Stocks brush off bad economic news again

Chuck Zodda and Marc Fandetti dive into the jobs data released in the morning that came in 'much lower than expected'. Is Europe catching up to the US's GDP growth? Todd Lutsky joins the show for his weekly segment, Ask Todd, where he will explain the differences between revocable and irrevocable trusts.

Episode Transcript

(00:00):
The Financial Exchange is produced by MoneyMatters Radio and is hosted by employees of
the Armstrong Advisory Group, a registeredinvestment advisor that provides investment advisory services.
All opinions expressed are solely those ofthe hosts, do not reflect the opinions
of Armstrong Advisory or anyone else,and do not guarantee profit. Investments can
lose money. This program does notoffer any specific financial or investment advice.

(00:20):
Please consult your own financial, tax, and estate planning advisors before making any
investment decisions. Armstrong and Money MattersRadio do not compensate each other for referrals
and are not affiliated. This isThe Financial Exchange, with Chuck Zada and
Mark Vandetti, your exclusive look atbusiness and financial news affecting your day,

(00:41):
your city, your world. Stayinformed and up to date about economic and
market trends plus breaking business news everyday. The Financial Exchange is a proud
partner of the Disabled American Veterans Departmentof Massachusetts. Help us support our great
American heroes by visiting DAV five kdot com, bust and making a donation
today. The DAV five K Bostonis presented by Veterans Development Corporation. This

(01:07):
is the Financial Exchange with Chuck Zadaand Mark Vandetti, Chuck, Mark and
Tucker here, and we continue toget a whole bunch of economic data out
this week. This morning, ADP. What does ADP stand for? Something
something? Payrolls, American something wrong. I'm going to tell you American data

(01:29):
processing. Probably that sounds right.But ADP, which is automatic data processing,
automatic data processing. Mine was morepatriotic your yours was maybe they could
do a rebrand and incorporate a littlebit of blue into that logo and there
you go. But ADP reported theirjobs numbers for the month of May at

(01:52):
eight fifteen this morning, and theyshowed one hundred and fifty two thousand jobs
added. That's compared to expectations ofone hundred and seventy to one hundred and
seventy five thousand, and so amiss to the downside, They're a modest
one. Despite CNBC telling me,quote, I just have to pull this
up because it was it was thatsignificant that I even went to Mark and

(02:12):
said, this isn't real. Quote. Private payrolls growth slows to one hundred
and fifty two thousand and May,much less than expected. It's like within
the margin of error on this andI don't really know what we're doing here,
but yet another data point that iscoming in under expectations. Then we
get the ISM services PMI number thatcame out at ten am this morning,

(02:37):
expected to print somewhere between fifty pointeight and fifty one, ends up printing
a fifty three point eight. Sokind of throwing a wrench in this whole.
Hey, everything's slowing narrative. Exceptthe thing you got to remember about
the ISM surveys, is there exactlythat they are. They're surveys. They're
what we refer to as soft data, not hard data, and the soft

(02:59):
data has not been that reliable thisbusiness cycle. It's been something where we've
talked for the last two years abouthow the ISM manufacturing data is just not
coherent with the rest of the economicdata that we've been getting. I have
some services has been a little bitmore reliable, but again, this is
one print for one month, andall of the other data is kind of

(03:21):
pointing in the opposite direction. Somy personal choice is, you know,
and looking at kind of the mosaicthat you build of Hey, this data
point in that one, say okay, it's a positive one, but there's
nothing else reinforcing it. Let's discountit until proven otherwise. Is kind of
how I would approach something like this. The FED started tightening two years ago,
a little over two years ago.It's stopped tightening about a year ago.

(03:44):
Yep. FED funds has been atfive and a quarter now for a
year. The consensus among researchers isthat it takes a few to several quarters
for those hikes to work their waythrough the economy. The mechanism through which
the Fed effects demand is interest rates, as we all know, so we've
all been waiting for the slowdown.Here's the question that I think is worth

(04:09):
asking. Then, the stock marketand the bond market are telling us two
different things at the moment. Thebond market, in the last few weeks
has seen the ten year treasury gofrom four to six down to four to
three, which is saying, Yep, there's a slowdown coming. It's probably
gonna take inflation down with it.That's what we're hearing there. The stock
market, which not to put words, no, to put words in your

(04:31):
mouth. I believe you often referto it as the best leading indicator of
the economy. Is that a fairstatement. No, I would never say
anything like that. You did sayit is. It is. It's my
personal favorite because of the frequency.It's constantly, whereas some data series are
monthly. We were talking like amonth or two ago, and you asked
me if I had to pick one, you said I, if you had

(04:51):
to pick a day. Different thansaying the best, though, Chuck,
that's just saying my personal preference.Probably because of my finance biases, I'd
go with the So what's the bestpredictor of the economy? It depends these
relationships are on something. You're notgonna give you a straight answer to that
question. I'm gonna wheeze a lotof it, But your relationships are two
unstable. Stocks are among my favorites. They're pretty reliable, a lot of

(05:13):
false positives, but they're as goodas anything else. And again, they're
really high frequency. People are votingevery fraction of a second in real time.
So here's the question. Is stocksDespite the data slowing in the last
couple of weeks, the S andP five hundred has been plateaued right around
fifty three hundred since May fifteenth gotup. It crossed that threshold for the
first time on May fifteenth, andit's been sitting there just saying, hey,

(05:40):
you know, not really budget much. I think we moved maybe like
a half percent or almost one percentdown intra day at one point. But
it's it's just kind of sitting theresaying, Okay, we're not budgeting despite
the slowdown that we're seeing in data. And I think it's an interesting question
to try to interpret what the stockmarket is telling us versus what the bond

(06:01):
market is telling us, and wedon't inherently know which one's going to be.
Right, Yeah, there does seemto be a disconnect and our stocks
had our stocks paralyzed a sort ofdeer or rabbit in the flashlight or headlights
whatever the right analogy is, uh, sense I I don't know. My
sense overall is that the data isyou point out, and as you guys

(06:23):
cover every day here is pointing towarda slow down. Hey, you don't
have to be a keen researcher tohave noticed the GDP in the first quarter
annualized was a lot slower than inthe previous couple quarters. Now, the
question on this, when we talkabout a slow down, that the question
that everyone wants to ask is isthis Is this going to be the recession?

(06:43):
Is this going to be the bigone? Mark Goods. It's the
right question ask Like you get alittle chest pain, You're like, oh,
it is, But everyone's just Ijust had everyone we're so anxious to
ask it. Yeah, I thinkthat's always. That's been the case.
My whole adult life has it.So it's not just I feel again,
I've worked in fine as guys whohave real jobs. Not to diminish what
we do, but you can diminishwhat we do. We move stuff around.

(07:06):
I mean, people who have realjobs aren't distracted by every blip in
the market stay to day. Butyeah, it's always We've always overreacted and
tried to read as much as wecan into data with arguably limited usefulness.
It's pretty normal. So the questionis where does the economy go? And
then the follow on to that is, well, what does that do to

(07:27):
stocks and bonds? Because that obviouslyis the thing that a lot of people
want to know. There is adifference between slowdowns to you, could you
elaborate on slowdowns versus recession? We'retalking about, sir. Slowdown is what
we went through in Q three oflast year where economic growth slowed. There
was a question of, hey,is this going to take us into a
recession where economic growth is actively contractinginstead of just growing at a slower rate,

(07:48):
and ultimately we didn't end up ina recession. Then now you always
get these questions as you head intoa growth slowdown. Is this just going
to be a slowdown for a quarteror two or is it going to be
a larger recession? And I'll givemy take on this. I think that
a recession by Q one of nextyear is possible, but I struggle to

(08:11):
see it being a deep recession forone simple reason, which is that in
a recession, if you were toget one, the Fed typically is very
aggressive and cutting interest rates typically anywherefrom two to four percent. You see
are the interest rate cuts that normallyaccompany a recession. When that happens,
longer term rates like the ten yeartreasury tend to fall not as much,

(08:31):
maybe anywhere from one to two percent. And the thought exercise that I go
through is just, hey, ifthe tenure treasury falls, that brings mortgage
rates with it. How much housingactivity is unlocked with mortgage rates in the
high fives? And my answer isa boatload. I can't say the word
is out on well, hold on. It depends on the state of the

(08:52):
economy. If people are fearful fortheir jobs, that's not going to be
the case. I could tell youtwo thousand and eight, two thousand and
nine, despite VA treasury yields,was not a heady time for housing.
So now the key difference there,in my opinion, is that the levels
of home equity now are massively higherthan what you had back then. Enough,
and this is something where if youhave interest rates coming down, you

(09:16):
know, one to one and ahalf percent from here, Hey, you've
got a lot of prospective buyers thatare willing and able, even if the
economy is slowing in my opinion,to provide some ballast before it gets too
bad. And I guess this isthe other place that I'm going, is
hey, even before you get twosaid recession, interest rates on mortgages right

(09:37):
now, the thirty year fixed ratemortgage, according to Mortgage News Daily,
has come down from about seven pointthree percent to seven point zero seven in
the last couple weeks. At thebeginning of the year, that rate was
floating around six seven to six eight, and we were seeing housing activity that
was running eight to ten percent abovelast year's numbers. With rates up where

(09:58):
they are now or where they've beenrecently, you're not only seeing housing activity
up one to two percent year overyear. So if we continue to see
the data slowing but not yet inrecession, my view is that as interest
rates on mortgages drop into the midto high sixes before that job loss happens,
you start to see the economic activitypick up from lower mortgage rates,

(10:22):
and that makes it challenging to haveany kind of meaningful recession because of the
economic activity generated there, both interms of just home you know, purchases
and sales, but also you getbuilders who say, yep, we're going
to be more optimistic, We're goingto start some new construction, and that's
a huge, you know, boostto the economy as well. So the
question is is the economy going toslow enough to get inflation down to the

(10:45):
Fed's target? Will, or stateddifferently, will an economic slow down reduce
inflation? I can tell you thatif you define economic slow down the way
I've been doing it internally the pastcouple of mornings, that doesn't help people
listening. No, I just definedit as two consecutive core of growth lower
than the previous quarter. Sure,and I was surprised to see in both
stock returns and in the change ininflation. You get things going up just

(11:07):
as often as you get them goingdown. If I told you with certainty
we're gonna have a growth slowdown inthe next six months, should you sell
equities? Absolutely not. I'm lookingat a chart. You can't see it.
But stocks have gone up more oftenusing my little definition of growth slowdowns
in the post war period, andI found ten such slow downs. They're
roughly when you'd expect them to begrowth slow The feed eased a little bit.

(11:28):
Maybe that helped equities, But equitiesare just as likely to go down
as up. Inflation interesting just aslikely to go down as up during growth
slowdowns as I define them here.It seems like, unfortunately, on the
inflation side, the only thing thatwe've conclusively found that can slow inflation is
a reduction in employment. Is thatIs that an accurate statement? Any economists

(11:54):
would agree with that? Yeah,that's the way inflation. The process excuse
me of inflation is modeled by amisus. It's a function of overall demand
for which a proxy is unemployment.You could put the Jolts number that we
talked about yesterday job openings relative unemployee. You can get some other proxies as
a stand in for that. Butyeah, Chuck, generally we've relied on

(12:16):
economic slowdowns to reduce inflation. Justthink about the experience of the early nineteen
eighties. Let's take a quick breakhere, and when we come back,
let's talk a little bit about Europe. We don't talk about the folks over
there as often as we should,and so we're going to book ourselves for
a little bit of imaginary travel toEurope to see what the economy looks like

(12:39):
over there. Right after this,miss any of the show. Catch up
and your convenience by visiting Financial Exchangeshow dot com and clicking the on demand
icon, where you'll find all ofour interviews in full shows. This is
your home for the latest business andfinancial news in New England and around the
country. This is the Financial ExchangeRadio Network. The Financial Exchange streams live

(13:03):
on YouTube. Like our page andstay up to date on breaking business news
all morning long. BA is theFinancial Exchange Radio Network. The Financial Exchange
is a proud partner of the DisabledAmerican Veterans Department of Massachusetts. This year's

(13:28):
race is Saturday, November ninth atFort Independence on Castle Island, and registrations
now open. Help us support thesegreat American heroes by visiting DAV fivek dot
Boston and registering for this year's race. Your gifts will support a wide variety
of initiatives like the DAV Transportation Program, which takes disabled vets to important medical

(13:48):
appointments that supply both the physical andmental care they need. For more information
or to make a donation, visitDAV FIVEK dot Boston. The DAV five
K Boston is presented by Veterans DevelopmentCorporation. The US and Europe are on
the same economic track, after all, that's the headline in the Wall Street
Journal. Is it accurate? Mark? I don't think so either. I

(14:11):
think it's more like two slowly movingtrend lines, which is the right way
I think to think about GDP GrossDomestic product, how we measure output that
have kind of crossed each other.Just because we grew at the same base
in one quarter on an annualized basisdoesn't mean we're on the same track.
It is true if you look atthe economic measures that we use to keep

(14:33):
track of economic health. They're reallyflawed, but they do a good job
capturing stories over long periods of time, like GDP, like inflation, the
whole Western world, advanced Western countriesthat trade a lot with each other,
that are a rule of law basedand stuff like that, And it's US
in developed Europe and Developed Asia,as you would imagine in Canada. If
I didn't mention that, if Ididn't imply that, broadly speaking, we

(14:56):
have common trends. You know,GDP has gone up over time. Inflation
is tend to spike at the sametime because the big spikes are always due
to shocks. You can't have excessdemands driven inflation forever. That usually wanes.
Sure, even in the seventies,we got to handle on it.
So no, I don't I wouldn'tphrase it the way that the author of
this article phrased it. But atthe same time, there's a I'll just

(15:20):
call it a common trend to thingslike inflation and growth among economies that are
similarly structured and that have a goodamount of trade with each other. I'm
being a little fast and loose withthe facts there, so forgive me.
But yeah, if that means thatour monetary policies will be more aligned.
ECB is expected to cut rates,although I don't know why they would if

(15:41):
growth is accelerating well, and beyondgrowth accelerating, you're starting to see a
little bit of an uptick in someof the underlying inflation metrics in the last
month or two as well, yep, And so it probably looks like you're
getting one cut from the ECB,and then now what do we do?
Which is not a exactly how youwant to approach it, but they've kind

(16:02):
of boxed themselves into where they needto cut now based on previous statements,
and I think that when you lookat it, the the interesting thing that
you do have here is the questionof again, in markets and economies,
you're you're always looking for correlations andwhen they start to break down, and

(16:25):
the one that you look at nowis kind of it gets it what you
mentioned, which is, hey,these economies tend to track each other,
you know in the long run.Here, Yeah, if you've got the
EU accelerating but the US is decelerating, how does that resolve? Because there's
one of two ways it resolves,either US and flex higher and you get
more growth in the US or EUin flex lower and you get less there.

(16:48):
So what is the resolution that youend up with on that. I
think that's an interesting question to askfor the next six to nine months in
terms of, you know, thebroader questions about inflation and growth and with
direct to those resolve on a globalI mean, it doesn't really have to
resolve. We could outgrow them aswe have been out growing them over the
past generation. And definitely if ourproductivity rate is higher, if our labor
force YEP, growth rate is higher, which yeah, I mean, look,

(17:12):
ultimately, if you look at thosetwo items, if you think the
US has bad demographic problems, theEU is worse. And the supportive aspect
that the supportive piece of GDP inthe US has been you know, productivity
growth that's been modest but still betterthan the EU. Does that continue or

(17:32):
doesn't accelerate? It's possible along thoselines. I do want to touch briefly
on what we're seeing on the inthe AI space, just from a productivity
standpoint, it's starting to feel alittle bit like the the hype on generative
AI is getting way out of controlin terms of what you can Again,

(17:56):
if if you can write or dopictures, make pictures and things like that.
That's that's great, But how mucheconomic activity is generated through making pictures?
Right? Not much? You know, like you make you make a
cool picture that you can put onyou know, the header of a piece,
and okay, I'd rather you knowhow long you been doing that?

(18:17):
Oh I spent you know, tentwenty minutes? Great, I'd rather be
you know, talking to someone abouta house I'm trying to sell, because
there's more economic activity that comes fromthat. What I'm getting at is I
suspect that what we learn over thenext year or two is not the generative
AI is useless, but that it'seconomic impacts in the short term are not
going to be as high as wethink it will be, and that's going
to cause a bunch of spending contractionin that space. That's going to bring

(18:41):
a lot of those companies back downto earth. It takes new technologies.
And I'm going to generalize here becauseI don't have the facts on the tip
of my tongue. But anybody who'sread a little bit about economic history,
you've mentioned Robert Gordon's Rise and Fallof Economic Growth. It's very popular book
written about ten years ago. Henicely chronicles major technology what I'll just call
technology breakthroughs, from steam to electricityand all the follow on benefits that accrue

(19:07):
from those a crew to people intothe economy from those and it takes decades
for them to work their way through. It would be a little bit surprising.
Even the Internet took twenty years tofind applications that were right. At
first it was just dancing hamsters.Yeah, I was thinking more like people
at universities emailing each other in theearly seventies to up to dancing you had

(19:30):
the highest form of Internet used dancinghamsters and so forth. Let's take a
quick break here. When we comeback, we got Wall Street Watch and
ask Todd. Like us on Facebookand follow us on Twitter at TFE show.
Breaking business news is always first righthere on the Financial Exchange Radio Network.

(19:55):
Time now for Wall Street Watch acomplete look and what's moving markets so
far today right here on the FinancialExchange Radio Network. Market's our mixed territory
with the jump in the tech sectoras investors continue to monitor the bond market
and digest this morning's ADP private payrollsreport ahead of a big jobs report this

(20:15):
coming Friday. Right now, theDow is off by about a quarter percent,
SMP five hundred is up by abouta half a percent, and the
NAZAC up over one percent. Rusttwo thousand is up by a quarter percent.
Ten year treasure reeled is down buysone basis point now our four point
three to two percent, and crudeoil is up by half a percent,

(20:37):
trating a seventy three dollars and sixtyone cents a barrel. Shares in Hewlett
Packard Enterprise jumping by twelve percent afterthe server in Cloud software company posted stronger
than expected quarterly results where it sawsales of AI servers doubled over nine hundred
million dollars. Meanwhile, cybersecurity firmCrowdStrike reported a climb in quarterly revenue and

(20:59):
also hiked its annual guidance, settingthat stock up by six percent. Elsewhere,
Dollar Tree down by four and ahalf percent after the discount retailer posted
first quarter results that came in linewith analysts forecasts. Separately, the Wall
Street Journal is reporting the company isexploring a potential sale or spin off of
Family Dollar Guidewhere Software shares up byseventeen percent after the insurance software specialist raise

(21:23):
its annual outlook after posting better thanexpected quarterly results. In a major sports
media news, The Wall Street Journalis reporting that the NBA is closing in
on deals with NBC, ESPN anda Amazon that would bring in about seventy
six billion dollars in media revenue overeleven years, citing people familiar with discuss

(21:44):
with the discussions, Amazon up byabout a third of a percent, while
Disney shares are off by over oneand a half percent. I'm Tucker Silva
and that's Wall Street Watch. Thisis Ask Todd on the Financial Exchange Radio
Network. If you have an existing, a state planned, or in the
market for one, Todd Lutsky ishere to answer your questions and help you
plan for a later life. AskTodd is presented by Cushing and Dolan,

(22:08):
serving Massachusetts and New England for morethan thirty five years, helping families with
a state and tax planning, Medicaidplanning, and probate law. Visit Cushingdolan
dot com. Now here's Todd Lutsky. As promised, we are now joined
by Todd Lutsky from the law firmof Cushing and Dolan. We call the
segment asked Todd because we open upthe phone lines and you get to ask

(22:30):
Todd your questions about estate planning.The studio number here is eight eight eight
two zero five two two six three. So get calin if you want to
ask Todd your question about your estateplan We usually only have the opportunity to
speak with two to three people atany given show. So again that number

(22:52):
is eight eight eight two zero fivetwo two six three. Get calling early
to make sure you get cued upand get one of those spots. That
phone number again is eight eight eighttwo zero five two two six three.
Mister Lutsky, how are you today? I'm never better in you? Uh
good. I'm in the middle ofan experiment right now. You're experimenting.
I ordered a chicken in an eggfrom Amazon. Yeah, I'll let you

(23:12):
know. Yeah, yeah, I'lllet you know. Let me know,
Todd. I want to talk alittle bit about uh, revocable trusts.
I have a question for me onthem, and specifically it relates to the
taxation of revocable trusts. Let's saythat someone goes and does trust planning and
chooses to utilize revocable trusts. Howdoes that impact their tax situation on a

(23:37):
yearly basis, And there are manydifferences between these trusts, and there's many
similarities, but let's talk this oneis just about the revocable correct. So
on the revocable trust, do wehave an income tax I believe is the
question an income tax difference? Yes, So when you put assets in these

(23:59):
trusts that could be owning something likejust so you understand why this is even
a question, you're going to befunding this trust with something like an investment
portfolio, bank accounts, maybe arental property. And so those assets that
are now owned by the trust aregenerating income, interest, dividends, capital

(24:23):
gains, or rent. Well,that income needs to be income taxed to
somebody. Well, if it's ownedby the trust, the question is who's
paying the tax. So when youtitle assets to a revocable trust, those
investment or bank accounts will be havea tax ID number equal to your social

(24:48):
Security number. So now that youknow it's in your social security number,
you can ignore filing any income taxreturns for the trust and just keep on
filing your own income tax returns.That being your ten forty and so long
winded answer to say, there isno change from an income tax perspective,

(25:11):
when you have a revocable trust,what if you are utilizing an irrevocable trust
designed to protect assets from a nursinghome, how does that impact the income
tax situation? And that is criticalbecause there's many kinds of irrevocable trust,
which is what Chuck's alluding to,right, So you've got to check that
kind of irrevocable trust you have,and for income tax purposes, it matters

(25:37):
whether that trust is a grand orirrevocable trust. What that means in English
is that you, the creator,are still the owner for income tax purposes.
So when you set up an irrevocablewe'll use medicaid trust as you mentioned,
Chuck, and you put in thosebrokerage accounts or that rental property the

(25:59):
brokerage account. Now we'll have anID number given to it, because the
trust will have its own ID number. So once the trust gets its own
ID number, the irs will belooking for a tax return for that ID
number. However, if it's agrand tour trust, and this trust earns
interest, dividends and gains, whetherit's distributed out or not, because it's

(26:25):
a grand tour trust, and you'retreated as the owner. For income tax
purposes, it will get picked upon your own personal ten forty. So
in English, yes, there's alittle difference. You have to file an
extra return for the trust. It'scalled a trust return, but it pays
zero tax and everything flows through toyour personal return. Talking with Todd Lotski

(26:51):
from the law firm of Cushing andDolan, we call the segment Asked Talk
because it's your chance to ask Toddyour questions. Still have room for another
person or two on the phone lines. That nowmber is eight hundred. I'm
sorry, eight eight eight to zerofive two two six three. That's the
number to call to ask Todd aquestion live on air. We're going to
take a quick break, but whenwe come back, it's right to your

(27:11):
phone calls. That studio number againis eight eight eight to zero five two
two six three. Quick break,right to your phone calls when we return.
Ask Todd with Todd Lutsky every Wednesdayat ten thirty on link here on
the Financial Exchange Radio Network. You'relistening to Ask Todd with Todd Lutsky on

(27:33):
the Financial Exchange Radio Network. Allright, it's time to get right to
your calls with Todd Leutsky. Firstup, we've got Tom on the Cape.
Tom, what's your question for Todd? Good morning, gentlemen, how
are you great. It's in regardsto my aging mother who's now an assisted

(27:56):
living She had gifted us the maximumor whatever the I think it's eighteen thousand
five, whatever it is the stateof Massachusetts. Does that look back pertaining
to a gift also or is itsticarly just for her assets? Yeah,
so a great question. It's confusingfor folks. This is when you're thinking
about protecting assets from a nursing home. Right. First of all, assisted

(28:19):
living is going to be private pace. You would need to you know,
decline and need further help to bein a nursing home in order to get
eligible for Medicaid. But a lookback is a five year look back for
and I'll just give you the definition. Any time a person takes any asset
and that was a formally available tothe nursing home and puts it somewhere where

(28:44):
it's no longer available, you createa five year waiting period forget the amount
for the moment. So this eighteenthousand dollars number you're discussing is confusing for
people because for gift tax purposes,You're right, it's a freebie. You
don't need to file a seven hnine gift tax return, and you don't

(29:07):
need to pay any gift tax,and you don't need to report it anywhere.
It's eighteen thousand per year per person. That's for IRS gift tax purposes.
For Medicaid eligibility purposes, completely differentrules. Every penny you give away
creates this five year waiting period,so that eighteen is still going to create
a five year waiting period for eachperson that they gave it to. So

(29:30):
hope that helps a little. Butyou know, these are the kind of
things that are confusing to people,and maybe the better approach for Tom's mother
at this point, again, she'sstill an assisted living and maybe has an
opportunity to do some planning figure outwhether a revocable or irrevocable trust is right
for you. That's what this guydoes. It's new for the month.
It helps you if you haven't doneyour planning, learn what the differences are

(29:52):
between the two, and if youhave done your planning, maybe you want
to switch. But here more importantly, it talks not only about the income
tax gift differences, which is whatChuck asked me about earlier. But are
there gift tax differences? What aboutthe estate taxes? Do they do the
same thing? And more importantly thanall that, how does it work day

(30:12):
today? What can I do withassets in there? What can I not
do anymore with assets in there?It really will clear up one of the
most frequently asked questions there is calland get the guide differences between revocable and
irrevocable trusts eight sixty six eight foureight five six ninety nine or Legal Exchange

(30:33):
Show dot com. One more timeeight six six eight four eight five six
nine nine or Legal Exchange Show dotcom. Todd, I got another one
here for you. We've got Lauriein New Hampshire. Laurie, you are
on with Todd Lutsky. All right, thank you, Hi, Todd.
I just have a question. Myhusband and I are in our young fifties,

(30:56):
fifty two fifty three. We havea lot of money set aside for
retirement, probably close to a million. We have a lot in our checking
and savings account. I don't knowif we should put everything in a trust.
We have property, probably twenty sevenacres, so I don't know.

(31:21):
This is something that we should lookat to put in the trust. Do
you have kids, Yes, wehave three kids, and we do have
a will, and it's set upthat it'll be whatever happens to us.
Are you are you rather than that? Are you are the kids? Miners
twenty two, nineteen and fifteen,so one miner, So that's important.

(31:45):
So, yeah, just listening towhat you're saying. You have the will,
which is basically not an overall estateplan. Some people think it is,
but it's really not. And sofor someone in your case, yeah,
mid fifties, early fifties, ayear looking like you say you've got
a million in retirement, you probablyhave who knows how much more in bank
accounts. You got twenty seven acresa house. You know, you start

(32:07):
adding up all that stuff, lifeinsurance, you're probably well north of two
million in total value of your estate. Would that be fair to say?
I think so yet. Yeah,and so you need to start thinking about
estate taxes. One, because you'venow exceeded your estate tax exemption threshold in
Massachusetts. So that's two million.But by doing basic trust planning, we

(32:29):
can eliminate that up to four million. We can double that. So if
you're under four million. With abasic trust, we can eliminate taxes number
one. Number two, we canavoid probate so your children don't have to
go through all that nightmare. Wekeep you in charge of everything, because
I think a revocable trust is probablyin order for someone in your situation,

(32:51):
your age group. I mean,I don't think we're worried about nursing homes
quite yet. And the other bigthing to think about is you still have
a minor child who can't own anything. So if you happen to die before
that child reaches majority, you knowthey can't own real estate, they can't
own investments, so you want toput it in a trust for them.
And so this and even your otherkids. With your size of your estate,

(33:13):
you might not want to just leavethings outright to them yet you might
want to control it for how theyget it and when they get it through
a trust. So I think youare in absolute right order to do a
plan of some kind, probably arevocable trust plan, a joint revocable trust
for work. And you know what, That's exactly what this guide's about,
folks. It's about revocable versus irrevocable. To help you decide which way is

(33:37):
right for you. So hopefully thathelped you out. Tod, I've got
one more for you here, wegot a couple minutes left. Let's go
to Mark Infoalmouth Mark. What's yourquestion for Todd? Hello Todd, Yes,
Hi, Todd. I've got twoproperties, both of them are irrevocable
trust, both of them passed bylook back here, Okay, getting ready

(34:00):
to retire. We want to sellthe primary residence and tear down the second
cottage and rebuild it. So myquestion is, is we have money outside
the trust that I'm going to putinto the cottage to rebuild it. Well
that putting that new money into rebuildthe cottage, well, that's start my
five year look back on that byby introducing those funds. So so the

(34:22):
answer, the quick answer is yes, if you take money that's not in
an eravocable trust now and put itin an earvocable trust, you will create
a new five year waiting period,but only for the new money. Okay,
So it's not going to start anew five year waiting period for the

(34:45):
two properties that are already in there. Now what I might suggest, and
again so that that's really good newsat the end of the day, if
there's no other money in the trust, what I might suggest, and what
I heard you say, is Imight be selling the primary residence that's in
there. And if you sell it, the trust can in fact sell it,

(35:06):
it should provide no adverse income taxconsequence to you, meaning you'll still
get your capital gains exclusion. Butmore importantly, you'll now have money in
the trust, and the selling itis not going to start a new five
year waiting period on that asset.So now you have money in the trust,
maybe use that money to fix upthe property that you were talking about

(35:29):
putting money in the trust to useto fix up. If you can swing
it that way and do it thatway, then you don't reset the clock
at all. That said, ifyou have extra money outside the trust that
you would like to protect anyway,and you're not really old yet, then
maybe you put more money in andget your five year clock started. So

(35:51):
now you've protected the two properties andeven some extra money along the way.
But those are the kind of thingsthat you need to think about when you
have it. But I hope youeven everybody listening, heard how flexible and
irrevocable trust can be. Just fromthis question, mister Watski. Thank you
so much for joining us today.Always pleasure. Thank you. This has

(36:12):
been Asked Todd on the Financial ExchangeRadio network. Ask Todd with Todd.
Lutsky has been presented by Cushing andDolan, serving Massachusetts and New England for
more than thirty years, helping familieswith the state and tax planning, Medicaid
planning, and probate law. Calleight hundred three ninety three four thousand and
one or visit Cushing Doolan dot com. The views expressed in this segment are
solely those of Cushing and Dolan.Armstrong Advisory does not provide any legal or

(36:35):
tax advice. Please consult with yourillegal or tax advisor on such matters.
Cushing and Armstrong do not endorse eachother and are not affiliated. Revocable and
irrevocable trusts are commonly used to protectyour assets, but there are significant differences
between the two. Don't take chancessecuring your future. Call Cushing and Dolan
right now at eight six six eightfour eight five six ninety nine and get
their brand new guide called the Differencesbetween Revocable and Irrevocable Trusts. Cushing and

(36:59):
Dolan are experts and elder life planning, and they can answer critical questions that
you may have as you determine whichtrust may be best for you and your
family. The guide contains crucial informationabout a variety of topics, including the
income tax effects of both trusts,ways to leave assets to your children,
as well as many other factors youshould consider in the estate planning process,
such as your net worth, yourage, and your marital status. Call

(37:21):
today eight six six eight four eightfive six ninety nine. That's eight sixty
six eight four eight five six ninenine, or request the guide online from
their website Legal Exchange show dot com