we have a very valuable show for you tonight here on LIFE Ahead.

I'm Sandy Thomson, the host of the show but I have two attorneys here that not only will answer a lot of questions I have but any questions you have as well.

>> Now our main topic is going to be about tax considerations that when estate planning but we can get off that topic a little bit if you have something legal to ask here that's within that vein now I'd like to introduce you to Terry Kiffer and we'll start Dale, very nice to have you gentlemen.

>> And this is Troy at the far end here.

He's been on a number of times so you may know him and Will's been on before as well.

>> We talked about myths and misperceptions.

That's correct.

Thank you for having us back.

Oh, happy to.

And I will tell you these gentlemen are both from a firm that's located in the Warsaw area.

But you know what?

If you're watching and you're from that area, you can call us toll free.

You'll see the number on the bottom of the screen here throughout the show and if you just put it one 866 in front of that, it'll be toll free for you.

So let's see how many times we can trip them up on questions.

>> Let's start with you, Troy.

Let's talk about a different taxes that people should be concerned with when they're working on their estate planning.

>> Yeah, sure.

Absolutely.

When we're talking about taxes we primarily focus on taxes after people pass away, OK and how to minimize those as much as possible.

>> OK, so that's going to be the main focus of our conversation this evening.

>> Your taxes after you've passed away but you're preparing for that before.

>> Yes.

OK, you have to have things in place prior to that just like with all estate planning.

Sure.

To make sure that everything runs smoothly.

You're not paying more taxes than you have to and that's why one of the reasons we want to talk about this now so that people can begin to do some planning.

>> OK, federal gift tax and estate taxes how do those work?

Well, so just to back up one smidge.

The three big ones that we deal with are the income tax.

verybody knows the area, the federal gift and estate tax and the capital gains tax and to get back to the federal gift and estate tax how that works you can give away during your lifetime right now up to twelve oint nine million dollars per person.

So if you're married that's twenty four million dollars between the two of you without paying a penny of federal gift or estate.

>> I think I'll just do that tomorrow.

On top of that you can give away up to seventeen thousand dollars a year to as many people as you could line up around this TV station until you ran out of money without even filing a gift tax return to declare that you've made a gift.

>> So does that make a really big difference for people when their taxes are being finished or done after they passed?

>> Typically only very, very it's very rare that somebody will have a federal estate tax return now that could be changing here in a couple years because after twenty twenty five if Congress does nothing that federal gift and estate tax exemption that's twelve point nine million dollars now is going to go down to around six million dollars per person.

>> So if you've got more than six million dollars, give somebody a call.

Well, OK, you said it might go down so it's not a definite 20 25 yet if Congress doesn't act it will sunset at one point nine million will go down to six million.

I would say the way Congress is it would be very dangerous to make any assumptions about what's going to happen.

So plan for the worst and hope for the best.

>> You probably depend on the election next year would be my guess.

Oh yeah ok ok so what should people do anything about that now if they're within that financial category.

>> What do you think.

Well so I have some clients that are very concerned about you know they may be on that borderline of more than 12 million dollars but less than twenty five.

Yeah.

ensure that they get things off of their balance sheet before the taxes go down and they're subject to a bunch of federal estate tax is that they can make lifetime gifts of assets now and when you've got twenty four million dollars it's not so bad to give things away.

>> Right?

Well, you can right.

OK, let's talk about gifting.

All right.

Federal gift tax you've mentioned about that.

Are there other ways people can gift things financially that might be helpful and that's estate planning drawing.

>> Yeah, well during lifetime I think people don't realize that they can gift as much as they want subject to the tax after they pass away.

But if a gift is made while people are alive, neither the person giving the gift nor the person receiving a gift will only taxes on that.

>> OK, so then is it a good idea or not a good idea to to start gifting before you pass away?

>> Say you want to give so much to each child every year or grandchildren or something like that DREUX from a tax perspective and just is from an estate planning perspective it's really a neutral decision but from a Medicaid planning perspective which is something we talk a lot about on your show.

>> Yes, gifting is really not advisable.

Yeah, I understand that.

And you know, if you want this very often, you know that we do reference the Medicaid issues that have the five year look back if you started to get things away they might look at that is something we're going to check into this and see if they were trying to do something not ethical.

>> OK, jump in here, Sandy .

Sure.

I would never counsel a client not to make gifts.

It's just that you have to gift with a plan so just make sure that what you're doing is, you know, part of a comprehensive estate plan.

Make sure that you understand the implications of the gift.

Got it.

If you have an early diagnosis of dementia and it looks like you're going to go into long term care in the next five years, yeah, that's not the time to be making gifts.

So and then one other downside and like I said, I do agree gifting is a neutral thing.

>> There's no right or wrong answers.

But one of the downsides of gifting during your life is that the donee, the person who you give the gift to, they get your tax basis.

So things like stocks that have a tax basis or real estate that hashtag basis you make a gift during your life .

The person you give it to gets your tax basis if they ever sell it for capital gains purposes.

So you lose out on that step up in basis to fair market value as of the date of death for capital gains tax purposes.

>> Yeah, I'm glad you brought that up.

I am curious about this step up basis.

>> I don't understand what that is.

Yeah it really is a pretty simple concept when you think about it if you buy a stock or a piece of property so you pay one hundred dollars and nineteen fifty and over time that asset will appreciate it'll grow in value.

Well when you sell that and you realize a gain that's a capital gain and except with some exceptions that the federal tax law always gives some exceptions.

Sure you're going to owe capital gains on that.

One of the big exceptions is when a person passes away and they give that piece of property or that asset to a child, they get a step up in basis meaning that as far as capital gains calculations is concerned, they take date of death value, not the original to original purchase value is that only if it's given to a grandchild of U.S. or anybody know it as long as it's in the beneficiary gifting after someone passes I say because that's in the decedent's taxable estate so that's been subject to federal estate tax.

Even if there is none then it gets a step up in basis to date of death value.

>> OK, that's making a lot more sense to me.

Again, don't forget to give us a call here at (969) 27 twenty with any questions you might have for Will or for Troy.

>> OK let's talk about a lifetime credit.pWhat type of tu expect to see on it on individual assets?

>> Try to start with you?

Well maybe we'll can jump in and is a little more knowledgeable about that.

OK, all right.

So when you get over that twelve point nine million dollar unified credit so you can give away that amount while you're alive or at your death without paying any taxes if you get over that number or if that number goes down historically looking back to maybe the nineteen nineties early 2000s that number was more like 600000.

>> It's been in the several million dollar range about five million dollars ever since 2006 or so.

But if you get above that number in lifetime gifts or gifts at your death you will be subject very quickly to about 40 percent taxes on any amount over that.

>> That's huge.

That's really wow.

OK, good to keep in mind.

How about portability?

I don't understand what that means but I know that has something to do with taxes and estate planning, right?

>> Yeah well it used to be that it didn't make a difference to that federal exemption that that almost 13 million whether people were married or not they each had their own individual federal tax exemption and that created some problems we had to use some trusts and some other planning tools in order to make sure that when the the first spouse passed away their exemption was not lost and then when the law changed it, they introduced portability which means that with a filing that exceeds deceased spouses exemption would go to the surviving spouse.

So basically double the surviving spouses exemption if there's a trust, is that what you're saying?

>> No.

And now it's sort of eliminated the need for trust or OK for most people OK because you're trying to you're the trust to make that work but so husbands and husbands and wives used to have to a lot of times have separate trusts and then they would try to equalize their estate values.

I see so that when one passed away they would use their credit and not lose it.

>> Got it.

With portability you can now use the unused spouse's portion of their credit.

You can pull it over to yourself.

So instead of having only twelve point nine million you can have the full twenty four if all of the assets are owned by the surviving spouse.

>> OK, is it important that we understand well understand and know that word portability is that going to come up a lot in estate planning?

>> Not necessarily.

There are very few clients at this point who have the kind of net worth where that's a huge concern but it does come up it's good to understand because if you're borderline or you have an amount of assets and that exemption goes down later on due to some changing winds politically or whatever is the case you want to be familiar with that.

You want to know somebody who you can talk to about that issue if you have substantial assets or even if you don't honestly because you never know where that number is going to go through.

There were there was a year where there was no federal estate tax exemption.

So just because it fell through the cracks and Congress didn't act and think a lot of people paid estate tax that year.

>> So again, like both of them have mentioned a lot of it may have political overtones.

>> You know, when it comes to tax laws, Troy and many not so many years ago we were talking about state inheritance tax.

>> We don't talk about that anymore.

>> Let's talk about why.

No, we don't actually Indiana did away abolish the state inheritance tax and some people may not know that that really.

>> Yeah, I talk to people all the time were surprised by that because it used to be such a huge part of a problem of the state.

Right.

And quite frankly some law firms lost a lot of business because that was their specialty.

Yeah, I a number of law firms they hired one person that's all they did was inheritance tax filings and where is the money coming from instead of that now to the state there's no question I do not know.

>> OK, any ideas?

Well, I mean obviously they're going to replace that void with something.

>> Yeah, I guess I don't know.

I don't know that state income taxes haven't necessarily gone up all that much but I'm sure they've replaced that with some kind of revenue stream.

>> But it's nice to know, you know, for many people as they're doing estate planning that you don't have to think about inheritance tax anymore.

I remember like my parents and grandparents, you know, using that phrase frequently.

So yeah, good to know it wasn't the easiest form to fill out.

Oh really?

It was a little complicated.

I mean I think it probably gave the federal return a run for its money.

>> It wasn't the easiest thing to to work through.

Did it work I mean did it involve not only your the money you actually had but all your assets in the values of them?

>> Yes, that's correct.

OK, yeah and there was a formula and certain exemptions and so yeah you almost had to hire an attorney in order to to work through it so that erm you're talking about that guy was needed at the time and not so much now you never know things maybe maybe change it and go back to you never know how about federal gift and estate tax retouching a little bit.

>> Anything else you can add.

Well I mean where is that headed as far as we can tell it doesn't sound like Congress is inclined to act at this point to do anything about it.

When the current president took office there were talks of getting rid of the step up in basis and unrealized capital gains and all kinds of new tax, you know, sort of ideas.

Yeah, none of that has really come to fruition at this point.

>> So I think everybody's just inclined to probably kick the can down the road a little.

But the problem is and it was built in with that sunset sunset clause yet if they do nothing it will go away and that's what I got.

>> I understand but there's nothing so they're playing to their strength and so if they don't do anything the exemption will go away.

So we'll just have to wait and see OK and wait and see and that happens a lot in our world doesn't it?

>> Whether we're talking about estate planning or anything how people responded to the lifetime gift and estate tax any any changes or possible changes coming down the road?

>> I wouldn't say that people have to terribly responded a lot of times that many people are still stuck in the idea of any time I give assets away then I'm going to have a gift tax or something like that or they look at that IRS annual exemption number.

So the annual exemption being the amount that you can give away to as many people as you want without even declaring to the IRS that you've made a gift.

So with gift splitting gift splitting is the concept where a husband and wife can each gift to a person that's seventeen thousand.

>> So if you're two parents want to gift you thirty four thousand dollars, they're free to do so without filing a gift tax return.

So I mean clients all the time are surprised that they can get by with OK even if I do gift in excess of that number I'm not going to actually have any tax to pay because I understand gifting is kind of a dirty word.

I feel it feels like everybody's so worried about oh my gosh which in the nursing home in the Medicaid world for sure gifting is very problematic because Medicaid only lets you give away twelve hundred dollars a year to family members before they start imposing transfer penalties for divestment.

>> If you are currently are going to plan to be in a nursing home or assisted living I mean I don't know that Medicaid I don't know that anybody plans for it but in the event that something happens to you, you know you have a stroke or you go to rehab and then you just have to stay in skilled care.

Yeah, a lot of times we're really behind the eight ball if somebody has prior gifting of several thousand to hundreds of thousands of dollars over the last five years got it.

>> When you talk about misconceptions that is one we see all the time is people think that they can give seventeen thousand dollars for any reason whatsoever and they've done that over the last few years and then they come in to do Medicaid planning because the need is there.

Then we have to tell them well you gifted seventeen thousand dollars, you know a number of times you're done and they think they think that that was OK and it was for for federal gift an estate tax.

It wasn't for Medicaid.

>> So two different programs and different laws got it.

A charitable gift giving we'll put it that way not gifting iving or maybe it's the same thing like oh if you're going to donate things noncash or cash, are there any changes in then?

>> I mean wasn't it was it five hundred dollars you were allowed for noncash donations am I correct or not correct?

>> I'm not sure on any of that.

>> I do know that charitable giving is a really good way to reduce income tax particularly with things like IRAs where you have required minimum distributions.

And that's right countable income.

A lot of times people will donate.

There are LMDs to charitable organizations and you have to plan this beforehand.

>> Yes.

You know, even if you just designate a beneficiary of an IRA a lot of times as a charitable organization.

So if you left an IRA to anpindn years to pull that money out and they've got to pay income tax so they're really only getting seventy five cents on the dollar for whatever is in that account no matter how many years it takes them, no matter how when they pull it out I mean they're going to be subject to whatever their personal income tax rate is.

So but on the other hand, if you leave that to a charitable organization, a church, a charity if I have a one say three something like that Pibor, PBS they don't pay income taxes so they get a hundred percent of that money don't have to pay any taxes on it.

So your dollar goes farther when you donate to charity when it comes to IRAs 401k is other qualified assets so you name them on the beneficiary then can you get what you're saying ok yes OK. >> Is there any way to reduce or avoid income taxes with qualified accounts?

>> Troyes that makes sense and I should say that we're not financial planners and so this is kind of getting into the I understand realm of financial planning.

So we're attorneys we're probably not your attorney.

So I you should have the disclaimer please speak with your attorney or financial planner.

>> All right.

Any decisions to make regarding this but there is a way to convert to a Roth IRA.

OK, would address some of those income tax issues?

I don't know.

Well, if you can so another great benefit to avoid some income tax on qualified accounts like that if you have a surviving spouse you can leave them your IRA and they have their entire remaining life expectancy to take that money out of the IRA as opposed to individual which the secure act a couple of years ago changed the rules so that an individual typically only has ten years to take all the money out of the IRA.

So that's an inherited IRA.

You've got ten years if the trust is a beneficiary of an IRA a lot of times they have only five years to take all of the money out but if you leave IRAs to a surviving spouse, they're going to be able to spread that income tax over a number of years a surviving spouse but it wouldn't apply to like leaving it to your children or grandchildren.

There are always exceptions disabled children, certain people who are you know, within the same kind of age group as you are who maybe aren't even children.

Yeah, there's there's a number of exceptions when you when you mentioned, uh, disabled so we're talking about a trust that you would maybe be setting up for a special needs child or grandchild.

>> Is that what you mean?

>> No, I missed the question.

I was drinking my water.

I'm so sorry.

Please don't kick me off the wall.

>> I want that that's allowed Dreux anything to add on that?

I mean I know when we've had attorneys here before they often mentioned that it's sometimes a good idea if you have a special needs child in a family to set up a trust beforehand.

I mean that goes into your will even whatever.

>> Yes, absolutely great.

A great thing to do and other than the IRA beneficiary language, I'm not sure how much tax savings there would be for that person but there are some advantages to giving qualified funds.

IRA Yeah.

To children who are disabled.

>> Right.

They get some special treatment on paying taxes on that and one of the other benefits of that of that I know from your attorneys being here is that if if it's a special needs or a disabled child they may be getting Medicaid and may be getting therapies paid or schooling or special.

>> You know, Sandy , that's one of the biggest benefits of a supplemental needs trust is that you can leave an inheritance to children who are otherwise on public benefits receiving SSI or Medicaid, things like that without disqualifying them and making them spend all of that inheritance on what they need so they can supplement their life , improve their life without disqualified from other benefits.

>> Yeah, OK. All right.

Steven, you had a drink of water.

You still got the question.

We have a question here tonight from Ron Ron, thank you so much for watching us here on LIFE Ahead.

>> And he said If I knew I was going into a nursing home and had millions, could I gift that all today and cover nursing home cost and pick up Medicaid after five years?

>> Wow, that is very interesting.

That's a great question.

OK, you take it then.

Yeah, the answer is yes.

>> Oh really?

Yeah that's a great question.

Yeah that's so great.

I want to say I want to read that again so the rest of you if you didn't hear before did Ranford if I knew I was going into a nursing home and I had millions could I get that all today and cover nursing home cost and pick up Medicaid after five years?

>> Yeah Medicaid has a total disregard for any gifting prior to five years of the application.

>> They don't pay any attentin to it.

They don't care.

They don't care.

They don't ask for the documentation.

>> It's completely free and clear.

OK, Ron, you let us know how so one of the one of the big red flags though with this question and it's a great question and we'll hire you today but one of the big problems you run into a lot of times with getting everything liquidated and gifted is that if you have IRAs you maybe have a million dollars to million dollar IRA.

You cash that out in one year to gift it to your children or to whoever you're going to run into a big, big income tax bill.

So a lot of people are very turned off by that.

>> Got it.

OK, well we're down to about forty five seconds of our show right Troy, very quickly, what advice would you give to our viewers in this area of tax considerations?

>> Yeah, as most people know, the tax scheme is very can be very complicated, very detail oriented.

There are a lot of exceptions.

Don't go it alone.

Speak with a tax attorney, elder law attorney, accountant, financial planner, get some advice before making any large decisions regarding gifting just so you can avoid some common problems.

>> OK, all right.

Good advice.

And I do want to mention by the way, last week on our show we talked about the senior information fair that's coming up the 21st of September.

Troy is going to be one of the speakers there so you can save some questions for him there.

>> September 21st Edmonstone I'll be speaking in the afternoon so plan your visit accordingly.

OK, sounds good.

>> Will Troy, thank you very much.

Thank you so much for having us.

Thank you all for watching and I'll see you right here again next Wednesday night at seven thirty.

Stay safe and stay healthy.

Good night