January 22, 2025 • 15 mins
This week, Todd Lutsky explains how difficult planning for long term care can be the longer you wait. Todd also takes questions from the audience about selling a rental property that is in a trust and placing reverse mortgages into a trust.
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Episode Transcript
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Speaker 1 (00:01):
This is Ask Todd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Todd Letsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate law.
(00:22):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (00:27):
As promised, Todd Lutsky is with us now for Ask Todd.
This is your chance to ask Todd your estate planning questions.
Studio line is open at eight eight eight two zero
five two two six three, so get dialing. I know
it's new year, so this is your chance to ask
Todd your questions to get your estate plans squared away
in twenty twenty five. Again eight eight eight two zero
(00:50):
five two two six three. Usually have time for two
or three questions, so get dialin to make sure that
you are in the front of the line. Again, that
number is eight eight eight two zero five two two
six three. Mister Lutsky, how are you doing today?
Speaker 3 (01:07):
I am great?
Speaker 2 (01:08):
How you been, uh a little confused.
Speaker 3 (01:11):
Yeah, it happens.
Speaker 2 (01:12):
Was out yesterday doing a little bit of running. You're
jogging on the track, uh huh. And I saw that
there was a clam over on the side of it.
A clam pulled a muscle. Yeah, that that happens. Real problem.
It is a problem, real problem in this weather. Todd,
I want to talk to you a little bit about
the age at which it's appropriate to consider long term
(01:33):
care planning and trying to protect assets from the cost
of long term care. Specifically, is there ever an age
that that someone gets to where you say, hey, like
you might be too old to consider this kind of planning?
Is that a thing?
Speaker 3 (01:49):
I think we should talk about the high end and
the low end. Let's do that. Sure, so, so on
the low end, right, when clients come in and they wonder,
you know, what, what do I know? I want to
do a state planning. But you know, then our job
is to guide them, you know, as to what kind
of a state plan may makes sense, and so we'll generally,
you know, age as one factor that we look at.
(02:10):
So if you come in in your and this is
just my own number. By the way, there's no book
telling us this, you know, sixty and up, I'm going
to ask, you know, sixteen up. I'm probably going to say,
you know, are we concerned about the future and potential
long term care planning? Because we all know it takes
five years to protect it. So if I can have
(02:30):
this in my rear view mirror by sixty five or
by seventy, I want to do that. If you come
in and you are you know, fifty, but you tell
me you know what I got, you know, diagnosed with
Parkinson's or I have you know, MS, or something that
might affect mobility, well then you might you might want
to get the clock started sooner rather than later. But
those are you know, the exceptions to the rule to
(02:52):
your point. What about the other end, Well, you know,
I hate to put a cap on the other end
because you know, I'm always betting on you living, not
on you dying.
Speaker 2 (03:05):
So nice of you.
Speaker 3 (03:06):
Yeah, that's what I do. So you know, if you
came into me and you're eighty five and you say, geez,
I want to start my medicaid clock running, well, you
know what, that's okay, I'm going to say, do it.
You know, I hope you make ninety And if you
do then, and something happens, then it'll be You'll be protected,
and that's important. Plus, there's never a downside to having
(03:27):
the clock running. Right. If you have the clock running
and somebody gets sick, you know, four years into the clock,
well I might want to just private pay for one
year if I can guarantee the protection of the you know,
dollars or assets that I've transferred, and I only have
to pay one one year, say one hundred and ten
(03:50):
hundred and twenty thousand dollars, I might do that if
I'm protecting half a million or a million dollar home
or whatever it is I've I've done. Planning for sure
makes makes sense. So getting the clock running now hurts.
And of course I'll share with you the story that
I did do. Uh. A ninety four ninety five year
old came in and they needed trust planning anyway, just
from an estate planning standpoint, so I said, well then
(04:10):
why not just make them irrevocable and then you get
the best of both worlds. Sure enough, it worked and
they didn't get sick until they beat the five year clock.
So never hurts to get it done. I guess there's
not an age. I guess that's too old to do
the planning. How's that?
Speaker 2 (04:25):
There? You go talking with Todd Loltsky from Cushing and Dolan.
Still got a little bit of room on the phone lines,
and know we already got a couple of people that
called in. But uh again, eight eight eight to zero
five two two sixty three is the number again? Eight
eight eight to zero five two two six three. We're
gonna take a quick break right now. But then it
is your calls with Todd right after this. That number
(04:47):
one more time is eight eight eight to zero five
two two sixty three.
Speaker 1 (04:53):
Ask Todd with Todd Letsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (05:11):
Let's get right to your calls with Todd Lutsky.
Speaker 3 (05:13):
Here.
Speaker 2 (05:14):
First in the queue is Philip on Cape cod Philip,
what's your question for Todd?
Speaker 4 (05:19):
Tod, you did an irrevocable trust for me about six
years ago. I have rental property. If I sell the
rental property, can I take some of that money out?
Because I've not enjoyed any of the rental income to
this state.
Speaker 3 (05:34):
Well, let me ask you why you have not enjoyed
the rental income. First and foremost, Well, I at this
point I thought it'd be better just to keep it
in the trust.
Speaker 4 (05:45):
In case we needed some money for repairs on the property.
Speaker 3 (05:49):
Okay, so first and foremost, and I get it, not
everybody remembers everything you talk about in meetings, But that
trust is an income only trust, and all the rent
belongs to you every single year, and you've been picking
it up, I'm sure on your income tax return and
it and it belongs to you and your family, so
that rent is yours. Now. Having said that, my next
(06:11):
comment would be, how long you said, six years you've
been renting this?
Speaker 4 (06:14):
Right, Well, we've been renting it longer, but it's been
in the trust for since we met with.
Speaker 3 (06:21):
You, and so right, right. So the good news is
that in our trust we have language that says all
the income shall be distributed to you. But I get it.
Some people don't physically take the income out and put
it into your personal bank account, although you're certainly entitled
(06:42):
to it, and so we have language in the trust
that says that doesn't go to principle. If you don't
take it, it doesn't revert to principle. It's basically an
account receivable. Okay. So if you are earning, if this
thing generated, you know, sixty thousand dollars a year in rent, okay,
(07:04):
then you have six years of sixty thousand dollars a year,
so sixty times six of technically an account receivable. Now
I get it. You might have used some of the
money to pay for real estate taxes or or some
upkeeper maintenance. I get it. All that money might not
be there, but you're getting the drill, right, you're getting
the feel. So you need to find out how much
(07:27):
income and you can just look on your tax returns
it'll be there. Find out how much income got deposited
in that trust over six years, and that's one big
account receivable, right, So six times six is three hundred
and sixty thousand dollars of money. So you're allowed to
take that because it's still income. It's not considered principle.
(07:49):
So that's how I would go about taking it out.
How much you're looking to take out.
Speaker 4 (07:54):
Believe it or not, I'm like, one hundred thousand will
get me over the.
Speaker 3 (07:58):
Hump, all right, So there you go. Oh, I think
even before you go to sell it. There's probably money
sitting in that trust bank account, correct, Yeah, yes, there is. Yeah,
so probably a lot of money because you haven't taken it.
So I suspect that you now have the ability that
if you did that, and I said there's three hundred
and sixty thousand dollars of income, certainly one hundred is
(08:20):
not going to be a problem to take out. And
that's how I would go about it. It is an
account receivable for you. Then when you sell the property again,
it's completely a grant toward trust, so you have the
ability to sell it. It's flexible, You're going to have
no adverse income tax consequences, although I recommend you use
our firm to help you with the closing so that
you don't screw up the five year waiting period, which
(08:42):
you will not. Right as long as the money gets
put in the trust, and therefore that money you probably
can just leave there and let continue to be protected
and not have to worry about grabbing the principle because
we figured out how to do it. So hopefully that
helps a little. And you can see and everybody can
see the flexibility built in to these irrevocable trusts. So
Hopefully that's helpful, Philip.
Speaker 2 (09:03):
Folks.
Speaker 3 (09:04):
Sometimes people that do their planning like Philip and others
who don't find themselves faced with nursing home care. Nevertheless,
and so for either group, whether you've done your planning
or not, if you find yourself faced with a nursing home,
there's gonna be assets outside the trust if you've done
your planning that are at risk, and there's gonna be
folks who didn't do their planning and all their assets
(09:26):
are at risk. Get this guide. It's getting close to
the end of the month long term care planning for procrastinators,
and it will teach you how to make countable assets
non countable last minute. And each asset is differently treated
for married versus single people, whether it's a home, a rental,
or money itself. So get the guide eight six six
(09:48):
eight four eight five six ninety nine or Legal Exchange
Show dot com. So don't just write to check to
the nursing Home eight six six eight four eight five
six or Legal Exchange Show dot com.
Speaker 2 (10:04):
Todd, we got another caller for you here. Let's go
to Gail in Wooster Gale. You are on with Todd Lutski.
Speaker 1 (10:12):
Hi.
Speaker 2 (10:12):
Todd I have a question. I understand that in the
state of Massachusetts a TOD for real estate is not balanced.
Speaker 3 (10:21):
Is that true? Yeah, I don't realize. So, folks, what
you need to understand about a TOD is it's a
transfer on death, and you normally see that at the
bank account level, not even so much at an investment
account level. You see that at a bank account level,
where you it's similar to a designated beneficiary on a
(10:41):
bank account that says, when I die, I transfer this
account on death too, and you put a name down.
But that is for a bank account and perhaps an
investment account, but not that I'm aware of anyway for
real estate. So to avoid the probate on the real estate,
whereas a TOD will avoid the probate on a bank
account for real estate, I think you need to really
(11:04):
do some trust planning and figure out how best to
avoid the probate, protect the asset and get it to
your family. So hopefully that was helpful.
Speaker 2 (11:12):
Todd, I got one more for you here. Let's go
to Jim in haver Old. Jim, you are on with
Todd Letsky. What's the question?
Speaker 3 (11:20):
Hi? How you doing? Gentlemen?
Speaker 1 (11:22):
My question is pretty simple. Can you put a house
that he has a mortgage on it, or maybe even
a house that has a reverse mortgage on it into
a trust.
Speaker 3 (11:30):
Well, what kind of trust? Revocable or irrevocable?
Speaker 2 (11:35):
Either one, probably the irrevocable. It seems like you lean
towards those more than the revocable.
Speaker 3 (11:39):
Well, and I think it's fair that you would say that.
I don't want to say that I lean towards one
or the other. It's strictly a function of what makes
sense for the particular client and their situation. So we
can try to address both if we have the time.
But you know, revocable trusts are less problematic when you're
transferring encumbered property because pretty much you're still the owner,
right and so you don't have to worry about triggering
(12:01):
a d on sale clause, So you could transfer it
in and even refinancing inside a revocable trust. I mean,
banks sometimes give you a little headache, but ultimately what
will happen is the bank might say, Okay, take the
house out of the revocable trust, put it in your name,
get the refinancing done, and then put the house back
(12:21):
in their revocable trust. And that's fine. They don't care.
So from a revocable trust standpoint, with a mortgage on it,
I don't see any issues the irrevocable trust. If it's
encumbered property, then yes, you have to take a couple
of steps. So if it's your primary residence, what we do,
(12:44):
and we talk about life estates a lot. We've talked
about them over the years. A life estate is something
I use infrequently, but would use it, and I'm going
to say to really everyone else that planners and the
like should use it when you're transferring an encumbered primary
residence to an irrevocable trust. Okay, so if you do that,
(13:09):
If you don't do that, and you don't reserve the
life of state and put the remainder interest into the
irrevocable trust, you could if the bank ever checked, trigger
the du on sale clause. Okay, unlikely the banks ever
check on these transfers as long as you pay, but nevertheless, uh,
(13:30):
it's an issue. So there's also the Guard Saint Germain
Act that says you might not trigger it. But the
easier thing to do is say, you know what, if
I reserve a life estate and the deed, then I
have the right to live there. The rest of my life,
the right to collect the income and so, and the
right to pay the bills. Hooray. So that's the nugget
(13:51):
of ownership that I kept. Means I cannot trigger the
due on sale clause. Okay, So I cannot trigger it,
and I can keep my existing mortgage by transferring it
to the trust and reserving a life estate and I
don't have to worry about it. Now. The issue that
becomes with that is, well, you can keep your existing mortgage,
(14:15):
you're not likely going to be able to refinance it.
Right If you try to refinance it, the bank is
likely going to make you take the whole thing out
of the trust and reset the five year waiting period. Now,
I can tell you that a lot of my clients
that have done this, of course in the past, have
what very low rates, and today rates are really high.
(14:38):
So one, we don't want to trigger the Duwan sale clause,
so we reserve a life state. And two they're really
not going to be refinancing so and mostly I can
tell you folks that that people that do irrevocable trust
planning don't have mortgages on it. But we can solve
that problem for you. And if it happened to be
on a rental property. You just got to keep a
ninety nine year lease. I can explain that into TAIL
(15:00):
and that will prevent a triggering. So long winded answer.
Sorry for that, but I hope it's addressed the the question.
Speaker 2 (15:07):
Mister Lutski, Thank you so much for joining us today.
Speaker 3 (15:10):
Always a pleasure.
Speaker 1 (15:12):
This has been asked Odd on the Financial Exchange Radio network.
Ask Todd with Todd Lutsky has been presented by Cushing
and Dolan, serving Massachusetts and New England for more than
thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred and three
nine three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(15:33):
Cushing and Dolan Armstrong advisor. He does not provide any
legal or tax advice. Please consult with your legal or
tax advisor on such matters. Cushing and Armstrong do not
endorse each other and are not affiliated
This is Ask Todd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Todd Letsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate law.
(00:22):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (00:27):
As promised, Todd Lutsky is with us now for Ask Todd.
This is your chance to ask Todd your estate planning questions.
Studio line is open at eight eight eight two zero
five two two six three, so get dialing. I know
it's new year, so this is your chance to ask
Todd your questions to get your estate plans squared away
in twenty twenty five. Again eight eight eight two zero
(00:50):
five two two six three. Usually have time for two
or three questions, so get dialin to make sure that
you are in the front of the line. Again, that
number is eight eight eight two zero five two two
six three. Mister Lutsky, how are you doing today?
Speaker 3 (01:07):
I am great?
Speaker 2 (01:08):
How you been, uh a little confused.
Speaker 3 (01:11):
Yeah, it happens.
Speaker 2 (01:12):
Was out yesterday doing a little bit of running. You're
jogging on the track, uh huh. And I saw that
there was a clam over on the side of it.
A clam pulled a muscle. Yeah, that that happens. Real problem.
It is a problem, real problem in this weather. Todd,
I want to talk to you a little bit about
the age at which it's appropriate to consider long term
(01:33):
care planning and trying to protect assets from the cost
of long term care. Specifically, is there ever an age
that that someone gets to where you say, hey, like
you might be too old to consider this kind of planning?
Is that a thing?
Speaker 3 (01:49):
I think we should talk about the high end and
the low end. Let's do that. Sure, so, so on
the low end, right, when clients come in and they wonder,
you know, what, what do I know? I want to
do a state planning. But you know, then our job
is to guide them, you know, as to what kind
of a state plan may makes sense, and so we'll generally,
you know, age as one factor that we look at.
(02:10):
So if you come in in your and this is
just my own number. By the way, there's no book
telling us this, you know, sixty and up, I'm going
to ask, you know, sixteen up. I'm probably going to say,
you know, are we concerned about the future and potential
long term care planning? Because we all know it takes
five years to protect it. So if I can have
(02:30):
this in my rear view mirror by sixty five or
by seventy, I want to do that. If you come
in and you are you know, fifty, but you tell
me you know what I got, you know, diagnosed with
Parkinson's or I have you know, MS, or something that
might affect mobility, well then you might you might want
to get the clock started sooner rather than later. But
those are you know, the exceptions to the rule to
(02:52):
your point. What about the other end, Well, you know,
I hate to put a cap on the other end
because you know, I'm always betting on you living, not
on you dying.
Speaker 2 (03:05):
So nice of you.
Speaker 3 (03:06):
Yeah, that's what I do. So you know, if you
came into me and you're eighty five and you say, geez,
I want to start my medicaid clock running, well, you
know what, that's okay, I'm going to say, do it.
You know, I hope you make ninety And if you
do then, and something happens, then it'll be You'll be protected,
and that's important. Plus, there's never a downside to having
(03:27):
the clock running. Right. If you have the clock running
and somebody gets sick, you know, four years into the clock,
well I might want to just private pay for one
year if I can guarantee the protection of the you know,
dollars or assets that I've transferred, and I only have
to pay one one year, say one hundred and ten
(03:50):
hundred and twenty thousand dollars, I might do that if
I'm protecting half a million or a million dollar home
or whatever it is I've I've done. Planning for sure
makes makes sense. So getting the clock running now hurts.
And of course I'll share with you the story that
I did do. Uh. A ninety four ninety five year
old came in and they needed trust planning anyway, just
from an estate planning standpoint, so I said, well then
(04:10):
why not just make them irrevocable and then you get
the best of both worlds. Sure enough, it worked and
they didn't get sick until they beat the five year clock.
So never hurts to get it done. I guess there's
not an age. I guess that's too old to do
the planning. How's that?
Speaker 2 (04:25):
There? You go talking with Todd Loltsky from Cushing and Dolan.
Still got a little bit of room on the phone lines,
and know we already got a couple of people that
called in. But uh again, eight eight eight to zero
five two two sixty three is the number again? Eight
eight eight to zero five two two six three. We're
gonna take a quick break right now. But then it
is your calls with Todd right after this. That number
(04:47):
one more time is eight eight eight to zero five
two two sixty three.
Speaker 1 (04:53):
Ask Todd with Todd Letsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (05:11):
Let's get right to your calls with Todd Lutsky.
Speaker 3 (05:13):
Here.
Speaker 2 (05:14):
First in the queue is Philip on Cape cod Philip,
what's your question for Todd?
Speaker 4 (05:19):
Tod, you did an irrevocable trust for me about six
years ago. I have rental property. If I sell the
rental property, can I take some of that money out?
Because I've not enjoyed any of the rental income to
this state.
Speaker 3 (05:34):
Well, let me ask you why you have not enjoyed
the rental income. First and foremost, Well, I at this
point I thought it'd be better just to keep it
in the trust.
Speaker 4 (05:45):
In case we needed some money for repairs on the property.
Speaker 3 (05:49):
Okay, so first and foremost, and I get it, not
everybody remembers everything you talk about in meetings, But that
trust is an income only trust, and all the rent
belongs to you every single year, and you've been picking
it up, I'm sure on your income tax return and
it and it belongs to you and your family, so
that rent is yours. Now. Having said that, my next
(06:11):
comment would be, how long you said, six years you've
been renting this?
Speaker 4 (06:14):
Right, Well, we've been renting it longer, but it's been
in the trust for since we met with.
Speaker 3 (06:21):
You, and so right, right. So the good news is
that in our trust we have language that says all
the income shall be distributed to you. But I get it.
Some people don't physically take the income out and put
it into your personal bank account, although you're certainly entitled
(06:42):
to it, and so we have language in the trust
that says that doesn't go to principle. If you don't
take it, it doesn't revert to principle. It's basically an
account receivable. Okay. So if you are earning, if this
thing generated, you know, sixty thousand dollars a year in rent, okay,
(07:04):
then you have six years of sixty thousand dollars a year,
so sixty times six of technically an account receivable. Now
I get it. You might have used some of the
money to pay for real estate taxes or or some
upkeeper maintenance. I get it. All that money might not
be there, but you're getting the drill, right, you're getting
the feel. So you need to find out how much
(07:27):
income and you can just look on your tax returns
it'll be there. Find out how much income got deposited
in that trust over six years, and that's one big
account receivable, right, So six times six is three hundred
and sixty thousand dollars of money. So you're allowed to
take that because it's still income. It's not considered principle.
(07:49):
So that's how I would go about taking it out.
How much you're looking to take out.
Speaker 4 (07:54):
Believe it or not, I'm like, one hundred thousand will
get me over the.
Speaker 3 (07:58):
Hump, all right, So there you go. Oh, I think
even before you go to sell it. There's probably money
sitting in that trust bank account, correct, Yeah, yes, there is. Yeah,
so probably a lot of money because you haven't taken it.
So I suspect that you now have the ability that
if you did that, and I said there's three hundred
and sixty thousand dollars of income, certainly one hundred is
(08:20):
not going to be a problem to take out. And
that's how I would go about it. It is an
account receivable for you. Then when you sell the property again,
it's completely a grant toward trust, so you have the
ability to sell it. It's flexible, You're going to have
no adverse income tax consequences, although I recommend you use
our firm to help you with the closing so that
you don't screw up the five year waiting period, which
(08:42):
you will not. Right as long as the money gets
put in the trust, and therefore that money you probably
can just leave there and let continue to be protected
and not have to worry about grabbing the principle because
we figured out how to do it. So hopefully that
helps a little. And you can see and everybody can
see the flexibility built in to these irrevocable trusts. So
Hopefully that's helpful, Philip.
Speaker 2 (09:03):
Folks.
Speaker 3 (09:04):
Sometimes people that do their planning like Philip and others
who don't find themselves faced with nursing home care. Nevertheless,
and so for either group, whether you've done your planning
or not, if you find yourself faced with a nursing home,
there's gonna be assets outside the trust if you've done
your planning that are at risk, and there's gonna be
folks who didn't do their planning and all their assets
(09:26):
are at risk. Get this guide. It's getting close to
the end of the month long term care planning for procrastinators,
and it will teach you how to make countable assets
non countable last minute. And each asset is differently treated
for married versus single people, whether it's a home, a rental,
or money itself. So get the guide eight six six
(09:48):
eight four eight five six ninety nine or Legal Exchange
Show dot com. So don't just write to check to
the nursing Home eight six six eight four eight five
six or Legal Exchange Show dot com.
Speaker 2 (10:04):
Todd, we got another caller for you here. Let's go
to Gail in Wooster Gale. You are on with Todd Lutski.
Speaker 1 (10:12):
Hi.
Speaker 2 (10:12):
Todd I have a question. I understand that in the
state of Massachusetts a TOD for real estate is not balanced.
Speaker 3 (10:21):
Is that true? Yeah, I don't realize. So, folks, what
you need to understand about a TOD is it's a
transfer on death, and you normally see that at the
bank account level, not even so much at an investment
account level. You see that at a bank account level,
where you it's similar to a designated beneficiary on a
(10:41):
bank account that says, when I die, I transfer this
account on death too, and you put a name down.
But that is for a bank account and perhaps an
investment account, but not that I'm aware of anyway for
real estate. So to avoid the probate on the real estate,
whereas a TOD will avoid the probate on a bank
account for real estate, I think you need to really
(11:04):
do some trust planning and figure out how best to
avoid the probate, protect the asset and get it to
your family. So hopefully that was helpful.
Speaker 2 (11:12):
Todd, I got one more for you here. Let's go
to Jim in haver Old. Jim, you are on with
Todd Letsky. What's the question?
Speaker 3 (11:20):
Hi? How you doing? Gentlemen?
Speaker 1 (11:22):
My question is pretty simple. Can you put a house
that he has a mortgage on it, or maybe even
a house that has a reverse mortgage on it into
a trust.
Speaker 3 (11:30):
Well, what kind of trust? Revocable or irrevocable?
Speaker 2 (11:35):
Either one, probably the irrevocable. It seems like you lean
towards those more than the revocable.
Speaker 3 (11:39):
Well, and I think it's fair that you would say that.
I don't want to say that I lean towards one
or the other. It's strictly a function of what makes
sense for the particular client and their situation. So we
can try to address both if we have the time.
But you know, revocable trusts are less problematic when you're
transferring encumbered property because pretty much you're still the owner,
right and so you don't have to worry about triggering
(12:01):
a d on sale clause, So you could transfer it
in and even refinancing inside a revocable trust. I mean,
banks sometimes give you a little headache, but ultimately what
will happen is the bank might say, Okay, take the
house out of the revocable trust, put it in your name,
get the refinancing done, and then put the house back
(12:21):
in their revocable trust. And that's fine. They don't care.
So from a revocable trust standpoint, with a mortgage on it,
I don't see any issues the irrevocable trust. If it's
encumbered property, then yes, you have to take a couple
of steps. So if it's your primary residence, what we do,
(12:44):
and we talk about life estates a lot. We've talked
about them over the years. A life estate is something
I use infrequently, but would use it, and I'm going
to say to really everyone else that planners and the
like should use it when you're transferring an encumbered primary
residence to an irrevocable trust. Okay, so if you do that,
(13:09):
If you don't do that, and you don't reserve the
life of state and put the remainder interest into the
irrevocable trust, you could if the bank ever checked, trigger
the du on sale clause. Okay, unlikely the banks ever
check on these transfers as long as you pay, but nevertheless, uh,
(13:30):
it's an issue. So there's also the Guard Saint Germain
Act that says you might not trigger it. But the
easier thing to do is say, you know what, if
I reserve a life estate and the deed, then I
have the right to live there. The rest of my life,
the right to collect the income and so, and the
right to pay the bills. Hooray. So that's the nugget
(13:51):
of ownership that I kept. Means I cannot trigger the
due on sale clause. Okay, So I cannot trigger it,
and I can keep my existing mortgage by transferring it
to the trust and reserving a life estate and I
don't have to worry about it. Now. The issue that
becomes with that is, well, you can keep your existing mortgage,
(14:15):
you're not likely going to be able to refinance it.
Right If you try to refinance it, the bank is
likely going to make you take the whole thing out
of the trust and reset the five year waiting period. Now,
I can tell you that a lot of my clients
that have done this, of course in the past, have
what very low rates, and today rates are really high.
(14:38):
So one, we don't want to trigger the Duwan sale clause,
so we reserve a life state. And two they're really
not going to be refinancing so and mostly I can
tell you folks that that people that do irrevocable trust
planning don't have mortgages on it. But we can solve
that problem for you. And if it happened to be
on a rental property. You just got to keep a
ninety nine year lease. I can explain that into TAIL
(15:00):
and that will prevent a triggering. So long winded answer.
Sorry for that, but I hope it's addressed the the question.
Speaker 2 (15:07):
Mister Lutski, Thank you so much for joining us today.
Speaker 3 (15:10):
Always a pleasure.
Speaker 1 (15:12):
This has been asked Odd on the Financial Exchange Radio network.
Ask Todd with Todd Lutsky has been presented by Cushing
and Dolan, serving Massachusetts and New England for more than
thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred and three
nine three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(15:33):
Cushing and Dolan Armstrong advisor. He does not provide any
legal or tax advice. Please consult with your legal or
tax advisor on such matters. Cushing and Armstrong do not
endorse each other and are not affiliated
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