Can a trust help you avoid probate, taxes and protect your assets? Brenton and Greg discuss different types of trust and their uses and benefits. Learn more at mcelderlaw.com/trustmap or call: 704-749-9244.
Greg McIntyre: Our assets and [crosstalk 00:00:04] and you may notice, I’m not in a suit and tie today and I have a bike with me. I guess I could put on my bike helmet. I was out riding bikes or riding a bike on a Saturday and I was thinking about trust. I mean I’ve worked so hard to [inaudible 00:00:23], to stay in shape and to try to live a long life and to work every day and take care of my family. My wife and I both work very hard to take care of our six kids and what are we doing it for and how can we keep those things? How can we have quality of life and then also pass those items that we work for and that we get during our life to our next generation to benefit the children and hopefully the grandchildren to help send them to college? I know law school that I went to was not cheap, so Brenton was law school cheap for you?
Brenton Begley: No it wa not. Fellowship wasn’t cheap.
Greg McIntyre: Correct. Yes. Believe in the same breath, I’m glad that I work for it and I’m paying that off. I don’t think that getting a lot of money at 18 years old would have helped me. Although being saddled with a lot of debt is not fun either.
Brenton Begley: Right. Man, if I got a lot of money at 18 I probably want to be driving a Maserati right now and not a Chevy, but what I will say is that at 18-
Greg McIntyre: If you still had the money.
Brenton Begley: Right, if I still had the money yeah I would have blown that. Yeah, but at 18 if I had my college law school paid for that’d been nice too. Well, yeah I mean it would be nice to have school paid for because obviously you don’t want to get saddled with debt, student loan debt. Not a lot of people know this, but you can’t just discharge student loan debt in a bankruptcy or anything like that, you know?
Brenton Begley: So for me though, if I was going to get that money to have my student loads paid for, I couldn’t have just gotten at 18 all at once because I wouldn’t have used that for my education. Like I said, I would’ve used it to buy, I would’ve blown it because I was 18 years old. Xbox games, Hot Cheetos, whatever.
Greg McIntyre: [inaudible 00:02:30] Hot Cheetos.
Brenton Begley: That’s right. That’s right. So when you think about leaving property to people, right? You work hard all your life, you leave property, assets, money, whatever it is. You got to think to yourself, okay, well what’s going to happen when I leave this to this person? Will they be able to effectively use this? Is it going to be a burden or is it going to be of benefit? In fact, the person that you leave it to could have special needs, right? That could be a problem.
Greg McIntyre: So trust come to mind to assist in this situation. That’s what we’re talking about today. How can trust help you and your family achieve your goals? First we want to talk about new goals and common goals come to mind, such as I want to send the grandkids to college. A discretionary trust that is for their health, education, and welfare. Until say they turn 25 or achieve certain milestones and then we start distributing part of it 25, 30, 35, and 40 or we say for instance, for example, 10% a year over the next 10 years once they turn 25 after we’ve helped get them through college or could be trade school educations. Once we’ve gotten them a little older, wiser, and more educated, then they will make better use of that money and it can really, really help them throughout their lives.
Greg McIntyre: That may be a concern of yours that we can help with. We do a lot of trust drafting like that. Also Brenton was referring to special needs individuals, people who might be on SSI, which is asset dependent and also comes with it, a Medicaid health care component that will all be disrupted and kicked off line if they receive money from you. A special needs trust is designed to receive that money and still allow them to receive the benefit. A third party trustee can spend money on them for things they need, that their Medicaid healthcare benefit doesn’t supply. There’s special rules with special needs trust and they’re complicated. However, very, very beneficial. That’s why we write a special or supplemental needs trust into every will we draft as an option for an executor use because when am I children going to become disabled?
Greg McIntyre: I hope never, but I don’t know what the future holds with illness or accidents in their future or my future. So think about that when you’re leaving money to an heir as to if they have the option for them. You may have a special needs person in your family that you want to plan for and we can use special needs trust either built into the will or stand alone outside of the will because that might not be where you want to pass that property to receive life insurance money, other monies, money you want to put in that trust now for that individual to care for them for the rest of their lives.
Greg McIntyre: So when we talk about trust, we’re talking about an array of different types of trust. A revokable living trust. Brenton, I find revocable living trust can really help when we talk about goals. To keep say, especially for individuals who are married to a family in trust to make sure that a spouse is provided for and to make sure that money and property is protected for the next generation, or at least past outside of probate to the next generation and not past through probate in that. However, a lot of times I find myself planning for higher wealth individuals with revocable living trust. What do you think about that?
Brenton Begley: Yeah, here’s the thing with higher wealth individuals, they have more wealth, right? So there’s a couple of things you got to think they’re maybe they want their wealth distributed in certain ways where it’s going to go to certain people and maybe they have children that are minors or grandchildren that are minors that they don’t want to give it to all at once. Here’s the other thing, recently we’ve been enjoying this gift and estate tax that has really not affected most Americans lately, right? So our gift and estate tax is really, really high, meaning that you have to have a lot of a lot of money passing to even be affected by it. So the threshold is high. So right now for an individual it’s $11.18 million. That’s how much you can give during your life or at your death before you’re ever even touched by the estate tax. Okay, so double that for a couple. Okay.
Greg McIntyre: You sent me an article earlier today.
Brenton Begley: Exactly.
Greg McIntyre: There’s talks right now in the legislature at the national level of really reducing that estate tax down and then having a graduated estate tax that starts, I want to say around 43, 45% of what’s passing. That means almost half of everything you pass would be taken away and given to the government up to 77% I think it was.
Brenton Begley: Right, right.
Greg McIntyre: 77% tax at the top end on what you’re trying to pass on to the next generation. So trust and really help with them. How can they help?
Brenton Begley: Right? So the trust are going to do a couple of things for you that you can do a lot of tax planning with trust. If you do it the correct way, you can effectively eliminate any estate tax that is going to really, really deplete your estate. There’s ways that you can double your estate tax exemption, right? Really with the right type of tax planning, you can really mitigate that tax, especially the tax that’s going to affect you. Like these talks were saying, I mean 40% of your estate being taxed, that’s huge. I mean [crosstalk 00:09:01].
Greg McIntyre: I want to say it’s crazy. It’s a lot. It’s hard to fathom that that will all go away. Or hald of what you have will go away.
Brenton Begley: Right, right.
Greg McIntyre: Trust can help with that. Trust can help far extend that exemption.
Brenton Begley: Certainly, certainly. I mean there’s lots of things you can do with trust when it comes to tax planning. I mean trusts are a very flexible vehicle and if you plan the right way and you understand what your goals are, you can not only eliminate tax, but protect the assets in many other ways.
Greg McIntyre: What about, okay, we talked about revocable living trust and they have a lot of tax benefits. Avoiding probate. There’s a lot of benefits for that. Achieving your goals long term with your money and property. What about an irrevocable trust? I hold here an example of an irrevocable trust. We call this one a Medicaid asset protection trust, MAPT. It’s an a big mason jar. It’s got money. There’s some monopoly houses in there. There’s a little spicket so that the income beneficiaries can receive that and pull that out even during your life. So how does this work in a nutshell?
Brenton Begley: Right.
Greg McIntyre: How does this work and how can it benefit people?
Speaker 2: Irrevocable trust is the other trust, right? So two main types of trust. Trust revocable, irrevocable. Irrevocable by the way, you can also have tax benefits, but irrevocable trust specifically the Medicaid asset protection trust is going to do two main things. It’s going first help someone qualify for Medicaid and two, it’s going to protect those assets that are in the trust from being looked at by Medicaid or being taken by Medicaid after Medicaid pays out. Because by the way, Medicaid, if they pay that money, they want it back. Right.
Speaker 2: So the way the Medicaid asset protection trust works is that it’s irrevocable. So you have to have a third party trustee. So if it’s a single individual, it has to be someone other than them. If it’s a couple, has to be someone other than them or their spouse who is over the trust as trustee and that trustee manages the funds, they protect the funds in the trust, whatever is put in the trust, but they are given power to distribute income during the grantors, the creator of the trust life for their benefit. Okay. Up until the time that they need Medicaid. Then once they get Medicaid, the asset that they put in the trust can no longer count against them and the assets that they put it in the trust are going to be protected from Medicaid or any other creditor or entity from taking those assets.
Greg McIntyre: Absolutely. I mean this is the best safe that we could draft for you. For you to place your money to make sure that no long term care stay if Medicaid has to pay for it can ever come back in the cupboard and it will be yours, that it will be your family’s for the rest well that it will pass to your family and not through the probative state or be subject to a Medicaid recover. So provides ultimate protection. Okay. We draft many types of trusts who would love to talk to you about how trust can help you and your family both stay in control of your assets and also protect your assets for the rest of your life and for generations. If you’re interested in seeing if trust planning is right for you or your family and having that conversation, we’d be glad to have that conversation with you and your family.
Greg McIntyre: Give us a call 704-749-9924 or visit us online at mcelderlaw.com and also I’m going to tell you I have the trust planning map that I have right here and a new trust planning workshop that we worked on that we’re going to start giving regularly. Just done trust planning. Check out the trust planning map.
Greg McIntyre: If you want to get the trust planning map, okay. You want the trust planning map for yourself to see a lot of the differences between irrevocable and revocable trust. Go to mcelder.com/trustmap. Mcelderlaw.com/trustmap and I will show you. So if you are interested in the trust map, go to mcelderlaw.com/trustmap. See it highlighted there mcelderlaw.com/trustmap. Enter this information and it will take you directly to the trust map and we’ll give you that free of charge today. So Brenton, thank you for being with us today. For those of you who don’t know Brenton as an Elder Law attorney with McIntyre Elder Law, and he has an LLN specifically in tax, so his focus area a lot of times is taxation and high wealth clients and he can help with really extending and maximizing that tax exemption and trust are great tools to do that. Right Brenton?
Brenton Begley: That’s right. Right the best tool to do it.
Greg McIntyre: Thanks for joining us from home today and I’m going to hop back on the bike, man.
Brenton Begley: Yeah have fun. Be safe. Get back on it.
Speaker 2: Please don’t wait till it’s too late. Call McIntyre Elder Law.