Video Posted: October 8, 2025
John: People ask me all the time, “Should I give my house to my kids while I’m alive?” My answer is always no. Please don’t do that. You’ll lose the step-up in basis, and you’ll also expose your home to your kids’ creditors.
Michael: Exactly. So many people come in thinking estate planning is simple: one spouse dies, everything goes to the other, then to the kids equally. But real life—blended families, creditor risk, divorce—makes it complex. That’s why we often use lifetime trusts for children instead of outright distributions.
John: Welcome back to Money Isn’t. Today I’m joined by Michael Canarick JD, LL.M. (Tax from NYU), admitted to the bars in New York, New Jersey, and Pennsylvania, and managing partner at Canarick Law in Red Bank, NJ. Michael, thanks for being here.
Michael: Thanks, John. Happy to be here.
John: Let’s start simple before we get fancy. What are the basic documents every family should have?
Michael: First, a Durable Power of Attorney, a Health-Care Proxy, and an Advance Directive (Living Will). Once your child turns 18, HIPAA prevents you from getting medical information unless those forms are in place.
John: We all remember the Terri Schiavo case—that’s exactly why these documents matter. They’re simple, cheap, and crucial.
Michael: Right. Then there’s probate. People misunderstand it. Probate is just the court process to appoint an executor. If assets are titled to a Revocable (Living) Trust, your Successor Trustee can act immediately—no court delay. That can save months.
John: And a revocable trust keeps the step-up in basis, which you lose when you gift assets during life. That’s one of the biggest mistakes I see.
Michael: Exactly. And state death taxes vary. New Jersey Inheritance Tax, Pennsylvania Inheritance Tax, and the New York Estate Tax all have different rules. Plus, New York has no portability, so first-death planning is critical.
John: Let’s unpack that. What’s the difference between portability and a Credit-Shelter Trust?
Michael: If spouse #1 leaves everything to spouse #2 and you elect portability on Form 706, the survivor can “stack” both exemptions. But if the estate doubles later, part of it can still face the 40% federal estate tax. If, instead, spouse #1 funds a Credit-Shelter (Bypass) Trust, all future growth in that trust stays outside the survivor’s estate—saving millions in tax.
John: For remarriage or blended families, a QTIP Trust (Qualified Terminable Interest Property) provides income to the surviving spouse for life, but you control where the money goes after. It’s like a built-in prenup.
Michael: Exactly. For kids, I prefer Lifetime Beneficiary Trusts instead of mandatory payouts at 25 or 30. You get divorce and creditor protection, multigenerational estate-tax efficiency, and the trust can buy a home, investments, or even a business for the child.
John: Let’s clear up another misconception. People think probate means the court “owns” their assets. But anything with a beneficiary designation—like life insurance, annuities, or 401(k)/IRA accounts—passes directly. Joint accounts pass automatically. It’s the individually titled assets that go through the executor.
John: Now let’s jump to advanced planning—the kind that saves people real money. Talk to me about SLATs.
Michael: A SLAT ( Spousal Lifetime Access Trust ) lets you use your lifetime exemption now to move assets—or even a pre-sale business interest—into a trust for your spouse and descendants. You remove all future growth from your estate. If you pair it with a professional Business Appraisal that includes Valuation Discounts for Lack of Control and Lack of Marketability, you can transfer a lot of value using less exemption.
John: So, you shift before the “pop.” Move it early, freeze the value, and let the appreciation grow outside your estate.
Michael: Exactly. And if you don’t need the income, the SLAT can buy life insurance owned by the trust to create additional estate-tax-free liquidity.
John: What about where the trust lives—its “situs”?
Michael: Huge factor. Certain Domestic Asset Protection Trust (DAPT) states—like Nevada, South Dakota, and Wyoming—offer both strong creditor protection and potential state income-tax advantages. If the trust is drafted as a Non-Grantor Trust, it’s its own taxpayer, often in a no-tax state. A Grantor Trust instead reports income on your personal return. The choice depends on your objectives.
John: So you can blend both protection and tax strategy. And this is where good design—attorney, wealth advisor, and CPA—really matters.
Michael: Exactly. It’s a team effort. That’s why coordination with Smallwood Wealth Management and legal counsel like Canarick Law makes the plan cohesive instead of piecemeal.
John: Let’s bring it home. For everyone listening, the foundation matters—start with your Durable Power of Attorney, Health-Care Proxy, and Advance Directive. Add a Revocable Trust if you want faster administration or privacy. Then layer on the tax tools—Credit-Shelter Trusts, QTIPs, Lifetime Beneficiary Trusts, and for larger estates, SLATs and smart trust situs choices.
Michael: And please, pick one primary agent on your power of attorney and health documents. Too many cooks can paralyze decisions. Choose competence and proximity over fairness.
John: People also underestimate their estate. Add up your real estate, retirement accounts, and the death benefit of life insurance—which is income-tax-free to heirs but still part of your taxable estate unless it’s in an ILIT (Irrevocable Life Insurance Trust).
Michael: Exactly. And for anyone in New York, remember: there’s no portability. So if you skip first-death planning, you can lose millions in exemption.
John: Final thought: Design beats default. If you don’t build a plan, the state will do it for you—and you probably won’t like the result.
Michael: Couldn’t agree more. If any of this resonates, schedule a free consultation at Canarick Law. We’ll walk through your specific situation and design a plan that fits.
John: And for a holistic financial approach—cash flow, investments, risk, and estate design—visit Smallwood Wealth Management.
Michael, this was fantastic. Thanks for joining me.
Michael: My pleasure, John. Thanks for having me.
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