Page 18 THE MALDEN ADVOCATE–Friday, February 24, 2023 WHY IRREVOCABLE TRUSTS ARE MOST OFTEN A BETTER CHOICE OVER LEGAL LIFE ESTATES B y placing your home, rental property or other assets into an irrevocable trust, the five year look back period will begin. Five years later, the assets in the irrevocable Trust will not be countable for MassHealth eligibility purposes. Furthermore, not only is probate avoided upon the Settlor’s death (i.e. the creator of the trust), but probate would also be avoided if a child/beneficiary were to die prior to the Settlor (i.e. parent). The predeceased child’s children or even grandchildren would become a beneficiary of the trust and that child’s beneficial interest in the trust would escape the probate process. If that child leaves minor children behind, the trustee would follow the terms of the trust and pay for items such as medical expenses, educational expenses, house expenses, etc. If, on the other hand, a parent chooses to deed the home or rental property to his or her children directly, while reserving a life estate, and one of the children were to predecease the parent, that child’s remainder interest in that property would be part of his or her probate estate. As estate planners, we try to avoid the probate process whenever possible for many reasons, such as cost and time delays. This could present a problem many years down the road if no one takes steps to probate the estate of the predeceased child. Furthermore, in a legal life estate situation, the parent would need the consent of the child who has a remainder interest in the property in order to sell the property. With an irrevocable trust, the child has no current ownership interest. The trustee is free to sell the real estate any time without the consent of the child. If the trust is drafted as a grantor-type trust, the capital gain exclusion of $500,000 on the sale of the principal residence will still be afforded to the Settlor of the trust. If it was rental property that was sold, the entire capital gain would still be reported by the Settlor on his or her tax return. The children would not be reporting any of the capital gains transactions on their own tax returns. The trust would actually file a tax return as a grantor-type trust and then issue a grantor letter to the Settlor (also referred to as a Grantor). With a legal life estate, the capital gain on the sale of a home or rental property would have to be allocated to the parent who reserved the life estate and the children who are the remaindermen. The computation for IRS purposes is based on the Book Aleph table and the IRS Section 7520 interest rates. For MassHealth purposes, at least for now, the computation is based upon the Social Security POMS tables. Hopefully, MassHealth will agree to use the IRS tables as the IRS tables are much more favorable to the life tenant if the home were to be sold, for example, as less of the net sales proceeds will be placed back on the table for the life tenant only to be included as a countable asset for MassHealth eligibility purposes. With an irrevocable trust, if the home or rental property is sold and converted to cash, the cash is safe inside the irrevocable trust. There is no risk of the trust assets becoming countable. If the parent decides to serve as trustee and there is a trust provision allowing for use and occupancy of any real estate held in trust, then any real estate abatement offered by the city or town will remain intact. It will not be lost due to placing the home into trust. The trust must be absolutely clear that there can be no principal distributions to the Settlor under any circumstances and that the Trustee must strictly adhere to the terms of the trust and comply with each and every fiduciary duty owed to the remaindermen of the Trust. Joseph D. Cataldo is an estate planning/elder law attorney, Certified Public Accountant, Certified Financial Planner, AICPA Personal Financial Specialist and holds a master’s degree in taxation. Malden Catholic 4-0 Senior Night Victory vs Smithfield Advocate Staff Report M alden resident Preston Tully dominated the crease for Malden Catholic en route to a 4-0 victory over Smithfield (R.I.) on the Lancers’ Senior Night at the Malden Valley Forum rink. Tully, a Malden native, responded to the nod to start his first varsity showdown, and he brought the Lancers (5-10-3) a pivotal spark with his 25-save performance, as the team collected its second shutout victory of the season. “It was a special night getting the shutout win on senior night,” said Tully. “The boys have worked hard all season and it was great to get rewarded tonight for all that hard work.” Michael Doe, Michael Bourgeois, Jaylen Chu and Connor Seeley collected goals for the Lancers in their third period surge, paving the way for the Lancers’ fifth win of the season. Three Malden residents – Conner Seeley, Preston Tully and William Fosdick – were among those recognized on Senior Night at Malden Catholic. The Lancers were also able to celebrate the night with a shutout win. Pictured from left to right, are; Daniel Zizza, Trevor Strauss, William Fosdick, Conner Seeley, Michael Bourgeois, Coach Chris Kuchar, Tyler Fukuda, Preston Tully and Brendan Zinck. (Courtesy photo) Michael Bourgeois is shown with his dad, Mike, brothers Shane and Matthew, mom, Christine and MC President John Thornburg. (Courtesy photo) Malden resident William Fosdick is shown with his parents, Jon and Mirabel, and MC President John Thornburg. (Courtesy photo) Malden resident Preston Tully is shown with his brother, Carson, sister, Emerson, mom, Deborah, dad, John and MC President John Thornburg. (Courtesy phots) Tyler Fukuda is shown with his brother, Matthew, mom, Jennifer, dad, Tsuyoshi and President John Thornburg. (Courtesy photo) Brendan Zinck is shown with his sister, Audrey, mom, Cathy, dad, Brian and MC President John Thornburg. (Courtesy photo) Trevor Strauss is shown with his dad, Wayne, mom, Debbie and MC President John Thornburg. (Courtesy photo) REAL ESTATE TRANSACTIONS BUYER1 VITAL, NIFLORE BUYER2 VITAL, JOHNY V SELLER1 MEZINI, GENCI SELLER2 MEZINI, TATJANA Daniel Zizza is shown with his brother Christian, mom, Stephanie, dad, Stephen and MC President John Thornburg. (Courtesy photo) Malden resident Conner Seeley is shown with mom, Rose, sister, Haylee, dad, Darrell and MC President John Thornburg. (Courtesy photo) Copyrighted material previously published in Banker & Tradesman/The Commercial Record, a weekly trade newspaper. It is reprinted with permission from the publisher, The Warren Group. For a searchable database of real estate transactions and property information visit: www.thewarrengroup.com. ADDRESS 55-57 ASHLAND ST CITY MALDEN DATE 02.01.23 PRICE 885000
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