An Operational Guide to Life Estates and Irrevocable Trusts for the General Practitioner Part Three

Concluding a Three-Part Series for REBA News Readers

Leo J. Cushing, Esq., CPA, LL.M. and Todd E. Lutsky, Esq., LL.M.

Editor’s Note;  This is the third and final  installment and an exclusive three-part series of articles in REBA News directed to transactional and general practice attorneys, exploring the use of life estates and irrevocable trusts in estate planning and Medicaid planning.  The first installment focused on the SJC’s landmark Daley case and discuss what is a life estate vs. a trust, along with related tax implications of carryover basis vs. step-up in basis.

The second installment explained some of the gift and income tax pitfalls associated with life estates and remainder interests, with some detailed examples.

This concluding installment will explore creating a life estate and transferring the remainder interest to a Medicaid irrevocable trust along with the related gift, estate, and income tax implications.

What are Some of the Benefits of Creating a Life Estate in which the Remainderman is an Irrevocable Income only Trust Instead of the Children or a Family Member?

1.               Step-up in basis:  The assets in the irrevocable trust will be includable in the decedents’ gross estate and receive a step-up in basis for capital gains tax purposes.  Since the Donor will have transferred the property to the trust and retained a life estate in the deed that would cause IRC Section 2036 to apply and cause the inclusion of the home into the Donor’s estate.  This inclusion would cause IRC Section 1014(a) to apply resulting in the basis of the property to be stepped-up in the hands of the beneficiary.  This will reduce the capital gains tax consequences associated with a sale of the property following the life tenants’ demise, if sold by the beneficiary shortly after their demise.

2.               Rent it:  The life tenant may choose to rent the property and the rent would simply be paid directly to the life tenant and would not be deposited or associated with the Trust in any manner.  (See Daley decision above.)  The life tenant would continue to report the rental income directly on their individual income tax return, form 1040 and provided there was no other income generating asset inside the Trust, the Trust would not be required to file an income tax return.  However, even if the trust did need to file a tax return, form 1041, since the trust is a Grantor trust it would not pay any tax and instead all of the trust income would simply flow through to the Donor and be reported on their individual return and the tax calculated at their rates, just like it was done before they created the Trust.

3.               Sell the home:  The Donors can sell the home any time they wish and do not need the permission of the trustee. In addition, there will be no adverse income tax consequences associated with the sale as was the case when the house was transferred to the children, as shown above.  An example of such a sale will be explored below.

Why Creating a Life Estate in which the Remainder Interest is in an Irrevocable Medicaid Income Only Trust may be Superior to Putting the Remainder Interest in the Hands of the Children or a Family Member

1. Does transferring a home or other real estate to an irrevocable income only trust have any gift tax ramifications?

If the Donor or creator, meaning the parent, of the Trust has reserved a right in the Trust to designate the final beneficiary either during life or through a will after the execution of the irrevocable trust, this would cause any transfer of assets to the Trust to be an incomplete gift for gift tax purposes under Internal Revenue Code Section 2511 and Regulation 25.2511-2C.  The effect of this reserved power by the Donor, i.e. mom and dad, means that when the remainder interest in the home is transferred to the irrevocable trust in which the Donor reserves a life estate, the transaction results in an incomplete gift for gift tax purposes thereby resulting in no gift tax consequences to the Donor or parents.  This is a very different result from the one encountered when the property was given to the children with a retained life estate.  However, a gift tax return is still required to be filed even though there would be no resulting gift tax liability (see example above for potential gift tax savings).  It is this regulation that enables you to transfer such valuable real estate to the trust without paying any gift taxes, or reducing your gift or estate tax exemptions or reducing your Massachusetts exemption amount.

2. Can the property be easily sold after it is transferred to the irrevocable income only trust and what are the income tax ramifications? 

In this case the life tenant, mom and dad would be able to freely sell the property without the need to obtain the remaindermen’s permission.  This arrangement allows mom and dad to control the life interest as well as the remainder interest since the remainder interest has been transferred to the irrevocable trust in which mom and dad control the trustee by retaining the ability to remove the trustee at any time.  This is accomplished by giving the Donor the right to remove and replace the trustee provided however that the replacement trustee cannot be the Donor or Donor’s spouse.                                                                                                                             

With regard to the income tax consequences associated with the sale, the sale proceeds will still need to be split between the life tenant and the remaindermen in the same manner as described above.  However, since the Donor of the trust, i.e. mom and dad, reserve that right to designate the income and principal of the trust to the final beneficiaries during their life, generally limited to charities but excluding nursing homes that maybe a charity or a nonprofit and governmental entities, this makes the trust a Grantor trust, under Internal Revenue Code Section 674(a) thus eliminating the adverse income tax consequences experienced when the remaindermen are the children, as shown above. 

In other words, the term Grantor trust means that all of the income from the trust will be deemed to be the Donors for income tax purposes, thereby allowing the portion of the sale proceeds allocable to the irrevocable trust to be eligible for the capital gains tax exclusion associated with the sale of their primary residence, via IRS Section 121, thereby eliminating any adverse income tax consequences associated with the sale.  In addition, since the portion of the proceeds equal to the remainder interest is being deposited into the trust and not into the hands of the children, as happens when the children are the remaindermen, there is no early inheritance passing to the children.  Furthermore, the life tenant by directing the trustee as mentioned above, would continue to be able to use the proceeds in the irrevocable trust to purchase another home or a downsize condo, or simply invest the money and live off the income.  Finally, this sale and repurchase transaction will not restart the five year waiting period for Medicaid eligibility purposes and the proceeds of the new home in the trust would remain protected from the nursing home.  Remember this transaction does not result in any new asset going into the trust but instead it is simply a reinvestment of assets that were already in there.

For Example:  Let’s assume the same example as mentioned above, in which the life tenant decides to sell the home during their life for $600,000 with a cost basis of approximately $200,000.  First, since the children are not involved in the transaction the life tenant does not require their permission to complete the sale.   Second, assuming the life tenant is age 79 and based on the applicable life estate tables used in the above example, this means that 81.741% or $490,446 ($600,000 x 81.741%) of the proceeds would be allocated to the trust as the remainder beneficiary and 18.259% or $109,554 ($600,000 x 18.259%) of the proceeds would be allocated to the life tenant or mom and dad in this case.  This also assumes that 18.259% or $36,518 ($200,000 x 18.259%) of the $200,000 cost basis would be allocated to the life tenant and 81.741% or $163,482 ($200,000 x 81.741%) to the irrevocable trust. 

The result would be that $109,554 of the proceeds would be allocated to the life tenant minus a $36,518 cost basis would result in a $73,036 capital gain.  There would also be a corresponding $490,446 allocation of proceeds to the irrevocable trust minus a $163,482 cost basis resulting in a $326,964 gain seemingly at the trust level.  However, since the Trust is a Grantor trust, as mentioned above, this would cause the $326,964 capital gain at the trust level to be allocated to the life tenant’s tax return where it will be added to their own $73,036 gain.  Therefore, the full $400,000 gain would be reported on the Life tenant’s, i.e. mom and dad, individual income tax return and since they have owned and used the property for two of the last five years as their primary residence, they would be able to avail themselves of the full $500,000 capital gain exclusion thereby resulting in no tax liability.  This is in stark contrast to the result when the property is transferred to the children with the retained life estate, which resulted in a tax liability of approximately $96,166.  Not to mention the fact that the children did not receive any of the proceeds, which allow mom and dad the ability to use the income from the proceeds to live on for the rest of their lives. Finally, this arrangement does not expose the proceeds to the kids’ creditors.

Conclusion:

The Daley case made it clear that a life estate is a property interest and not an interest in trust.  However, as you can see from this article, there are implications and considerations to think about when using a life estate arrangement.  Although life estates are commonly used, they may not always be fully understood.

Todd Lutsky, of Cushing and Dolan, P.C. Concentrates in the preparation of estate plans, including the use of revocable trusts, joint trusts, irrevocable life insurance trusts, qualified personal residence trusts and family limited partnerships. He has a specific interest in Medicaid and asset protection planning for the elderly, assisting clients with the Medicaid application, preparation and eligibility process of obtaining MassHealth benefits, fair hearings, and advanced Medicaid planning and the preservation of assets through the use grantor irrevocable income only trusts. He hosts  his own radio show called, “The Legal Exchange with Todd Lutsky,” and it can be heard every Saturday at 5:00PM on WRKO 680AM and on four other local stations. Todd can be contacted at tlutsky@cushingdolan.com.

Co-chair of REBA’s estate planning, trusts and estate administration section, Leo Cushing is the founding Partner of Cushing & Dolan, P.C., specializing in closely held businesses, taxation, sophisticated estate planning, elder law and real estate. Leo's practice includes all aspects of sophisticated estate planning techniques, asset protection, trust planning, charitable giving and resolution of tax controversies.  Leo has written and lectured extensively on all aspects of taxation and estate planning. Leo is a much sought after speaker as he is able to articulate complex issues in a way that is clear, concise and easy to understand.  Leo’s email address is lcushing@cushingdolan.com.

OPERATIONAL GUIDE TO LIFE ESTATES VS. IRREVOCABLE TRUSTS PART TWO

Leo J. Cushing and Todd E. Lutsky

Part Two of a Three Part Series

Editor’s Note;  This is the second installment and an exclusive three-part series of articles in REBA News directed to transactional and general practice attorneys, exploring the use of life estates and irrevocable trusts in estate planning and Medicaid planning. 

The concluding installment will explore creating a life estate and transferring the remainder interest to a Medicaid irrevocable trust along with the related gift, estate, and income tax implications.

What are the Tax Pitfalls Associated with Creating a Life Estate in which the Remainder  Interest is in the Hands of the Children or a Family Member?

1.      Does transferring the home or other real estate to the kids while retaining a life estate constitute a completed gift for gift tax purposes? 

When an individual transfers their interest in property directly to the children or a family member and reserve a legal life estate they would have made a completed gift of the remainder interest to that person.  In the event the value of the remainder interest exceeds the $14,000 present interest exclusion, a Form 709 gift tax return should be filed.  The $14,000 present interest exclusion is an amount that can be currently given away each year per person gift tax free and will not require the filing of a gift tax return.  The value of the remainder interest is calculated using IRS Table S in accordance with interest rates in effect on the date of transfer under IRC Section 7520 which can be found at tigertables.com and once you determine the interest rate you go to Table S for that interest rate to get the value of the remainder interest that correlates to the life tenant’s age.  Then you multiply the value of the property by that remainder percentage to get the value of the gift.

For Example:  If the value of the property transferred was $600,000 and the individual was 66 years old, and assume the applicable federal rate of interest on the date of creation of the life estate is 2.4%, the corresponding Internal Revenue Code Table S for that interest rate would tell us that the value of the remainder interest is 68.921% of the whole or $413,530 ($600,000 x 68.9217%).  Therefore, the value of the gift made as of the date of transfer would be $413,530 and a gift tax return must be filed by April 15^th of the year following the year in which the transfer occurred to report the resulting gift tax liability.  While no actual tax may be due because the giver would likely just reduce federal their gift tax exemption of currently $5,490,000 by the gift tax liability.  While there is no Massachusetts gift tax, the value of the gift would reduce the current Massachusetts $1,000,000 estate tax exemption or filing threshold.

2.      Can the life tenant sell the home after placing the remainder interest in the hands of the children and what are the income and gift tax ramifications?   

The first major hurdle the life tenant faces prior to selling the property is getting the children’s permission.  Assuming that the children or family member have agreed to sell the property, this arrangement would still result in adverse income tax consequences associated with the sale.  If the property is sold, the gains (and proceeds) would be split between the life tenant and the remainderman using the actuarial tables discussed above and the IRS Section 7520 rate that applies for the month in which the sale occurred.  The basis would also be allocated at the time of sale using the 7520 rate.  (See also Revenue rulings 71-122, 66-159 and 85-45).  The gain allocated to the life tenant is eligible for the capital gains exclusion under Internal Revenue Code Section 121 provided the life tenant has owned and used the property as their primary residence for at least two of the last five years.  However, the gain allocated to the remainder interest holders is not eligible for this capital gains exclusion provided that the children have not used the property as their primary residence.

This capital gains exclusion applies to an individual who has owned and used his property as his/her primary residence for two of the last five years and entitles him/her to exclude $250,000 of capital gain attributable to the sale of his primary residence.  This amount is increased to $500,000 for a married couple who has owned and used their property as their primary residence for two of the last five years.  The ability to shelter this gain exists every two years.  In this case, if the children have moved out of the home then the portion of the sale proceeds allocated to them as remaindermen would be subject to capital gains tax and not eligible for the exclusion under this rule.   However, the life tenant would be able to apply this capital gain exclusion to his portion of the proceeds received from the sale thereby reducing and possibly eliminating any capital gain tax liability at least for the life tenant.

For Example:  Let’s assume the life tenant decides to sell the home during their life for $600,000 with a cost basis of approximately $200,000. It is further assumed that the children agreed to sell the home.   Assuming the life tenant is age 79 and the applicable federal interest rate on the month of sale found in the tiger tables mentioned above is 2.4% then based on the applicable corresponding Table S life estate tables, the remainder interest is worth 81.741% of the property which translates into $490,446 ($600,000 x 81.741%).  Upon completion of the sale the $490,446 of the proceeds would be allocated to the children as remaindermen and the balance of $109,554 of the proceeds would be allocated to the life tenant.  This also assumes that 18.259% (100% - 81.741%) or $36,518 ($200,000 x 18.259%) of the $200,000 cost basis would be allocated to the life tenant and 81.741% or $163,482 ($200,000 x 81.741%) would be allocated to the children. 

The result would be that $109,554 of the proceeds would be allocated to the life tenant minus a $36,518 of cost basis would result in a $73,036 capital gain. This gain would be reported on the life tenant’s, i.e. mom and dad, individual income tax return.  However, since they have owned and used the property for two of the last five years as their primary residence, they would be able to avail themselves of the full $500,000 capital gain exclusion thereby eliminating any capital gains tax liability.

There would be a corresponding $490,446 allocation of proceeds to the children minus a $163,482 cost basis resulting in a $326,964 capital gain.    However, since the children do not live in the property they would not be able to avail themselves to this capital gains exclusion and would have to pay federal and state income tax on the gain in the amount of approximately $94,166 ($326,964 x 20% fed, 3.8% Obama care tax and 5% MA).

A final problem with this arrangement is that after the tax has been paid by the children as remaindermen, the portion remaining in the hands of the children or family member is an early inheritance.  If the life tenant needs that money to live on or to purchase a new home, the life tenant would be forced to ask the children or family member to return it.  In the event the children or family member decide to return it, they then would be subject to the gift tax rule in the event the amount given back to the life tenant exceeds the current $14,000 present gift exclusion.  Either way the parent will have less money for themselves after the payment of the capital gains tax by the children than would otherwise have been the case.  A parent should not have to jump through so many hoops and encounter such adverse income tax consequences in order to protect their assets from the cost associated with long-term care.  It is important to fully understand how a life estate operates and what your options are prior to gifting the remainder interest in your property to your children or a family member and instead compare the benefits of transferring the remainder interest to an irrevocable Medicaid income only trust.

Editor’s Note:  This is the second installment of a three-part REBA News series.

Todd Lutsky, of Cushing and Dolan, P.C. Concentrates in the preparation of estate plans, including the use of revocable trusts, joint trusts, irrevocable life insurance trusts, qualified personal residence trusts and family limited partnerships. He has a specific interest in Medicaid and asset protection planning for the elderly, assisting clients with the Medicaid application, preparation and eligibility process of obtaining MassHealth benefits, fair hearings, and advanced Medicaid planning and the preservation of assets through the use grantor irrevocable income only trusts. He hosts  his own radio show called, “The Legal Exchange with Todd Lutsky,” and it can be heard every Saturday at 5:00PM on WRKO 680AM and on four other local stations. Todd can be contacted at tlutsky@cushingdolan.com.

Co-chair of REBA’s estate planning, trusts and estate administration section, Leo Cushing is the founding Partner of Cushing & Dolan, P.C., specializing in closely held businesses, taxation, sophisticated estate planning, elder law and real estate. Leo's practice includes all aspects of sophisticated estate planning techniques, asset protection, trust planning, charitable giving and resolution of tax controversies.  Leo has written and lectured extensively on all aspects of taxation and estate planning. Leo is a much sought after speaker as he is able to articulate complex issues in a way that is clear, concise and easy to understand.  Leo’s email address is lcushing@cushingdolan.com.

OPERATIONAL GUIDE TO LIFE ESTATES VS. IRREVOCABLE TRUSTS PART ONE

Leo J. Cushing and Todd E. Lutsky

Part One of a Three Part Series

Editor’s Note;  This is the first installment and an exclusive three-part series of articles in REBA News directed to transactional and general practice attorneys, exploring the use of life estates and irrevocable trusts in estate planning and Medicaid planning.  The first installment will focus on the SJC’s landmark Daley case and discuss what is a life estate vs. a trust, along with related tax implications of carryover basis vs. step-up in basis.

The second installment, which will be published in the March/April issue, will explain some of the gift and income tax pitfalls associated with life estates and remainder interests, with some detailed examples.

The concluding installment, to be published in the May June issue, will explore creating a life estate and transferring the remainder interest to a Medicaid irrevocable trust along with the related gift, estate, and income tax implications.

Congratulations to REBA on submitting an amicus brief in support of the applicant in the Daley case, arguing that a life estate interest is a property interest and not an interest in trust.   In a recent Massachusetts Supreme Judicial Court decision, Mary E. Daley, Personal Representative v. Secretary of the Executive Office of Health and Human Services (the Daley case), the Court reversed the Superior Court’s decision and provided clarity in determining that a life estate reserved in a deed is in fact a property interest and not an interest in trust.  While this may seem like the common sense result, a little history of the case and circumstances surrounding it is in order to fully appreciate the gravity of the decision.  The article will also explore the pros and cons of creating a life estate with the remainder interest in the hands of children versus the remainder interest into a Medicaid irrevocable grantor trust along with the income, gift, and estate tax implications. 

First, let’s look at the history of the Daley case.

In the Superior Court of Daley v. Sudders, Worcester Superior Court Civil Action Number 15 CV 0188D (“Daley”), the Court determined that a life estate was essentially an interest in a trust and, as a result, trust assets were considered available for purposes of MassHealth eligibility.  The facts of the case are quite simple and common but the result was troubling.

In Daley, an individual who owned a condominium transferred her interest in the condominium to an irrevocable trust and retained a life estate in the property in a quitclaim deed and continued to live there for approximately six years until, for health reasons, the life tenant was admitted to a nursing home.  The individual applied for long term care and the application was denied.  The Superior Court upheld the denial for two reasons.  First, the Court found that the assets of the trust (i.e., the condominium) were countable because the applicant had retained a life estate in the property.

Specifically, the Court stated:

“Property held in an irrevocable trust is a countable asset where it is ‘available according to the terms of the trust[.]’  130 Code of Massachusetts Regulations Section 520.023(C)(1)(d).  If a Medicaid applicant can use and occupy her home as a life tenant, then her home is ‘available,’  See Doherty v. Dir. of the Office of Medicaid, 74 Mass. App. Ct. 439, 441 (2009) (home was available because applicant retained the right to reside there during her lifetime.)[[1]]

“This Court concludes that Mr. and Mrs. Daley’s condominium was available to them because they retained life estates under the deed, and continued to use and live in it after establishing the Trust.  It is undisputed that they lived together at the condominium for about six years after they established the Trust until Mr. Daley was required to be admitted into the nursing facility.  It is also undisputed that Mrs. Daley continues to live in the property.”

The Court also found that as a result of certain other provisions contained in the trust, the trust assets also nevertheless would be considered countable.  This article focuses only on the Court’s reasoning regarding retention of the life estate and makes no conclusion about the correctness of the other provisions of the trust that caused the assets to be countable.  

The Massachusetts Supreme Judicial Court in the Daley case stated that since the Daley’s retained a life estate in the deed and transferred the remainder interest in their home to the trust, that the trust has no property interest in the home during the Daley’s lifetime.  Furthermore, their continued right to live in the home or collect income from the home cannot be deemed income received from the trust since the trust has no property interest during the Daley’s lifetime.  Instead, the Court acknowledged that the life estate is an asset of the Daley’s that could be sold, mortgaged, or leased.  The Court further acknowledged that if the property were sold, the life tenant is entitled to a portion of the proceeds calculated in accordance with an actuarial evaluation of the life estate.  Finally, the Court concludes that “where the irrevocable trust does not own the life estate in the applicant’s primary residence, the continued use of the home by the applicant pursuant to his or her life estate interest does not make the remainder interest in the property owned by the trust available to the applicant.”  This ruling reversing the Superior Court provides clarity that a life estate is in fact a property interest and not an interest in trust.

Since life estates are so commonly used, but perhaps mistakenly understood, the balance of the article will explore the pros and cons of creating a life estate with the remainderman the children versus the remainderman being an irrevocable Medicaid grantor trust and the related income, gift, and estate tax implications.

What is a Life Estate?

A life estate is not a trust according to the MassHealth regulations.  A life estate is established when all of the remainder legal interest in a property is transferred to another, while the legal interest for life, right to use, occupy or obtain income from the property is retained.  130 Code of Massachusetts Regulations 15.001.  For example, in the event a husband and wife were to transfer their home to the children and retain a legal life estate in the property, they would in essence have the right to live there the rest of their lives as well as rent the property, collect the rents and report the income and expenses on their individual income tax returns.

What is a Trust?

A legal devise satisfying the requirements of state law that places the legal control of property or funds with a Trustee.  It also includes, but is not limited to, any legal instrument, devise, or arrangement that is similar to a trust, including transfers of property by a Donor to an individual or a legal entity with fiduciary obligations so that the property is held, managed or administered for the benefit of the Donor or others.  Such arrangements include, but are not limited to, escrow accounts, pension funds, a similar device as managed by an individual or entity with fiduciary obligations. 

1.      Will the beneficiaries of the life estate receive a full step-up in basis for capital gains tax purposes upon the death of the life tenant and what are the tax benefits? 

Although property subject to a life estate avoids probate and in many ways feels like it has been given away, it really has not been given away for estate tax purposes and will be includable in the individual’s gross estate following the life tenant’s demise under Internal Revenue Code Section 2036(a)(1) at the full fair market value on the date of the decedent’s death.  This Internal Revenue Code Section indicates that the gross estate will include the value of all properties to the extent of which the decedent at any time made a transfer but retained possession or enjoyment of the property or the right to the income from the property.  As shown in the definition above, a life tenant has effectively transferred the property and retained the right to enjoy it for the rest of their lives thereby effectively causing the full value of the transferred property to be includable in their gross estate ensuring the full step-up in basis for capital gains tax purposes under IRC Section 1014(a).  However, in the event husband and wife had a life interest in the property, there would only be one-half included in the estate of the first spouse to die.  This would result in only a one-half step-up in basis.  Upon the death of the surviving spouse, again only a one-half interest would be included in his/her estate which would result in only a one-half step-up in basis.  Basis by definition is essentially what you have paid for the property or what you are deemed to have paid for the property. This basis step-up means that the person who received the property as a result of another person’s death will get a cost basis in the property equal to the fair market value of the property as of the date of death of the person who died owning it. In other words, it is as if the person who inherited the property paid fair market value for it even though they did not.  This can effectively eliminate capital gains tax on such property if it is sold shortly after the person receives it, as will be shown in the example below. 

Planning Note/Example:  Let’s assume that mom and dad purchased their property 30 years ago and decided to establish a life estate by transferring the remainder interest to the children.  Their cost basis in the property was $200,000 consisting of a $50,000 purchase price and they put $150,000 into the property in the form of capital improvements during their lives.  As of the date of their death, that property was valued at $600,000.  The children, assuming they do not live in the property, would now like to sell the property and are concerned about their income tax consequences associated with the sale. 

Conclusion/Tax Benefits:  Since the property is includable in the estate of the decedent because it was owned in a life estate, the children’s cost basis for income tax purposes will be stepped up or equal to the fair market value of the property as of the date of death i.e. $600,000.  Therefore, when the property is sold for $600,000.00 with a basis equal to $600,000 there would be no resulting capital gains associated with that sale, thus enabling the children to keep the full $600,000 proceeds without paying any income tax. 

    2.      What are the tax implications if the property were instead just gifted outright to the children during the life of the parents?

Under this approach the parents would have in effect given their cost basis to the children along with the property.  Therefore, if following the death of the parents the children would still like to sell the property, their basis would be the same basis as it was in the hands of the parents i.e. $200,000.  See IRC Section 1015 (for carryover basis rules.)  If the property was ultimately sold for $600,000 minus a $200,000 cost basis in the hands of the children, the result would be a $400,000 gain.  Assuming a 20% federal capital gains tax rate, 3.8% Obama care tax, and 5% state tax rate, the result would be an $115,200 income tax liability for the children.  In this case, the use of a life estate would result in a savings of approximately $115,200. Please think twice before you ever gift your house to your children while you are living, as nothing good can come from it.

Editor’s Note:  This is the first installment of a three-part REBA News series. The second installment will be published in the January/February issue.  It will discuss the tax pitfalls of life estates with the remainder interest in the children and some preferred alternative options.

Todd Lutsky, of Cushing and Dolan, P.C. Concentrates in the preparation of estate plans, including the use of revocable trusts, joint trusts, irrevocable life insurance trusts, qualified personal residence trusts and family limited partnerships. He has a specific interest in Medicaid and asset protection planning for the elderly, assisting clients with the Medicaid application, preparation and eligibility process of obtaining MassHealth benefits, fair hearings, and advanced Medicaid planning and the preservation of assets through the use grantor irrevocable income only trusts. He hosts  his own radio show called, “The Legal Exchange with Todd Lutsky,” and it can be heard every Saturday at 5:00PM on WRKO 680AM and on four other local stations. Todd can be contacted at tlutsky@cushingdolan.com.

Co-chair of REBA’s estate planning, trusts and estate administration section, Leo Cushing is the founding Partner of Cushing & Dolan, P.C., specializing in closely held businesses, taxation, sophisticated estate planning, elder law and real estate. Leo's practice includes all aspects of sophisticated estate planning techniques, asset protection, trust planning, charitable giving and resolution of tax controversies.  Leo has written and lectured extensively on all aspects of taxation and estate planning. Leo is a much sought after speaker as he is able to articulate complex issues in a way that is clear, concise and easy to understand.  Leo’s email address is lcushing@cushingdolan.com.

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[1] Doherty did not involve a retained life estate; rather, in Doherty the applicant deeded the entire fee into trust, which contained a provision that allowed the applicant to reside in the home.  Doherty, 74 Mass. App. Ct. at 441.