax is.

Speaker 2 (18:54):
It sounds fabulous, Yeah.

Speaker 4 (18:56):
We call it GST Right if basically, first, if you
you do not need a separate trust like this, you
can have one. You can set up a separate trust
and have it be just a grand children's trust and
stick money in it right now, make completed gifts perfectly, okay, okay,
and then those assets are not part of your estate anymore,

(19:19):
and if designed properly, will be available to the grandkids
through trustee actions. They don't own it, and ultimately when
the grandkids died, it might not be included in their
estate and can continue on another generation down.

Speaker 2 (19:33):
What's the benefit of setting that up now before you die? Todd?
That separate talk trust why would you actually be motivated
to do that.

Speaker 4 (19:39):
So those are probably for folks that have a lot
more assets, right network, higher net worth people that you
want to actually get assets out of your estate now,
because remember, folks, if you're worth I don't even know
what number we should be using anymore, but certainly people
over thirty million are over twenty over twenty eight million.
But even if you think of the estate's going to
come down depending on where you are, you want to

(20:01):
get these assets out of your estate because it's not
just the asset you're giving away, it's all the future
growth that you care about.

Speaker 2 (20:10):
So you're using up some of your lifetime gifting exemption.

Speaker 4 (20:14):
To give it away now and then have all the
growth be outside of your estate. And that's really the key.
Growing estate tax free is what we want. And so
that's kind of what the idea is. But when I
say you don't need to trust, you could just have
your own revocable trust like they had in this case,
and then have language in there that talks about how
you leave it to the next generation, like, for example,

(20:38):
you know, if we can get assets down there without
paying tax, So they say you set aside at death
an amount equal to your GST exemption, which today equals
the federal exemption thirteen point nine million. Yeah, pretty close,
you're right, four fourteen million. So the GST exemption is
the same as your federal exemption. Right now, if you

(21:00):
set up a revocable trust, you could provide in there
that all assets equally to the kids and then have
that sole discretionary language that we talk about. Right, So
you got ten million dollars in the trust and you
divide it amongst three kids. So now you got you know,
three point three three million bucks in each bucket. Yep,
kids can take it out in the disinterested trustees discretion.

(21:25):
So now it's coming out to them. Basically up to
the disinterested trustee.

Speaker 2 (21:29):
Still like an attorney or a CPA or somewhere.

Speaker 4 (21:31):
Somebody not related or supporting, and the kids can remove
and replace that person. Give them a lot of power,
and so distributions come out when they pretty much needed
college education for the for their kids, or or they're
buying a family car taking a trip. You know, Yeah,
the money comes out.

Speaker 2 (21:46):
They could still buy houses and things within the name
of the trust. Sure, they say it'll use it the
same way.

Speaker 4 (21:51):
Absolutely, Susan, you could buy a vacation home. Don't distribute
the money out, buy it inside the trust. And so
and by the way, the kids are the ones managing
all of this, and then they have their own kids.
Those are the grandkids that I'm talking about, and so
life goes on, and so never mind are they protected
from divorce. But when you die, whatever is in that trust,

(22:11):
the kids still didn't own, so that will pass estate
tax free to the grandkids because it's not tax at
the kids level, and.

Speaker 2 (22:19):
Who knows what it's worth at that point, right.

Speaker 4 (22:22):
And the bigger issue is when mom and dad set
up the revocable trust for their kids and grandkids. When
mom and dad died, that's when we allocate this generation
skipping tax exemption. So if we had ten million dollars
in the trust and our exemption is thirteen point nine,
your inclusion ratio is zero. In English, that means that
it's less than the exempt amount.

Speaker 2 (22:44):
So you're not paying those fed estate taxes.

Speaker 4 (22:45):
Well, not only that, it can grow and grow to
twenty million, and even though it grew over the exemption amount,
when you die, it's still in that trust, it passes
a state tax free to the grandkids. So even though
it might grow to exceed the exemption amount during the
kids' life, it won't matter. It won't be included in
the kids estate and it won't be a generation skipping

(23:06):
tax problem when it goes to the grand kids. Nice
tax free. And you're right, you cannot even begin to
calculate the estate tax savings that go with these kinds
of things. Folks, if you haven't done your planning, this
guide is for you. If you've done your planning, this
guide is for you. It's got something for both of you.
Estate planning potholes to avoid, things to do after you've

(23:28):
done your planning, and things to look out for while
you're doing your planning eight six six eight four eight
five six ninety nine or Legal Exchange show dot com.

Speaker 2 (23:39):
You've been listening to Todd Lutsky, a partner with a
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 when we return to the
Legal Exchange with Todd Lutsky.

Speaker 1 (23:55):
Creating an estate plan can be a difficult process if
you aren't working with an expert who can make sure
your plan is secure. Cushing and Dolan can help. Call
them today at eight six six eight four eight five
six nine nine. Estate planning is their business, and their
new monthly guide is called Detour a head estate planning
blunders to avoid. Don't put your assets at risk and
open yourself up to severe tax consequences. Even if you

(24:17):
already have a plan, this guide may correct an issue
that could come back to haunt you in the years
to come. Proper estate planning is crucial to you being
able to enjoy your later years, and it may be
the difference between retiring comfortably or living under incredible financial pressure.
Call Cushing and Dolan right now at eight sixty six
eight four eight five six ninety nine and get your
free guide today that's eight six six eight four eight

(24:40):
five six ninety nine, or request an online from their
website 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 or investment services. Cushing and Armstrong
do not endorse each other and are not affiliated HI.
This is Mike Armstrong from the Armstrong Advisory Group.

Speaker 5 (24:58):
A state and financial planning go hand in hand, and
one of the most common ways to keep that bond
secure is with a trust. Our new guide called Trusts
in Your Financial Plan is available right now. In it,
we'll discuss the various types of trusts that exist and
how they might benefit your planning process. Trust provide a
number of different protections for your assets, including privacy control
and tax efficiency. If you're retired or nearing retirement and

(25:20):
have concerns about your financial strategy and whether or not
a trust may help, call us today at eight hundred
three nine three four zero zero one and ask for
your free guide called Trusts and your Financial Plan. Learn
about how a trust could make a difference for you
and your family by calling eight hundred three nine three
four zero zero one. That number again is eight hundred
three nine three four zero zero one, or you can

(25:40):
request the guide from Armstrong Advisory dot com.

Speaker 1 (25:43):
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.

Speaker 6 (25:56):
This is Michael Valila, adjued of the Disabled American Veterans
Department of Massachusetts. The DAV of 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,

(26:16):
and companionship. But we need your support. You can help
by making a donation today. Please visit DAVFIVEK dot Boston.
That's DAV fivek dot Boston.

Speaker 1 (26:27):
The United States Virgin Islands has consistently voted one of
the top Caribbean destinations and recently two of their beaches
Trunk Bay and Saint John and Magan's Bay and Saint Thomas.
We're voted at top ten best beach in the Caribbean
at the twenty twenty five Travelers Choice Best of the
Best awards. From the pristine beaches to its world class dining,
rich history, incredible golf and perfect weather, the USVII has

(26:50):
everything you need to make memories that will last a lifetime.
From the moment you arrive, you will 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 place for your
next adventure. Go to visit USVII dot com right now

(27:12):
for more information and to book your trip. The USVII
is Americas Caribbean Paradise. Go to visit USVII dot com 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

(27:35):
in the estate planning process. Once again, here's Todd, Lutsky
and Susan Powers.

Speaker 2 (27:41):
Welcome back, Todd. We have a few questions from listeners
for you. First question comes from Ron in Freetown, mass
and Ron writes, my wife is currently in a rehab
facility after having fallen recently, and it's likely that she
will not be able to return home due to her
memory issues. We've not done any planning to protect our assets,

(28:02):
but we do have a revocable trust, a power of attorney,
and a healthcare proxy. Our home is worth four hundred thousand,
We have around eight hundred thousand in iras split evenly,
and other investments in savings of four hundred thousand. What
are my options now?

Speaker 4 (28:21):
So, so at least there's it's a married situation. So
we've got what is called a community spouse, somebody living
at home that's married. So that allows us a lot
more options, and these are called last minute options, right,
A lot more options last minute than we would have
if you're single.

Speaker 3 (28:42):
Yeah.

Speaker 4 (28:42):
I think that the big lesson here is for folks
like you Ron, don't panic and start writing a check
to the nursing home.

Speaker 1 (28:52):
M hm.

Speaker 3 (28:53):
Just because you've.

Speaker 4 (28:54):
Done no planning doesn't mean there's not something that can
be done now last minute to either reduce the bleeding
financially or eliminate it depending. So let's take a peek
at this case. So, first and foremost, the house non countable. Right,
we can check that box that I intend to return home,

(29:14):
that the wife intends to return home, even though she doesn't,
And you don't even really need to check the box.
As long as the spouse is living there, it's non countable.

Speaker 3 (29:26):
And non leanable.

Speaker 2 (29:27):
Non leanable as well.

Speaker 4 (29:28):
Okay, and now I wouldn't leave it that way because
we do have the power of attorney here in place,
which I saw which is very helpful. Yeah, because we
have the power of attorney in place, I would then
advise the ron to sign over if the house was joined.
I assume it probably was that. You know, he should

(29:48):
sign over his wife's half to him, so he owns
it one hundred percent. That way, if he dies first,
it doesn't go to her who's in the nursing home,
so you want to get it out of her. Yeah,
and that's allowed. Transfers between spouses is allowed, and he's
allowed to live in the house. And then he can
do planning for himself to protect that house because he

(30:11):
might not be able to dodge the bullet like we
are now, he should douce planning, but not until she's
approved for Medicaid, actually approved. So now we've taken the
house off the table, and we've even talked about ways
to get it protected in case he gets.

Speaker 3 (30:29):
Sick in the future.

Speaker 4 (30:30):
Okay, Well, the eight hundred thousand in the IRA split
evenly and the four hundred thousand, these are the issues.

Speaker 2 (30:38):
So yeah, one point two million and liquid.

Speaker 4 (30:40):
Assets, so one point two he's allowed to keep about
one hundred and fifty.

Speaker 2 (30:45):
So then you have just over a million.

Speaker 4 (30:46):
Yeah, So what we really have to do is, unfortunately,
we're gonna have to take her IRA money.

Speaker 3 (30:53):
And let's say it's four hundred thousand, it is what
it is.

Speaker 4 (30:56):
You're going to take it out of the Ira, pay
some in taxes on it, sure are. Yeah, you won't
be in the top top bracket as a married couple,
believe it or not. But even if you lose thirty percent, yeah,
I get it. But if I don't, I'm going to
lose a fifteen thousand a month. So I got away
the tax ramification of taking it out.

Speaker 3 (31:15):
I get that.

Speaker 4 (31:16):
But if we end up deciding to take it based
on her health and longevity, we take it, we give
it to him, and then he ends up buying an
annuity not only for the balance of the four hundred
after we back out the one fifty YEP and her
IRA and then a separate one for his IRA.

Speaker 3 (31:36):
Got it, but he gets to keep one.

Speaker 4 (31:38):
Hundred and fifty in cash for himself. So it's the
amount over the one fifty that we will be buying
this one or two annuities to convert them into an
income stream so that he can then get that money monthly.
And then she's immediately eligible for medicaid so we can
actually get her on medicaid right away. No lean on

(32:01):
the house. There will be a lean on the annuity
if he dies first. If he doesn't die first, he'll
just get all the money back and it'll.

Speaker 2 (32:09):
Be over okay, and in a very special specific annuities.

Speaker 4 (32:12):
Please don't do this alone. You need to get some
guidance on how to make the annuity qualify to satisfy
these rules. Doesn't just happen, so, folks, that's a little
bit about what happens when there's no planning. What we
want you to do is get the guide so you
do your planning right. And this is potholes to avoid,
well certainly not planning and is a pothole to avoid

(32:34):
because if you don't plan, you run into these problems.
So it's got things in it from you know, if
you've done your planning. Folks, get the guide because it's
going to give you tips on what you might still
need to do, Like a divorce that occurred a spouse
who died you changed residencies. All these things that you
don't think about that impact your estate plan. Get the guide.

(32:55):
Learn what you might have to do to modify your plan.
If you've never done your plan, you're probably thinking, I
don't need one, I don't have enough money, I'm single,
I have no kids, I have my house and a
realty trust, on and on, I have a will. I'm
all set, folks. These are all things that you want
to avoid. Learn what to do if you've not done
your planning. Get the guide eight six six eight four

(33:17):
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 (33:29):
Our last question comes from Sharon in Woostermass and Sharon writes,
my parents created an irrevocable trust thirteen years ago. I
used your tip and check the tax bill, but the
trust is not listed. My parents are I found a
copy of the deed they signed in twenty twelve, but
it doesn't look like it was ever recorded by the attorney.

(33:50):
Is all this time wasted? Is there anything we can
do to backtrack the transfer date?

Speaker 4 (33:56):
So I've actually had a real life fair hearing situation
on this very issue. So this has come up, and
not only did it come up, but I actually had
to go to a fair hearing to convince the state
that they were wrong, and the fair hearing officer got

(34:17):
it right away.

Speaker 3 (34:18):
But I had to do that, and that's.

Speaker 2 (34:19):
Because they applied for medicaid and got denied, right something
like That's.

Speaker 3 (34:24):
Exactly what happened. So let's play. Let's put out the
string here.

Speaker 4 (34:26):
Let's say that in fact, you know, Sharon's coming to
me saying, my parents have an irrevocable trust that they
set up, and there's this deed that is going into
this irrevocable trust, but it's never been recorded, and now
I want to apply for medicaid. Am I screwed? Well again,

(34:47):
this was done in twenty twelve. Well that's way more
than five years ago. We're in twenty twenty five. So
the question is did the five year clock start to
run because the deed transferring the property from their name
to the irrevocable trust was not recorded, although it was

(35:08):
executed and dated and signed. So the answer is it
does start the clock running, and the recording of the
deed is a mere formality and doesn't affect transfer of title.

Speaker 2 (35:25):
That's good. She'll be happy to hear that.

Speaker 3 (35:27):
So but I had to go to a hearing.

Speaker 4 (35:29):
They thought, oh no, because if you if you go
put that on record now, they'll say, the five year
clock starts today the day you recorded it. But I
was in that situation. And in this case, it was
a it was a rental property. There was a trust
set up like here. It had an ID number, it
had a bank account, it received the rent, It even
filed income tax returns. It had all of that evidence.

(35:53):
And so the statute simply says, if you have a
deed that is executed and you have delivery, then you
transfer title recording as a formality. And so I went
and I showed him here's the deed.

Speaker 2 (36:09):
That's like real estate law.

Speaker 3 (36:10):
Yeah, that's real estate law.

Speaker 4 (36:11):
That's the deed. Here, it is executed. Was it delivered. Well,
we know it was delivered because the trustee opened a
bank account, received the rent, filed income tax returns. The
trustee would not have done all that if he didn't
know that the deed was delivered. So we had delivery,
We had an executed deed. I said, the clock started running.
In this case, it was back in twenty fourteen and

(36:34):
more than five years had gone by, and that was
the shortest fair hearing I ever had. The fair hearing
officer said, yeah, I'm going to rule on it right
now unless you can find me a statute that says
in the medicaid world that the clock doesn't begin to run,
it runs, and they couldn't find it. So that's the answer, folks.
There's many other potholes out there to avoid in your

(36:56):
estate planning world. Call and get the guide eight six
six eight four eight five six ninety nine or Legal
Exchange Show dot com. You can download it right there.

Speaker 2 (37:07):
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

(37:28):
Power as a financial advisor with the Armstrong Advisory Group.
We'll be back with more after this quick break on
the Legal Exchange with Todd.

Speaker 1 (37:36):
Lutsky creating an estate plan can be a difficult process
if you aren't working with an expert who can make
sure your plan is secure. Cushing and Dolan can help.
Call them today at eight six six eight four eight
five six nine nine. Estate planning is their business, and
their new monthly guide is called Detour a head estate
planning blunders to avoid. Don't put your assets at risk

(37:57):
and open yourself up to severe tax gun sequences. Even
if you already have a plan, This guide may correct
an issue that could come back to haunt you in
the years to come. Proper estate planning is crucial to
you being able to enjoy your later years, and it
may be the difference between retiring comfortably or living under
incredible financial pressure. Call Cushing and Dolan right now at
eight six six eight four eight five six ninety nine

(38:20):
and get your free guide today that's eight six six
eight four eight five six ninety nine, or request an
online from their website Legal exchange show dot com. The
proceeding was paid for and the views expressed are solely
those of Cushing and Dolan. Cushing and Dolan and or
Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong do not endorse each other and are
not affiliated. The United States Virgin Islands has consistently voted

(38:43):
one of the top Caribbean destinations, and recently two of
their beaches, Trunk Bay and Saint John and Magan's Bay
and Saint Thomas, were voted at top ten best beach
in the Caribbean at the twenty twenty five Travelers Choice
Best of the Best awards. From the pristine beaches to
its world class dining, rich history, incredible golf and perfect weather,
the USVII has everything you need to make memories that

(39:05):
will last a lifetime. From the moment you arrive, you
will 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 place for your next adventure. Go to visit
USVII dot com right now for more information and to

(39:27):
book your trip. The USVII is Americas Caribbean paradise. Go
to visit USVII dot com today. That's visit USVII dot com.

Speaker 5 (39:40):
A solid financial plan has many layers, and trusts are
often a core piece. HI This is Mike Armstrong from
the Armstrong Advisory Group. Understanding the various kinds of trust
that exist can be extremely beneficial to your strategy. If
you're retired or nearing retirement age, a trust may help
you with a wide range of issues such as asset protection,
tax efficiency and avoiding probate. Call us today at a
eight hundred three nine three four zero zero one and

(40:02):
ask for our new guide called Trusts and your Financial Plan.
We'll discuss a number of different trusts in the areas
in which they may help, and how to determine which
one may be right for you. Even if you already
have a trust in place, this guide can provide a
description of certain issues that may arise and could help
you decide if changes are needed. Call us today at
eight hundred three nine three four zero zero one and

(40:22):
get your guide today, or you can request the guide
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 is 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
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

(40:48):
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 advice 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 Todd, I want to focus on
those folks that have done their estate planning okay, and

(41:20):
they've put it on the shelf and they've completely forgotten
about it because their life really hasn't changed much with it.

Speaker 3 (41:26):
That's right. They're not affected.

Speaker 4 (41:27):
It's uneventful and they're getting all the protection and they're
not having an interruption.

Speaker 2 (41:32):
But now I want to talk about those folks. Good
for you, you've done your planning, but you can't just
set it and forget it. There are lots of events
that happen in life that should trigger a review or
revisit of your plan. So let's start with something that
will eventually happen to all of the married couples that

(41:53):
you've done planning for, and that's a loss of a spouse.
What do they need to do when they lose a spouse?

Speaker 4 (42:00):
First and foremost folks, remember this is what you planned for.
I mean, you don't want to think about it, but
by doing all of your estate planning in advance, you've
put the plan up against the goal line, and when
someone dies, you need to take it and push it
over the goal line and accomplish what you set out
to do. That's when you're doing it. So please don't

(42:23):
do it alone. Pick up the phone, call the lawyer,
probably the one who drafted it. Just go back to
that law firm, and you know, say my spouse died,
what do I do? That's really all you have to remember,
because then they're going to pull out the book and
they're going to explain to you. But if you don't
do this, you know, things could go awry, like you
have to think about the fact that the trust is
now irrevocable.

Speaker 2 (42:44):
So even if you have a revocable trust.

Speaker 4 (42:46):
It's now irrevocable, even if it's joint or if it's
the individual's own trust. Because the person died, it's irrevocable.
You now need to make sure you've got the trustee on.
You might have some marital share and remain share assets.
You want to add up what's in the trust, and
those buckets are designed to hold the assets that are
going to then be sheltered from future taxation when the

(43:11):
surviving spouse dies. Okay, the remainder the bypass share would
get in Massachusetts anyway up to the two million dollar number.
The amount over two million, but not to exceed thirteen
point nine million would end up in the next bucket,
the special marital Share, and then everything would flow over
over the federal exemption into the what we call the

(43:33):
general marital share. So the ABC buckets likely be and
SEA buckets are the only ones that'll be funded in
a lot of cases.

Speaker 2 (43:40):
So that sounds like a lot basically, let me translate
that into English for all of you listening. What you
need to do if you lose your spouse is pick
up the phone and call your attorney. You They are
going to navigate these waters for you and tell you
what needs to be done. All that stuff that you
just said that sounds super complicated, that's on you. That

(44:02):
is that's for the attorneys to handle.

Speaker 4 (44:04):
And that's smart that you say that. Yeah, it's smart
that you say that, because you don't. Folks don't need
to remember, as Susan said, the formula that I just
told you, Right, you don't just say I don't remember
the buckets and then we fill those buckets and that's
going to help shelter the assets for you.

Speaker 3 (44:17):
Please don't make the mistake.

Speaker 4 (44:18):
What if you're on your own and people have done this,
Oh I just emptied my husband's trust and put it
all on my trust. Oh big, no, complete waste. First
of all, you can't do that, so the trust doesn't
really permit it. But you know, if somehow you did,
that's a really big, big mistake.

Speaker 2 (44:34):
So that's on the trust side of things. What about
you know, typically when you have a married couple, if
I lost my husband, he's listed as my power of attorney,
my healthcare proxy. I know there's a backup on there,
but should I revise those or do I just go
with the backup?

Speaker 3 (44:52):
Yeah?

Speaker 4 (44:53):
Yeah, I mean I would definitely do some what we
call a state planning updates, which again is what the
guide's all about, right, get get this. An update would be, yeah,
I probably revise the will and add a new primary
and a new alternate because my primary died. I'd probably
do the same thing with a healthcare decision maker, maybe

(45:13):
move the alternate to the primary and give me a
new alternate. Same thing with the power of attorney, update those.
So those three documents, trust is probably okay, and you
don't think you need to do that. The will we
said we'd revise, and then I would say after that,
just make sure that you that you you know, fund
those buckets that we talked about, and you should be off.

Speaker 3 (45:34):
Off and running.

Speaker 2 (45:35):
Okay, great, But.

Speaker 4 (45:36):
Folks, that's just a little bit about getting started. And
also you might have a poor overwill that moves things
into the trust in case there's something kicking around in
your own.

Speaker 3 (45:45):
Name when you die, could be, could be.

Speaker 4 (45:47):
So we got that safety net in place, so folks,
that's what happens after you pass. But you got to
have the estate plan in place before you pass to
get there. And that's what this guide is somewhat about.
It's a avoiding potholes so that when you do your
estate plan, if you've never done them, get the guide.
This will tell you things to avoid when you're doing

(46:08):
your estate plan or getting started. Don't think that you
can just do a will or have a nominee realty trust,
or you don't have enough money to plan. I mean
you need to look and see why you need.

Speaker 3 (46:19):
To do planning. This guide I'll get you there.

Speaker 4 (46:21):
If you have already done planning, as Susan's talking about, now,
there's things that could happen that might make you need
to review your plan. Please call and get the guide
something for everybody eight six six eight four eight five
six nine nine or Legal Exchange Show dot com. Potholes
to avoid eight six six eight four eight five six
nine nine or Legal Exchange Show dot com.

Speaker 2 (46:43):
So let's say someone has done their planning and there
both spousers are still living. What do they have to
do if they move to another state?

Speaker 4 (46:51):
Yeah, so relocating is an issue, right, So let's say
that's a great one. I should have mentioned that's in
the guide. By the way, folks, what if we decide
that we're done with Massachusetts and we're now moving to Florida.

Speaker 3 (47:05):
Can we do it?

Speaker 1 (47:06):
Well?

Speaker 4 (47:06):
Sure, I know the trust we have, whether they're revocable
or irrevocable, you're going to be able to sell that
house through the trust. Money goes in and you can
buy another house right in the trust. And when you
move you really don't have to change trusts.

Speaker 2 (47:22):
So that doesn't restart the clock. Moving to another state.

Speaker 4 (47:25):
Great question, and the answer is no, because the trust
will go with you. Trusts can go to In fact,
you could take the trust with you and still have
it governed by the laws of Massachusetts if you want to,
you could change the situs of the trust to be
governed by the laws of Florida, but I don't know
that's critical.

Speaker 3 (47:43):
So trust goes with you.

Speaker 4 (47:45):
Having your irrevocable trust and buying and selling and moving
is not going to reset the clock, So wipe your brow.

Speaker 3 (47:52):
But when you move.

Speaker 4 (47:55):
To another state, couple of things that we should change,
just like when when you lose a spouse. We discussed
updating basic documents, the.

Speaker 2 (48:05):
Power of attorney, the healthcare proxy.

Speaker 3 (48:07):
The will, the living will right.

Speaker 4 (48:09):
So you want to update those when you lose a spouse.
But when you go to another state, you want to
update those basic documents, not the heavy lifting documents, but
the basic documents to be from that state. So state specific,
state specific. So the power of attorney in Florida looks
very different than ours here. Yeah, right, the health care

(48:30):
proxy different, right, the will right, living will, hipiform. They
should all be done for the new state. Not just
because you're in a new state and you should do it,
but because you want to do everything you can to
show Massachusetts that you're not a resident anymore, right, right.

Speaker 3 (48:50):
It's not just.

Speaker 4 (48:50):
Oh I moved, right, you need to really think through
when you're moving, you know, changing your voter registration, changing
how they address you use when you file your federal
income tax return, changing your driver's license, shifting the insurance around,
changing your estate planning documents, everything.

Speaker 2 (49:09):
To wait if you leave a house here, like what
if you have you know, you go into Florida because
you're going to be snowbirds, but you leave a house
here on the Cape and you still own real estate here.

Speaker 3 (49:19):
Yeah, now that's a really big concern. Right.

Speaker 4 (49:21):
So again, these are things that you really need to
think about when you relocate, which is again, why you
get this guide to learn these things? So most people
do that they've got that cape property or that house
that they just kept where they live here. When they
come to come back for the you know, summertime, it

(49:42):
needs to be transferred to a limited liability company if
you leave it as real estate. Massachusetts has the authority
to tax non residents on mass property.

Speaker 2 (49:57):
So even if it's in your irrevocable TRUP, you still
need to.

Speaker 4 (50:00):
Do that doesn't matter, okay, uh medicaida revocable trust. It
needs to be in an LLC that converts it to
an intangible and Massachusetts cannot tax non residents on intangibles.

Speaker 2 (50:15):
So in the English that's a tax loophole.

Speaker 4 (50:17):
Tax loosehol I can tax residence on intangibles, but not
non residence. So folks, these are just a couple of
things to think about when you're doing your estate planning.
So for people who don't do estate planning, get the guide.
For people who haven't have already done it, this will
give you some things to think about. Eight six six

(50:37):
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 (50:46):
Thank you, Susan. It's always a pleasure.

Speaker 2 (50:48):
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 Lutsky.

Speaker 1 (51:00):
In the State. Plan can be a difficult process if
you aren't working with an expert who can make sure
your plan is secure. Cushing and Dolan can help. Call
them today at eight six six eight four eight five
six nine nine. Estate planning is their business, and their
new monthly guide is called Detour a head estate planning
blunders to avoid. Don't put your assets at risk and
open yourself up to severe tax consequences. Even if you

(51:22):
already have a plan, this guide may correct an issue
that could come back to haunt you in the years
to come. Proper estate planning is crucial to you being
able to enjoy your later years, and it may be
the difference between retiring comfortably or living under incredible financial pressure.
Call Cushing and Dolan right now at eight sixty six
eight four eight five six ninet nine and get your
free guide today. That's eight six six eight four eight

(51:45):
five six nine nine or request an online from their
website Legal exchange show dot com. The proceeding was paid
for in The views expressed are solely those of Cushing
and Dolan. Cushing and Dolan ind or Armstrong Advisory may
contact you are offering legal or investment services. Cushing and
Armstrong do not endorse each other and are not affiliated. HI.

Speaker 5 (52:00):
This is Mike Armstrong from the Armstrong Advisory Group. A
state and financial plan and go hand in hand, and
one of the most common ways to keep that bond
secure is with a trust. Our new guide called Trusts
in your Financial Plan is available right now.

Speaker 3 (52:12):
In it, we'll.

Speaker 5 (52:12):
Discuss the various types of trusts that exist and how
they might benefit your planning process. Trust provide a number
of different protections for your assets, including privacy control and
tax efficiency. If you're retired or nearing retirement and have
concerns about your financial strategy and whether or not a
trust may help, call us today at eight hundred three
nine three four zero zero one and ask for your
free guide called Trusts and your Financial Plan. Learn about

(52:35):
how a trust could make a difference for you and
your family by calling eight hundred three nine three four
zero zero one. That number again is eight hundred three
nine three four zero zero one, or you can request
the guide from 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 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.
The United States Virgin Islands has consistently voted one of
the Topcribbean destinations, and recently two of their beaches, Trunk

(53:08):
Bay and Saint John and Magan's Bay and Saint Thomas,
were voted at top ten best beach in the Caribbean
at the twenty twenty five Travelers Choice Best of the
Best awards. From the pristine beaches to its world class dining,
rich history, incredible golf and perfect weather, the USVII has
everything you need to make memories that will last a lifetime.
From the moment you arrive, you will fall naturally in

(53:30):
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 to book your trip. The USVII
is America's Caribbean paradise. Go to visit USVII dot com today.

(53:55):
That's visit USVII dot com.