May 22, 2024 • 37 mins
Chuck Zodda and Marc Fandetti finds a major flaw in the recent Fed financial survey and the results that showed inflations ongoing burden on Americans. The Fed being uniform on interest rates brings high risk. Todd Lutsky stops by for his weekly segment, Ask Todd. Todd looks at how the size of your estate determines the complexity of your trust.
Mark as Played
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Episode Transcript
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The DAV five K Boston is presentedby Veterans Development corporation. Face is the
Financial Exchange with Chuck Zada and MarkVandetti. Chuck, Mark and Tucker with
you here, and our top storytoday is yesterday the Federal Reserve, they
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released their Economic well Being of USHouseholds Report for twenty twenty three. They
released this every year, and ittells us a little bit about what households
are thinking about the state of theirown finances the state of the economy over
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the past year. And what's niceis that they've been doing this every year.
The earliest data I could find wasgoing back to twenty thirteen, but
they've been doing this for eleven yearsnow, which is nice because we have
a you know, a track wreckthat we can compare this against in order
to understand, you know, howthese things may be evolving over time.
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Because one of the things that Ireally dislike when it comes to studies is
when they're like, hey, wejust got this report that eighty two percent
of people think the sky is green, and you're like, well, how
does that compare to prior years,Like is that up, down or neutral?
Is this a problem or is thissomething that the people have always thought.
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So it's nice that we have awhole bunch of data to compare on
this, because it's again it givessome context. I think that is important
here. Now as far as thesampling that they do on this, it
looks like, just to give youa sense of this in terms of you
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know, who this actually who completedthis, there were eleven four hundred and
eighty eight people that participated and completedthis survey out of about sixteen thousand that
they contacted, so that they actuallygot like seventy percent participation, which is
pretty darn good if you're asking me. And so you've got eleven four hundred
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plus people that are in here,and I want to really dig in on
this because I think right now whatpeople think about the economy is for better
or for worse, as important aswhat the economy is actually doing. You
know, I think it actually itmatters somewhat. So in this survey,
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and there's a piece from the NewYork Times that says, you know,
people having a harder time this year. So seventy two percent of responding said
that they are doing at least okayfinancially, which is down from seventy three
percent last year. The New YorkTimes also mentions, hey, that's way
down from the seventy eight percent andtwenty twenty one mark. Twenty twenty one
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was a year where there was justlike stimulus flush stimulus payments. Seventy two
percent is the same as it wasin April twenty twenty, by the way,
the depths of the COVID recession andbefore or at the more or less
same time that those payments were juststarting to hit. So people feel the
same about the about their their financialstatus. To be more specifically, those
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who responded in the affirmative to thestatement, are you doing at least okay
financially? Is the same now thanit was when unemployment was fourteen percent?
Well, here, this is oneof the things that I'm going to get
at, is that overall, there'srelatively few data points that suggest this number
change is meaningfully over time. Soyou go back to pre pandemic twenty nineteen,
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the end of twenty nineteen, inOctober of nineteen, really good economy,
right, inflation was low, unemploymentwas low, and you would say,
okay, gee, like that mustmean like eighty ninety percent of responded
say that yes, we're doing atleast okay. What was seventy five five
percent, same as the year before, same as the year before. Twenty
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seventeen was seventy four percent, twentysixteen was seventy percent. What you get
if you go back to like twentyI'm sorry, twenty thirteen and twenty fourteen,
when you know, you still hada very sluggish economy at that point
coming out of the recession. Youfinally got down into the mid sixties in
terms of you know, the respondentsthat said, hey, things are okay
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or better. But where I'm goingwith this is that the vast majority of
people, if you ask them howthey're doing financially, they generally say,
yeah, I'm okay or or better. Like there's an ego component to this
where I don't think a lot ofpeople want to admit they are doing poorly
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or the other pieces. Hey dowe focus way too much on all this
stuff, and the overall message shouldbe that most people are just fine.
It's it's one of those two things. It's either our egos prevent us from
saying things aren't good with our ownsituation, or for all of the gyrations
the economy makes most people figure outhow to make it work and they're you
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know, okay with it even ifthey're not great, because you would expect
a survey like this to have moreof a difference based on how the economy
is actually doing, and it reallydoesn't. I'm not sure the survey is
useful. And that's a polite wayof saying, I don't think it's useful.
I don't think if you don't mindme editorializing the Fed's job. And
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it's amusing. And the preamble tothis eighty three page document, the FED
lists its responsibilities. The first they'rein bullet points. They're not ordered,
probably because they don't want to seemto be They don't want to be perceived
to be prioritizing them. So firstis conduct the nation's monetary policy. How
you doing on that front? Guys? Not so hot in that they have
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been better? Yeah, slightly slightlybetter, but it's been better, it's
been yeah, yeah, exactly.And then it goes on remote the stability
of the financial system. Okay,that is a that was that was the
that was the reason for the FEDcoming into existence. It was in response
to a series of panics. Andthen you start and then you get down
the list and it gets more andmore questionable. Uh, The last bullet
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is promote consumer protection through community development. Nowhere on this list do I see
take the temperature of people's financial people'seconomic perceptions. I just don't understand why
the FED is doing something that plentyof private entities do. They're not succeeding
in their primary mandate. Look,I'm cursing at the wind here or cursing
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the wind, whatever the expression is. Well, the FED is a research
institutional, Like, yes, itconducts all this banking, but it's a
huge research institution, and so,you know, conducting surveys about how what
people are, you know, thinkingabout the economy goes along with that.
The question that I think is worthasking, and this one is redundant.
There's plenty of good data out there. Well here here's the question that I
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think is worth asking right now iswhy does it seem that the vast majority
of data out there about people's perceptionof the economy does not necessarily reflect broad
reality? And what I mean bythis. There was a poll that I
saw this morning, and again itdovetails nicely into here. Was conducted by
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Harris, which is a polling firm. They surveyed a bunch of people from
the US and forty nine percent ofthem believe that the S and P five
hundred is down this year. Now, not only is the S and P
five hundred up more than twelve percentthis year, it was up twenty four
percent last year. So when weget basic facts like that wrong, it
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makes the opinion based stuff even harderto figure out what's going on, because
again, you would expect, likein twenty twenty two, when inflation was
really freaking high, you'd be like, wow, a lot of people should
be polling and you know, beresponding and saying yes, like my my
personal financial situation is not good,And in fact, you were getting the
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same number that we're saying it wasfine as twenty seventeen when unemployment was low
and inflation was low, Like,we're there's something fundamentally broken here in how
we are assessing reality. Well,and that's kind of where I've started to
land, like on some stuff whereyou say, look, you know that
the median person does this, andyes, I understand that when you look
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at medians, fifty percent of peopleare going to be worse than fifty better.
So there's there's room for interpretation onthat stuff, you know, when
it comes to hey, is theis the stock market up this year?
There's not room for interpretation on thatthe stock market's up. I think people
have taken to rejecting officially produced economicsto they just don't believe this stuck market's
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not a statistically well, they wouldput it in that category. So if
you ask somebody about Chuck, Iknow this sounds unbelievable, but I've talked
to people, particularly those who watchFox News like I do. I'm an
economic conservative, I want smaller government. Let me preface this so that we
don't get a bunch of texts sayingI'm a communist by saying I've never voted
for a Democrat in my life.Okay, maybe that's a little too much
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information, sure, but that sortof sets the context for where I'm about
to go with this. I've neverseen such misinformation propagated by a news entity
about the state of the economy,whether you like it or not. On
average, the economy is doing reallywell. I don't credit the current administration
for that, no, but thereare a bunch of people who are so
hostile toward it that they can't admitthat unemployment is bumping around fifty year lows.
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That growth is above three percent,something that's been rarely achieved in the
past twenty years, including by thelast president. I don't credit the current
administration for it, nor do Iblame the last administration necessarily, though you
could attributes some of their economic problemsto COVID lockdowns. For the economic successes
or failures, A lot of itis just part of the business cycle and
the structural state of the economy.But there are people who just watch one
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news channel, frankly, and they'regetting one as a result, very filtered
and in many ways inaccurate view ofthe economy. Doesn't surprise me at all.
Well, I'm sorry to have tosay that. I know it offends
a lot of them. No,Look, I don't think that it's inherently
unique to either side of the spectrumthere, you know, I think that
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if you look at that's fair too. I think if you look at what
gets propagated by MSNBC, it's justas like, it's just as distorted.
It's it's not something that you're you'relooking at and saying, oh, like
they get no, like, that'snot how it is. But when when
we can't look at the S andP five hundred, which is not a
government statistic, it's it's something thatis check. They are numbers in number.
They don't trust any of them.They have been conditioned. And when
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I say they, I mean peoplewho just watch one news channel. I'm
sorry for picking on you and beingso specific here, but you know you
are you reject at all. Youdon't think unemployments low, You think that
numbers cooked, you don't think inflationhas come down. And I I am
as upset or more upset about thatthan you are. Believe me, but
Chuck. They reject anything quantitative thatcomes from an authority or seeming authority.
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That's where we are. So Ithink the question is how do we fix
this? And I don't have theanswer for that. You know, it's
deeper than I don't have the answerfor that. And again when when you
ask people, look how we're youknow, you know, are you struggling
with inflation? Like? Yes,like there are things that are completely unique
to individuals on that side of things. But what I struggle with is when
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half of people think that the stockmarket is down this yet I'm not surprised
at all given what I just don'tknow how to reconcile that with there is
what is actually going on, andthat's no basis for a discussion. It's
kind of tough for me to figureout what to do with their Let's take
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a quick break. When we comeback, why don't we talk a little
bit about the FED and the riskassociated with the current policies that they are
undertaking. This is your home forthe most comprehensive coverage of the economy and
the trends on Wall Street. Thishe's the Financial Exchange Radio Network. The
(13:20):
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That's visit USBI dot com. Piecetoday from Mohammed El Aaron in Bloomberg talking
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about how there seems to be noone who wants to jump out of line
at the FED, talking about theuniformity in their policy signaling, and how
Mark, did you know that thisweek we have sixteen FED speakers scheduled two
speaker that's that's somebody we had atthe beginning of the week. We've got
three and a third a day.I feel bad for the third of a
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FED speaker that has to speak everyday, but it's it's just something where
I don't really know what we're doinghere in terms of the frequency of communication,
Like why do we need the FEDgiving two interviews on Bloomberg A day
three commencement addresses two economic roundtables likeLarry Summers, the Harvard guy. Yeahs,
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who's a lightning rod. I lovethe guy, but he's a lightning
rod. A couple of weeks ago, at a conference on this subject,
said the FED needs to cut thecacophony they do. It's, you know,
they give us so much messaging totry I was talking with I forget
who it was about this a coupleof weeks ago, and the case that
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the Federal make is well. Bycommunicating better, we're able to get our
message out to help, you know, manage inflation expectations. It's the name
of the game. Yeah, Mark, what person says, oh gee,
you know Waller's speaking today, Letme tune in and listen to them other
than short term traders, other thanmarket participants. And I'm not chusing about
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market There are there are inflation expectationsseries based solely on market perceptions, so
that's not unimportant. But when wetalk about like inflation expectations, they mean
you and me, and they're basedon Hey, I passed the Gulf station
in Saugus and it was three fiftyinstead of three forty two. Inflation's getting
worse and and we just don't needten to twenty fed speakers a week.
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Larry Summers made the point, He'slike something to the effect of, you
know, when a company is executinga change in policy, you don't hear
from every C suite person and allof it it gets. That would be
very confusing. When the Supreme Courtmake hands down a ruling, there are
dissenting opinions, but you don't seethe sausage making that would be confusing and
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maybe divisive. The FED seems tobe, as Summers pointed out, the
only very high profile, certainly veryimportant in a national sense, entity that
feels the need to in real timeshare its thinking with everybody. And it's
confusing to me anyway. So Iguess Mark, you understand monetary policy far
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better than I do. What wouldbe What would be the impact if the
FED said, look, we're notgiving speeches anymore and instead of this long
FED statement. I mean, youremember the days when the FED statement on
their rate decision was we kept interestrates the same. I remember the days
when there were no FED statement?Right? What would happen if you know,
you just go to the Fed's keepinginterest rates the same. Inflation is
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still too high. My guess isfinancial market participants who like to front run
and game these things would squeal,Yes, But how would you evaluate?
How would you answer that question empirically? As researchers like to say, how
would you determine whether or not wewere better off under such a regime?
You would have to look at thevolatility of different real economic variables, things
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that affect you and me and everybodylistening. All I can tell you is
that the volatility of economic variables hasnot been tamer since the FED started doing
this, and that's because you can'tremove volatility. You can transform it,
but it just shows up in differentplaces. Like it doesn't go away.
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It might show up differently and expressitself differently, but it doesn't just you
can't suppress it. So to answeryour question, we did live in that
world for a very long time.Press conferences are very new. What twelve
statements only from there, and Ifind it hard to find fault with Alan
Greenspan, but he is the guythat started issuing statements explaining what they did
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with a brief explanation as to why. Before then, as you pointed out,
you didn't get any information. Youhad to infer what the FED did
by looking at the interest rate bankscharge one another on overnight loans so called
FED funds, and you had toinfer what the FED did as a consequence.
So I'd love to try it,Chuck. I suspect, by the
way, that we'll get back tothat this isn't the Fed, jeez.
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The American Republic is an ongoing experimentwith an uncertain future. That's doubly or
triply true of the FED. Wewill get back to that. We will
curtail the cacophony. As Larry Summerssaid, I don't find myself agreeing with
Larry Summers very often, but whenI do, it's now you know,
it's the other piece. Elian makesthe other point that he makes quoter.
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As I've argued before, two percentmay now be too low a target for
domestic economic approach that is no longeranchored by the Washington consensus of liberalization,
deregulation and fiscal discipline. When youtalk about what we're seeing economically, it
is very much heading towards more tariffs, more regulation, less fiscal discipline,
regardless of who is in office.That's something that we need to reckon with
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as far as what it means forcosts. Taking a quick break here Wall
Street Watch and ask Todd our next, Like us on Facebook and follow us
on Twitter at TFE show. Breakingbusiness news is always first right here on
(19:48):
the Financial Exchange Radio Network. Timenow for Wall Street Watch a complete look
at what's moving markets so far todayright here on the Financial shall Exchange Radio
Network. Well, markets are incrediblyflat as investors await meeting minutes from the
Fed due out this afternoon, inaddition to the highly anticipated first quarter earnings
(20:11):
report from Nvidia. After today's closing, bell right now dows up by eleven
points, SMP five hundred is flat, and the Nasdaq up by nine points.
Russell two thousand down by about athird of a percent, ten year,
Treasure reeled up by one basis pointnow a four point four to six
percent, and Crude oiled down nearlyone and a half percent, trading at
(20:33):
seventy seven dollars and fifty seven centsa barrel. Target is the latest retailer
to report first quarter earnings, missingon earnings as it saw a year over
year sales decline of about three percent, where the retailers saw its customers purchase
fewer discretionary items. Target's comparable salesalso slumped three point seven percent, marking
a fourth consecutive quarter of declines.Target down by about seven percent. Meanwhile,
(20:59):
shares in ts JX companies up byseven percent, as the parent company
to Tjmax, Marshalls and Home Goodsposted higher quarterly sales driven by an increase
in customer transactions. TJX also liftedits profit outlook for the year. Elsewhere,
Lululemon announced it will restructure its productand brands team and said its chief
product officer was resigning to pursue anotheropportunity. Lulu down by seven percent.
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And CNBC's reporting that Amazon is planningto unveil a souped up version of its
decade old voice assistant Alexa with GenerativeAI this year and will charge a monthly
fee, citing sources. The reportalso states that Amazon's Alexa offering will not
be included in Amazon Prime subscriptions.Amazon up by about half percent so far
(21:47):
today. On Tucker Silvan, That'sWall Street Watch. This is Asked Todd
on the Financial Exchange Radio Network.If you have an existing estate plan or
in the market for one, todletskey is to answer your questions and help
you plan for a later life.Ask Todd is presented by Cushing and Dolan,
serving Massachusetts and New England for morethan thirty five years, helping families
(22:08):
with a state and tax planning,Medicaid planning, and probate law. Visit
Cushingdolan dot com. Now Here's ToddLutsky as promised for joined now by Todd
Lutsky for ask Todd. This isyour chance to ask Todd your questions about
your state plan. So we've openedup the phone lines here at eight eight
(22:29):
eight to zero five two two sixthree. That's the number to call in
order to ask Todd your questions.The number again is eight eight eight two
zero five two two six three.Usually we're only able to get two to
three calls in, so make sureyou get in line early to make sure
that your call can be answered byTodd live on air. Here that number
one more time is eight eight eightto zero five two two six three.
(22:55):
Mister Lutsky, how are you today? I am never better? And you
well, was a little confused overthe weekend. What happened? Well,
I wasn't really sure why I neededa Geiger counter a Geiger counter, but
then it clicked. You got it? Yeah, oh good, I get
it. Let's talk a little bitabout I want to talk a little bit
about trust planning, Todd. Isthere ever a size estate that is too
(23:19):
small for trust planning? And Ithink when we talk about potholes, which
I know is the guide that we'regiven away as we approach the end of
the month, this is one.This is probably the first one on the
list. I really don't want peopleto think that, you know, my
estate's too small to plan. Idon't need to worry about it. I
(23:41):
mean, I find it Is itpossible to have an estate that's too small?
Yes, I guess it is,but I think generally probably not.
And maybe here's the guideline. Youknow, even if you're single and you
have no kids. Now, obviously, if you have kids, you're married,
you have assets can't possibly be tootoo small a plan because there's loved
(24:02):
ones that you want to take careof. But let's say you're even if
you're single and no kids, youmight have some nieces and nephews, you
might have some cousins, siblings,people that you do are close in your
life and you want to take careof. And let's say your assets consist
of you know, I just gota house and you know, sure,
not a lot of other money.To me, that's enough. I mean,
houses are big assets that need toget where you want them to go,
(24:26):
and you should decide how to dothat other than leaving it undone.
Because if you have no will,now who gets it. Well, now
you've got to go to court andlet the state decide who's going to get
these assets and that can never begood. Plus it's going to probate.
So I mean, at least doa will to direct where where your assets
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go. But I don't know ifit's too if there's just the one that's
too small, if you have absolutelynothing, then yes, I guess you
don't need an estate plan. Talkwith Todd Lotski from the law firm of
Kushingen Dolan. If you've got aquestion you'd like to ask Todd Lai on
air. The phone number here iseight eight eight to zero five two two
six three. That number again iseight eight eight to zero five two two
(25:10):
six three. That's the number calledask Todd your estate planning question. Tod,
let me take the other side ofthat. Sure, at what size
estate does someone outgrow kind of morebasic estate planning needs? When do you
start needing something that's more complex.That's really a good question too, because
you know, we know that thisestate tax law is changing. We've been
(25:30):
talking about it for you know,a couple years now. We know it's
getting closer and closer. Is theend of next year, Yes, it's
the end of twenty twenty five.January one, twenty twenty six, so
it is quickly approaching and that numberis going to fall. So the estate
tax exemption, let's say, indexedfor inflation, it falls to say seven
(25:52):
million, and that's after the index. You know, if you're married and
you're worth fourteen million in you're onthe bubble, right, you're on the
bubble. It doesn't mean you everoutgrow. So I'll clarify the language a
little. When you talk about youryour foundation for estate planning, that's that
ability to use both of your estatetax exemptions and double them. And so
(26:15):
that's always the foundation. So ifmy estate is suddenly twenty million and I'm
looking at a you know, twelveto fourteen million dollar exemption range, I
need to think right now, that'snot that I've outgrown my foundation, but
what do I have to add tothe estate plan that I might not have
needed before. So that's an additionalbuilding block to do what we call more
(26:40):
complex or sophisticated estate planning, totake advantage of the exemption that we have
today before I lose it. Soif I'm at twenty million, and I
can shelter almost twenty six million todaytwenty seven million today, how can I
gobble up some of that exemption beforeit goes away. And that's the more
(27:00):
sophisticated planning that you might have toadd to your plan. Talking with Todd
Lutsky from the law firm of Cushingand Dolan. The phone number for the
studio here so you can ask Toddyour question is eight eight eight to zero
five two two six three. Stillhave another spot or two open, so
uh again call that number so youcan speak to Todd right now about your
(27:22):
estate planning questions. Eight eight eightto zero five two two six three.
We're going to take a quick breakhere, but when we come back,
it's right to your questions with Todd. That number one last time is eight
eight eight to zero five two twosixty three. Ask Todd with Todd Lutsky
every Wednesday at ten thirty only hereon the Financial Exchange Radio Network. You're
(27:48):
listening to Ask Todd with Todd Lutskyon the Financial Exchange Radio Network. All
right, let's get right to yourquestions for Todd Lotski. First off,
we've got Paul in Connecticut. Paul, what's your question for Todd? In
(28:10):
an irrevocable grand or trust under twoscenarios One, as you are subject to
a state tex and the other thatyou are not. How do you facilitate
getting step up on the assets giventhe recent ruling and the lack of clarity
and multiple websites from attorneys I've readon that subject of getting step up within
a grand tour of revocable trusts.So this is the confusion, and it's
(28:37):
unfortunately that it's unfortunate that other attorneysdon't understand what this revenue ruling says.
I'm familiar with it. We've beentalking about it for an entire year.
It is crystal clear to me thatthis revenue ruling that you're referring to does
not change the rules at all regardinga step up in basis, it's basically
confirming the exact same rules that havealways existed. Let's go through them.
(29:03):
One, If you have an irrevocabletrust, much of which might be one
like I talk about, like amedicaid type irrevocable trust. If you have
an irrevocable trust in which you transferassets but retain the right to like the
income or the ability to change thebeneficiaries of the trust, and you retain
(29:26):
that right, then that makes thetransfer to the trust an incomplete gift for
gift tax purposes, and so twentythirty six of the Code says, if
you transfer assets to a trust likethat where you retain the right to the
income, then for estate tax purposes, that asset will be included in your
(29:48):
estate as if you never gave itaway. Again, it's going to avoid
probate, it's protected from the nursinghome. It's doing everything it's supposed to
do, but it's not reducing yourestate for estate tax purposes. I want
inclusion, and that's why in thatkind of trust it would be drafted for
inclusion. And when it's included inthe estate, you get the ten to
(30:14):
fourteen a step up in basis forsure. Now to your point, what
about a grant or trust that isa completed gift for estate tax purposes.
I transfer my asset to the trust, and I'm not the trustee. I
don't have the right to the income. I've not reserved those powers. I've
(30:37):
what cut the string, if youwill, from that asset, so that
asset will no longer be included inmy estate when I die. Because the
desire was to have that reduce myestate and grow outside my estate. Lovely,
that's what the goal was that's what'sdone, even though for income tax
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purposes, I retain a grant orpower causing me to be treated for income
tax purposes as the owner. Butwhen I die, if it's not included
in my estate, I do notget the step up in basis whereas that
revenue ruling was trying to say,because ten to fourteen A is an income
(31:23):
tax code section that and I'm deemedthe owner when I die, that I
should get the step up. Butit's not included, so you don't get
the step up, which is exactlyhow it has always been confusing for some
I hope I cleared it up becausethere is and should be no confusion about
(31:48):
it. And that said, there'splenty of confusion about potholes to avoid in
your estate planning. This could beone of them. Right, How do
I know which trust is right forme? Right? How do I know
what to do in my estate plan? This is a guide called estate planning
Potholes to avoid. As we nearthe end of the month, if you've
(32:12):
not done your planning, this isfor you. It's going to show you
things to think about that you mightnot have thought about going forward and get
avoid those those potholes as you're goingto get your plan in place. If
you've done your planning, it's goingto show you why you might need to
revisit it and maybe change it.Right. Please, some of the tips
(32:32):
don't rely on a will, asChuck said, don't think you have a
nominee realty trust and that's all youneed. You know, maybe I haven't
looked at my plan in ten years. Maybe I moved, maybe I remarried.
All things to think about and howthose things impact your plan. It's
good for the planner, good forthe person who hasn't started their planning eight
(32:54):
six six eight four eight five sixninety nine or legally change show dot com.
You can download it there again eightsix six eight four eight five six
nine nine or legal exchange show dotcom. Todd, I've got another caller
for you. Let's go to Danin Peabody. Dan, you are on
(33:14):
with Todd Lutsky. Well, Todd, first, I have to say that
my wife passed away in October.Oh, I'm sorry to hear that,
and we were in the middle ofa divorce. She had a house,
I had a house, you know. So so let me ask you this.
That's gor to interrupt a minute.So your wife passed away before you
(33:38):
completed the divorce, that's correct,So you were technically married when she passed,
absolutely, So what's your question,Well, am I entitled to any
of her assets? Was there anykind of estate plan in place on the
(33:59):
date of death? I believe theychanged the two kids involved, change the
trust that we had prior to thedivorce and prior to the death. That's
correct. That she had Pakinson's andPackinson's dementia. So you're going to have
(34:20):
to see whether or not there's acapacity problem, to see whether or not
when she changed the trust they had, she had capacity to do that,
and you might be able to challengethat to say that doesn't that was ineffective,
right, And of course it can'tbe changed after you file for divorce.
Once somebody files for divorce, there'san automatic stay on all assets.
(34:40):
You can't change things. So youhave to check with your divorce lawyer to
see when all those dates coincide andhow that may or may not impact the
plan. But once you find outwhat the estate plan was, you need
to find out what possible agreements werein place regarding the divorce prior to her
death. If any, and thenyou can determine what a state planning documents
(35:06):
were in place that were actually effective, and then you got to see what
they say. Now, interestingly enough, if you had any jointly held assets
on the date of death, thoseautomatically passed to you as the surviving joint
owner. So yeah, I thinkyou would get that, but I'm not
sure how how that's going to impactthe divorce. Obviously you don't need a
(35:28):
divorce anymore. But you know thatis absolutely one of the potholes that I
talk about in an estate plan right, what if somebody got a divorce,
go back and check your planning,get it done. That's a pothole,
a red flag to remind you ofsomething to do. So in your case,
find out what was in place,challenge something. If you think capacity
(35:51):
didn't exist when the change was done, look at the final documents and see
how all the other assets were ownedon the date of death. It might
affect what you're going to get,and then you'll have to deal with the
divorce issues later. So hope thathelps. Mister Lutsky, thank you so
much for joining us today. Alwayspleasure. Thank you. This has been
(36:12):
asked odd on the financial exchange radionetwork Ask Todd with Todd Lutsky has been
presented by Cushing and Dolan, servingMassachusetts and New England for more than thirty
years, helping families with the stateand tax planning, Medicaid planning, and
probate law. Call eight hundred andthree nine three four thousand and one or
visit Cushing Doolan dot com. Theviews expressed in this segment are solely those
of Cushing and Dolan Armstrong advisor.He does not provide any legal or tax
(36:35):
advice. Please consult with your legalor tax advisor on such matters. Cushing
and Armstrong do not endorse each otherand are not affiliated. Creating the right
estate plan to help secure your futuretakes effort. There are plenty of mistakes
that you can make, any oneof which could have a dramatic and damaging
effect on your financial strategy. Cushingand Dolan are experts in estate planning.
Their brand new guide is called Detoura Head Estate Planning Blunders to Avoid.
(36:58):
In it, you'll learn about thesecritical A layers so that you can make
the right decisions to always protect yourassets. As an example, if you've
created a trust more than ten yearsago and haven't updated it. Since you're
setting yourself up for problems. Cushingand Dolan's new guide will help you address
issues like this, So call rightnow eight six six eight four eight five
six ninety nine and ask for yourcopy of our new free guide called Detour
(37:20):
Head Estate Planning Blunders to Avoid.That's eight six six eight four eight five
six nine nine, or requested onlinefrom their website Legal exchange show dot com.
That's legal exchange show dot com.The proceeding was paid for and the
views expressed are solely those of Cushingand Dolan. Cushing and Dolan and or
Armstrong Advisory may contact you offering legalor investment services. Cushing and Armstrong do
not endorse each other and are notaffiliated
The Financial Exchanges produced by Money MattersRadio and is hosted by employees of the
Armstrong Advisory Group, a registered investmentadvisor that provides investment advisory services. All
opinions expressed are solely those of thehosts, do not reflect the opinions of
Armstrong Advisory or anyone else, anddo not guarantee profit. Investments can lose
money. This program does not offerany specific financial or investment advice. Please
(00:21):
consult your own financial, tax,and estate planning advisors before making any investment
decisions. Armstrong and Money Matters Radiodo not compensate each other for referrals and
are not affiliated. This is TheFinancial Exchange, with Chuck Zada and Mark
Vandetti, your exclusive look at businessand financial news affecting your day, your
(00:42):
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(01:02):
The DAV five K Boston is presentedby Veterans Development corporation. Face is the
Financial Exchange with Chuck Zada and MarkVandetti. Chuck, Mark and Tucker with
you here, and our top storytoday is yesterday the Federal Reserve, they
(01:22):
released their Economic well Being of USHouseholds Report for twenty twenty three. They
released this every year, and ittells us a little bit about what households
are thinking about the state of theirown finances the state of the economy over
(01:45):
the past year. And what's niceis that they've been doing this every year.
The earliest data I could find wasgoing back to twenty thirteen, but
they've been doing this for eleven yearsnow, which is nice because we have
a you know, a track wreckthat we can compare this against in order
to understand, you know, howthese things may be evolving over time.
(02:07):
Because one of the things that Ireally dislike when it comes to studies is
when they're like, hey, wejust got this report that eighty two percent
of people think the sky is green, and you're like, well, how
does that compare to prior years,Like is that up, down or neutral?
Is this a problem or is thissomething that the people have always thought.
(02:28):
So it's nice that we have awhole bunch of data to compare on
this, because it's again it givessome context. I think that is important
here. Now as far as thesampling that they do on this, it
looks like, just to give youa sense of this in terms of you
(02:50):
know, who this actually who completedthis, there were eleven four hundred and
eighty eight people that participated and completedthis survey out of about sixteen thousand that
they contacted, so that they actuallygot like seventy percent participation, which is
pretty darn good if you're asking me. And so you've got eleven four hundred
(03:14):
plus people that are in here,and I want to really dig in on
this because I think right now whatpeople think about the economy is for better
or for worse, as important aswhat the economy is actually doing. You
know, I think it actually itmatters somewhat. So in this survey,
(03:37):
and there's a piece from the NewYork Times that says, you know,
people having a harder time this year. So seventy two percent of responding said
that they are doing at least okayfinancially, which is down from seventy three
percent last year. The New YorkTimes also mentions, hey, that's way
down from the seventy eight percent andtwenty twenty one mark. Twenty twenty one
(03:57):
was a year where there was justlike stimulus flush stimulus payments. Seventy two
percent is the same as it wasin April twenty twenty, by the way,
the depths of the COVID recession andbefore or at the more or less
same time that those payments were juststarting to hit. So people feel the
same about the about their their financialstatus. To be more specifically, those
(04:17):
who responded in the affirmative to thestatement, are you doing at least okay
financially? Is the same now thanit was when unemployment was fourteen percent?
Well, here, this is oneof the things that I'm going to get
at, is that overall, there'srelatively few data points that suggest this number
change is meaningfully over time. Soyou go back to pre pandemic twenty nineteen,
(04:42):
the end of twenty nineteen, inOctober of nineteen, really good economy,
right, inflation was low, unemploymentwas low, and you would say,
okay, gee, like that mustmean like eighty ninety percent of responded
say that yes, we're doing atleast okay. What was seventy five five
percent, same as the year before, same as the year before. Twenty
(05:02):
seventeen was seventy four percent, twentysixteen was seventy percent. What you get
if you go back to like twentyI'm sorry, twenty thirteen and twenty fourteen,
when you know, you still hada very sluggish economy at that point
coming out of the recession. Youfinally got down into the mid sixties in
terms of you know, the respondentsthat said, hey, things are okay
(05:26):
or better. But where I'm goingwith this is that the vast majority of
people, if you ask them howthey're doing financially, they generally say,
yeah, I'm okay or or better. Like there's an ego component to this
where I don't think a lot ofpeople want to admit they are doing poorly
(05:46):
or the other pieces. Hey dowe focus way too much on all this
stuff, and the overall message shouldbe that most people are just fine.
It's it's one of those two things. It's either our egos prevent us from
saying things aren't good with our ownsituation, or for all of the gyrations
the economy makes most people figure outhow to make it work and they're you
(06:08):
know, okay with it even ifthey're not great, because you would expect
a survey like this to have moreof a difference based on how the economy
is actually doing, and it reallydoesn't. I'm not sure the survey is
useful. And that's a polite wayof saying, I don't think it's useful.
I don't think if you don't mindme editorializing the Fed's job. And
(06:30):
it's amusing. And the preamble tothis eighty three page document, the FED
lists its responsibilities. The first they'rein bullet points. They're not ordered,
probably because they don't want to seemto be They don't want to be perceived
to be prioritizing them. So firstis conduct the nation's monetary policy. How
you doing on that front? Guys? Not so hot in that they have
(06:50):
been better? Yeah, slightly slightlybetter, but it's been better, it's
been yeah, yeah, exactly.And then it goes on remote the stability
of the financial system. Okay,that is a that was that was the
that was the reason for the FEDcoming into existence. It was in response
to a series of panics. Andthen you start and then you get down
the list and it gets more andmore questionable. Uh, The last bullet
(07:14):
is promote consumer protection through community development. Nowhere on this list do I see
take the temperature of people's financial people'seconomic perceptions. I just don't understand why
the FED is doing something that plentyof private entities do. They're not succeeding
in their primary mandate. Look,I'm cursing at the wind here or cursing
(07:39):
the wind, whatever the expression is. Well, the FED is a research
institutional, Like, yes, itconducts all this banking, but it's a
huge research institution, and so,you know, conducting surveys about how what
people are, you know, thinkingabout the economy goes along with that.
The question that I think is worthasking, and this one is redundant.
There's plenty of good data out there. Well here here's the question that I
(08:00):
think is worth asking right now iswhy does it seem that the vast majority
of data out there about people's perceptionof the economy does not necessarily reflect broad
reality? And what I mean bythis. There was a poll that I
saw this morning, and again itdovetails nicely into here. Was conducted by
(08:24):
Harris, which is a polling firm. They surveyed a bunch of people from
the US and forty nine percent ofthem believe that the S and P five
hundred is down this year. Now, not only is the S and P
five hundred up more than twelve percentthis year, it was up twenty four
percent last year. So when weget basic facts like that wrong, it
(08:50):
makes the opinion based stuff even harderto figure out what's going on, because
again, you would expect, likein twenty twenty two, when inflation was
really freaking high, you'd be like, wow, a lot of people should
be polling and you know, beresponding and saying yes, like my my
personal financial situation is not good,And in fact, you were getting the
(09:11):
same number that we're saying it wasfine as twenty seventeen when unemployment was low
and inflation was low, Like,we're there's something fundamentally broken here in how
we are assessing reality. Well,and that's kind of where I've started to
land, like on some stuff whereyou say, look, you know that
the median person does this, andyes, I understand that when you look
(09:35):
at medians, fifty percent of peopleare going to be worse than fifty better.
So there's there's room for interpretation onthat stuff, you know, when
it comes to hey, is theis the stock market up this year?
There's not room for interpretation on thatthe stock market's up. I think people
have taken to rejecting officially produced economicsto they just don't believe this stuck market's
(10:01):
not a statistically well, they wouldput it in that category. So if
you ask somebody about Chuck, Iknow this sounds unbelievable, but I've talked
to people, particularly those who watchFox News like I do. I'm an
economic conservative, I want smaller government. Let me preface this so that we
don't get a bunch of texts sayingI'm a communist by saying I've never voted
for a Democrat in my life.Okay, maybe that's a little too much
(10:22):
information, sure, but that sortof sets the context for where I'm about
to go with this. I've neverseen such misinformation propagated by a news entity
about the state of the economy,whether you like it or not. On
average, the economy is doing reallywell. I don't credit the current administration
for that, no, but thereare a bunch of people who are so
hostile toward it that they can't admitthat unemployment is bumping around fifty year lows.
(10:48):
That growth is above three percent,something that's been rarely achieved in the
past twenty years, including by thelast president. I don't credit the current
administration for it, nor do Iblame the last administration necessarily, though you
could attributes some of their economic problemsto COVID lockdowns. For the economic successes
or failures, A lot of itis just part of the business cycle and
the structural state of the economy.But there are people who just watch one
(11:11):
news channel, frankly, and they'regetting one as a result, very filtered
and in many ways inaccurate view ofthe economy. Doesn't surprise me at all.
Well, I'm sorry to have tosay that. I know it offends
a lot of them. No,Look, I don't think that it's inherently
unique to either side of the spectrumthere, you know, I think that
(11:31):
if you look at that's fair too. I think if you look at what
gets propagated by MSNBC, it's justas like, it's just as distorted.
It's it's not something that you're you'relooking at and saying, oh, like
they get no, like, that'snot how it is. But when when
we can't look at the S andP five hundred, which is not a
government statistic, it's it's something thatis check. They are numbers in number.
They don't trust any of them.They have been conditioned. And when
(11:52):
I say they, I mean peoplewho just watch one news channel. I'm
sorry for picking on you and beingso specific here, but you know you
are you reject at all. Youdon't think unemployments low, You think that
numbers cooked, you don't think inflationhas come down. And I I am
as upset or more upset about thatthan you are. Believe me, but
Chuck. They reject anything quantitative thatcomes from an authority or seeming authority.
(12:15):
That's where we are. So Ithink the question is how do we fix
this? And I don't have theanswer for that. You know, it's
deeper than I don't have the answerfor that. And again when when you
ask people, look how we're youknow, you know, are you struggling
with inflation? Like? Yes,like there are things that are completely unique
to individuals on that side of things. But what I struggle with is when
(12:37):
half of people think that the stockmarket is down this yet I'm not surprised
at all given what I just don'tknow how to reconcile that with there is
what is actually going on, andthat's no basis for a discussion. It's
kind of tough for me to figureout what to do with their Let's take
(12:58):
a quick break. When we comeback, why don't we talk a little
bit about the FED and the riskassociated with the current policies that they are
undertaking. This is your home forthe most comprehensive coverage of the economy and
the trends on Wall Street. Thishe's the Financial Exchange Radio Network. The
(13:20):
Financial Exchange Show podcast drops every dayon Apple, Spotify, and iHeartRadio.
Hit that subscribe button and leave usa five star review. You're listening to
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(13:41):
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to exchange. Go to visit USBIdot com and book your trip today.
That's visit USBI dot com. Piecetoday from Mohammed El Aaron in Bloomberg talking
(14:07):
about how there seems to be noone who wants to jump out of line
at the FED, talking about theuniformity in their policy signaling, and how
Mark, did you know that thisweek we have sixteen FED speakers scheduled two
speaker that's that's somebody we had atthe beginning of the week. We've got
three and a third a day.I feel bad for the third of a
(14:30):
FED speaker that has to speak everyday, but it's it's just something where
I don't really know what we're doinghere in terms of the frequency of communication,
Like why do we need the FEDgiving two interviews on Bloomberg A day
three commencement addresses two economic roundtables likeLarry Summers, the Harvard guy. Yeahs,
(14:56):
who's a lightning rod. I lovethe guy, but he's a lightning
rod. A couple of weeks ago, at a conference on this subject,
said the FED needs to cut thecacophony they do. It's, you know,
they give us so much messaging totry I was talking with I forget
who it was about this a coupleof weeks ago, and the case that
(15:16):
the Federal make is well. Bycommunicating better, we're able to get our
message out to help, you know, manage inflation expectations. It's the name
of the game. Yeah, Mark, what person says, oh gee,
you know Waller's speaking today, Letme tune in and listen to them other
than short term traders, other thanmarket participants. And I'm not chusing about
(15:39):
market There are there are inflation expectationsseries based solely on market perceptions, so
that's not unimportant. But when wetalk about like inflation expectations, they mean
you and me, and they're basedon Hey, I passed the Gulf station
in Saugus and it was three fiftyinstead of three forty two. Inflation's getting
worse and and we just don't needten to twenty fed speakers a week.
(16:04):
Larry Summers made the point, He'slike something to the effect of, you
know, when a company is executinga change in policy, you don't hear
from every C suite person and allof it it gets. That would be
very confusing. When the Supreme Courtmake hands down a ruling, there are
dissenting opinions, but you don't seethe sausage making that would be confusing and
(16:26):
maybe divisive. The FED seems tobe, as Summers pointed out, the
only very high profile, certainly veryimportant in a national sense, entity that
feels the need to in real timeshare its thinking with everybody. And it's
confusing to me anyway. So Iguess Mark, you understand monetary policy far
(16:48):
better than I do. What wouldbe What would be the impact if the
FED said, look, we're notgiving speeches anymore and instead of this long
FED statement. I mean, youremember the days when the FED statement on
their rate decision was we kept interestrates the same. I remember the days
when there were no FED statement?Right? What would happen if you know,
you just go to the Fed's keepinginterest rates the same. Inflation is
(17:12):
still too high. My guess isfinancial market participants who like to front run
and game these things would squeal,Yes, But how would you evaluate?
How would you answer that question empirically? As researchers like to say, how
would you determine whether or not wewere better off under such a regime?
You would have to look at thevolatility of different real economic variables, things
(17:36):
that affect you and me and everybodylistening. All I can tell you is
that the volatility of economic variables hasnot been tamer since the FED started doing
this, and that's because you can'tremove volatility. You can transform it,
but it just shows up in differentplaces. Like it doesn't go away.
(17:56):
It might show up differently and expressitself differently, but it doesn't just you
can't suppress it. So to answeryour question, we did live in that
world for a very long time.Press conferences are very new. What twelve
statements only from there, and Ifind it hard to find fault with Alan
Greenspan, but he is the guythat started issuing statements explaining what they did
(18:17):
with a brief explanation as to why. Before then, as you pointed out,
you didn't get any information. Youhad to infer what the FED did
by looking at the interest rate bankscharge one another on overnight loans so called
FED funds, and you had toinfer what the FED did as a consequence.
So I'd love to try it,Chuck. I suspect, by the
way, that we'll get back tothat this isn't the Fed, jeez.
(18:38):
The American Republic is an ongoing experimentwith an uncertain future. That's doubly or
triply true of the FED. Wewill get back to that. We will
curtail the cacophony. As Larry Summerssaid, I don't find myself agreeing with
Larry Summers very often, but whenI do, it's now you know,
it's the other piece. Elian makesthe other point that he makes quoter.
(19:03):
As I've argued before, two percentmay now be too low a target for
domestic economic approach that is no longeranchored by the Washington consensus of liberalization,
deregulation and fiscal discipline. When youtalk about what we're seeing economically, it
is very much heading towards more tariffs, more regulation, less fiscal discipline,
regardless of who is in office.That's something that we need to reckon with
(19:27):
as far as what it means forcosts. Taking a quick break here Wall
Street Watch and ask Todd our next, Like us on Facebook and follow us
on Twitter at TFE show. Breakingbusiness news is always first right here on
(19:48):
the Financial Exchange Radio Network. Timenow for Wall Street Watch a complete look
at what's moving markets so far todayright here on the Financial shall Exchange Radio
Network. Well, markets are incrediblyflat as investors await meeting minutes from the
Fed due out this afternoon, inaddition to the highly anticipated first quarter earnings
(20:11):
report from Nvidia. After today's closing, bell right now dows up by eleven
points, SMP five hundred is flat, and the Nasdaq up by nine points.
Russell two thousand down by about athird of a percent, ten year,
Treasure reeled up by one basis pointnow a four point four to six
percent, and Crude oiled down nearlyone and a half percent, trading at
(20:33):
seventy seven dollars and fifty seven centsa barrel. Target is the latest retailer
to report first quarter earnings, missingon earnings as it saw a year over
year sales decline of about three percent, where the retailers saw its customers purchase
fewer discretionary items. Target's comparable salesalso slumped three point seven percent, marking
a fourth consecutive quarter of declines.Target down by about seven percent. Meanwhile,
(20:59):
shares in ts JX companies up byseven percent, as the parent company
to Tjmax, Marshalls and Home Goodsposted higher quarterly sales driven by an increase
in customer transactions. TJX also liftedits profit outlook for the year. Elsewhere,
Lululemon announced it will restructure its productand brands team and said its chief
product officer was resigning to pursue anotheropportunity. Lulu down by seven percent.
(21:26):
And CNBC's reporting that Amazon is planningto unveil a souped up version of its
decade old voice assistant Alexa with GenerativeAI this year and will charge a monthly
fee, citing sources. The reportalso states that Amazon's Alexa offering will not
be included in Amazon Prime subscriptions.Amazon up by about half percent so far
(21:47):
today. On Tucker Silvan, That'sWall Street Watch. This is Asked Todd
on the Financial Exchange Radio Network.If you have an existing estate plan or
in the market for one, todletskey is to answer your questions and help
you plan for a later life.Ask Todd is presented by Cushing and Dolan,
serving Massachusetts and New England for morethan thirty five years, helping families
(22:08):
with a state and tax planning,Medicaid planning, and probate law. Visit
Cushingdolan dot com. Now Here's ToddLutsky as promised for joined now by Todd
Lutsky for ask Todd. This isyour chance to ask Todd your questions about
your state plan. So we've openedup the phone lines here at eight eight
(22:29):
eight to zero five two two sixthree. That's the number to call in
order to ask Todd your questions.The number again is eight eight eight two
zero five two two six three.Usually we're only able to get two to
three calls in, so make sureyou get in line early to make sure
that your call can be answered byTodd live on air. Here that number
one more time is eight eight eightto zero five two two six three.
(22:55):
Mister Lutsky, how are you today? I am never better? And you
well, was a little confused overthe weekend. What happened? Well,
I wasn't really sure why I neededa Geiger counter a Geiger counter, but
then it clicked. You got it? Yeah, oh good, I get
it. Let's talk a little bitabout I want to talk a little bit
about trust planning, Todd. Isthere ever a size estate that is too
(23:19):
small for trust planning? And Ithink when we talk about potholes, which
I know is the guide that we'regiven away as we approach the end of
the month, this is one.This is probably the first one on the
list. I really don't want peopleto think that, you know, my
estate's too small to plan. Idon't need to worry about it. I
(23:41):
mean, I find it Is itpossible to have an estate that's too small?
Yes, I guess it is,but I think generally probably not.
And maybe here's the guideline. Youknow, even if you're single and you
have no kids. Now, obviously, if you have kids, you're married,
you have assets can't possibly be tootoo small a plan because there's loved
(24:02):
ones that you want to take careof. But let's say you're even if
you're single and no kids, youmight have some nieces and nephews, you
might have some cousins, siblings,people that you do are close in your
life and you want to take careof. And let's say your assets consist
of you know, I just gota house and you know, sure,
not a lot of other money.To me, that's enough. I mean,
houses are big assets that need toget where you want them to go,
(24:26):
and you should decide how to dothat other than leaving it undone.
Because if you have no will,now who gets it. Well, now
you've got to go to court andlet the state decide who's going to get
these assets and that can never begood. Plus it's going to probate.
So I mean, at least doa will to direct where where your assets
(24:48):
go. But I don't know ifit's too if there's just the one that's
too small, if you have absolutelynothing, then yes, I guess you
don't need an estate plan. Talkwith Todd Lotski from the law firm of
Kushingen Dolan. If you've got aquestion you'd like to ask Todd Lai on
air. The phone number here iseight eight eight to zero five two two
six three. That number again iseight eight eight to zero five two two
(25:10):
six three. That's the number calledask Todd your estate planning question. Tod,
let me take the other side ofthat. Sure, at what size
estate does someone outgrow kind of morebasic estate planning needs? When do you
start needing something that's more complex.That's really a good question too, because
you know, we know that thisestate tax law is changing. We've been
(25:30):
talking about it for you know,a couple years now. We know it's
getting closer and closer. Is theend of next year, Yes, it's
the end of twenty twenty five.January one, twenty twenty six, so
it is quickly approaching and that numberis going to fall. So the estate
tax exemption, let's say, indexedfor inflation, it falls to say seven
(25:52):
million, and that's after the index. You know, if you're married and
you're worth fourteen million in you're onthe bubble, right, you're on the
bubble. It doesn't mean you everoutgrow. So I'll clarify the language a
little. When you talk about youryour foundation for estate planning, that's that
ability to use both of your estatetax exemptions and double them. And so
(26:15):
that's always the foundation. So ifmy estate is suddenly twenty million and I'm
looking at a you know, twelveto fourteen million dollar exemption range, I
need to think right now, that'snot that I've outgrown my foundation, but
what do I have to add tothe estate plan that I might not have
needed before. So that's an additionalbuilding block to do what we call more
(26:40):
complex or sophisticated estate planning, totake advantage of the exemption that we have
today before I lose it. Soif I'm at twenty million, and I
can shelter almost twenty six million todaytwenty seven million today, how can I
gobble up some of that exemption beforeit goes away. And that's the more
(27:00):
sophisticated planning that you might have toadd to your plan. Talking with Todd
Lutsky from the law firm of Cushingand Dolan. The phone number for the
studio here so you can ask Toddyour question is eight eight eight to zero
five two two six three. Stillhave another spot or two open, so
uh again call that number so youcan speak to Todd right now about your
(27:22):
estate planning questions. Eight eight eightto zero five two two six three.
We're going to take a quick breakhere, but when we come back,
it's right to your questions with Todd. That number one last time is eight
eight eight to zero five two twosixty three. Ask Todd with Todd Lutsky
every Wednesday at ten thirty only hereon the Financial Exchange Radio Network. You're
(27:48):
listening to Ask Todd with Todd Lutskyon the Financial Exchange Radio Network. All
right, let's get right to yourquestions for Todd Lotski. First off,
we've got Paul in Connecticut. Paul, what's your question for Todd? In
(28:10):
an irrevocable grand or trust under twoscenarios One, as you are subject to
a state tex and the other thatyou are not. How do you facilitate
getting step up on the assets giventhe recent ruling and the lack of clarity
and multiple websites from attorneys I've readon that subject of getting step up within
a grand tour of revocable trusts.So this is the confusion, and it's
(28:37):
unfortunately that it's unfortunate that other attorneysdon't understand what this revenue ruling says.
I'm familiar with it. We've beentalking about it for an entire year.
It is crystal clear to me thatthis revenue ruling that you're referring to does
not change the rules at all regardinga step up in basis, it's basically
confirming the exact same rules that havealways existed. Let's go through them.
(29:03):
One, If you have an irrevocabletrust, much of which might be one
like I talk about, like amedicaid type irrevocable trust. If you have
an irrevocable trust in which you transferassets but retain the right to like the
income or the ability to change thebeneficiaries of the trust, and you retain
(29:26):
that right, then that makes thetransfer to the trust an incomplete gift for
gift tax purposes, and so twentythirty six of the Code says, if
you transfer assets to a trust likethat where you retain the right to the
income, then for estate tax purposes, that asset will be included in your
(29:48):
estate as if you never gave itaway. Again, it's going to avoid
probate, it's protected from the nursinghome. It's doing everything it's supposed to
do, but it's not reducing yourestate for estate tax purposes. I want
inclusion, and that's why in thatkind of trust it would be drafted for
inclusion. And when it's included inthe estate, you get the ten to
(30:14):
fourteen a step up in basis forsure. Now to your point, what
about a grant or trust that isa completed gift for estate tax purposes.
I transfer my asset to the trust, and I'm not the trustee. I
don't have the right to the income. I've not reserved those powers. I've
(30:37):
what cut the string, if youwill, from that asset, so that
asset will no longer be included inmy estate when I die. Because the
desire was to have that reduce myestate and grow outside my estate. Lovely,
that's what the goal was that's what'sdone, even though for income tax
(31:02):
purposes, I retain a grant orpower causing me to be treated for income
tax purposes as the owner. Butwhen I die, if it's not included
in my estate, I do notget the step up in basis whereas that
revenue ruling was trying to say,because ten to fourteen A is an income
(31:23):
tax code section that and I'm deemedthe owner when I die, that I
should get the step up. Butit's not included, so you don't get
the step up, which is exactlyhow it has always been confusing for some
I hope I cleared it up becausethere is and should be no confusion about
(31:48):
it. And that said, there'splenty of confusion about potholes to avoid in
your estate planning. This could beone of them. Right, How do
I know which trust is right forme? Right? How do I know
what to do in my estate plan? This is a guide called estate planning
Potholes to avoid. As we nearthe end of the month, if you've
(32:12):
not done your planning, this isfor you. It's going to show you
things to think about that you mightnot have thought about going forward and get
avoid those those potholes as you're goingto get your plan in place. If
you've done your planning, it's goingto show you why you might need to
revisit it and maybe change it.Right. Please, some of the tips
(32:32):
don't rely on a will, asChuck said, don't think you have a
nominee realty trust and that's all youneed. You know, maybe I haven't
looked at my plan in ten years. Maybe I moved, maybe I remarried.
All things to think about and howthose things impact your plan. It's
good for the planner, good forthe person who hasn't started their planning eight
(32:54):
six six eight four eight five sixninety nine or legally change show dot com.
You can download it there again eightsix six eight four eight five six
nine nine or legal exchange show dotcom. Todd, I've got another caller
for you. Let's go to Danin Peabody. Dan, you are on
(33:14):
with Todd Lutsky. Well, Todd, first, I have to say that
my wife passed away in October.Oh, I'm sorry to hear that,
and we were in the middle ofa divorce. She had a house,
I had a house, you know. So so let me ask you this.
That's gor to interrupt a minute.So your wife passed away before you
(33:38):
completed the divorce, that's correct,So you were technically married when she passed,
absolutely, So what's your question,Well, am I entitled to any
of her assets? Was there anykind of estate plan in place on the
(33:59):
date of death? I believe theychanged the two kids involved, change the
trust that we had prior to thedivorce and prior to the death. That's
correct. That she had Pakinson's andPackinson's dementia. So you're going to have
(34:20):
to see whether or not there's acapacity problem, to see whether or not
when she changed the trust they had, she had capacity to do that,
and you might be able to challengethat to say that doesn't that was ineffective,
right, And of course it can'tbe changed after you file for divorce.
Once somebody files for divorce, there'san automatic stay on all assets.
(34:40):
You can't change things. So youhave to check with your divorce lawyer to
see when all those dates coincide andhow that may or may not impact the
plan. But once you find outwhat the estate plan was, you need
to find out what possible agreements werein place regarding the divorce prior to her
death. If any, and thenyou can determine what a state planning documents
(35:06):
were in place that were actually effective, and then you got to see what
they say. Now, interestingly enough, if you had any jointly held assets
on the date of death, thoseautomatically passed to you as the surviving joint
owner. So yeah, I thinkyou would get that, but I'm not
sure how how that's going to impactthe divorce. Obviously you don't need a
(35:28):
divorce anymore. But you know thatis absolutely one of the potholes that I
talk about in an estate plan right, what if somebody got a divorce,
go back and check your planning,get it done. That's a pothole,
a red flag to remind you ofsomething to do. So in your case,
find out what was in place,challenge something. If you think capacity
(35:51):
didn't exist when the change was done, look at the final documents and see
how all the other assets were ownedon the date of death. It might
affect what you're going to get,and then you'll have to deal with the
divorce issues later. So hope thathelps. Mister Lutsky, thank you so
much for joining us today. Alwayspleasure. Thank you. This has been
(36:12):
asked odd on the financial exchange radionetwork Ask Todd with Todd Lutsky has been
presented by Cushing and Dolan, servingMassachusetts and New England for more than thirty
years, helping families with the stateand tax planning, Medicaid planning, and
probate law. Call eight hundred andthree nine three four thousand and one or
visit Cushing Doolan dot com. Theviews expressed in this segment are solely those
of Cushing and Dolan Armstrong advisor.He does not provide any legal or tax
(36:35):
advice. Please consult with your legalor tax advisor on such matters. Cushing
and Armstrong do not endorse each otherand are not affiliated. Creating the right
estate plan to help secure your futuretakes effort. There are plenty of mistakes
that you can make, any oneof which could have a dramatic and damaging
effect on your financial strategy. Cushingand Dolan are experts in estate planning.
Their brand new guide is called Detoura Head Estate Planning Blunders to Avoid.
(36:58):
In it, you'll learn about thesecritical A layers so that you can make
the right decisions to always protect yourassets. As an example, if you've
created a trust more than ten yearsago and haven't updated it. Since you're
setting yourself up for problems. Cushingand Dolan's new guide will help you address
issues like this, So call rightnow eight six six eight four eight five
six ninety nine and ask for yourcopy of our new free guide called Detour
(37:20):
Head Estate Planning Blunders to Avoid.That's eight six six eight four eight five
six nine nine, or requested onlinefrom their website Legal exchange show dot com.
That's legal exchange show dot com.The proceeding was paid for and the
views expressed are solely those of Cushingand Dolan. Cushing and Dolan and or
Armstrong Advisory may contact you offering legalor investment services. Cushing and Armstrong do
not endorse each other and are notaffiliated
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