How to protect assets from creditors

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 (00:36):
Welcome 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 the law firm
of Cushing and Dolan with a master's in taxation. Welcome Todd.
How are you today?

Speaker 3 (00:53):
I'm never better in you.

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

Speaker 3 (00:57):
Couple of things got to First of all, we got
a new guide. It's a new month, you know.

Speaker 2 (01:02):
Never ever before offered, and that is true, presses actually
never been offered.

Speaker 3 (01:09):
We're gonna go to Connecticut. We got an appelled court
there basically how to leave assets to protect from creditors? Interesting?
And then we're gonna go to Mississippi appellied court there.
When do you have to deal with undue influence and
capacity issues at the same time. In this case, you

(01:30):
know this person, Lisa, does a will and she leaves
things to mother, nieces and nephews. The biggest problem with
this case is why is it going up a generation
to mother. I'm gonna leave it at that, and we're
going to talk about how maybe not to leave things
up a generation and how to protect assets from creditors.

(01:52):
This is a situation where there was someone who went
into a nursing home and basically owed three hundred and
ten thousand dollars to the nursing home and mother ends
up dying, leaving things to daughter who is in the
nursing home, and those assets are not good planning when

(02:12):
you know someone, Yeah, so you know, leaving assets down
a generation, this usually doesn't happen. But what about when
people leave it up a generation. This is a really
interesting day really when you think about the two cases
that we've got to deal with, so a little different.
We're going to talk about it, but more importantly, and
I guess I'm more excited about it, is this new

(02:33):
guide that we're given away. We put one together. I
feel like with the passage of the BBBA, it's just
sort of cemented the idea of the simplicity of joint
revocable trusts, and that is the name of the guide,
the simplicity of joint revocable Folks. I know we talk
a lot about irrevocable revocable trusts compared to two trusts,

(02:55):
where you have to divide assets between a husband trust
and a wife trust and worry about which one grows more.
This is so much simpler. It's simpler from funding standpoint,
put it all in one trust. It's also better for
moderate estates. You know, what's a moderate estate under fifteen
million nowadays, so you know, it's better for a moderate estate,

(03:15):
and especially for people who have large iras as a
part of their ass a part of their estate. It
allows you to shelter way more on the first death
than you can with two trusts, and it allows you
to get even something called a step, a full step
up in basis, and then maybe even a double step
up in basis on the second death. Folks, so much
to learn about with these revocable trusts. If it's something

(03:38):
that interests you, get the guide eight six y six
eight four eight five six ninety nine or Legal Exchange
Show dot com The Simplicity of Joint Revocable Trusts eight
six y six eight four eight five six nine to nine.
Let's go to Connecticut. So we've got Patricia. She was

(04:00):
a patient Mayfair Healthcare Center and spent a couple of
years there till her death in late twenty twenty two.
Patricia was the only heir to her mother, Margaret's estate.
It like, why are we talking about her mother who
owned property in eastern Connecticut at the time of her death.

(04:20):
Mayfair files in July of twenty twenty two a prejudgment
remedy against Patricia's estate for three hundred and ten thousand
dollars of unpaid costs attaching to the eastern Eastern property
that she owned. The mother owned well. The trial court
confirmed that Mayfair had provided services and was owed the money,

(04:45):
but they denied the claim for this prejudgment claim because
mom's estate was still being administered and the property is
not yet subject to Patricia's control. Well, Mayfair didn't like that,
so they peel, of course, and the appellate court reversed.
As as to the prejudgment statute in Connecticut, it defines

(05:09):
property as a present or future interest in real property.
So even though Patricia's title to the eastern property was
contingent on the administration of Margaret, her mother's estate.

Speaker 2 (05:23):
Because Margaret had died already, Margaret had.

Speaker 3 (05:24):
Died, she still had a future interest in the property,
and it's attachable. I always pause there and I say,
I wonder if the fact that Patricia was the only
heir made a difference. Yeah, you know what I'm thinking.
So anyways, folks, this isn't so much just about what

(05:46):
happened here. You know, we've got to learn something from
this case. And so what I say is, this is
a very uncommon situation. Right. You don't usually leave assets
down a generation to a child who's in a nursing home.

Speaker 2 (06:00):
Frankly, if your child is in the nursing home, review
what you've got going on with your estate plan makes
them change.

Speaker 3 (06:07):
It absolutely, Susan, That's exactly right. And it's like, it
seemed to me that Mom could have figured out a
better way to leave her assets.

Speaker 2 (06:14):
To anybody else.

Speaker 3 (06:15):
Yeah, well it did say it was her only air,
but leave it in a way that, in case she
hadn't died, could have taken care of her but not
exposed it.

Speaker 2 (06:25):
How would she have done that?

Speaker 3 (06:26):
So through trust would be the way. It didn't seem
like it didn't really get into mom's estate here, but
I assume Mom didn't have any real estate planning done
at the time, so I definitely would have had her
set up some kind of a trust to hold the assets.
It seems like the asset probably just just passed through

(06:46):
the estate right to or even in the will right
to the daughter, because it made it sound like she
did have this future interest. So all good points for sure, Susan.
I mean, that's it. But the thing I want to
teach from this is that this is uncommon. You're right,
you usually don't leave it down a generation. But to
your point, if you're going to Susan and you know
that there's a problem with your child, whether it's a

(07:08):
nursing home or a special needs child, or you know,
whatever the case may be, figure out a way to
plan for that child. But sometimes I have kids and
you might have seen it in your practice, Susan who
who want to take care of a parent, And so
I always tell them, Look, don't leave assets up a

(07:30):
generation outright, because then it's going to be included in
their estate and subject to their estate taxes. In addition,
if they go to a nursing home, it's going to
be taken by the nursing home. So those are so
you never do it that way. And again when I

(07:51):
say if you leave it and forget the nursing home
for a minute, again the inclusion in the estate and
subject to estate taxes, because then it's taxed when it
comes back down. Now it's back down at the generation
it started at, and now it's going to be taxed
again to get down to the generation that it should

(08:11):
have gotten to without having been taxed twice. Right, So
you really got to consider that when you're leaving it.
How do you do it? You use a trust, right
you take say I want to leave a percentage of
my assets to my parents. Fine, I'm going to put this,
you know, say fifty percent of my assets held in
trust for the benefit of my parents. If living the trustee,

(08:34):
in their sole discretion, can make distributions out and this
distributions can be made for whatever the trustee wants.

Speaker 2 (08:44):
Oh, so use the same kind of trust you would
if you want to protect your kid's inheritance, but you're
protecting your parent. Ah, I never thought of it going
in the other direction.

Speaker 3 (08:53):
Yeah, you put that same language in there, And now
mom and dad don't own it, right, they can enjoy it.
They can have maybe someone bring health care into their house. Right,
they want to stay at home. They might be a
need for them. Maybe they don't have a lot of
money to live on, and so this will help provide
them a better lifestyle. But if they get sick and

(09:15):
go to the nursing home, even the next day after,
let's say the child died in advance and left something
to them, there's no five year waiting period. So because technically, right,
it was never theirs to begin with, So it's not theirs.
Now they get sick, it's not theirs, and more importantly,
when they die, it's not theirs. And it's not taxed,

(09:36):
and it's not taxed, so it's not included in their
state and it's not taxed. And to your point, Susan,
it is that discretionary language that we use for dynasty
trusts on the way down, same thing here. The mother
could have done that. The mother could have simply set
up a trust and said, oh, I see it's my
only heir. I leave it in trust for my daughter,
sole discretion. And again, most of us doing our planning

(09:57):
for our kids use the sole discretionary language to provide
generation skipping tax benefits and protection from divorces and creditors
for the kids. So, folks, all this can be done.
It also can be done when you use the simplicity
of the Joint Revocable Trust Guide. It's brand new for
the month, never before given away. Eight sixty six eight

(10:18):
four eight five six ninety nine.

Speaker 2 (10:20):
You've been listening to Todd Lutski, a partner with the
law firm of Cushing and Dolan. I'm Susan Powers, a
financial advice with the Armstrong Advisory Group, and we've got
much more to come when we return to the legal
exchange with Todd Lutski.

Speaker 1 (10:35):
The state planning isn't just about taxes, it's about peace
of mind. At Cushing and Dolan, we believe your plan
should protect your family, not complicate your life. A joint
revocable trust can help you do both. It lets you
avoid probate, which means no court delays, no public filings,
and no stress for your loved ones. Your state stays
private and your family stays in control. Our new guide,

(10:56):
The Simplicity of Joint Revocable Trusts also explains how a
trust can protect your children's inheritance from creditors, divorce, or
bad financial decisions down the road. This guide makes it
easy to understand why a joint trust may be the
smart move for your family's future. Call eight six six
eight four eight five six ninety nine right now and
ask for your free copy of The Simplicity of Joint
g Revocable Trusts. That's eight six six eight four eight

(11:18):
five six ninety nine, or requested online from our 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 and or Armstrong Advisory may contact you
offering legal or investment services. Cushing and Dolan in Armstrong
Advisory do not endorse each other. In are not affiliated HI.
This is Chuck Zada from the Armstrong Advisory Group. Your
home is more than just a place to live, It's

(11:40):
part of your story. In retirement, real estate can play
a powerful role in how you manage your wealth and
plan for the next generation. Passing property to family members
isn't always easy. One child might want to keep the
home while another prefers to sell it. Maintenance costs, taxes,
and distance to healthcare services are all important factors that
need to be considered, which is why having a clear
plan can help prevent family stress while keeping your wishes

(12:01):
front and center. Our new guide Owning real Estate and
Retirement is designed to help you fit your property into
a long term strategy that supports your life today and
preserves what matters most for your future. Get your free
copy right now by calling eight hundred three nine three
for zero zero one. That's eight hundred three nine three
four zero zero one a request the guide at Armstrong
Advisory dot com. The proceeding was paid for by Armstrong

(12:24):
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 advisory services.

Speaker 4 (12:35):
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Speaker 1 (13:01):
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Speaker 1 (13:36):
You're listening to the Legal Exchange with Todd Lunsky, an
expert in elder life planning and taxation. Need help with
your estate plan contient right now and make an appointment
eight six six eight four eight five six ninety nine.
That's eight sixty six eight four eight five six ninety nine.

Speaker 2 (13:52):
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 Lahti, a partner with the
law firm of Cushing and Dolan with a master's in taxation.
Where are we headed now, Todd.

Speaker 3 (14:07):
We're going to go to Mississippi talk about undue influence
and legal capacity. So we have Lisa, who did a
will in nineteen ninety nine real property to her nieces
and residue to her mother. Only here we go up
a generation and nieces and grand niece, nieces and grand niece.

(14:30):
So those big group of people notice no children. Just
keep that in the back of your mind for learning
as we go forward. Following a diagnosis of colon cancer
in twenty twelve, Lisa's sister Karen became her primary caregiver. Oh,
that seems nice. For now, then diagnosed with liver cancer

(14:52):
later Lisa, yes, Lisa was the one diagnosed with the
liver cancer. Layership redoes her will right after that, and
this time the will says real property to Karen and nieces.
So Karen gets a little bump up there. Yeah, Karen
gets a little bump up and residue two nieces and

(15:15):
grand niece. Okay, so people are still kind of included,
but it seems like Karen got a little bump up.
Twenty fourteen. Lisa then moves in with Karen because I
guess her health is declining.

Speaker 2 (15:26):
Yep.

Speaker 3 (15:28):
Lisa then does a new will right after she moves
in in twenty fourteen. This time the lion's share of
the assets goes to Karen, a bigger bump up and
one niece, so it all looks like the grand nieces
are out. June twenty fifteen, Lisa dies. Lisa and Karen's
sister Susan, so this is another sister. Susan files to

(15:52):
determine airship. Karen then probates the twenty fourteen will. Makes
sense it's the most recent will, but the court sets
aside the second will the twenty fourteen will because it
was clear and convincing evidence of undue influence, and Karen
did not rebut or overcome that argument. It did look

(16:13):
a little fishy. Yeah, finally Karen, Lisa moves in with Karen.
Next thing, you know, Karen or Lisa does a new will,
leaving the lion's share to Karen. I mean, that's the
definition of undue influence, all right. Well, six years later,
Karen probates the nineteen ninety nine will with the first

(16:33):
and second condicils. So she got a little bumper six
years later, and now Karen successfully rebuts any presumption of
undue influence from the earlier wills. Susan objects. The appellate
Court affirms, stating that no one other than Lisa had
direct involvement in executing those earlier documents, and she had

(16:57):
full knowledge and full deliberation and when executing those earlier documents,
And just because she was subject to a conservatorship at
the time does not mean she has lost testamentary capacity.
The nineteen ninety nine wills and condicils stand. That's probably
the right decision, But folks, I think we have a

(17:19):
lot to learn about what went on in this case
and what we can do better when we're doing our planning.
So let me tell you that in one of the
ways maybe to do that would have been, you know,
to set up the simplicity of a joint revocable trust,
which is exactly what the guide is entitled to this month.

(17:40):
It basically helps you understand how easy a revocable trust
can be to fund it. You can then be trustees
of it. It explains how it shelters assets on the
first death for a state taxes and allows the full
amount of the assets, not half, to be included in
the estate on the first death, getting a full step

(18:00):
up in basis, so you're able to shelter more assets
than you could otherwise. And it explains how you can
actually use this trust to get a second step up
in basis when the surviving spouse dies. So all the
drafting languages in there, and it's really a great trust.
It's just almost like a universal trust for a lot

(18:20):
of people. If you haven't done your planning, call and
get the guide. This might be the kind of trust
that works for you. 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. What do we

(18:42):
learn from this? So, first thing I say is, remember
the beginning I said there was no kids involved. Right,
How many people say I don't need a plan because
I don't have any kids. Maybe you still do.

Speaker 2 (18:53):
I think you need it even more so, Yeah.

Speaker 3 (18:55):
I mean I remember my great aunt and uncle had
no kids, and we were there kids, and so it
was important to them. And so you can have close nieces, nephews,
what have you and plan for them.

Speaker 2 (19:08):
Sure, as you should make sure your assets go where
you want them to go, because it wouldn't have in
their case, wouldn't have gone to you and your siblings. No,
go to your parents.

Speaker 3 (19:16):
Yes, so if you died, she died without a will.
So again, at least she did a will. We can
give her credit for trying to do the will. I
mean maybe a trust would have been a little better
if you knew you were sick or you wanted to
protect the assets for somebody in here. She had the cancer.
So you don't ever know how that plays out. But
so I tell people, you know, it's important to plan,

(19:38):
you know, just to ensure, as you said, your assets
go where you want. So next, let's talk a little
bit about you know, capacity, right, because I meet with
people a lot who would have had you know, might
come in and they say, well, my husband is here,
but he has early dementia. But if you didn't tell me,
I wouldn't know, right, and early that's what I mean.

(19:59):
So early to like in this case, she was under
some sort of a conservatorship. Doesn't always mean that you
lost testamentary capacity. You still might be able to plan
your estate, maybe get a doctor's note or something. So example,
when when people come in and they say that they

(20:20):
have early dementia, that I simply ask a few questions
more to make sure that I know that they have capacity.

Speaker 2 (20:27):
So that doesn't stop them from being able to plan.

Speaker 3 (20:29):
Yeah. I think the difference is what's the difference between
contractual capacity and testamentary capacity. If you're signing a contract,
you need to have full capacity, right. If you're signing
a will, you got to ask questions like do you
know how many children you have? Yes, and you could

(20:51):
rattle their names off. Do you know how many grandchildren? Yes,
and they rattle names off. Do you know where they live?

Speaker 1 (20:57):
Yes?

Speaker 3 (20:57):
They right? I mean do you know who this?

Speaker 1 (20:59):
You know?

Speaker 3 (20:59):
These are the kind of things. Now you start saying,
you know what they know who the nature of their
bounty is. Yes, that's probably enough again just to be safe.
But that's that's probably enough. They don't have to be
you know. You worry when you say how many children
do you have and they say three and they have five?

Speaker 1 (21:19):
Right?

Speaker 3 (21:19):
Or I have how many daughters do you have and
they say none and they are all daughters. I mean
that's the problem.

Speaker 1 (21:25):
Okay.

Speaker 3 (21:25):
Now having cleared that piece up from this case, you know,
I also have clients who I've done planning for years
and years ago, and they come back now I want
to make a change, and folks, yes, many of them
have irrevocable Medicaid trusts, and yes we're allowed to make

(21:46):
a change. Yeah, absolutely, we can exercise the limited power
of appointment. So that's when my little red flags go
up when I have somebody coming back later years later,
and usually you get a call from a kid, you know,
and then I say, well, hold on, we're not talking
to children. We're going to talk to the parent and
that's the end of it. So you kids are great,

(22:06):
but that's not what we're doing. Ye. And then even
if they're there and I talk to them all and
I explain, And usually I do this because it's they're
coming back because one child is going to end up
getting something less, sometimes cut out all together, but sometimes
just getting less and someone's getting more. And when I

(22:26):
see this come in to me and I'll say, okay,
doesn't mean we can't do it. First, are you do
you have capacity? We always want to check that, and
then depending on their age, even if I feel there's
no diagnosis, no medical issues and they're fine, seemingly perfectly,
you know, having capacity. I tell everybody, if you want

(22:48):
this to work when you die, go get a doctor's
note now, so that when we sign we have that
in the file. So later when the person who's getting
less comes back and tries to challenge your capacity, we
slide the doctor's note in. And it's important. It's not
done because we don't trust them. It's done to help

(23:09):
them ensure that their wishes are going to be honored. So, folks,
that's really how you do it. And now's the difference
between capacity and ways to plan. When you're doing your planning,
if you've never done one and you're not sure how
trusts work. This joint revocable trust might be the way
for you to get started eight six six eight four
eight five six nine nine or Legal Exchange show dot

(23:32):
com and request the brand new guide The Simplicity of
Joint Revocable Trusts.

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. Todd will be
answering your listener questions when we return to the Legal
Exchange with Todd Lutsky.

Speaker 1 (23:52):
The state planning isn't just about taxes, It's about peace
of mind. At Cushing and Dolan, we believe your plan
should protect your family, not implicate your life. A joint
revocable trust can help you do both. It lets you
avoid probate, which means no court delays, no public filings,
and no stress for your loved ones. Your state stays
private and your family stays in control. Our new guide,

(24:13):
The Simplicity of Joint Revocable Trusts also explains how a
trust can protect your children's inheritance from creditors, divorce, or
bad financial decisions down the road. This guide makes it
easy to understand why a joint trust may be the
smart move for your family's future. Call eight six six
eight four eight five six nine nine right now and
ask for your free copy of the Simplicity of Joint
Revocable Trusts. That's eight sixty six eight four eight five

(24:36):
six ninety nine, or requested online from our 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 and or Armstrong Advisory may contact you
offering legal investment services. Cushing and Dolan in Armstrong Advisory
do not endorse each other. In are not affiliated. The US.
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Speaker 5 (25:53):
This is Chuck Zada from the Armstrong Advisory Group. Your
home is about more than where you live. It's a
big part of your financial life. As you head into retirement,
certain questions may come up. Does the space feel too
large or too expensive to maintain? Does it still fit
your needs? But the taxes, insurance and upkeeper starting to
add up. Our new guide Owning, real Estate and Retirement
offers insight into how to decide what's right for you.

(26:14):
Should you stay, put downsize, or relocate to an area
with lower costs. We cover those issues as well as
how factors like property taxes, insurance premiums, and local living
expenses can impact your retirement budget, and why it's important
to match your housing decisions to your long term financial plan.
Call us right now at eight hundred three nine three
for zero zero one. That's eight hundred three nine three

(26:36):
for zero zero one A request the guide at Armstrong
Advisory dot com.

Speaker 1 (26:40):
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.

Speaker 3 (26:53):
Hi.

Speaker 6 (26:54):
I'm Michael Valila, adjedent of the Disabled American Veterans Department
of Massachusetts, the DAVIA massachuf US. This provides thousands of
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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 (27:41):
Welcome back, Todd. We have a few questions from listeners
for you. First question comes from Donna in Newton, mass
And Donna writes, my mother passed away and had a
trust that gave my sister the ability to stay in
my mother's home for as long as she wants to.
My sister does not have any money to take care
of the property and pay the real estate taxes, which

(28:01):
are substantial. Are my siblings and I now responsible to
pay for these expenses with a little money that is
left in the trust.

Speaker 3 (28:11):
Well, I'm not sure how this trust reads, but it
sounds like somebody wanted to take care of this one child,
and in a way where this child probably doesn't have
a house and probably couldn't afford one on her own.
R see. But that's where the problem is so when
people deal with real estate, first of all, you need

(28:31):
a trust. So kudos to Dono for doing one. M
Please don't try to deal with passing real estate on
without a trust. I find it just causes problems. It's
okay to allocate one trust to one child or to
hold it in trust for a child because you want
to care for that child. That's a good idea. The
problem is how do you pay for it. So you

(28:53):
have a couple of things. One again, not knowing what
this child situation is, you would hope that they could
at least work or they're not disabled. I don't know
what this child situation is. But if the child was
able to work and sort of live but just not
able to buy a house, then you put language in
that says the child can live there, but the child

(29:16):
must pay all the real estate taxes, utilities, upkeep maintenance,
and put teeth in there that says, you know, if
she doesn't pay the bills within ninety consecutive days, if
there's any bill out standing after ninety consecutive days, so
you can miss a bill but pay it, or you
move out of the house for six consecutive months, or
you know, put some trigger events in there. Of course

(29:38):
die as a trigger event. Well, then the house you know,
goes to everybody or gets sold and the money gets split,
So you lose your right in essence to live there
if you violate any of these rules. So always have
that mechanism in there to provide payment for the house.

(29:59):
Now I was like, that wasn't thought through or there
was no money here. I don't know. If there's money
and a house, well then you can say, well, I
know my daughter doesn't have the or my son doesn't
have the ability to pay these bills. So then I'm
going to leave the house in trust and a bucket

(30:20):
of money for the trustee, who probably would not be
the child living there, to make sure these bills are paid,
and that way it can be used. So the quick
answer to your question is yeah, I mean, whatever money's
in the trust, if you haven't taken it and it
wasn't allocated to you kids, then you know, if you're
the trustee and you want to use it to pay

(30:40):
to maintain the house so your sibling has a place
to live, I would say you could probably do it,
and then of course there won't be money for everybody else.

Speaker 2 (30:49):
Right, It sounds like she's concerned that there isn't enough
money in the trust to support it for very long.

Speaker 3 (30:54):
Yeah, so they're gonna have to talk with her and
find out, you know, do you have the ability to
go to work? Do you need to at least generate
enough money to pay real estate taxes and utilities and
keep the heat on?

Speaker 5 (31:04):
Right?

Speaker 3 (31:05):
If not, it's gonna be up. Unfortunately, it's gonna be
one of these things where the planning was sort of
done halfway, it wasn't fully thought through, and it'll now
be up to siblings to say, well, we can't have
a homeless sibling, so we need to figure out, Yeah,
we need to figure out something to do here. Maybe
it's sell the house, get as much money as we
can buy a little condo for you know something, you know,

(31:26):
figure out a way to do it. But yeah, it's
going to require it's going to require some thinking. But
you know what, folks, that's part of planning. Planning is
not just getting your your trust done, but thinking it through.
How is it going to work? Always?

Speaker 4 (31:41):
Right?

Speaker 3 (31:42):
So when I plan for people, I always tell them
I've used this comment over and over. I plan not
for today, but for whole life. Right. We plan for
whole life, so we got to think through it. So
and I think if you're going to get your planning started,
learning about what kind of trust is right for you
is also important. And I think a good place to

(32:02):
start would be this brand new guide, The Simplicity of
Joint Revocable Trusts. It's so much easier to fund. You
don't divide assets. And Folks, if you ever had a
large IRA. Let's say you've got a five million dollar estate,
but you know two million or three million is in
an IRA, well, we want to make sure we can
cram down all the non IRA assets on the first death.

(32:24):
A joint trust does that for you. It will show
you how you can shelter more assets on the first
death than you can with two trusts. It explains the
estate tax ramifications, how the if there's formulas in there
to show you how the taxes are saved. Get started
and it learned how to do your state plan. Get

(32:44):
the guide eight six six eight four eight five six
nine nine or Legal Exchange Show dot com. The Simplicity
of Joint Trusts eight sixty six eight four eight five
six nine nine or Legal Exchange Show dot org.

Speaker 2 (33:00):
Our last question comes from Bob in New Haven, Connecticut,
and Bob writes, my father transferred his home and investment
accounts to me seven years ago and recently died. The
home was worth around one million, but he had a
life estate, so I'm not worried about capital gains tax
on that. The investment accounts total around two million, and

(33:21):
the cost basis is really low. Is there any way
to get a step up on those assets like we
will with the home. I did send the dividend income
to him each month that I received. Sounds like he
wants an implied life estate on the dollars.

Speaker 3 (33:37):
I mean, it's strange, you know, so an implied life state.
So we'll first we'll first explain that comment Susan to people.
You know, if if you have given away your house,
which he did, we can talk about that million dollar home.
But in that case he actually reserved, yes, the right

(33:57):
to live there. So you know, this Code section twenty
thirty six says, when you give away an asset, but
retain the right to the income or that's a b
or the right to enjoy the benefits of what you
gave away, you didn't technically give it away. Okay, they

(34:19):
say they say you kept a string on that item.

Speaker 2 (34:23):
So even if you didn't formally reserve a life estate, no.

Speaker 3 (34:27):
This is the example of a formal reservation. Yeah, that
you actually kept that string. That's the item you kept
got and it pulls the entire asset back into the estate.
And so this million dollar home, even if he bought
it years ago, long ago, for very little money, all

(34:47):
the built in gain will go away because the full value,
not just the life estate piece, the full value of
the house is included in the estate. To get a
step up in basis, which is that's it eliminates it avoided, probated,
and eliminated the capital gain. To your point, Susan, what
if somebody just gave away their house but lived there,

(35:11):
paid the bills, did everything, maintained it. Well, then now
that's that implied. There's a court case back in that seventies,
that's seventy one, I think, where it's called an implied
life estate. You didn't reserve that nugget, You didn't actually
keep it. But the statute says if you give something

(35:33):
away and enjoy what you gave away, well then you
kept it. So even though there was no legal keeping
that caused it to be included anyway. Now let's shift
gears and say, how does that apply to the money. Yes,
not sure you're going to get there. It'll be interesting though.
In this case, you're saying that he gave away all

(35:54):
this investments full stop, didn't actually reserve anything. Although you're
saying that the kid decided to gift him the.

Speaker 2 (36:05):
Income because tax wise they would have to be on
the kid's tax returns.

Speaker 3 (36:09):
Yeah, that's my point. Who's picking up that capital gain
or that interest and dividends? Probably the kids? So you know,
did he did he actually retain No, he didn't retain anything,
and it was a completed gift. I think it would
be a stretch, although there might be some argument maybe
in that estate of Gwen case. Again, I'm always open

(36:31):
for these creativity ideas. But you could say, look, I
gave away my my asset and I continue to receive
the income. Therefore I should I should get it, and
so be interesting.

Speaker 2 (36:45):
I would love to hear about that loophole.

Speaker 3 (36:46):
I mean, people who have given away rental property but
continue to get the income. That's an argument. Maybe go
give it a shot, but instead do your planning in
the fact that simplicity of The joint revocable trust will
allow allow you to get that full step up in
basis and maybe a double Learn how to get it
eight six six eight four eight five six nine nine

(37:08):
or Legal Exchange Show dot com.

Speaker 2 (37:11):
If you have a question you'd 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 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):
The state planning isn't just about taxes, It's about peace
of mind. At Cushing and Dolan, we believe your plan
should protect your family, not complicate your life. A joint
revocable trust can help you do both. It lets you
avoid probate, which means no court delays, no public filings,
and no stress for your loved ones. Your state's stay's
private and your family stays in control. Our new guide,

(38:02):
The Simplicity of Joint Revocable Trusts, also explains how a
trust can protect your children's inheritance from creditors, divorce, or
bad financial decisions down the road. This guide makes it
easy to understand why a joint trust may be the
smart move for your family's future. Call eight six six
eight four eight five six nine nine right now and
ask for your free copy of the Simplicity of Joint
Revocable Trusts. That's eight six six eight four eight five

(38:24):
six nine nine, or requested online from our 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 in or Armstrong Advisory may contact you
offering legal or investment services. Cushing and Dolan in Armstrong
Advisory do not endorse each other. In are not affiliated HI.

Speaker 5 (38:41):
This is Chuck Zada from the Armstrong Advisory Group. Your
home is more than just a place to live. It's
part of your story. In retirement, real estate can play
a powerful role in how you manage your wealth and
plan for the next generation. Passing property to family members
isn't always easy. One child might want to keep the
home while another prefers to sell it. Maintenance costs, taxes,
and distance as a healthcare services are all important factors

(39:02):
that need to be considered, which is why having a
clear plan can help prevent family stress while keeping your
wishes front and center. Our new guide Owning Real Estate
and Retirement is designed to help you fit your property
into a long term strategy that supports your life today
and preserves what matters most for your future. Get your
free copy right now by calling eight hundred three nine
three for zero zero one. That's eight hundred three nine

(39:24):
three four zero zero one A request the guide at
Armstrong Advisory dot com.

Speaker 1 (39:28):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or 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.
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(40:52):
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 (41:01):
Welcome back into the Legal Exchange with Todd Lutsky. I'm
Susan Powers, a financial advisor with the Armstrong Advisory Group,
and I'm joined, of course by Todd Lutsky, a partner
with the law firm of Cushing and Dolan with a
master's in taxation. Todd, I'd like to walk through the
hypothetical fact pattern that you have in this month's new

(41:21):
guide about the joint revocable trust. So in your guide,
you have a married couple. They're fifty five years old.
They have a home primary home worth two million, a
VKA home worth two million, iras of a million, investments
of ten and they're all jointly owned except for the iras.

Speaker 3 (41:43):
H what's they campy, right?

Speaker 2 (41:46):
Three kids, three grandkids. I want to talk about the
benefits that they get that they'll realize by having that
joint revocable trust in place.

Speaker 3 (41:59):
Okay, broad brush do we want.

Speaker 2 (42:01):
To Yeah, we're going to talk about all the benefits
that they get. So let's talk about I mean the
kind of the no brainer for everybody, do you want
to go to probate? So they don't know what it is,
but they know they don't want it.

Speaker 3 (42:14):
I just want to get my hands on the assets.
Fifteen million we're looking at for an estate yep, total
estate about fifteen million. Ten Yeah, okay, So just keep
that in mind, folks, because that's going to help us
with our benefit discussion today. So we got fifteen million. Now,
I'm sorry, reprobate the question probate so.

Speaker 2 (42:32):
What it is? But they know they don't want to
go there.

Speaker 3 (42:36):
This is certainly a very easy way to avoid probate.
You know, you simply retitle your assets. You retitle your
your bank accounts, your brokerage accounts, your deed to your home,
to the home, the vacation home. Right, not the iras.
You're absolutely right. The iras have to stay where they are.
But I think part of the beauty of a joint

(42:58):
trust is just what you're talking about, this funding idea.
You know, when you have a husband trust and a
wife trust, you say, okay, well, what do I have
to do? Do I have to put like one bank
account here and one bank account there? Do I have
to put you know, do I have to split my
accounts like when you go to even when you go
to fund them, well, even when you like help people
fund them. Let's say someone comes to you with a
joint account and you say, okay, I or I tell

(43:22):
you make that joint account half in one trust and
half in another trust. Yes, it's a lot of paperwork.
You cannot Yeah, you cannot take that joint account and
then just retitle half into each trust. Can't do it.
You have to create two separate individual accounts first, correct,
and then from those individual accounts you have to then
put them into the husband trust Life Trust. Not with

(43:46):
this So with the joint trust, you just throw it in. Yeah, right,
you can just throw the joint account in. You can
take that joint home, joint vacation home, need it directly in,
no need to the trust. And the reason there's no
need to split it is something in this trust called
a general power of appointment.

Speaker 2 (44:08):
What does that mean in English?

Speaker 3 (44:09):
That is the power that makes the trust, that really
makes the trust so wonderful. It says, well, well, two things.
Let me back up before I tell you that. First,
I have language in the trust that says jointly held
assets are treated as contributed one half by each perfect.

(44:30):
So I have the language in there so you don't
have to do the paperwork. Yeah, it's Oh, the joint
investment account went in and it says jointly held account. Okay,
we both contributed half. No problem. But what if for
some reason you didn't contribute half. What if one person
ended up having a bunch of accounts in their own
name and they and they just threw it in, Like

(44:50):
maybe the wife had a whole bunch of accounts in
her name and she just threw it in, and she
ended up putting seventy percent of the assets in and
he only put in, you know, thirty percent. Does it
matter No, because of this general power of appointment. I'm
going to tell you what that means in a minute,
because I want to explain, folks, what we're about to
talk about. This guide called the Simplicity of Joint Revocable Trusts.

(45:14):
It's all about the basis that's kind of the title.
It's this general power of appointment that is explained in
the document that really allows all of this, these positive
things to happen. This power of appointment is in here
and it explains how it causes the full amount of
the assets to be included in the estate on the
first death, and that's what we want, right. If we

(45:36):
can get full inclusion, then we don't really care who
dies first. We don't have to worry because you don't know,
and we can get a bigger step up in basis
because the assets in the trust will go to the
marital share and the remainder share, and even though they
were contributed by different people, you can still get a
full step up in basis. So it's so important to

(45:58):
understand that because the estate tax exemptions are so high
that we can cause inclusion, pay no estate taxes, and
win on the income tax side by getting a basis
step up. Call and get the guide, folks, it's going
to really help you understand not only basic estate planning,
but maybe the kind of trust that's right for you.
Eight sixty six eight four eight five six nine nine

(46:20):
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 (46:29):
So if it's one trust because you don't know who's
going to die first, that must help somehow yep, with
the estate taxes.

Speaker 3 (46:40):
It does so let's go through this, and this is
where I'm going to spend a little more time on
the general power of appointments, just to try to hammer
this point home back to our idea. One spouse put
in seventy percent just because that's how they own the stuff. Yeah,
and the other one put in thirty. Does it matter?
Does it matter if one put one hundred percent in
and one put nothing in? Doesn't matter. Here's why this

(47:03):
general power appointment is language in the trust that says
two donors, right, donor one donor two. Each donor has
the power to direct where the other donors half goes. Okay,
So if somebody put in seventy and somebody put in thirty,

(47:24):
and let's say the person that put in thirty dies first, yep. Well,
we know that when you contribute assets to a trust
thirty percent, that thirty percent is going to be included
in that person's estate. They gave it away, they retain
the right to control and enjoy it. It's included in
their estate. We get that, But the seventy percent donor

(47:47):
is still living, there's no estate. Well, I want that
seventy percent included in the thirty percent. Donors who died estate,
I want to cram down more assets. How do I
do that? This power of appointment, says, donor with the
thirty percent dies has the power to direct where the

(48:13):
other donors half or in this case seventy percent the
other donors portion goes, including to himself, his estate, his
creditors of his estate. So dying, even though you never
exercise that power, you never actually direct where they go.

(48:34):
The fact that you died with the ability to direct
that that seventy percent come to you causes it to
be included in the estate of the first to die.
So now the first to die got his own thirty
and her seventy included. Yep, for the full hundred percent

(48:57):
in the estate. Now the beauty of that is so the.

Speaker 2 (49:01):
Whole thing is tax right essentially.

Speaker 3 (49:03):
Right, So let's say it. Let's say you know, if
it was a ten million dollar estate, there would have
only been three million that would have been included. Wow,
there's a lot more I can include and cramm down.
So I don't have to worry about future death taxes
federally ever, right, because now I got the whole ten
million and into the remainder share, which is our state

(49:24):
death tax. Here in mass we'll get the two million,
and the reque tip share that we call it the
special marital share will get eight million. Is there eight
and two is ten. The full ten million dollars is
included in the first.

Speaker 2 (49:39):
Death no problem on the federal side.

Speaker 3 (49:41):
On the federal side, we got a thirteen point nine
million dollar exemption. We have no death tax. It can
grow and grow and grow, and it will never be
taxed again in the surviving spouse's estate. And we got
a full step up in basis on all of those assets,
even the piece that was that came over for from
her to him and went in. There's actually there's revenue

(50:03):
rulings in this guide that are laid out that if
you read them, I mean, they are written so easy
to read, and it explains exactly what I'm talking about
as to how you get that full step up. And
remember only the eight million would be subject to tax
in Massachusetts anyway when the survivor dies.

Speaker 2 (50:21):
Got it.

Speaker 3 (50:21):
And there's even some solutions in here as to how
to fix that problem. Call and get the guide, folks.
The simplicity of joint revocable trusts, it's all about the
basis eight six six eight four, eight five, six ninety
nine or Legal Exchange show dot com and you can
download the guide right there.

Speaker 2 (50:40):
Brand new this month, 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 Power as 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):
The state planning isn't just about taxes, it's about peace
of mind. At Cushing and Dolan, we believe your plan
should protect your family, not complicate your life. A joint
revocable trust can help you do both. It lets you
avoid probate, which means no court delays, no public filings,
and no stress for your loved ones. Your estate stays
private and your family stays in control. Our new guide,

(51:21):
The Simplicity of Joint Revocable Trusts, also explains how a
trust can protect your children's inheritance from creditors, divorce, or
bad financial decisions down the road. This guide makes it
easy to understand why a joint trust may be the
smart move for your family's future. Call eight sixty six
eight four eight five six ninety nine right now and
ask for your free copy of the Simplicity of Joint
Revocable Trusts. That's eight sixty six eight four eight five

(51:44):
six ninety nine, or requested online from our 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 and or Armstrong Advisory may contact you
offering legal or investment services. Cushing and Dolan in Armstrong
Advisory do not endorse each other in or not affiliate HI.

Speaker 5 (52:00):
This is Chuck Zada from the Armstrong Advisory Group. Your
home is about more than where you live. It's a
big part of your financial life, and as you head
into retirement, certain questions may come up. Does the space
feel too large or too expensive to maintain? Does it
still fit your needs? But the taxes, insurance and upkeeper
starting to add up. Our new guide Owning, real Estate
and Retirement offers insight into how to decide what's right

(52:21):
for you should you stay, put downsize, or relocate to
an area with lower costs. We cover those issues as
well as how factors like property taxes, insurance premiums, and
local living expenses can impact your retirement budget and why
it's important to match your housing decisions to your long
term financial plan. Call us right now at eight hundred
three nine three for zero zero one. That's eight hundred

(52:42):
three nine three for zero zero one A request the
guide at 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 cansult your
own financial tax into state planning advisors before making any
investment decisions. Armstrong may contact you to offer investment advisory service.

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