How Does the Medicaid 5-Year Look-Back Period Work if I Have a Castle Trust | Weekly Wednesday Wisdom Webinars

Weekly Wednesday Wisdom Webinars March 4, 2021

Certified Elder Law Attorney and Financial Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm.

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Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.


On this week’s webinar, attorney and advisor Chris Berry of answers the below questions.

  • How does the Medicaid 5-year look-back period work if I have a Castle Trust? Does someone or the government review my documents?
  • (pop-in question) Does a Castle Trust protects assets from all creditors?
  • (pop-in question) If you have a trust what is involved in having it switched over to a Castle Trust?
  • (pop-in question) What is the legal name for Castle Trust?
  • Is savings account with POD to executor a faster way to provide funds for final expense sets than a trust provision?
  • May income to a Castle Trust be defined to include capital gains, to be taxed at a lower donor rate?
  • (pop-in question) What federal tax law created the Castle Trust?
  • When administering a trust with Separate Share/Legacy Inheritance Provisions, how does that work?
  • (pop-in question) When the home deed is in the name of one spouse and the mortgage is in both, how do you separate ownership in case of one spouse trust? What happens if they decide to sell taken into account the mortgage was inflated due to the business of the other spouse?


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Episode Transcript

We’re at about 100, almost 100 subscribers. Once we get to 100 subscribers, there’s some different things we can do. So, if you wouldn’t mind, maybe after the webinar or in a separate window, click the link. If you wouldn’t mind subscribing I’d love that. All right. We’re live there. Let’s start the video. Everyone, let me know if you can hear me all right. Just put in the chat that you can hear me. We already have a… Hi, Vicky. All right. We already have a question submitted. All right. Gary, thanks. He can hear me.

All right. So we’ll go ahead and get started. Angela, I saw your question just come in. We’ll make sure to go ahead and we’ll get to that one. Ed, thank you. So, happy Wednesday, everyone. We do these every Wednesday at 1:00. I will not be on next week. Instead, we’re going to have someone else from my team, Mark Ball, he’s a retirement legacy planner with the team, answering your questions. I will be recovering from a hip replacement, which these days is a out person or outpatient surgery. So, I should be walking home that day, but the next day I’m not going to be hopping on. So we’ll have Mark hop on.

We’ll still be going live at one 1:00, but you’ll see a different face next week, so feel free to still go ahead and submit those questions. If there’s something that maybe Mark can’t get to for whatever reason, we’ll make sure to follow up, but otherwise we’ll be business as usual. If you have any questions for our firm, I’m going to be out for maybe a couple of days, but our team will be available.

I always like to start with a positive focus, so my positive focus this week is that I’m having that hip replacement surgery within a week, so next Tuesday, actually. I’m excited to get that done, something that’s been causing me a lot of pain. You might be thinking, “Well, he’s pretty young to have a hip replacement.” But I’m pretty big guy, 6’5″, and I played a ton of sports, a lot of basketball and soccer and a lot of wear and tear on the joints. It was about time to get that done.

Another positive focus is the weather is starting to warm up, so that’s a nice thing. Once I get out of my surgery, I’ll be walking outside and enjoying the fresh air. So, that is my positive focus. I like to always start these with some type of positive focus, because it’s a good way to throw positivity out into the world.

And with that, we’ll go ahead and get into the questions and answers, so let me share my screen. Give me just a second. I click this button, click this button, and we go over here. Then we go over here. I hit this. Then I hit that, and we should be going. Just a moment here. All right. There we go. All right. So, very important, at all times understand this is general advice. It’s not specific to your situation. If you do have questions, want to see how this applies to your situation, feel free to book some time on my calendar. With that said, we’ll get into the questions.

So, these were submitted ahead of time, and if you do have questions or if something’s unclear as I’m going through things, feel free to go ahead and interrupt me. The first question, how does the Medicaid five-year lookback period work if I have a castle trust. Does someone or the government review my documents. Any time we have a trust, one of the benefits of a trust is it really, it’s a private document, meaning that this is a private contract between you, the person that sets up the trust called the grantor settler, and the trustee, the person who administers the trust and the beneficiary.

So, there’s no government review of any types of trusts. Banks, financial institutions, they’re not in charge of being a referee of these documents, nor is our firm. If we’re the ones that drafted the documents. The trust, it’s a private document between you and the beneficiaries. There is no government review, but what the person is getting at here is this idea that Medicaid, which is a governmental program that pays for long-term care costs… Medicaid, if you remember, and we’ve talked about this before, the way a castle trust works is we move assets into the trust. So, we fund assets into the trust, and then what that does is starts to race, where if we make it five years from the time we move the assets into the trust, then everything inside of that trust is protected from that nursing home or Medicaid spend out.

Why is that important? Because right now a nursing home costs about eight to 12, 13, I’ve had $14,000 per month. Right? And this is where Medicaid can come in to help pay that cost of care. To qualify for Medicaid, there’s asset tests involve, whether you’re single or married; but one of the strategies, if we’re concerned about long-term care costs, is we move assets into the trust. What this does is it starts this five-year race. Then once we make it five years before we need a nursing home, then everything inside of the trust is protected 100% from that nursing home or Medicaid spend out.

So, now we can have Medicaid pay that base level of care to protect against that devastating cost of nursing home care and then a pot of resources available to pay for additional services to improve our quality of life or for a married couple, ensure that if one spouse needs longterm care, that healthy spouse is not completely impoverished. So, the question that I think this person was getting at is how do they double check on this five-year lookback period. Do you have to keep records or an accounting? Do you have to share that with anyone?

Really what happens is at the time that someone enters a nursing home… So, kind of clear this out. At the time of someone entering a nursing home… So, let’s say now, for whatever reason, your loved one has to go into that nursing home. Okay? So, they went into rehab. They had some type of event. But now they’re entering the nursing home, and they’re going to stay there. Well, normally you’re going to have that eight to 12, 13, $14,000 per month, nursing home bill starting basically, once you enter that nursing home once you’re off of Medicare. But then, to qualify for Medicaid… So now let’s say you do want to qualify for Medicaid, then what the Medicaid office can do…

And this is where we have the Department of Health and Human Services… It used to be DHS. It used to be Department of Human Services. Then I think they changed the name of Department of Health and Human Services. So, it’s DHHS. What they do is they’re going to assign a caseworker, and that caseworker has the ability to go back five years to ask for you to gather up any bank records, investment statements, tax returns. So, it’s this caseworker that depending on how, I guess, diligent or overreaching that caseworker is, that’s going to determine what they’re going to look for for this previous five years.

So, it’s not so much of when we move the assets into the trust. It’s just understanding from the moment we enter the nursing home, the moment we enter the nursing home understand that we’re going to have to maybe provide records back five years. Okay? They always ask for different things. Sometimes I’ve had them just ask for the last three months of bank statements. Other times I’ve had a case worker… One of the things we did is we fixed up the house by hiring a commercial painter, to paint the house as a way to spend down some of the money at the last minute. Well, the caseworker wanted to know how many cans of paint the painter used.

So, really it all depends on the caseworker to figure out just how difficult that Medicaid application is going to be or what documents they’re going to ask for. There are certain things that we almost always provide, like last bank statements. The actual Medicaid application, it’s only about six pages; but when we submit one, typically it’s over a hundred pages because we’re providing all of the exhibits and explanations of what we’re doing. But really at the end of the day, especially with electronic records, it’s not like you have to do anything different moving forward when you set up a castle trust.

It’s just to understand that if we’re to need any nursing home care, depending on when you need it, that’s when, okay, we’re going to have to work with a caseworker and go back five years. Especially with electronic banking, it shouldn’t be too hard. Yeah. It’s all about what the case worker is looking for, And unfortunately, caseworkers are overworked. You have good caseworkers, bad ones. Just like any other profession, you have good apples, bad apples, people that are easy to work with, people that are difficult to work with.

So, it’s not like the government’s going to review your documents when you start up a castle trust. It’s you set everything up. It’s basically business as usual. God forbid you need nursing home care. Now, depending on the case worker, they might go back and ask for… You don’t know what they’re going to ask for. Sometimes they have asked for like the last five years of bank statements, and then a lot of times we’ll reply and say, “You know what? That’s not feasible for whatever reason.” So, a lot of it just depends on the caseworker.

Question on the castle trust just came in. Does the castle trust protect assets from all creditors? So, the castle trust, the big thing that I was talking about is it protects against the nursing home care, and then also it does protect against creditors. So it does build in protection from creditors and lawsuits. This is a big thing for a lot of clients because of the changes we’ve had in auto-insurance, but yes, the castle trust does provide another layer of asset protection from creditors, lawsuits, et cetera.

I never make any guarantees with regards to the asset protection nature of the trust, just because sometimes you can have what we call bad fact situations where if you don’t follow the terms of the trust, then there could be a situation where now, if you are sued, a personal injury attorney is going to say, “Well, if the client didn’t follow the terms of the trust, why should we follow the terms of the trust to build in that protection?”

Another question on the castle trust just came in. If you have a trust, what is involved in having it switched over to a castle trust? So, if you have a revocable trust, what is involved if you were to switch over to a castle trust. Really just think about it like this. Okay. We have our revocable living trust or legacy trust, and we have our stuff here. Well, understand that a castle trust is a completely different type of trust. So, A, we have to create the trust, and then B, we have to move the assets from the old trust to the new trust.

So, we have a lot of clients that maybe they did a revocable trust say 10 years ago, 2010, when they’re just concerned about avoiding probate. Now, it’s 2021. Now, we want to avoid probate, but also we want to build in the protection from long-term care or build in the creditor protection. So, it’s a typical, I guess, lifecycle we see in terms of legal planning is a lot of times when we have that first child, we set up that will-based estate plan to name guardians or maybe we have a basic revocable trust that it says it goes all right to the kids once they reach 25.

Then as we get older, then we accumulate more wealth. Then maybe we see who our kids are marrying, and now we have in-laws and that type of thing. Maybe around retirement age, and now we want to build in… We’ve accumulated wealth. We have a nest egg. Now, we want to protect it from creditors and getting in car accidents and the big thing being long-term care costs. Now, we upgrade and go to the castle trust. What is the legal name for a castle trust, a castle trust. It’s just a form of asset protection for us. There’s lots of different types of asset protection trusts. There’s some attorneys that are doing these castle trusts.

All right. So, that is the first question that came in. Number… Let’s see. All right. Number two, let’s go to number two here. Is a savings account with a POD to executor, a faster way to provide funds to final expense sets, final expense, probably that was costs, than a trust, than set up in a trust. I really mangled that question. So, really the question that the gentleman was getting to was, okay, I have savings account with payable on death. I have these final expenses. Right? So, final expenses, how do I pay off these final expenses? Is it better to have a savings account with POD, or is it better to have the final expenses handled in the trust?

What I would say is probably neither because the problem or the issue that you have with both of these is that you need to get a death certificate. Okay? So, the problem with this is that to get a death certificate, before you get a death certificate, the first step is you need to work with typically the funeral home or handle the cremation, et cetera. Typically, to get a death certificate from the time someone passes away, you’re typically looking to maybe seven days to 21 days. So, before getting access to a payable on death, or even in a trust, there’s going to be a delay of typically seven to 21 days. So, how do you handle the final expenses?

We could look at joint ownership, naming a personal representative or a beneficiary joint ownership on your checking or savings accounts. I really don’t recommend that because you’re opening yourself up to all the liabilities of that individual. Plus they could cash you out. They could take your money. So, there’s a lot of problems with joint ownership. I’m not a big fan of joint ownership unless you’re a married couple. Joint ownership is great for a married couple. I would not recommend naming anyone else joint on your accounts. There’s almost always a better way to do it. I don’t like joint ownership.

Problem with payable on death is that we have these death certificates, and even with a trust, even though we talk about a trust being very easy to administer, a lot of times you still have to wait for that death certificate. When we’re talking about final expenses, a trust really isn’t a great option either. Now, you might say, “Well, I have life insurance. That’s going to cover my final expenses.” Again, the problem with even life insurance is we have to worry about getting a dosh certificate.

What we typically recommend, and this is something that we can help with, is we set aside some money for final expenses. So, one option is you can go to a funeral home and prepay a funeral. Okay? If you’re dead set and you know exactly where you want to be buried or cremated, you can go ahead and prepay this. There’s some problems with this. The downside side, what happens if something happens to the funeral home? what happens if you’re traveling, or you decide to move down to Florida or something like that? What happens if you just want to be buried somewhere else or cremated somewhere else? And that also it doesn’t cover all of the final expenses.

So, that’s where… And I was just talking to a client yesterday about this, and we got it going on, is we put together what we call a final expense trust. It’s not a separate trust or anything like that. It’s a final expense account, and the nice thing about this is it pays out to your beneficiaries within 24 to 48 hours of your death. So, not that you’re waiting for a death certificate. It pays out upon death within 24 to 48 hours, so now you can cover the final expenses.

Completely transferable, meaning that you’re not locked into using any specific funeral home. So if you’re living in Michigan and then you moved down to Arizona and you want to be cremated down in Arizona, you can do that. Also, a nice thing about this is it’s asset protected. Okay? So, if you were to need long-term care or sued or whatever, it’s taken care of. Plus you can cover more than just funeral expenses. It can cover all final expenses. If someone has to take off work, or I had a client whose personal representative lived in Alaska, and now they have to pay for a plane ticket and hotel and that type of thing. There’s other expenses other than just prepaying the funeral.

So, final expenses when we’re talking about just prepaying, the funeral, that type of thing, it might be anywhere from five on the low end, $10,000. But then when we add in things like time off work and final expenses, a lot of times people will put in maybe like 10 to $15,000, just set aside in a separate account where it’s asked to protected. You don’t have to worry about joint ownership. Pays out immediately to whoever you’ve named as a trustee, beneficiary. Gives them immediate funds. Then if there’s anything left over… Let’s say the funeral was $10,000 but you put in 15, then the remaining $5,000 would go to whoever your beneficiaries are.

Again, there’s no cost to it other than just what you want to put into it. Okay? So, that would be the way to really check all the boxes to make it as easy as possible. The final expenses shouldn’t be done through joint ownership or payable on death, because you have to worry about death certificates. Instead, probably the optimal way to cover final expenses would be through a final expense tool. Okay?

All right. Then number three, may income… Yep. Okay. May income to a castle trust, be defined to include capital gains taxed at a lower donor rate? I wouldn’t say donor. I would say grantor, person that created the trust. Yeah. So, we set up a castle trust, and again, this is why we do legal, financial, and tax planning. We need to know the tax implications of setting up these different types of trusts. Let’s say we have, I’m just making up numbers, a million dollars in here. So, that would be what’s called principal.

Okay? Then let’s say that million dollars, we invest it well and that million dollars goes up a hundred thousand dollars. Well that would now be income. We have that income going out to… You can keep it in the trust, but from a tax perspective, if you were to sell this, this would be capital gains. What we always do… So, the castle trust is, to use a legal term, a grantor trust. All of the income does not show up on a trust tax return, but instead, any taxes would be showing up on your personal tax return.

The reason this is important is the way taxes work. You have these tax brackets of 10%, 12%, 22, 24, 32, was it 35, 37. Right? So, married filing jointly, 12% tax bracket. Wow, gosh. Darn it. That… Where was I? What was that? 10, 12, 22, 24. So, individual tax brackets, like a married couple, once you get to $80,000, you’re at the 12% tax bracket. 22 is roughly 170. 24 is roughly 326 and up. Right? Versus… So, this would be personal. Goodness gracious. This would be personal.

If we’re looking at trust tax rates, and this is why we don’t have any of our trusts typically tax at a trust tax rate, trust tax rates get to the 37% tax bracket, so the top tax bracket once you make $12,500 worth of gains. So, that’s why with a castle trust, it’s a grantor trust, meaning it’s taxed at your personal tax rate, not your trust tax rate. If there are any capital gains… And there might not even be capital gains, depending on your income level. Plus if you were to pass away, you might get step-up in basis.

So, even if it isn’t a taxable account inside of the trust, it’s still might be tax free at the end of the day. But the big thing is it’s not taxed at trust tax rates. Okay? So, a castle trust from a tax perspective, taxed the same as your ordinary income as if you owned it in your name or the same as a revocable living trust.

All right. And then another question here. Let me make sure there’s nothing else in the chat. After death capital gains to beneficiary rate or trust tax rates? So, Jim asks, after death are the capital gains to the beneficiary rate or the trust tax rate? Well, here’s the thing. So, this is getting a little complicated, but we’re talking about capital gains. So, capital gains are taxed different than pretax accounts. Capital gains are going to be on post-tax accounts, where if you have a million dollars of principal and then it goes up a hundred thousand dollars, like I said, and then you sell, well, you’re going to have a hundred thousand dollars worth of capital gains.

The capital gains might be taxed at 0%, depending on your income, 15% or 20%, if you were to sell while alive. So, this is while you’re alive, if you have capital gains while you’re alive. Here’s the thing. Upon death right now, and this could change in the future, right now we have step-up in basis. Okay? Step-up in basis. So, let’s say we have $1 million, right? Lucky us. Then that money grows to $1.1 million, and then we die. Then let’s say the kids sell it for $1.2 million. Okay? So, the question is, what is the basis? Well, the basis normally would be one million. Right? And then if they sell it for 1.2, you would think that they would have to pay capital gains on 0.2 million. Right?

But what happens is that we have what’s called step-up in basis, which means that upon death, the basis is not 1 million. The basis is now 1.1 million. So, in essence, when we’re talking about basis upon death, you get step-up in basis, so there’s no capital gains on your post-tax accounts upon death. The only gains would be from the date of death until when they want to sell. Okay? So, long story short, Jim, the gains would be taxed at the beneficiary rate. You would probably get step-up in basis. So there would be no tax on what they inherit from the post-tax accounts.

Pre-tax accounts are completely different, of course. That’s IRA money, pretax money. Now, that’s going to be the same as… Or pre-tax money. That’s your 401ks, IRAs, all of that falls within the SECURE Act, and the SECURE Act says all the taxes have to be paid within 10 years because it’s pre-tax 401k, IRA. All of that is qualified money, subject to ordinary income tax whenever you take money out of that. If you take it out while you’re alive, you pay the income tax. If your kids inherit those pre-tax dollars, they have to pay the tax, and they have to pay the tax. Within 10 years.

A couple of questions on the castle trust. What federal tax law created the castle trust? There is no federal tax law that created any type of trust. This type of trust has been around since the ’90s. It doesn’t protect against federal estate taxes. In essence what us smart attorneys and advisors and tax people did is we took a look at how these trusts could be set up for a state tax purposes to remove it from your estate, and then with the estate tax exemption going up to now $11 million, granted, supposed to drop down, that we reworked these, not to protect against state taxes, but instead to protect against long-term care costs and lawsuits, which that’s what our clients were interested in because people are living longer than ever.

So, these trusts have been around since the ’90s, and the government’s aware of them. They don’t look unfavorably because so many attorneys were setting up trust just like this back in the ’90s. Then in 2006, they changed the look back period from three years to five years. When they made that change, they grandfathered in any prior planning. So, what federal tax law created the castle trust? None. It’s a form of asset protection trust.

They’ve been around since the ’90s. Is an IPOG the same as a castle trust? Similar. So, these are still irrevocable trusts that are grantor trusts, but keep in mind with the castle trust, you can change beneficiaries. You can change trustees. You can get access to the funds at any time. But keep in mind with any of these trusts, it’s not like you’re going to find a law that says, “Hey, Michigan is going to pass a law to allow the castle trust,” or, “The federal government is going to pass a law to allow this strategy or that strategy.” What we’re doing is we’re looking at the rules, and then we’re creating legal entities that operate within the rules.

So, at no point, are you ever going to see some statute that creates a specific type of trust. That said, you do have states that create a domestic asset protection trusts by statute, but really that’s not going to be the route that you’re going to want to go typically, just because there’s better ways to do the same thing. Just like joint ownership, you can do joint ownership to avoid probate, but there’s almost always a better way to handle things.

All right. Done. Answered that question. Okay. All right. Fourth question, when administrating a trust with separate share or legacy inheritance provisions, how does that work? So with most of our trusts, there’s a trace of how we want to leave things to the next generation. Really it boils down to… Let’s say you have a trust and maybe a joint trust, you’re married, and you have two options on how you want to leave things to your beneficiaries. One option is just a pillowcase of money approach, where we leave things outright to the beneficiaries once they reach a certain age, whether it’s 25 or 30 or 35.

This would also be the same thing as just naming them outright as beneficiaries. Once you pass away, they inherit the money. The problem with this is if there’s a divorce, a lawsuit, a creditor action, bankruptcy, all that money could be lost. If they pass away, all that money could go to a in-law, who we call an “outlaw,” who might remarry versus going down to your grandchildren or staying in the family or the bloodline. So, that’s where we have, and we call these legacy inheritance trust provisions, where instead of it outright, it could be held in trust where your one trust could split into separate shares for the number of beneficiaries.

We could also call this a separate share trust, and each of your beneficiaries could be the trustees of their own separate shares. Whatever they leave and trust would be protected. The income would come out to them, so they’d still pay personal income tax rates. But the advantage here is that whatever you leave to them is now protected from creditors, protected from divorces, and the money stays in the bloodline. So, the question here was, how do we actually administer this? So, what we do… Let me erase this.

Think of it like this. Let’s say mom and dad, they set up this trust, and now we have, let’s say, three beneficiaries. Okay? And let’s say we built in those provisions. We said, okay, for each one of the beneficiaries, we’ll give you the opportunity to have this asset protection, whatever you inherit. So, let’s say this is the Jim Smith trust, and then Jim passes away. Well, now we could set up… What we would have to do is first for Jim’s trust, if we don’t already have one, get a certificate of trust naming the new trustee which would be the successor trustee, the person who wraps up the affairs of the beneficiary and then potentially get another tax ID. Okay?

Then we pay off all the final expenses, and then once we’re ready to distribute, once we’ve paid everything off, then we need to look at splitting Jim’s trust into three separate shares, one share for each child. We have child one, so child one, child two, and child three. So, now we’d have this trust would be the Smith trust for the benefit of child one. All right. So, now we would need a separate certificate of trust showing that child one is the trustee of the trust, and then we’d have a separate tax ID for that trust.

There are a couple of hoops to jump through, but the advantage of this is now as long as they keep it in trust, it’s protected from the divorces, creditors, bankruptcies, et cetera. But let’s say child two wants the same thing. Now we have the Smith trust for the benefit of child two, and child two can manage the assets however they want to. It won’t affect child one. But then let’s say child three says, “You know what? I’m not really interested in the asset protection,” because all we’re doing is giving them the opportunity to inherit this money.

So, child three could say, “You know what? I don’t really want the trust. I’m just going to take the money outright and do whatever I want.” Well, if we give the child the ability to do that, then they can go ahead and just be done with the trust, give up all the asset protection, but maybe they want to spend the money or do something else. That’s how we set up typically when we have adult children where we trust them to make good decisions. So, what we do is we give them the opportunity so that whatever they inherit from you, if anything, can be protected, but if they want to just take the money and run, they can do that too, assuming we give them the flexibility or option to do that.

Really it’s not super complicated. We get a certificate of trust. We get a tax ID, pay off expenses or bills. Typically, we’ll leave the accounts open for about a month or so, make sure nothing else comes in, and then it’s a matter of distributing assets. Again, if we’ve set this up correctly, maintained everything funded in the trust, nothing ends up going into probate, we don’t have to have someone oversee this other than we just make sure the beneficiaries are kept aware. We can do accountings for them or inventories for them so they know where the money is going, but it’s really a straightforward process. Then once it’s split up, assuming we have adult children and we trust them to make their decisions, each child can then decide what they want to do with their piece of the inheritance.

That’s how you administer one of the separate share trusts or legacy trust. So with that, that was all the questions that I had. Oh, I’m sorry, Angela. Angela submitted a question. When the home deed is in the name of one spouse and the mortgage is in both, how do you separate ownership in case of one spouse trust? What happens if they decide to sell, take into account the mortgage was inflated due to the business of the other spouse? All right. Let me get back to drawing my pictures, and give me a second here. I hit this button and this button, and we should be seeing my screen. There we go. Okay. And it looks like I need another screen. All right.

So, here’s the question. We have a home. Okay? The big thing here is we need to distinguish between the home and the bank. Okay? All right. So, ownership, let’s just assume we have husband and wife. We have husband and wife, and let’s say the bank has a mortgage. They have a secured interest in the house. Let’s say for whatever reason, the bank only has the wife on the mortgage. Okay? Now, understand there’s a difference. We need to understand the difference between ownership versus this mortgage, because it’s a different concept. Okay?

So the bank has an agreement only with the spouse. Okay? Now, the husband and wife, to be able to sell this property, if I’m going to assume that it’s joint between both of them. To sell, both of them have to sign off. Okay? Both of them have to sign off, but if there’s still an outstanding mortgage, let’s say $100,000, and let’s say the value of the house is $500,000. Okay? If they were to both sell, well, then husband and wife is going to get a check valued at $500,000. But when they sell, that’s going to trigger the due-on-sale clause that now says we need to pay off the bank for $100,000. Okay?

So, when the home deed is in the name of one spouse, and the mortgage is… Oh, I did that wrong. Okay. That would be… I’m sorry. I butchered the question. So, the mortgage is in both names, but the house is just in one. Whoops. Reminds me of Bill… Oh, shouldn’t reference Bill Cosby, but I think Bill Cosby had a drawing kids show way back in the day. Whenever he’d erase things, it made noise. Okay. So, we have the mortgage is in both. All right.

The mortgage is in both, but let’s say the property is just in husband’s name, just to change it up a little bit. If husband were to sell, okay, same deal. So, husband sells. We only need one person to sell it. If the $500,000 comes in, you still have to satisfy the mortgage. So, in the end, it’s going to be the same. Either way, the bank is going to have to get paid whenever you sell the property because they have what’s called a due-on-sale clause. Okay?

Yeah. If only one of you is on the property, then that person can sell without the other spouse signing on. There used to be what’s called dower rights. This was just on its face kind of sexist because it only worked one way. If the husband sells and he was sole on the property, the wife would have to sign off as to her dower rights. A husband could not sell out from under a wife if the house was just in the husband’s name, versus if the wife, if it was just in the wife’s name and the husband wasn’t on, the wife could sell out from under the husband. Dower rights were killed off in 2014. Okay?

So, now if you’re married and we just have one spouse on the property, they can sell without the other spouse signing off on that. If there’s a mortgage that both of them are on, when that husband sells or when the one spouse sells, he or she still has to satisfy the mortgage because of the due-on-sale clause. So, kind of complicated, but hopefully I answered that correctly or clearly enough for you. Okay?

So, with that, I answered all the questions that were submitted. Any other questions you have? Remember I’m not going to be on next week. Mark will. So I invite you to still log on, submit your questions ahead of time. You’ll see a different face, but we’ll still be providing value. Then I’ll be back the week after. Again, if you do have any questions, please go ahead and submit those questions. I’ll throw it out there. If you’ve been following the markets, the new GameStop is now Rocket. If you’ve been following the markets at all, with some of these, they’ve been called meme stocks or Reddit stocks. That’s been kind of interesting. I don’t recommend if you’re near retirement that you play around with that stuff, but it’s been a interesting story, that’s for sure.

Best healthy wishes for surgery. Thank you so much, Barb. I appreciate it. All right. With that, thank you so much. Oh, I’ll throw one other thing out there. It’s around tax time. So what we’re hearing, no guarantees on this yet, but as of right now, taxes are still going to be due submitted by April 15th. There are some rumbling that might be pushed back just like it was last year. I had a question with a client today. I didn’t cover it on the webinar here, but they were asking about required minimum distributions for this year.

With what happened last year and how RMDs got waived partway through the year, I recommend maybe unless you need the required minimum distribution from your IRAs for income right now, maybe hold off just to see what happens in terms of the different relief acts that are getting pushed through, because if you take your RMD, that might stop you from doing as much of a Roth conversion. If we don’t need to do an RMD, then there’s some other strategies.

So, maybe if you are of age to take out required minimum distributions from your IRAs, 401ks, et cetera, meaning you’re over 72. Or if you have an inherited IRA, maybe wait a little bit longer if you can, to see if there’s any requirements of those RMDs being waived, because there’s some different strategies if you don’t have to take out RMDs from those pre-tax accounts. So, that was something that came up in a client meeting right before I hopped on here. One more thing to think about from a tax and financial planning standpoint. A lot of the questions were legal questions today, which I certainly appreciate.

So, with that, thank you so much. Enjoy your week. Mark will take good care of you next week. Make sure if you haven’t, please go to that YouTube channel. Make sure to subscribe if you haven’t. I really would appreciate that, and then if you do have questions, just reply to the email that gets sent out. Angela, thanks for the RMD comment. You’re very welcome. If you do have questions, always email us We’ll cover them on the webinar and make sure to give Mark a lot of questions for next week. Let’s make him work. So with that, thank you so much. Take care.


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