The pitfalls of not planning

Episode Transcript

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

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

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

Speaker 3 (00:52):
I am never better on you?

Speaker 2 (00:53):
I'm great? Thank you? Whatdye huffers? This week?

Speaker 3 (00:56):
Got a couple of cases. One that is really I
mean it's it's really just a soap opera. Of of events.
I mean, we're going to talk about a client who
gets married and then has a child, and then there's
we learn later that there's a child that is born
out of wedlock, and how does that play in the case.

(01:16):
Then this person remarries without ever getting divorced, and then
there's some question after he dies whether or not it's
like late night, Oh, it's crazy. Then there's kids that
are born after he dies that they think are from
artificial insemination, and how does that work? And who is
going to be the ultimate I mean, this is, this

(01:39):
is and of course there was no planning done. So
now we're trying to figure out who is the beneficiary
of these assets.

Speaker 2 (01:46):
Where is that plunk go board gonna go folks.

Speaker 3 (01:49):
Obviously we're going to learn a lot of lessons, not
just it's really all about not planning and how it
could have been very different if planning was done, even
with these events well tuned for that. And then we're
going to go to Illinois. I'm sorry, Iowa. We have
an Iowa appellate court case. And this one's a little interesting,
really dealing with life estates and medicaid a state recovery.

(02:11):
But in this case, it was about a life estate
that was granted in a will to the survivor, not
a life estate that was set up prior to death.
And that's a big distinction. So we're going to talk
about how a state recovery works, how trust would work differently,
and how life estates work. So lots to learn about
in this particular Iowa case. But before you do any

(02:35):
of that, folks, it is the month of December. It's
a brand new month, and in this month we have
a new guide. It's the guide dealing with balancing asset
protection and avoiding estate taxes. So it does two things.
Talks first about the basic estate tax planning with revocable trusts.
Gives you all the formulas, all the tables to calculate

(02:57):
your tax, put in your own numbers, put in your
own assets, and figure out how your tax works and
how the trust works. Then it talks about not only
federal but also state calculations so you can learn about
how much you owe for mass. And also it deals
with how do we do it if we use irrevocable
trusts and save the estate taxes and protect from the

(03:18):
nursing home At the same time, folks, lots of stuff
in this guide 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.

(03:39):
Are you ready for Little General Hospital?

Speaker 2 (03:41):
I am? That sounds juicy.

Speaker 3 (03:43):
So Patrick and Marie Mary in nineteen ninety five they
have a child, Marcel. Patrick had another child turns out
from a prior marriage, Tierra, So we've got Marcel and Tierra.
In nineteen nine, ninety nine, Patrick decides to marry Maureen
in Cameroon, and of course disputes exist as if as

(04:07):
if whether or not the Patrick knew they knew Patrick
was married? Are whether he was already married? Okay, well
this is interesting. In two thousand and seven, Patrick dies
in a plane crash. Fourteen months later, Maureen, who he
married in Cameroon, gives birth to twins, allegedly Patrick's kids

(04:27):
through artificial insemination. Hmm. Interesting. Cameroon then had filed They
filed a lawsuit in Cameroon to determine airship and to
nullify Maureen's marriage to Patrick.

Speaker 2 (04:41):
And you going to need a chart?

Speaker 4 (04:43):
Oh?

Speaker 3 (04:43):
Yeah. In twenty ten, Maureen and Conrad, Pat's brother, files
wrongful death claim against the airline because he died in
a plane crash. So in twenty sixteen, there's a settlement reached.
Who gets the money, right, don't know? So now we're
going to find.

Speaker 2 (04:58):
Out one of his gaggle of chill and I would assume.

Speaker 3 (05:01):
Well, let's try to figure this out. So we've got
twins from artificial insemination, we've got Tierra born out of wedlock,
and we've got Marcel the only real child born from
a marriage, right, okay, and a second marriage that maybe
isn't valid because Patrick was already married. Right.

Speaker 2 (05:24):
Wow.

Speaker 3 (05:25):
Twenty nineteen, Conrad told the Illinois.

Speaker 2 (05:28):
Court Comrade's brother, Yeah, yeah.

Speaker 3 (05:31):
That the Cameroon court found that Marcel and Tierra were
to be the heirs. Remember they filed that lawsuit to
find out who the airs were and that Maureen was
not Patrick's spouse, and then her twins are out, okay,
which seems to make sense.

Speaker 1 (05:47):
Right.

Speaker 3 (05:48):
The Illinois court ordered the money to Conrad as guardian
for Marcel and Tierra. Okay, I'm liking this well. Twenty
twenty two, Edmund files a register's files to register the
twenty ten foreign judgment from Cameroon that nullified Maureen's marriage,
but granted her up what they call paternity spousal rights

(06:14):
and declared the twins co beneficiaries of Patrick's estate. Well.
After some back and forth with the court, the Illinois
Court of Appeals finally dismissed the foreign judgment from Cameroon,
stating that Maureen knew Patrick was married and her twins
are out, So I think when this all shakes.

Speaker 2 (06:35):
Out, he couldn't have been involved in that decision. They
came along fourteen months after he died.

Speaker 3 (06:40):
So yeah, but with artificial insemination fourteen months, nine months.
I get where you're going with I know, but at
the end of the day, it seems like Tierra and
Marcel are the only only heirs. Yeah, and this Cameroon
marriage didn't go anywhere. Wow, which is probably the right.

Speaker 2 (06:58):
Yeah, it's going to be a book.

Speaker 3 (07:01):
But you know, at the end of the day, what
can we learn from this, right, Folks, if you're married,
I'm not sure why they didn't do planning after the
first marriage, especially with that mess. Well the first marriage,
Patrick and Marie to have a kid, Marcel, do your
estate plan, yeah, because if they had done their estate
plan right, likely the trust would have said I'm going
to take care of my spouse, Maria. That's how you

(07:23):
do it, right, if living otherwise, I'm going to leave
things to our daughter Marcel, and then you add a
no contest clause to that trust. Everyone else is out
this way, even if he had these other twins or
the kid from the prior marriage, they would be out.

Speaker 2 (07:40):
Because you don't have to leave money for your children.
You can specifically exclude them, right, disinherit them, and leave
them for for anybody you want.

Speaker 3 (07:49):
So if you go yeah, So if you're back up
and start at the very beginning, Patrick and Marie get married,
they have a kid doing an estate plan, right, I
just carved out exactly how that would work. It'd be perfect.
Why in our trust we actually have language that says
children born out of wedlock are deemed children of the
mother only unless they marry. So this tiera person who

(08:14):
he had out of wedlock would not be a kid. Right.
Oh but wait a minute, it said child from a
prior marriage. Okay, so if they were married, then that
kid would be in. But it's important to understand that
we do put that language in to prevent things like
children that you know, because because a man could have
a child and not know it.

Speaker 2 (08:35):
Right, So the first marriage, in the fact that they
had a kid, should have predicated having an a statement.
If not, then having a second marriage exactly should have
absolutely been the call, the actual action.

Speaker 3 (08:49):
They should have done it when they had Tiera and
then Marcel's actually the second marriage, so so you're right
they should either way, you could provide for this. And
that's my point. Now, if you died without a will,
if this person ended up dying and had no planning,
which it doesn't tell me. It sounds like they had
no planning, well then you would go. And let's assume
that the spouse is already dead Mariam hm. Well, then

(09:12):
it would go to the next closest next of kin
through the intestate succession statute. Right, and that means it
would go to all kids out of wedlock or not.
If you're a biological child, you would be in the
intestate succession statute that would encompass these.

Speaker 2 (09:29):
Twins if you don't plan.

Speaker 3 (09:30):
So if these twins are actually his kids, you'd be
in right, folks. This is why, right with a second marriage,
it's very important or significant other plan take care of
your spouse, take care of your kids, take care of
your kids from your prior marriage while you also take
care of your spouse. You can do it all if
you do your trust planning. We've had plenty of cases

(09:52):
like this, folks. Call understand how to get your planning
in order that balancing, asset protection and avoiding a state tax.
Guide deals with both revocable trusts and irrevocable trusts in
terms of how to calculate the estate tax for both
federal and mass and if you want save assets from
the nursing home at the same time. It's a great
guide to learn about both avenues of estate planning. Call

(10:14):
and get it eight six six eight four eight five
six nine nine or Legal Exchange show dot com.

Speaker 2 (10:22):
You've been listening to Todd Lutski, a partner with the
law firm of Cushing and Dolan. I'm Susan Power as
a financial advice with the Armstrong Advisory Group. We've got
much more to come when we return to the Legal
Exchange with Todd Lutsky.

Speaker 1 (10:35):
If you're retired or getting close, now's the perfect time
to take a fresh look at your estate plan. Doing
your planning early can help you protect your assets and
keep more of your wealth in your family. Cushing and Dolan,
the leaders in elder lawn taxation, have put together a
new guide called Balancing, Asset Protection and Avoiding Estate Taxes,
and in it you'll learn how to secure your assets
if you ever need long term care, how to avoid
having everything tied up in probate, and how to get

(10:57):
a clearer picture of your estate tax Exposure guide also
breaks down real options that may help you reduce or
even eliminate your estate taxes when you plan the right
way and plan early. Whether you have an existing estate
plan or starting from scratch, this guide makes it easy
to understand what steps could help you and your family
in the long run. To get your free copy, call
Cushing and Dolan at eight six six eight four eight
five six ninet nine. That's eight six six eight four

(11:19):
eight five six nine nine, or you can request it
online at legal exchange show dot com. That's legal exchange
show dot com. The proceeding was paid for and the
use expressed or solely those of Cushing and Dolin. Cushing
and Dolan and or Armstrong Advisory may contact you offering
legal or investment services. Cushing and Dolan and Armstrong Advisory
do not endorse each other and are not affiliated.

Speaker 4 (11:36):
The Armstrong Advisory Group understands retirement planning and when it
comes to married couples, it can be about more than money. Hi,
this is Mike Armstrong and our new guide called Retirement
Planning for Spouses tackles many issues that couples face as
they're preparing for later life. This guide keeps things simple,
focusing on important matters such as making sure both partners
understand where their money's coming from in retirement, being aware

(11:57):
of scams, how to stay organized if one spouse outlives
the other, and ways to handle gifts, donations or legacy
goals as a team. It's a straightforward look at the
steps every couple can take to feel confident about retirement.
Call the Armstrong Advisory Group right now at eight hundred
three nine three for zero zero one to get your
free copy of Retirement Planning for Spouses that's eight hundred
three to nine three for zero zero one, or you

(12:19):
can request it online at Armstrong Advisory dot com.

Speaker 1 (12:22):
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.

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Speaker 1 (13:34):
Today you're listening to the Legal Exchange with Todd Lusky,
an expert in elder life planning and taxation. Need help
with your estate plan? Call Todd right now and make
an appointment. Eight sixty six eight four eight five six
ninety nine. That's eight sixty six eight four eight five
six ninety nine.

Speaker 2 (13:54):
Welcome into the Legal Exchange with Todd Lutsky. I'm Susan Powers,
a financial advisor with the I'm Strong Advisory Group, and
I'm joined by Todd Letski, a partner with the law
firm of Cushing and Dolan with a master's in taxation.
I don't know how you follow that story, Todd, but
where are we headed now?

Speaker 3 (14:11):
It's thankfully a lot easier, less painful time. Yeah, we
don't need the diagram. We're going to go to Iowa.
There's an appellate court case there. In this case, we've
got Dennis who died or Denise who died. February twenty twenty,
Denise's daughter submitted the will to probate. The will devised

(14:34):
a specific life estate in real property to Joe Okay,
Denise had been in a nursing home, however, prior to
her death, and she received medical assistance amounting to about
one hundred and thirty eight thousand dollars from the state.
So Donna files a petition. Now Donna is the daughter.

(15:00):
I believe Donna files a petition to sell the real
estate and pay the money right for the estate recovery
claim because the estate's insolvent otherwise. The court ordered that
the real estate be sold, but also said that Donna's
residuary bequest be used up first to pay What does

(15:25):
that mean In England the estate the residuary estate would
be everything left over, not other than the house. So okay,
that was the order. Well in January twenty twenty four,
while four years later, Donna files an estate final accounting
indicating that this state had been paid seventy eight thousand dollars,

(15:48):
leaving about sixty thousand dollars due. The state filed a
release and satisfaction of its own claim with the probate court.

Speaker 2 (15:58):
Okay, so somebody screwed up.

Speaker 3 (16:00):
Well. The probate court then ordered Donna to amend the
accounting because the balance due to the state was not
clear before the amendment to the accounting could be done.
The state filed a motion to modify their claim, stating
it was still owed money sixty thousand dollars. Yeah, okay,

(16:22):
And the probate court denied the state's motion. Really yeah,
And the appellate court affirmed that, saying wow at the
propriate court, yeah, you follow the rules right. Probate court
said that the state already waived their claim and they
failed to make more than a perfunctory agreement or argument

(16:43):
rather as to why they should be allowed to file
an amended complaint and then claim. So, state, you messed
up here. Yeah, and you're going to be penalized for
that misstep, which is fine. I mean you're supposed to
follow these rules, that's what you do. And so at

(17:04):
the end of the day, this is how it ended up.
But I think there's a lot more to learn about here.
First of all, why was there a state recovery at all?
Why didn't you do planning in advance to prevent the
estate recovery? What's going on with this life estate? How
did that even work? And was it an actual life
estate or was it created differently than how we create
life estate. So I'll explain all that. You know, a

(17:25):
state recovery, how does that even work? So I'm going
to explain it all, and I'll explain it mainly from
a Massachusetts point of view, because this is an Iowa
propellatort case. Yeah, please please note that, Yeah, exactly, Susan.
They are different by state, so be mindful of that.
But folks, before we get to that answer, Balancing estate
and avoiding estate taxes is the guide for the month.

(17:48):
It talks about portability. Remember, how does portability work? What
are the pros and cons of electing portability? Keeping that
unused exemption for estate taxes when the first spouse dies
for the surviving spouse. That's what portability is talks about.
Gives you all the tables in a fact pattern on
how to calculate your estate tax both federally and Massachusetts,

(18:11):
so you can get the guide, put your own numbers in,
figure out what your tax liability is, and pick whether
you want the revocable trust option which is listed here,
or the irrevocable trust option. Let's say your state's worth
four million or less, maybe five million or less. You
might say, well, how does the irrevocable trust save my
assets from the nursing home, but also protect and eliminate

(18:34):
my Massachusetts estate tax. So all that is in the guide, folks.
It's a great way to get started for your estate
plan eight six six eight four eight five six nine
nine or legal exchange show dot com. You can download
it right there again eight six six eight four eight
five six nine nine or Legal exchange show dot com.

(18:59):
What can we learn?

Speaker 2 (19:00):
Hmmm, I think a lot.

Speaker 3 (19:01):
Yeah, let's go through this. We'll go through it a
little slowly. Right One, A state recovery. What is it.
It's the ability for the state to get paid back
for Medicaid benefits that they pay on behalf of an individual.

Speaker 2 (19:14):
So when someone goes into a nursing home and Medicaid's paying.

Speaker 3 (19:18):
In this case, one hundred and thirty eight thousand bucks, they.

Speaker 2 (19:20):
Want to recoup some of that money that they spent
on their care.

Speaker 3 (19:22):
They'd like to get it back. Now, remember this is
where it varies from state to state. I'm going to
tell you in Massachusetts, not understanding the Iowa rule. In
Massachusetts anyway, like many other states, they only allow recovery
against the probate assets in the estate. A probate asset
is an asset you die owning in your own name

(19:43):
with no designated beneficiary and not join. Okay, well, here
the individual probably got on medicaid because they own the home,
which is still here.

Speaker 2 (19:55):
Right.

Speaker 3 (19:55):
But the home is your home and so it's generally
non countable if it's your primary residence, but leanable, so
the state's going to throw a lean on it and
get recovery. And that's how it works here in mass
if you're single. If you're single. And then the excess money,
because there was some money apparently whatever this residuary money
was that Donna lost.

Speaker 2 (20:16):
And she inherited that right from her mom.

Speaker 3 (20:18):
Right, this was said in the will. Whatever the residuary
would go to Donna, she had to give that up first.
So this excess money was likely a medicaid annuity, right.
And if there's excess money over two thousand dollars, they
would have probably bought an annuity. I'm just guessing, and
that annuity is still in existence, and the state can
put a lean on the annuity because remember with an annuity,
you have to name the state as the beneficiary after

(20:40):
the first after the death of the annuitant.

Speaker 2 (20:42):
So then the state starts to get paid back and
if there's anything left, then the rest goes to the family, and.

Speaker 3 (20:48):
Likely that they would break the contract and just make
a full payment, probably because now when they died, there'd
be one hundred and thirty eight thousand dollars due. So
now the state, and this is probably what happened here.
The state's saying, all right, well, I want to be
able to collect from the house, and I want to
be able to have a lean on this annuity. Yep.
And so in my eyes that would be how a

(21:08):
state recovery would work in Massachusetts. I'm guessing there probably
was enough to be fully paid here. Okay, So that's
a little bit about estate recovery and how it works
in Massachusetts. So in this case, upon the death of
both the annuitant and the home, I said that the

(21:29):
whole assets would be would be subject to recovery, except
for the misstep by the state in Iowa who decided
I've been paid. All right, how does this life estate work?
There was some life estate, granted, Why isn't I thought
that always protected assets from a nursing home.

Speaker 2 (21:49):
Right that it didn't. It doesn't go away until the
person who has the life estate.

Speaker 3 (21:53):
Dies, right, So in this case. What what happened was
the life estate was granted by the will to Joe,
which means that the individual died owning the entire house.
There was no life estate on the date of death.

(22:16):
The life estate was granted after death in the will
to another person saying you have the right to live there.
That's very different, folks, than how you set up life estates. Right,
if you set up a life estate before you die,
while you're alive, you give the house to Joe in
this case, and reserve the right to live there yourself.

(22:39):
So that would be Denise Dennis in this case would
reserve the right to live there. Okay, that's a life
Five years later, if you get sick and go in
a nursing home, that house is completely protected from the
nursing home. There might be a lean during life, but
when you die, that life estate goes away and the
lean goes away and the house is fully protected. So, folks,

(23:02):
that's how a life estate normally works, and it would
have worked here, but it wasn't done that way, so
that's why it was still at risk. Now, we don't
do life estates all that often, but folks, that's how
they work. So just if you're going to do them,
make sure you do them right if you're trying to
protect that house from the nursing home. Otherwise, just use
a trust folks call and get the guide about the trusts.

(23:23):
Revocable and irrevocable are in here helping you understand how
to reduce the state taxes and protect assets from the
nursing home eight six six eight four eight five six
ninety nine or Legal Exchange show dot com.

Speaker 2 (23:38):
You've been listening to Todd Letski, 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 Leutski.

Speaker 1 (23:54):
If you're retired or getting close, now's the perfect time
to take a fresh look at your estate plan. Doing
your planning early help you protect your assets and keep
more of your wealth in your family. Cushing and Dolan,
the leaders in elder lawn taxation, have put together a
new guide called Balancing Asset Protection and Avoiding Estate Taxes,
and in it you'll learn how to secure your assets
if you ever need long term care how to avoid
having everything tied up in probate, and how to get

(24:15):
a clearer picture of your estate tax exposure. The guide
also breaks down real options that may help you reduce
or even eliminate your estate taxes when you plan the
right way and plan early. Whether you have an existing
estate plan or starting from scratch, this guide makes it
easy to understand what steps could help you and your
family in the long run. To get your free copy,
call Cushing and Dolan at eight six six eight four
eight five six ninety nine. That's eight six six eight

(24:37):
four eight five six nine nine, or you can request
it online at legal exchainshow dot com. That's legal exchange
show dot com. The proceeding was paid for in the
use expressed or so legos of Cushing and Dolin. 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 and are not affiliated. When
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Speaker 4 (25:54):
At the Armstrong Advisory Group, we know the retirement might
not be the end of a career, but rather the
start of a new chapter, you and your spouse get
to build together. Hi, this is Mike Armstrong, and the
way you plan as a team can make all the difference.
That's why we're offering a brand new free guide called
Retirement Planning for Spouses. It covers real issues couples face,
how much income you'll need, where you want to live,

(26:15):
how you'll spend your time, and how to make sure
the surviving spouse is protected. Long term retirement planning isn't
one size fits all, and this guide may help you
start building a plan that fits both partners, both goals
and both futures. Call the Armstrong Advisory Group right now
at eight hundred three nine three for zero zero one
to get your free copy of our new guide called
Retirement Planning for Spouses. That's eight hundred three nine three

(26:36):
for zero zero one, or you can request it online
at Armstrong Advisory dot com.

Speaker 1 (26:41):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial, tax and to state planning advisors before
making any investment decisions. Armstrong may contact you to offer
Investment Advisory Services. You're listening to the legal exchange and
it's time for Ask Time, the segment where Todd will

(27:01):
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 (27:11):
Welcome back, Todd. We have a few questions from listeners.
First question comes from Jenna in Lakefille, Mass and Jenna writes,
my parents created an irrevocable trust with you years ago.
My father passed away recently, and I'd like some guidance
as the trustee as to what the next step should be. Also,
if my mother remarries, will she still have all the
same protection that she and my dad planned for m

(27:35):
sorry planning for phase two of mom's life.

Speaker 3 (27:37):
It was an irrevocable trust with you that was designed, okay,
and so let's let's try to unpack this. So the
first question was next steps because dad died. Dad died,
so and I'm assuming there were two trusts here.

Speaker 2 (27:56):
One for her husband and he just says irrevocable trust.
So maybe it's it was a smaller estate, so.

Speaker 3 (28:01):
Maybe it's a joint trust. If we want to talk
about it as one trust, I can do that. So remember, folks,
in this case a little different than with a revocable trust.
When it's revocable and it's a joint trust, it becomes
irrevocable when one dies. In this case, it was irrevocable
from the beginning, so it remains irrevocable. What will happen
in this trust is there'll be two buckets that will

(28:24):
break down inside the trust, and we will fund these buckets.
So likely this if it was a joint trust, there
was probably not a federal estate tax issue, and there
may not have even been a mass tax issue. I'm
not sure, depending on how large the estate was, but
probably if there was two million or less in the trust,

(28:47):
that two million would now find its way to the
remainder share. The remainder share is designed to provide the
same benefits for the surviving spouse, so the surviving sp
So many people think that the trust ends. I hear it,
you hear it over and over. Right, Oh well, it
just ends when I die. No, they live on for

(29:09):
the survivor, right, So now the survivor has this irrevocable
trust with a remainder share bucket and all the money
and in that remainder share bucket, we'll get two million
dollars designed to equal the state exemption. Okay, there's a
marital share that may get funded or may not get funded,
depending on how much is in the trust.

Speaker 2 (29:31):
In that remainder share, that's a new tax ID number.
So they need to get a new tax id n.

Speaker 3 (29:36):
Correct, a brand new tax ID number for that remainder share.
And so let's say there was no other money in
the trust, that the marital share would just be empty. Okay,
that's fine. But if there was more than that, say
there was three million in the trust, well, then two
million would go in the remainder share and one million
would go into the marital share, and that one million

(29:56):
would be taxed later when the surviving spouse dies in
her estate from an estate tax perspective, but it would
also get its own ID number and have to file
income tax returns every year. So you're right, very important distinction.
The death tax return gets filed when you die, the
ongoing income tax returns continue during life for those buckets.

(30:20):
So that's what would happen, and that would help from
an estate tax planning standpoint going forward. That's the next steps. However,
the tax returns will be filed income tax returns every year.
And yes, the last piece of this equation is does
she get the same protection she had later? Yeah, that
trust is still protected from the nursing home, it's still

(30:42):
avoiding probate, and she still has the same access to
the assets that she would have had or not would
have had that did have when her husband was alive. Okay,
so you would have all of that now if she
gets married, you should probably think about obviously, whenever you
get married, come in and talk about how to modify

(31:03):
the plan to make sure we're taking care of a
new spouse. So I would say, if you get remarried, come.

Speaker 2 (31:10):
In, come in. Something likely needs to be there.

Speaker 3 (31:12):
Yeah, we should probably just come in. But most of
those answered questions have been answered for you here, Jenna.
Hope that helps, And folks, that's really part of what
we're doing in this guide balancing asset protection and avoiding
estate taxes. In there it tells us what about portability,
how do we use and maintain the unused exemption of
a federal exemption when one spouse dies. That's portability gives

(31:36):
you the pros and cons gives you all the calculation
all the tables to calculate federal estate tax and to
calculate mass estate tax. So you're going to learn how
to calculate the tax. Put your own numbers in. We
gave an example. You can use your own numbers. Then
you'll figure out do I want the revocable trust version

(31:58):
which is there and explains how it works. Then there's
an irrevocable version for folks that have lower estates and
want nursing home protection and estate tax at least state
estate tax avoidance or I should say elimination. So folks,
this guy got a little something for everybody. Call and
get it eight six six eight four eight five six

(32:21):
nine nine or Legal Exchange Show dot com will certainly
help you get started with your estate plan eight six
six eight four eight five six nine nine or Legal
Exchange Show dot com.

Speaker 2 (32:34):
Our last question comes from a lane in Dover, mass
and a lane rights. I was planning to gift my
vacation home to my kids now to reduce my estate size,
but someone told me that could create a big capital
gains tax later on. How do I know if gifting
is the right move? My total net worth is around
two and a half million, including my vacation home that's

(32:54):
worth around one million. I originally, excuse me, I originally
paid around two hundred and fifty thousand for the vacation home.

Speaker 3 (33:02):
For the vacation that's the one she wants to gift.

Speaker 2 (33:04):
Yeah, so that's worth one million.

Speaker 3 (33:06):
Million, fifty So there's about a seven hundred and fifty
thousand dollars gain.

Speaker 2 (33:10):
And her thought is likely, if I get this million
dollar house out of my estate, now, I'm going to
be worth one and a half million. And oh no,
mass tax two and a half million, because she's in mass.

Speaker 3 (33:21):
So this is a great question, folks, And this is
you know here we are in the gifting season, right,
so do we want a gift? Do we not want
to gift? A great question, And my initial reaction just
off the cuff, absolutely not. I wouldn't gift. But I
think we need to break that down for you a
little bit. Explain it. First and foremost. I think about gifting,

(33:42):
I think about what's my federal estate tax limit. Well,
you know it's thirteen point nine million. Today January one,
it'll be fifteen million. Well I'm only worth two and
a half million, So any gift I would make today
is not going to save me forty percent, which is

(34:02):
the estate tax rate at the federal level, because you
don't have that. I don't have that, so I'm under
that amount. So making a gift has absolutely no bearing
on saving forty percent state taxes. All right, So that
kind of makes me say, why am I gifting? Oh wait,
I have two and a half million in Massachusetts has

(34:22):
a two million dollar exemption, so I can save by
gifting this house. Right? Well, yes, that is truth under
the new mass law. The way it works is remember
before the amount over, remember the Cliff rule. Yeah, you
don't have that problem now, but so it could work

(34:43):
if you were to if you were to do this,
it could work because you would give it away and
then you'd have one point five million. And yeah, because
there's no Cliff rule anymore, you would be able to
have no Massachusetts es.

Speaker 2 (34:57):
State by giving away or house. She could give a
she could avoid or eliminate Massachusetts of state taxes.

Speaker 3 (35:04):
So how much do we think that is? I think
we need to do that analysis. Well, if you die
with two and a half million, you're paying tax on
roughly five hundred thousand, it say ten percent, so maybe
fifty grand. Yeah, WHOA, Okay, But if I give it away,
then I trap the capital gain of seven hundred and

(35:28):
fifty thousand that's built into this vacation home.

Speaker 2 (35:31):
Right, because if she gives it during her lifetime, she's
gifted them her cost basis at the same time.

Speaker 3 (35:37):
Right, no gift tax, Yeah, right, because we have a
thirteen point nine million dollar gift tax exemption, so she
won't pay any gift tax. She being being Elaine, won't
pay any gift tax. Great, the kid won't have an
income tax from that, won't have a gift tax, but
will have a gain built into that property seven fifty.

(36:00):
So if she sells it the next day, the tax
on the gain, let's just it's twenty eight point eight percent.
Just call it thirty percent. Right, that's seven times three
is two hundred and ten thousand dollars. It's two hundred
and forty thousand dollars in tax.

Speaker 2 (36:13):
So, which is to save fifteen hundred and ninety thousand
more than she would pay if she just kept it.

Speaker 3 (36:19):
Folks, the answer, keep the asset, don't make the gift
pay Massachusetts the fifty save two fifty. Learn how to
do this for yourself. Get the guide eight six, six, eight, four, eight, five, six,
nine nine, or go to our website Legal Exchange Show
dot com and download Balancing Assets and Avoiding a State
Tax guide right now.

Speaker 2 (36:40):
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 the law firm of Cushing and Dolan. Susan Powers,

(37:00):
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 (37:09):
If you're retired or getting close, now's the perfect time
to take a fresh look at your estate plan. Doing
your planning early can help you protect your assets and
keep more of your wealth in your family. Cushing and Dolan,
the leaders in elder lawn taxation, have put together a
new guide called Balancing, Asset Protection and Avoiding Estate Taxes,
and in it you'll learn how to secure your assets
if you ever need long term care, how to avoid
having everything tied up in probate and how to get

(37:31):
a clearer picture of your estate tax exposure. The guide
also breaks down real options that may help you reduce
or even eliminate your estate taxes when you plan the
right way and plan early. Whether you have an existing
estate plan or starting from scratch, this guide makes it
easy to understand what steps could help you and your
family in the long run. To get your free copy,
call Cushing and Dolan at eight six six eight four
eight five six ninety nine. That's eight six six eight

(37:53):
four eight five six nine nine, or you can request
it online at legal exchange show dot com. That's Legal
exchange show dot com. The proceeding was paid for and
the use expressed to solely those of Cushingan Dolin. Cushian
Dolan and or Armstrong Advisory may contact you offering legal
or investment services. Cushing and Dolin in Armstrong Advisory do
not endorse each other and are not affiliated.

Speaker 4 (38:09):
The Armstrong Advisory Group understands retirement planning and when it
comes to married couples, it can be about more than money. Hi,
this is Mike Armstrong and our new guide called Retirement
Planning for Spouses tackles many issues that couples face as
they're preparing for later life. This guide keeps things simple,
focusing on important matters such as making sure both partners
understand where their money's coming from in retirement, being aware

(38:30):
of scams, how to stay organized if one spouse outlives
the other, and ways to handle gifts, donations or legacy
goals as a team. It's a straightforward look at the
steps every couple can take to feel confident about retirement.
Call the Armstrong Advisory Group right now at eight hundred
three nine three for zero zero one to get your
free copy of Retirement Planning for Spouses. That's eight hundred
three nine three four zero zero one, or you can

(38:53):
request it online at Armstrong advisory dot com.

Speaker 1 (38:55):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the or in any Armstrong
Guide a specific financial, legal, or tax advice. Consult your
own financial, tax, and estate planning advisors before making any
investment decisions. Armstrong may contact you to offer investment advisory services.
When the holidays roll in and the cold settles over
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(39:16):
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Speaker 5 (40:10):
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Speaker 3 (40:15):
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Speaker 5 (40:16):
Supporting those who bravely served our country isn't just a commitment,
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of Massachusetts, and thank you veterans for all you've done.

Speaker 1 (40:41):
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 eight
five six ninet nine and let him make sure your
assets are protected. That's eight six six eight four eight
five six nine nine, or visit him online at Legal
Exchange show dot com.

Speaker 2 (41:00):
Welcome back into the Legal Exchange with Todd Lutsky. I'm
Susan Powers, a financial advisor with the Armstrong Advisory Group,
and I'm joined, of course by Todd Lutsky, a partner
with the law firm of Cushing and Dolan with a
master's in taxation. So Todd, I'm going to take today
kind of back to the basics. Well year wrap up

(41:20):
and review here, right, So this guide it's all about
asset protection as well as a state tax avoidance my
favorite elimination. So let's just kind of start with the
first part with the asset protection. Sure, so, and specifically
with the asset protection we're talking about the Your formal
name is a Medicaid qualified income only airy vocable trust, so.

Speaker 3 (41:45):
You don't need to work qualified, but yeah, it is
Medicaid I trust.

Speaker 2 (41:49):
Okay, So how can one of these trusts actually help
protect your your money, your assets from nursing home costs.

Speaker 3 (41:58):
I mean, it's it's all about ownership and access. That's
kind of how it's divined. Right. If it's in an
irrevocable trust, arguably you're not the owner, which is good,
but you also enjoy it still and and sort of
control it. But you're not the owner, not really, Yeah,

(42:20):
but you're not the owner. So that's how it it again.
After but again you got that waiting period, but once
you put it in after five years, because you're not
the owner even though you control and enjoy it. If
you don't own it and you can't actually get it,
then it's protected from the nursing home.

Speaker 2 (42:38):
And you don't own it because you actually have a
separate tax ID number that's issued for the irrevocable trust.

Speaker 3 (42:44):
That's one of the reasons.

Speaker 2 (42:46):
Yeah, and you're transferring acids out of your name into
the name of the trust with that new tax ID number.

Speaker 3 (42:52):
I think it's it's important to spend a minute on
the ID number because there's a lot of people will
do two things with it. One, there's a lot of
people that that put just their home in yep. So
if you put just your home in or just a
vacation home in that you don't rent, then there's really
no need to tell the irs that we have this trust.
So I would say no ID number there.

Speaker 2 (43:14):
Because there's no in taxable income or event that would
need to have taxes paid on it. So I'm just
living in your house or in your vacation hooks exactly.

Speaker 3 (43:23):
So you would absolutely not tell the IRS. So it's
not the ID number itself that provides the protection. It's
the irrevocable trust itself, okay, that provides the protection. So
I wouldn't get an ID number if it's just that.
But you're right. If we throw money and let's say
we take one of your investment portfolios and throw it
into that trust, now we need an ID number because

(43:46):
you can't put the money in.

Speaker 2 (43:47):
Without it, right, Okay, it's just a little.

Speaker 3 (43:50):
Difference because some people don't want to be bothered filing
tax returns. And you wouldn't have to for.

Speaker 2 (43:54):
Just a house, just your real estate that's not rental.
And so if you're just putting your home in there,
you take care of the home with the deed when
they when they sign their trust documents, so life doesn't
really change for them, right, not at all.

Speaker 3 (44:07):
Really, it's so great. It's the old set it and
forget it wrong commercial. Right, Yeah remember that. Yeah, only
a few of us remember that.

Speaker 2 (44:14):
I think there's enough of us out there there, particularly
listening to this show where we all remember that.

Speaker 3 (44:21):
Yeah, the flowby.

Speaker 2 (44:24):
Core Memories unlocked.

Speaker 3 (44:26):
You didn't forget it. You don't have to do much
of anything. Just live in your house, like you said,
live in your vacation home, pay your bills, sell it
when you want to sell it. Just okay, work with
the trust. You can do it.

Speaker 2 (44:38):
And it's the rules that kind of go around Medicaid
planning that kind of necessitates this trust, and you're you're
just following the rules, the Medicaid rules with these trusts.
It's not that Medicaid wouldn't know about this trust because
if you went into the nursing home and applied, oh yeah,
they're going to see all of this stuff.

Speaker 3 (44:59):
You're not high right. In fact, it's required. They ask
questions right on the application. Are you a beneficiary of
any trust? Did you create any trust? Are you a
trustee of any trust? They have specific questions on the application,
so we have no trouble saying here's the document and
here's what's in it, and here's the access that they
have or don't have right to the asset. And it's

(45:22):
that access that provides the protection.

Speaker 2 (45:26):
And the gist of that is, did you give anything
away in the past five years that could otherwise be
used for your care? This is beyond the five year mark,
and then you're protected.

Speaker 3 (45:38):
That's right right, set it up now five years later,
it's protected from the nursing atle So, folks, these are
just one of the two trusts that we're talking about
in this guide. It's balancing asset protection and avoiding estate
taxes at the same time. Right, the first part is
all about revocable trusts and portability and un understanding how

(46:00):
to calculate the federal estate tax and your Massachusetts estate tax.
We provide the tables, We provide an explanation of the
trust and the marital share and the remainder share and
how it works. Then we do the same thing for
smaller estates that are irrevocable trusts, which is what Susan
and I were just talking about. That explains how those

(46:21):
irrevocable trusts also have marital shares and remainder shares. They're
a little different, they're drafted a little differently, but they
work for sheltering mass estate tax. And since they're irrevocable
and we explain how they work, they protect the asset
from the nursing home. So, folks, this is something in

(46:41):
here for everyone. Call and get the guide. Learn what
kind of a state planned path is right for you
eight six six eight four eight five six ninety nine
or Legal exchange Show dot com Brand New Guide for
the Month eight six six eight four eight five six
or Legal exchange Show dot com.

Speaker 2 (47:02):
So the word irrevocable, it sounds scary for a lot
of people. It sounds like you're giving up control when
you use a trust. Couldn't you just give your money
away instead?

Speaker 3 (47:17):
Yeah, who's going to do that?

Speaker 2 (47:19):
I mean, I'm not gonna do it, but and people
have done it, But couldn't you just do that?

Speaker 3 (47:23):
We have to we have to laugh about it though,
because folks, I don't want you to do that. Right.
When I do planning for people, we make sure that
the moms and dads of the world are in control
of their assets. They are not in a position of
weakness just because they did an irrevocable trust, which is
kind of what you're insinuating.

Speaker 2 (47:45):
But they're not their own trustee.

Speaker 3 (47:46):
They're not their own trustee, but they can remove and
replace that trustee. So they're really directing the show.

Speaker 2 (47:52):
So you can fire the kids anytime no reason, disinherit that.

Speaker 3 (47:56):
It's funny because a client recently asked me, isn't it
hard to do that? I go, No, you send them
a letter. It's not hard at all. You have to
talk to them. We're not asking them to resign. Yeah,
we're directing that they have been removed. Yes, So it's
very simple, very easy. To do and so so it
you know, you keep that control over the asset, but

(48:18):
you get the protection that you're that you're looking for.

Speaker 2 (48:20):
So and if you just give your money away and say, oh,
they're good kids, then you're really giving up control, right, Yeah.

Speaker 3 (48:26):
And you know the downside of that is and yeah,
you reminded me of why I wouldn't do it if
I give it to the kids. Now I don't have
any of that control. Not only that, I've probably created
tax problems for them, as we talked about earlier with
the step up and basis being allowed the capital gains
being lost, So I probably created tax problems for them.
I've lost control. They could kick me out, they could

(48:48):
have a divorce, and I would end up losing that.
They would lose my house, which is not helpful. So
we don't want to put things in their hands. And
I think the big misunderstanding is somehow people think that
if I don't, if I put it in a trust,
I have to wait five years for it to be protected.
But if I give it to my kids, I don't.

(49:10):
That's not true.

Speaker 2 (49:11):
Same five years, right, same five years. So you've just
given up all control.

Speaker 3 (49:16):
Yeah, and in order to like if you don't, if
you don't make the five years, you got to ask
them to give it back. It's it's just a nightmare.

Speaker 2 (49:23):
So other than firing your trustees, what else can you
change in your trust Because you say you have control,
but can you change mind about how you're leaving stuff?

Speaker 3 (49:32):
Yeah, And that's a really great question and an important
one because over time people do ask, you know, well, jeez, Todd,
I got grandkids now that I didn't have before, and
I'd really like to leave I like them better, absolutely do. Yeah,
you can come in. You don't need to ask the trustee.
This is not a trustee.

Speaker 2 (49:51):
You're not getting permission from the trustee as to how
you want to change it.

Speaker 3 (49:55):
No, this is not a trustee power at all. This
is a don't or power. This is a mom dad
creator of the trust power. You just call your lawyer
and say, i'd like to, you know, modify the trust
and we do that through changing the will, exercising what
is called a power of appointment built in to the
to the trust through the will to get that change

(50:19):
made nice, perfectly okay. Thing to do, folks. Learn about
the benefits of both revocable and irrevocable trust they're in here.
Call and get the guide Balancing Asset Protection and Avoiding
Estate Taxes at the same time eight six six eight
four eight five six nine to nine or Legal Exchange

(50:40):
show dot com a brand new guide for the end
or for the beginning of the month. As we move along.

Speaker 2 (50:45):
Todd Lutsky from the law firm of Cushing and Dolan,
thank you so much.

Speaker 3 (50:48):
Thank you, Susan. Always a pleasure.

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

Speaker 1 (51:00):
If you're retired or getting close, now's the perfect time
to take a fresh look at your estate plan. Doing
your planning early can help you protect your assets and
keep more of your wealth in your family. Cushing and Dolan,
the leaders in elder lawn taxation, have put together a
new guide called Balancing Asset Protection and Avoiding Estate Taxes,
and in it you'll learn how to secure your assets
if you ever need long term care, how to avoid
having everything tied up in probate, and how to get

(51:22):
a clearer picture of your estate tax exposure. The guide
also breaks down real options that may help you reduce
or even eliminate your estate taxes when you plan the
right way and plan early. Whether you have an existing
estate plan or starting from scratch, this guide makes it
easy to understand what steps could help you and your
family in the long run. To get your free copy,
call Cushing and Dolan at eight sixty six eight four
eight five six nine nine. That's eight six six eight

(51:44):
four eight five six nine nine, or you can request
it online at Legal exchange show dot com. That's Legal
exchange show dot com. The proceeding was paid for in
the use expressed, so legos of Cushing and Dolin, Cushion, Dolan,
and or Armstrong Advisory may contact you offering legal or
investment services. Cushing and Dolan in Armstrong Advisory do not
endorse each other and or not affiliated.

Speaker 4 (52:00):
At the Armstrong Advisory Group. We know that retirement might
not be the end of a career, but rather the
start of a new chapter you and your spouse get
to build together. Hi, this is Mike Armstrong, and the
way you plan as a team can make all the difference.
That's why we're offering a brand new free guide called
Retirement Planning for Spouses.

Speaker 3 (52:17):
It covers real issues couples.

Speaker 4 (52:18):
Face, how much income you'll need, where you want to live,
how you'll spend your time, and how to make sure
the surviving spouse is protected. Long term retirement planning isn't
one size fits all, and this guide may help you
start building a plan that fits both partners, both goals
and both futures. Call the Armstrong Advisory Group right now
at eight hundred three nine three for zero zero one
to get your free copy of our new guide called

(52:38):
Retirement Planning for Spouses. That's eight hundred three nine three
four zero zero one, or you can request it online
at Armstrong Advisory dot com.

Speaker 1 (52:46):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial, tax into state planning advisors before making
any investment decisions. Armstrong make contact you to offer investment
advisory soervices.

Speaker 5 (53:00):
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Speaker 3 (53:18):
Mark talks often about how.

Speaker 5 (53:20):
Serving his country was one of the greatest achievements of
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for Mark, and it's why he's taken the time to

(53:40):
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