Undue influence that benefits one child more than others

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 (00:36):
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 (00:51):
I am never better in you?

Speaker 2 (00:52):
I'm great?

Speaker 3 (00:53):
Thank you.

Speaker 2 (00:53):
What do you have for us this week?

Speaker 3 (00:55):
Couple things? We've got a United States tax Court case.
You don't see us going there very often, but we
are because of dealing with what we call the q
TIP election, the qualified terminal interest property. This is how
you shelter assets for estate tax purposes. We talk about
it all the time, but this is an actual case
involving a q TIP or a failed q TIP election

(01:18):
and why it's so important to have your estate tax
return done correctly when someone dies and know what to
do when someone dies. And I'm going to explain all
that to you here. So that's a really great case actually,
And then we're going to go all the way to Alaska.
Haven't been to Alaska in a while, and interesting case.

(01:38):
It's an undue influenced case, but Erna and James owned
five properties in Alaska and several properties outside of Alaska.
And then you're going to see how with the four
kids that they were always helping equally slowly ended up
getting more to one child than another right before they died.
And you're going to see how they only had a

(01:59):
will with all these properties, and folks, you can already
anticipate why there was you know, the comments we're going
to learn is why why didn't they plan better than
this and might prevent some of this undue influence, so
lots to learn about in these two cases, for sure.
But before we do that, it is a new month
and we are almost halfway through the year. Zip it

(02:22):
hard to believe, I know it, but we've got a
new one and we're going to do it with the
power of irrevocable Medicaid trusts. This is the guide. It's
really an operational type guide. It's going to help you
if you've never understood the irrevocable Medicaid trust as much
as we talk about them. It explains in a very
nice question and answer format, what you can do what

(02:42):
you can't do, from living in your house to selling
your house, to buying another house, to putting a rental
property in. How do you get the income, how do
you pay the income taxes? You're going to find all
of these answers in the guide. And if you've never
known if one was right for you or not, I
think after you read this you'll know whether it's right
for you or not. So get it. Get the new Guide,

(03:03):
Power of Unlocking Irrevocable Medicaid Trusts eight sixty six eight
four eight five six nine nine or Legal Exchange Show
dot Com again eight sixty six eight four eight, five, six,
nine nine or Legal Exchange show dot com, United States
Tax Court. So Martin Griffin establishes a revocable trust in

(03:29):
twenty twelve, amends it in twenty eighteen, and when he
does that, he directs two point three million dollars into
an irrevocable trust when he dies for his wife Maria,
clearly a second wife. Two point zero million or two
million was held in a trust for Maria, with the
trustee to pay reasonable amounts to her but not to

(03:52):
exceed nine thousand dollars per month or nine thousand dollars yeah,
per month, Okay, and then another three hundred thousand set
aside to be used for her living expenses. Oh, that's nice.
And she gets five thousand dollars a month for sixty months.

Speaker 2 (04:10):
This is not too shabby of a deal.

Speaker 3 (04:12):
No, But with regard to that three hundred thousand, anything
that she doesn't use on the date of her death
goes to her anyway out of the three hundred thousand bucket.
Will Martin died in twenty nineteen and they filed as
seven oh six, folks, as seven oh six is an
estate tax return. It's a federal estate tax return. That's
the form number they filed, the seven oh six, but

(04:34):
they do not make a q TIP election. But they
did list the two point three million dollars bequest to
Maria who was his spouse, in another in the this
section called other property section, which is not right. Okay, Well,
all the property ended up being included in Martin's estate

(04:56):
and the tax They got a tax bill unbeknownst to
them for one point zero four million and one hundred
billy and one hundred and eighty four thousand inaccurately related penalties. Well, again,
the reason they did that is because there must have
been a lot of other assets going to someone other
than the spouse, right because the exemption was high. So
they appealed, and the estate and the irs both filed

(05:19):
summary judgments and basically saying that there's no issue of
material fact here. Both sides actually agreed that the two
million dollar bucket was a terminable interest property and does
not qualify as q TIP unless you make this q
TIP election, and they also agreed that no such election

(05:42):
was made.

Speaker 2 (05:43):
So there was basically an error on the tax return itself.

Speaker 3 (05:46):
Absolutely, they put the property in the wrong place and
they didn't make the election However, the estate argued that
since the irs didn't bring this up during the initial audit,
that they can't claim it now. Well, the court said,
we're not persuaded by the lack of substantial compliance arguments,
so too bad for you. But they did acknowledge that

(06:07):
the three hundred thousand dollars piece ended up going to
the wife. Remember, no matter what, it would go to
the wife when and would be included in her estate.
So they gave the marital deduction for the three hundred
thousand Remember, folks, the Q tip here is all about
getting a marital deduction and not paying taxes on the
first death, yes, but perhaps having it included in the

(06:30):
estate of the survivor in paying taxes then, And of course,
between the date of death of the first spouse and
the second spouse you have time to do things to
move assets out of the estate that might not be
tax Oh okay, so that surviving spouse could have done
something with those assets. So the ruling is that pretty

(06:53):
much you lose pay the piper, except for the three
hundred thousand dollar piece. We'll give you a deduction for that.
Probably lowered the liability a little.

Speaker 2 (07:01):
Yeah, not much, not much.

Speaker 3 (07:04):
All right, folks, what do we learn from this? This
is all about the Q tip and remainder share that
we talk about so many times.

Speaker 2 (07:11):
But this is a second for a higher net worth
I'm thinking duals.

Speaker 3 (07:14):
I'm thinking it would have been right because in.

Speaker 2 (07:16):
General are used for higher net worth families.

Speaker 3 (07:19):
Well, Q tips are built into the trusts in general.
But yes, the higher if you're over two million dollars,
you want to fund it in Massachusetts with anything over too,
got it. If you're over fourteen million dollars, you're going
to fund it. You're going to fund it up to fourteen.

Speaker 2 (07:35):
The federal side of things, and then got it.

Speaker 3 (07:37):
The additional will go into a general marital So clearly
this was a second marriage right, and it seems to
me that it shows us that you are able to
divert assets in a trust to take care of a spouse.
That's what they were doing. And it was a good deal.
As you said, Susan, sounds like a pretty good deal,
and it was. And this is a great way to
do things to you know, lots of other assets must

(08:00):
have gone to the other kids from a prior marriage
because the federal exemption in twenty eleven or twenty nineteen
when she died was pretty high, so there probably was
a lot of exemption, a lot of assets going to
someone other than a spouse, which is what triggered the tax.

(08:20):
Plus this amount put them even over. They might have
been thinking this would have gotten a marital deduction, but
turned out to be included, and that was the problem. Now,
remember this is fine. You can take care of your
spouse while you're living and at the same time make
sure the kids from another marriage are taken care of. Right. However,
you got to be careful because if you leave more

(08:41):
assets than the exemption to a non spouse, then you're
going to have taxes due on the first death because
you only get a marital deduction if you leave it
to Now, remember a q TIP means that all income
must go to the spouse and principal cannot go to
anyone other than a spouse. Well, this trust said nine

(09:02):
thousand dollars, you know, per month. It likely would be
all the income, so you probably would qualify, probably even
need some principle to go to the spouse, so it
would have qualified for the q TIP, But again you
needed to make the marital deduction election. The q TIP
election in order to get that treatment. So remember it's
important at this point to always make sure when someone dies,

(09:25):
and this was probably in some of our old guides
as to you know, mistakes and potholes people make right.
Make sure you go to your estate planning attorney when
you lose a spouse so that all the right tax returns, adjustments, buckets,
q tips, remainder shares can be filled properly and then

(09:45):
accounted for properly to make sure you get to use
the deductions that are available to you and shelter the
assets that you can shelter. So, folks, this was a
little lesson on Q tips, but they are important and
they are very helpful in your estate planning. The new
guide for the month, Unlocking the Power of Irrevocable Medicaid
Trust not only explains to you how it works from

(10:08):
a day to day basis, but it also does the
Q tip analysis and the bypass share and reduces a
state taxes. Get the guide eight six six eight four
eight five six nine nine or Legal Exchange show dot com.

Speaker 2 (10:21):
You've been listening to Todd Lutsky, a partner with the
law firm of Cushing and Dolan. I'm Susan Powers, a
financial advisor with the Armstrong Advisory Group. We've got much
more to come when we return to the Legal Exchange
with Todd Lutsky.

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

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

(11:18):
eight six six eight four eight five six nine nine,
or you can request the guide right now by visiting
Legal Exchange show dot com. The proceeding was paid for
and the views expressed are solely those of Cushing and Dolan.
Cushing and Dolan indoor Armstrong Advisory may contact you offering
legal or investment services. Cushing and Dolan in Armstrong Advisory
do not endorse each other and are not affiliated.

Speaker 4 (11:36):
There are many different elements to a complete retirement plan,
and it takes time to make sure you've covered all
your bases. Hi, this is Mike Armstrong from the Armstrong
Advisory Group. Our new guide is called your Retirement Preparation Checklist,
and it may offer you the guidance you need to
make the right decisions about your retirement plan, from deciding
on a specific date to retire, to reviewing your income
sources to picking a place to live. This guide discusses

(11:59):
numerous topics that are important to your overall planning. Many
other issues need to be considered as well, like solidifying
your estate plan and establishing lifestyle goals. Call us right
now at eight hundred three nine three for zero zero
one and ask for your free guide today. That number
again is eight hundred three nine three four zero zero one,
or you can request it online at Armstrong Advisory dot com.

(12:19):
That's Armstrong Advisory dot com.

Speaker 1 (12:21):
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. Summer in New England is nearly upon us.
The kids are home from school, the sun doesn't set

(12:42):
until after eight. It's likely time for you to relax. Well.
While you're relaxing, take a few minutes to check out
visit USVII dot com and research your next vacation in
the United States Virgin Islands. The USVII has something for everyone,
be it the rich history of Saint Croix, the spectacular
beaches of Saint Thomas, or the trenk will quiet of
Saint John. Visit one island or all three and enjoy

(13:04):
the vacation of a lifetime. From the moment you arrive,
you'll fall naturally in rhythm with the heartbeat of the islands.
There's no money to exchange, and travel from New England
could not be easier. Whether you're looking for a romantic
getaway or a family vacation, The US Virgin Islands is
the perfect place for your next adventure. Go to visit
USVII dot com right now for more information and to

(13:25):
book your trip. The USVII is America's Caribbean paradise. Go
to visit USVII dot com to make your reservation today.
That's visit USVII dot com. You're listening to the Legal
Exchange with Todd Lutsky, 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

(13:48):
four eight five six ninety nine. That's eight sixty six
eight four eight five six ninety nine.

Speaker 2 (13:53):
Welcome back into the Legal Exchange with Todd Lotski. I'm
Susan Powers, a financial advisor the Armstrong Advisory Group, and
I'm joined by Todd Latsky, a partner with the law
firm of Cushing and Dolan with a master's in taxation.
Where are we headed now, Todd?

Speaker 3 (14:08):
We are going to go to Alaska. Yeah, it's far away.
Let's talk about this. This is an undue influence case.
We've heard a lot of these lately and I can't
help but bring them up because they keep coming up.
And I think it's important for people to make sure
they know that their wishes are going to be taken
care of and should take steps to prevent it from happening.

(14:31):
So in this case, Erna and James, they owned five
properties in Alaska and several properties outside of Alaska. I'm
guessing they're probably worth a good amount of money. They
had helped all four of their kids purchase their own properties,
entering into formal purchase and sale agreements with each of

(14:51):
them Lydia, Diane, Mary, and Jimmy. Erna in two thousand
and four did a will. Oh great, we have all
these properties, and she's doing a will no benefiting the
four kids equally. You could see that it's always been,
you know, we're helping the four kids buy properties. We've
got four kids treated equally. And it says if Jim

(15:15):
died and not survived by her, it goes to these
four kids. So Jim is her husband, Jimmy is the kid.
So the personal representative listed in the will if James
is not alive would be Lydia and Mary. Okay, Well,
Erna gets dementia in twenty fifteen, Well, not too bad yet.
So in twenty fifteen Erna and James decide to deed

(15:39):
two of their properties in Alaska to Jimmy for great
love and affection. Okay, well, here goes the slippery slope.
Twenty sixteen, Erna does a new will with a new
attorney that jim had a connection with. I'm sorry that
Jimmy the son had a connection with. So now all
of a sudden, in the new will, Jimmy and Mary

(15:59):
are the prs and Lydia is out. Huh plot dickens Yeah.
Twenty seventeen, Erna has a knee injury and starts to
rely on Jimmy the Sun for a lot more support
and is on heavy painkillers. In December of twenty eighteen,
same day James, her husband dies, Jimmy records Erna stating

(16:25):
that her intention is to give two other Alaska properties
to Jimmy and Mary and a fifth property to Jimmy
like a recorded will. Erna then transfers two hundred and
fifty thousand dollars to Jimmy. Erna also transferred the remaining
Alaska property to Jimmy. All that from twenty eighteen to
twenty nineteen, when she died on the day her husband died,

(16:47):
pretty much. Yeah.

Speaker 1 (16:49):
Yeah.

Speaker 3 (16:49):
So ten days later, Jimmy then buys some property in
Connecticut and Lydia, the daughter who's no longer the pr
decides to file for undue influenced claims and say all
the properties have to be transferred back. The two hundred
and fifty thousand have to be transferred back. This is
just bad. Yeah, court agreed, So they appeal. Jimmy says,

(17:11):
argues that under influenced standard only applies to testamentary transfers
transfers at death, not intravivos transfers transfers at life. Well,
the Appellotan court and the Supreme Court say, no, that's
not how it works. We agree with the lower court.
There was a fiduciary relationship here between Jimmy and her mother,

(17:33):
and that fiduciary relationship existed, and he had exerted influence
on her to make all this happen. So, Jimmy, you lose.
So good but bad, because why do we need to
go through all this headache to ensure our wishes of
treating our family equally is done. Let's do some more planning, folks.

(17:56):
One way to do that might have been set up
a trust and in this case with all the real estate.
Eight Maybe the irrevocable trust, which is the guide that
we're giving away this month, folks. It's the new guide
for the month of June. The Power of Irrevocable Medicaid
trust in an operational guide telling you what you can
do and what you can't do during life, So from

(18:16):
living in your house to selling a house, to buying
another house to moving You know, do I have income
tax issues? How can I collect my income if I
put rental property in one after another? Folks, you will
learn if you've never known how these trusts work, and
you've never known if one was right for you or not.
After you read this guide, I think you will be
able to decide yes I want to get one, or no,

(18:39):
I hate them, So call and get it eight sixty
six eight four eight five six nine nine. That's true?
Could be or Legal Exchange Show dot Com again eight
six six eight four eight five six nine nine or
Legal Exchange Show dot Com Tips and lessons. Folks. What
do we learn from that? Well, keep an eye on Jimmy,

(19:02):
keep an eye on Jimmy, keep an eye on all
your family. But more importantly, this estate is full of
real estate. When you have real estate, you really should
be using a trust. I mean, planning with a will
is just bad news.

Speaker 2 (19:15):
Right, because you can't have beneficiaries on your real estate, no,
and not like a regular account.

Speaker 3 (19:20):
Well, I think what you're driving at by that point,
Susan is if you have a will, it's not even
going to help you avoid probate, right, And if it's
not going to help you avoid probate in this case,
they had property outside of Alaska, So now they could
be probating in multiple states Alaska plus every state in
which they owned real estate because they did not own

(19:43):
it in a trust.

Speaker 2 (19:45):
And if they had a trust, it doesn't matter where
you own your property, right, that's right, you're not going
to probate with that property.

Speaker 3 (19:51):
And that's really the key here. So simply by setting
up a trust, you would have avoided the probate problems
in all states. Of course, with this many pieces of property,
I don't know where what the values are in all
these states, but I'm guessing they probably had some value,
and there's probably worth some money here, and so if

(20:14):
they are, you know, you need to be thinking about
trusts in terms of taxes.

Speaker 1 (20:18):
Right.

Speaker 3 (20:19):
So here I would have said let's put it in
a trust. Even if the trust could be irrevocable, you know,
depending on the size of the estate, we can not
only avoid probate, but maybe get them protected from the
cost of long term care so that it ultimately goes
to who we want it to go to. And clearly
from the facts, it appears that she really wanted to

(20:41):
treat her family equally, helped them all the same, helped
them buy houses. So you want that to happen, and
we can ensure that with a trust, plus the trust
shelters from a state taxes. You know, on the first
death remember our last segment talks about the q tip
share and the remainder share. Well, we could have not
only protected it from the nursing home, avoided probate, and

(21:03):
perhaps eliminated taxes on the second death right. So that's important.
And I probably would have put two kids on as trustees,
because if you do that, it becomes a lot harder
for one kid to exert undue influence. And when it's
owned by a trust, it's not so easy just to
distribute property out of a trust.

Speaker 2 (21:24):
Right in checks and balance give it.

Speaker 3 (21:26):
Yeah, you could require two signatures, you know, that would
only happen if you know she can't serve, so you'd
you know, you have some checks and balances with a trust,
so I would certainly want to do that to further
support my position. And something else you don't think about here.
Sometimes when people do things like here, give me these properties,

(21:48):
and a lot of these were all gifted right before
she died. M Well, he doesn't realize it, but all
the built in gain when to him, so even if
he kept it now, he's trapped capital gains taxes on
all these properties that I'm guessing they probably bought years

(22:08):
and years and years ago.

Speaker 2 (22:10):
And that would have been a taxi he would have
rightfully deserved.

Speaker 3 (22:12):
That's right, that's true. But these are things that people
don't think about. Yeah, and even just the regular mom
and dads of the world that are that are thinking,
I don't need to do estate planning. I'm just going
to give stuff to my children and not helpful. Right,
you end up creating a tax liability that you don't need.
Because if she had set up a trust here for

(22:34):
the kids, then those properties would have not only been
protected for them, but we may have been able to
avoid estate taxes and die owning them. To get a
step up in basis, to eliminate the built in capital.

Speaker 2 (22:49):
Gain, thus taxes are better.

Speaker 3 (22:50):
People winning on both fronts income and estate tax side.
And to prevent and finally with the trust, to prevent
any fighting. Our trust off always have language in there
regarding offering the property to be sold unless they all
want it right and if they don't, the ones who
want it can always buy out the ones who don't,
so everybody's still treated equally, just with different assets. Folks

(23:15):
can't say enough about a trust when it comes to
real estate, for sure. The new guide this month deals
with a trust happens to be the irrevocable medicaid trust
variety that can still own real estate. It will tell
you how to do it. Get the guide. If you've
never understood that how they work, this will tell you
eight six six eight four eight five six nine nine

(23:38):
or Legal Exchange show dot com.

Speaker 2 (23:39):
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. Tod will answer
your listener questions next on the Legal Exchange with Todd Lutsky.

Speaker 1 (23:53):
Elder life planning can be overwhelming, so be sure you're
prepared or you could make costly mistakes that affect your
overall plan. Cushing and Dolan are experts in elder lawn
taxation and they can devise a plan that covers you
in every area where issues can rise. Irrevocable trusts so
are the most common type of trust that folks use
for financial protection, and while they can be complicated to create,

(24:14):
they help keep your assets safe because they contain specific
protections that many of us need, like the possibility of
eliminating your estate taxes. Their new guide is called Unlocking
the Power of Irrevocable Medicaid Trusts. Learn more about how
these trusts can benefit you and your family by calling
eight six six eight four eight five six ninety nine
right now and asking for your free guide today. That's

(24:35):
eight six six eight four eight five six nine nine,
or you can request the guide right now by visiting
legal exchange show dot com. The proceeding was paid for
and the views expressed are solely those of Cushing and Dolan.
Cushing and Dolan, ind or Armstrong Advisory may contact you
offering legal or investment services. Cushing and Dolan in Armstrong
Advisory do not endorse each other and are not affiliated.
Summer in New England is nearly upon us. The kids

(24:57):
are home from school, the sun doesn't set until after eight.
It's likely time for you to relax. Well. While you're relaxing,
take a few minutes to check out visit USVII dot
com and research your next vacation in the United States
Virgin Islands. The USVII has something for everyone, be it
the rich history of Saint Croix, the spectacular beaches of
Saint Thomas, or the tranquil quiet of Saint John. Visit

(25:18):
one island or all three and enjoy the vacation of
a lifetime. From the moment you arrive, you'll fall naturally
in rhythm with the heartbeat of the islands. There's no
money to exchange, and travel from New England could not
be easier. Whether you're looking for a romantic getaway or
a family vacation, the US Virgin Islands is the perfect
place for your next adventure. Go to visit USVII dot

(25:40):
com right now for more information and to book your trip.
The USVII is America's Caribbean paradise. Go to visit USVII
dot com to make your reservation today. That's visit USVII
dot com.

Speaker 4 (25:54):
Preparing for retirement is a time consuming and challenging process. Hi,
this is Mike Armstrong from the Armstrong Advisory Group and
if you're at the point where you can see retirement approaching,
now is the time to make sure your plan covers
all the bases. Our new guide is called Your Retirement
Preparation Checklists, and it discusses a variety of important topics
as you make decisions for later life, everything from reviewing

(26:14):
your income sources so that you have a full understanding
of how much money you'll need in retirement, to addressing
any outstanding debt which may lessen your overall financial burden.
Planning for retirement takes a great deal of time and effort,
and this new guide is designed to offer you the
guidance you may need. Call us at eight hundred three
nine three for zero zero one and request your free
guide today. That's eight hundred three nine three for zero

(26:35):
zero one, or you can request it online at Armstrong
Advisory dot com.

Speaker 1 (26:39):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide is specific financial, legal or tax advice. Consult
your own financial tax into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services. You're listening to the Legal Exchange, and it's
time for Ask Todd, the segment where Todd will answer

(27:00):
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 (27:10):
Welcome back, Tod. We have a few questions from listeners.
First question comes from Rose in Boston, mass And Rose writes,
my sister and I live together in a two family
home that we inherited from our parents years ago and
now own is joint tenants with rights of survivorship. We
are getting older and are worried about what will happen
to the other if one of us ends up in

(27:31):
a nursing home. What's the best way to protect each
other while still protecting our respective children's inheritances.

Speaker 3 (27:39):
Yeah, so this is this becomes a big issue when
you have the siblings who own a piece of property
and I don't know if they live there. Just says
they own they.

Speaker 2 (27:48):
Live there together. They do live there together, live there,
they own it together, but they both have job.

Speaker 3 (27:53):
I missed the Cha children. Yes, so if they live
in the house, this is the two family, you know,
summer Bill properly, you kind of think of it that way.
Where where we've got siblings living up and down in
the in the building. Couple of things I've had this
happen where one family comes in, Let's say Rose, but

(28:14):
Rose's sister doesn't come in. I can tell Rose, Yeah,
to do planning. Yeah, I can tell Rose. Rose. Probably
if you want to protect us, we'll, you know, figure
out what the size of your estate is. And if
you want the nursing home protection, then you know, we'll
discuss these medicaid irrevocable trusts and how you can put
your home in there and how it works, how you
can live there and sell it and pay for your

(28:36):
expenses and really not disrupt your life at all, but
avoid the probate, get a five year clock running, protect
it from the cost of nursing home care, and provide
when you die for it to go to your family
the way you want it to go to, which is
what she's saying here. I wanted to go to my
side of the family, not to my sister. And again,

(28:57):
if you own it jointly, it will go to this
and not your side of the family. So doing nothing
is not really a good option here. But doing that planning.
Let's say we put together that whole planning. Now we're
accomplishing all of her wishes. She says, yeah, this is great,
sign me up, and we do it. If I don't

(29:19):
hear from the sister, have we really protected the house
from the nursing.

Speaker 2 (29:24):
Home only for the sister, right, Well.

Speaker 3 (29:28):
We protected the house from the nursing home for the
one who came in to do the planning, but only half, right,
And if this is not condominiumized, meaning she actually owns
half one unit and it's just all on one deed
and sister on the first floor doesn't do planning and

(29:52):
gets sick and goes to the nursing home, then her
that half of the house will be at risk for
them nursing home. Right, Okay, So we don't love this
because she would then need to do some planning to really,
because if you don't have the bottom the owner whoever's
living in the bottom of the house do the planning,

(30:14):
then what would happen is that the person who did
the planning would have two choices, sell and take half
the money mm hmm, or buy out the interest of
the sister who went to the nursing home to save
the house.

Speaker 2 (30:27):
Right, and who knows if she'd be able to do
that financially.

Speaker 3 (30:30):
And then even if you do it, then the sister
who went in the nursing home has kids and wants
her have to go to her kids.

Speaker 2 (30:36):
Right.

Speaker 3 (30:36):
That didn't help her kids at all. Because there's also
an exception whereas if you have an equity interest in
property and your siblings and you live together for at
least one year, then you are allowed to transfer the
house to the surviving, the healthy sibling with no five
year waiting period.

Speaker 2 (30:53):
But that doesn't protect your kids.

Speaker 3 (30:54):
Right exactly, Susan, That's where I'm headed, right. So, even
though there's this backdoor exception where maybe she the person
who did the planning, doesn't have to buy out the interest,
can just get it to preserve it, but then she
owns it all and I don't know who's she going
to leave it to. So there could be nieces and
nephews from the sister, the sister's kids who are looking

(31:20):
to get it.

Speaker 2 (31:21):
Yeah, they both need to do irrevocable trust planning.

Speaker 3 (31:24):
So that's a great, great point and a great situation
that can be resolved with these Medicaid irrevocable trust folks.
That's what the guide is this month, the power of
the irrevocable Medicaid trust. Both of these families should come
in and probably put their respective halves into their own
irrevocable trust, thereby fully protecting the property for each side

(31:46):
of the family. Everybody's happy, but you need to understand
how they work. And this is an operational guide. Question
and answer. Living in the house, renting a house, selling
a house, buying another house? Do I have to pay
income taxes on the trust? All these questions that people
worry about will be answered in this guide. So call

(32:07):
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.

Speaker 2 (32:22):
Todd. Our last question comes from Rich in Westborough, mass
and Rich writes, my wife and I have an irrevocable
trust that we created with you around eight years ago.
We are going to be putting our rental property up
for sale this year. Do we need to do anything
special since it is in the trust? What can we
do with the proceeds of the sale.

Speaker 3 (32:42):
I'm going to start by saying the most important special
thing that you need to do before you put this
property up for sale is call me. In this case,
it's me because it's it's apparently our client, so or
I'll tell you for other people listening, call your lawyer,
and don't do the sale without consulting the person who

(33:06):
created the trust, because you're going to go find a realtor.
The realtor's going to tell you, oh, I have a
closing lawyer that can help you with the real estate.
Let's just go over here and get this thing done.
That realtor, that real estate lawyer. No offense to the
real estate lawyer might not just understand the nuances of

(33:26):
a trust from a tax perspective and a nursing home perspective,
and might just sell the property and end up cutting
a check to you. If it goes to you, the
donor of the trust, then you run the not run
the risk you completely blow your five year waiting period,
which you don't want to do because you should be

(33:49):
able to sell the house very easily from the trust.
Money goes back into the trust. If it does, that
transaction does not reset the five year waiting period. And
then you will be in touch with the lawyer because
it's possible, now that you sold your home, you're homeless,
as funny as that might sound, you want to buy

(34:11):
another one. Maybe you're moving, maybe you're going to Maine.
Out goes the property. Incomes a new house. I'm sorry,
out goes the money. Yep, incomes a new house that
you bought in another state or any state. Again, that
transaction does not restart the five year waiting period.

Speaker 2 (34:32):
And what about in this case Todd, where they're selling
a rental property and they're not buying anything in replacement,
what can they actually do with the money that's now
owned by their trust Yeah?

Speaker 3 (34:41):
Great, great points. So again, the same transaction would apply.
It would not reset the clock.

Speaker 2 (34:46):
And their trustee has to sign all this PaperWorks, all right, Yeah,
they're not signing it themselves.

Speaker 3 (34:50):
Oh they're not. But now there's money in there. Well,
I guess if they're not replacing the property, I suppose
they're going to invest it. So now they're going to
call you and they're going to start saying what do
I do to invest it? So they'll have all the
same options of investing that they would have had had
they not done the trust and it was sitting in

(35:11):
their own hands. Then once it's invested, they can sit
back and collect the income.

Speaker 2 (35:17):
Which they're still entitled to, just like the rental.

Speaker 3 (35:20):
And they would be able to now replace the rent
which they were getting when it was in the trust, remember,
because the rent would come in and the rent would
come out. Now they've replaced the rental flow with interest
and dividend flow, which is also okay, and they continue
to pay the same income taxes at their own rate,
and life goes on for them.

Speaker 2 (35:40):
And so where they still have this bucket of money
owned by the trust, and then their primary residence is
also owned by the trust. Can they use some of
that bucket of money to pay for things for their
primary residents like taxes and improvements and things like that.

Speaker 3 (35:55):
That's great question. Let's focus more on like, oh, I
need the new kitchen.

Speaker 2 (35:59):
I need the new back big expenses.

Speaker 3 (36:01):
And it's these big expenses and they say, well, you
can't take it out. Well, yeah, that's true, but you
are allowed to reinvest the money from the brokerage account
saying I want to sell this stock and I want
to now buy a new kitchen. Right, Well, that's okay,
pay the contractor. Yeah, contractor builds the new kitchen, and
now you've improved the value of your house. So that's

(36:23):
just rearranging your investments. Folks, learn there's so much you
can do. All of those things can be done with
the house in an irrevocable Medicaid trust. Get the new
Guide eight six six eight four eight five six nine
to nine or Legal Exchange Show dot com.

Speaker 2 (36:40):
If you have a question you'd like to ask Todd,
visit his website, Legal Exchange Show dot com and click
on the ass 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,

(37:01):
a financial advice with the Armstrong Advisory Group. We'll be
back with more right after this on the Legal Exchange
with Todd Lutski.

Speaker 1 (37:09):
Elder life planning can be overwhelming, so be sure you're prepared,
or you could make costly mistakes that affect your overall plan.
Cushing and Dolan are experts in elder lawn taxation and
they can devise a plan that covers you in every
area where issues can rise. Irrevocable trusts are the most
common type of trust that folks use for financial protection,
and while they can be complicated to create, they help

(37:30):
keep your assets safe because they contain specific protections that
many of us need, like the possibility of eliminating your
estate taxes. Their new guide is called Unlocking the Power
of Irrevocable Medicaid Trusts. Learn more about how these trusts
can benefit you and your family by calling eight six
six eight four eight five six ninety nine right now
and asking for your free guide today. That's eight sixty

(37:51):
six eight four eight five six nine nine, or you
can request the guide right now by visiting legal exchange
show dot com. The proceeding was paid for in the
views expressed our those of Cushing and Dolan. Cushing and
Dolan Indoor Armstrong Advisory may contact you offering legal or
investment services. Cushing and Dolan in Armstrong Advisory do not
endorse each other and are not affiliated there.

Speaker 4 (38:10):
Are many different elements to a complete retirement plan, and
it takes time to make sure you've covered all your bases. Hi,
this is Mike Armstrong from the Armstrong Advisory Group. Our
new guide is called your Retirement Preparation Checklist, and it
may offer you the guidance you need to make the
right decisions about your retirement plan, from deciding on a
specific date to retire, to reviewing your income sources to
picking a place to live. This guide discusses numerous topics

(38:33):
that are important to your overall planning. Many other issues
need to be considered as well, like solidifying your estate
plan and establishing lifestyle goals. Call us right now at
eight hundred three nine three four zero zero one and
ask for your free guide today. That number again is
eight hundred three nine three four zero zero one, or
you can request it online at Armstrong Advisory dot com.
That's Armstrong Advisory dot com.

Speaker 1 (38:54):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong god to 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. Summer in New England is nearly upon us.
The kids are home from school, the sun doesn't set

(39:14):
until after eight. It's likely time for you to relax. Well.
While you're relaxing, take a few minutes to check out
visit USVII dot com and research your next vacation in
the United States Virgin Islands. The USVII has something for everyone,
be it the rich history of Saint Croix, the spectacular
beaches of Saint Thomas, or the tranquill quiet of Saint John.
Visit one island or all three and enjoy the vacation

(39:37):
of a lifetime. From the moment you arrive, you'll fall
naturally in rhythm with the heartbeat of the islands. There's
no money to exchange, and travel from New England could
not be easier. Whether you're looking for a romantic getaway
or a family vacation, the US Virgin Islands is the
perfect place for your next adventure. Go to visit USVII
dot com right now for more information and to book

(39:58):
your trip. U is America's Caribbean paradise. Go to visit
USVII dot com to make your reservation today. That's visit
USVII dot com.

Speaker 5 (40:09):
This is Michael Valila, adjudent of the Disabled American Veterans
Department of Massachusetts. The DAV of Massachusetts has helped me
and countless others adjust to civilian life through a variety
of incredible programs. Through our Local Veterans Assistance Program, we
provide necessary services to veterans in their communities such as food, shopping, landscaping,

(40:30):
and companionship. But we need your support. You can help
by making a donation today. Please visit DAV FIVEK dot Boston.
That's DAV five K dot Boston.

Speaker 1 (40:40):
Your tune to the Legal Exchange with Todd Lutsky. If
you are a loved one needs a nursing homes day,
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 for
eight five six nine nine, or visit him online at
Legal Exchange show dot com.

Speaker 2 (40:58):
Welcome back into the Lee 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 your guide this month, Todd, is
unlocking the power of the medicaid irrevocable or irrevocable medicaid trusts.

(41:21):
Who should actually consider using these types of trusts?

Speaker 3 (41:26):
Yeah, I think that's a great place to start, you know.
I generally will ask questions in an initial meeting with
clients to determine what objectives might make sense for them,
and then they can tell me whether those objectives do
matter to them or not. So if you came in

(41:47):
and you were like thirty five years old, I would
not even ask about an irrevocable medicaid trust because to me,
it doesn't even make sense to offer that. However, if
you come in and you're you know, sixty two sixty five,
you know, I'm probably going to ask the question one

(42:09):
of the objectives you have might be protecting assets from
the nursing home. If they say yes, then I can
explain at the whiteboard how this irrevocable trust works.

Speaker 2 (42:21):
And if they say not, really, yeah, it's really not
my worry.

Speaker 3 (42:25):
I think we can pay our own or we got
good long term care insurance. Or whatever the case may be. Well,
then we can close the book on the irrevocable type trust,
and then we know when we get to the whiteboard,
we'll be talking about the revocable trust. Because remember, folks,
the revocable trust and the irrevocable medicaid trust in this
case does almost exactly the same thing except for one thing.

(42:51):
They both avoid probate, they both help you reduce or
eliminate your taxes, and they both provide bloodline planning for
the children.

Speaker 2 (43:02):
But the thing that's different.

Speaker 3 (43:04):
The irrevocable trust provides nursing home protection and the revocable
never will.

Speaker 2 (43:10):
So if you want that nursing home protection, you have
to use the air evocable Uh yes, okay, yes you
really do.

Speaker 3 (43:17):
There's just if you have a revocable Please don't sitting
at home thinking I got my five year clock running.
Never started right, right, never started.

Speaker 2 (43:25):
So there are a lot of people out there. They
like to maintain control of their things. Not that I'm
saying I'm one of those people, but I might be.

Speaker 3 (43:34):
I think you are.

Speaker 2 (43:35):
So if I came in to see you to do
an irrevocable trust, you're gonna tell me that I can't
be my own trustee. Can you explain why that is?

Speaker 3 (43:46):
Yeah, so I've done it in the past. Obviously, tax laws,
rules change and evolve, and we evolve our trusts along
with them. The only reason I don't like it is
I've had to fight a few battles, all of which
we've won, knock on woods. So don't worry if you
happen to be trustee of your trust. But the battle

(44:07):
that you face when you're applying for Medicaid when you're
the trustee is there's a little paragraph in the trust
that says trustees are entitled to reasonable compensation, which, of course,
if you didn't have that, no professional trustee would take
the job.

Speaker 2 (44:24):
No, they wouldn't do it for frase, So you know.

Speaker 3 (44:27):
But obviously if you're your own trustee, you're not paying yourself,
right it says entitled to you don't have to take it. Well,
the state has come back and tried to make arguments that, well,
if you're entitled to get paid, then that means you
if there's no income being generated by the trust, the

(44:49):
only way you can get paid is with principle. And therefore,
because you have access to principle to get paid all
the assets and the trust are at risk.

Speaker 2 (44:57):
It's a bit of a stretch, and it is.

Speaker 3 (44:58):
And it hasn't won the best case scenario. I think
they've come back and they've said, well, since you are
demanding all the assets are at risk, none of them
are because trustees aren't entitled reasonable compensation does not result
in getting paid a million dollar home. You just get
a piece, a little piece of what would be considered income.

(45:22):
So they've lost on that argument many times. And generally
there are times where the trust actually has income producing assets,
like investments, and then you can run the numbers and say, well,
here's what I'm entitled to a half a basis point
of what's in the trust, and we're generating X number
of dollars of income, which is way more than then

(45:45):
the payment you're going to get as a trustee. Therefore,
you're only entitled to income and you still win. I
just don't want to cross that bridge, so there's no
reason to so in that regard, I wouldn't necessarily serve
as trustee. But we can talk about who could be trustee.
And by the way, the guide explains all of this,

(46:05):
It explains who can be the trustee, who can be
the donor, How you can get income, how you invest
the money? What are the gift and income tax ramifications
of setting this up? How can you live in your house?
Folks on and on operational guide as to how this
irrevocable trust works. Call and get it and you'll know
when you're done whether you like them or not. Eight

(46:27):
six six eight four eight five six nine nine or
Legal Exchange Show dot com again eight six six eight
four eight five six nine nine or Legal Exchange Show
dot com.

Speaker 2 (46:40):
So, if you have a couple of kids, todd, okay,
do you typically have your child serve one of your
children's service TRUSTe? Who do you typically recommend serve in
that role for this?

Speaker 3 (46:49):
Yea? I tend to lean towards a child. Again, I
always ask them, do you guys have good relationships with
your children? And are they level headed? And you know
these kinds of things. But if they are, then then
then yeah, I would say put a child on.

Speaker 2 (47:02):
And how about those folks that say, well, I have
three kids and I don't want any of them to
feel bad that I'm picking the other one as trustee.
I want three trustees.

Speaker 3 (47:12):
I tell them too bad? No, No, I don't tell them.

Speaker 2 (47:14):
That I cringe a little when I see that there's
more than two.

Speaker 3 (47:17):
Yeah, I just I sort of explained to them that
that they're not going to feel bad. Believe me, if
they're treated equally, as what matters. And if you can
be treated equally and not have a job and still
get money, you should be saying, actually the spin there
as I'm happy I wasn't listed as the trustee and
to have to deal with all of this, I just

(47:39):
sit back and get it right. Yeah, So it's usually
not a problem.

Speaker 2 (47:43):
In all of those assets once you transfer them into
the name of your trust. None of those assets are
going to probate. Correct, that's correct, None of them go
to probate at all. And they you know, and that's
that's a big reason to do them. And then for
those folks that are out there saying, yeah, well this
sounds like me, I want to protect from those nursing

(48:04):
home expenses. It's not an immediate thing, correct, right.

Speaker 3 (48:10):
It takes five years to do it. So when you
put the assets in, you know, you've got to realize
that it's not I can put them in today and
get sick and go in the nursing home tomorrow. That's
not how it works. You do it in advance. That's
why at sixty two when I mentioned sixty five, these
are great ages, Yeah, to start thinking about this, because

(48:30):
if I'm going to move my million dollar home in,
if I'm going to move my million dollar investment portfolio
into the trust, I know I'm not going to get
sick tomorrow. I want to do it now so that
by the time I'm seventy it's in my rearview mirror
not starting. But that doesn't mean you don't start. If
you haven't. Still get it running is always better than

(48:51):
not having that clock running.

Speaker 2 (48:53):
So you'll have quite a good portion of your assets
owned by this trust. Let's let's go back to the
question do we had earlier, which is I'm going to
be selling my rental property. What happens if you want
to sell your rental property but your trustee says, no,
I don't think so I really like that property. I

(49:13):
wanted to inherit it.

Speaker 3 (49:14):
No, I love the k Palace. We're not selling, right,
And that's exactly right. And I think this goes back
to our whole question earlier about trustees and and why
you know I told you that you shouldn't serve as trustee.
But you mentioned control, and do we give up the
control piece by putting a child on because I.

Speaker 2 (49:37):
Don't want to ask permissions as trustee.

Speaker 3 (49:39):
I'm on your side for sure, and so I think
we need to explain that we're not giving up that
control by adding a child as trustee, because we give
the donor the power to remove and replace the trustee,
but not with themselves, Okay, so they can remove and

(50:00):
replace any time there need be no cause. So you
simply say, oh, if you're not going to cooperate, then
I'm going to remove you. Go to the next child,
or pick an accountant, pick a lawyer.

Speaker 2 (50:11):
You didn't call me on Mother's Day.

Speaker 3 (50:13):
You're out, folks. You get to retain the control over
the assets and the trust even though you're not the trustee.
I'm going to leave that with you because that's the
most important reason perhaps to get this guide to help
you come overcome your fear that you're setting up an
irrevocable trust and that you're losing control, because I think

(50:34):
when you read it you'll see you're not eight six
six eight four eight five six nine nine or Legal
Exchange show dot com.

Speaker 2 (50:42):
Todd Lutsky from the law firm of Cushing in Dolan.
Thank you so much.

Speaker 3 (50:46):
Thank you, Susan, always a pleasure.

Speaker 2 (50:47):
I'm Susan Powers, a financial advisor with the Armstrong Advisory Group.
We thank you for joining us today and we'll be
back again next week on the Legal Exchange with Todd Lutsky.

Speaker 1 (50:58):
Elder life planning can be overwhelming, so be sure you're
prepared or you could make costly mistakes that affect your
overall plan. Cushing and Dolan are experts in elder lawn
taxation and they can devise a plan that covers you
in every area where issues can rise. Irrevocable trusts so
the most common type of trust that folks use for
financial protection, and while they can be complicated to create,

(51:19):
they help keep your assets safe because they contain specific
protections that many of us need, like the possibility of
eliminating your estate taxes. Their new guide is called Unlocking
the Power of Irrevocable Medicaid Trusts. Learn more about how
these trusts can benefit you and your family by calling
eight six six eight four eight five six ninety nine
right now and asking for your free guide today. That's

(51:40):
eight six six eight four eight five six ninety nine,
or you can request the guide right now by visiting
Legal Exchange show dot com. The proceeding was paid for
in The views expressed are solely those of Cushing and Dolan.
Cushing and Dolan ind or Armstrong Advisory may contact you're
offering legal or investment services. Cushing and Dolan in Armstrong
Advisory do not endorse each other and are not affiliated.
New England is nearly upon us. The kids are home

(52:02):
from school, the sun doesn't set until after eight. It's
likely time for you to relax. Well. While you're relaxing,
take a few minutes to check out visit USVII dot
com and research your next vacation in the United States
Virgin Islands. The USVII has something for everyone, be it
the rich history of Saint Croix, the spectacular beaches of
Saint Thomas, or the tranquill quiet of Saint John. Visit

(52:24):
one island or all three and enjoy the vacation of
a lifetime. From the moment you arrive, you'll fall naturally
in rhythm with the heartbeat of the islands. There's no
money to exchange, and travel from New England could not
be easier. Whether you're looking for a romantic getaway or
a family vacation, the US Virgin Islands is the perfect
place for your next adventure. Go to visit USVII dot

(52:45):
com right now for more information and to book your trip.
The USVII is America's Caribbean paradise. Go to visit USVII
dot com to make your reservation today. That's visit USVII
dot com.

Speaker 4 (53:00):
Preparing for retirement is a time consuming and challenging process. Hi,
this is Mike Armstrong from the Armstrong Advisory Group and
if you're at the point where you can see retirement approaching,
now is the time to make sure your plan covers
all the bases. Our new guide is called your Retirement
Preparation Checklist, and it discusses a variety of important topics
as you make decisions for later life, everything from reviewing

(53:20):
your income sources so that you have a full understanding
of how much money you'll need in retirement, to addressing
any outstanding debt which may lessen your overall financial burden.
Planning for retirement takes a great deal of time and effort,
and this new guide is designed to offer you the
guidance you may need. Call US at eight hundred three
to nine three for zero zero one and request your
free guide today. That's eight hundred three nine three for

(53:41):
zero zero one, or you can request it online at
Armstrong Advisory dot com.

Speaker 1 (53:45):
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 service is