Money Rehab with Nicole Lapin
Don't Just Make Money— Keep It: Tips for Protecting Your Money with Law Mother (Pamela Maass-Garrett)
26 Nov 2024
As Nicole always says: when it comes to your money, it's not what you make, but what you keep, that matters. Today, Pamela Maass-Garrett (the brilliant lawyer behind the Law Mother firm and viral Instagram account) teaches you how to keep more of your money with simple financial protection strategies. Check out Pamela's book Legally Ever After here: https://www.lawmotherco.com/lea-fbook
Full Episode
I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. When it comes to our hard-earned money, we all need to keep it. We all need to protect it, which means we all need Law Mother. You may know Pam Moss Garrett, aka Law Mother, from her Instagram account, where she posts these fun skits with legal and personal finance tips.
But Pam is a legit lawyer. She runs a law firm also called Law Mother and wrote a book, Legally Ever After, which I've linked in the show notes. Today, Pam gives me her tips around protecting money. Plus, she also weighs in on some celebrity legal news that taught me something. Pam Moss Garrett, aka Law Mother, welcome to Money Rehab. Thanks so much, Nicole. Glad to be here.
Let's do some law mothering and talk about what you do best, money protection. Thank you for doing that. There are so many ways we can lose money by not knowing the rules of the financial game. One really common one, and I know you talk about this, is inheriting a house. You say never let your parents give you their house. Why?
Yeah, so when it comes to passing on real estate, the idea is you want it to go in a way that's protected. We don't want to have it go to the wrong people. We don't want to pay unnecessary taxes. We don't want it to go through probate. And so when we say don't give your kids the house, there's an asterisk there, right?
And the asterisk that a common mistake people make is they had their children to title on their property while they're still alive. And the reason they do this is, hey, they found out about probate and they want to avoid probate. Hey, I'm going to go ahead and add my child to title while I'm alive, avoid probate, make things smooth and easy.
And the reason we never want to do that is it creates a tax issue. By adding your children to title while you're alive, you're creating a capital gains tax issue. What that means is while you're alive, it's going to continue to increase in value. And when you pass away, they're going to be taxed on that gain between the time you added them to title and the time that you pass away.
So the reason you don't want to add them to title from the tax purpose is that reason, because you want to preserve the step up in basis. So what should people do instead? Yeah, so what people should do instead is put their real estate in a trust and name their kids the beneficiary of that trust. That avoids probate and saves their kids time and money. It avoids that hassle of probate.
And then they receive it capital gains tax-free, meaning they don't have to pay those capital gains tax because it's from the time that they pass away that the value is counted.
And what kind of trust are we talking about here? Revocable, irrevocable, and what's the difference?
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