November 27, 2024 • 37 mins
Chuck Zodda and Marc Fandetti discuss Fed minutes signal more caution on cuts if inflation progress stalls. Fed’s preferred inflation gauge rises to 2.3% annually, meeting expectations
Inflation-Battered consumers are going to extreme lengths to nab holiday deals. Todd Lustky joins the show to share the pros and cons of gifting stocks.
Inflation-Battered consumers are going to extreme lengths to nab holiday deals. Todd Lustky joins the show to share the pros and cons of gifting stocks.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
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Veterans Development Corporation faces the Financial Exchange with Chuck Zada
and Mark Vandetti.
Speaker 2 (01:13):
Chuck Market Tucker with you, and if you are on
the road to wherever you are going to be spending Thanksgiving,
hopefully there's no traffic, but if there is, you get
us to listen to for the next couple hours here
as you head towards your Thanksgiving destination. Mark, as we
kick things off today, we do have a little bit
of economic data that we'll get to as we go
(01:36):
forward here, but ultimately I also just want to talk
a little bit about where this market is right now
and just kind of set the stage for again the
last month of the year, but more importantly, you know,
starting to build towards twenty twenty five, just because again
everyone's kind of looking ahead now with a new administration
coming in. It's all about, hey, what are the policies
(01:59):
that you're going to get that potentially impact the US
economy here and so we have a market that yesterday
did finally close at a new all time high after
a couple weeks of nothing big, but just you know,
some little waivers here and there that we saw in markets.
The S and P five hundred, closing above six thousand
yesterday and sitting here today still above six thousand, and
(02:20):
this continues to be a market that is expensive. But
we've noted before that markets being expensive is simply not
something that tells you about how they are going to
perform in the short term, even though you know clearly
in the long run it can impact, you know, future
growth of stocks, just because so much that growth might
(02:40):
be priced in already.
Speaker 3 (02:42):
Yeah, it'll be the second straight year if the twenty
seven some odd percent gain on the broad market Proxys
and P five hundred index of leading US companies, If
that year to date through yesterday gain again up about
twenty seven percent. If that holds, it'll be the second
consecutive year of twenty plus RETI turns for the first
time since the late nineteen nineties when we had a
(03:04):
string of them. So it is pretty extraordinary. It's also
the case, Chuck, is you point out that stocks, when
measured relative to the last roughly decades worth of inflation
adjusted earnings, are quite pricey expensive. There are a lot
of ways to measure price relative to earnings, but a
good way is that smooth measure, sometimes called the Shiller
(03:27):
PE or the cyclically adjusted pe so called cape. Stocks
are pricing. No matter how you define earnings in your
price to earnings calculation, is that justified? As you again
pointed out, time will tell. If the economy remains strong,
it has been strong, that economic backdrop has been supportive
of earnings and thus equity prices. If it stays strong,
(03:50):
high pees might not be cause for concern. If it
gets wobbly, then in retrospect, they will have been a
warning sign.
Speaker 2 (03:58):
When we look at yesterday what we got from the
Fed minutes, I know that these are, you know, again
talking about a meeting that occurred nearly four weeks ago
or nearly three weeks ago. They might already be out
of date at this point. Anything that you gleaned from
those meeting minutes as far as how the Fed may
(04:20):
be thinking about this economy right now and how it
may have evolved over the last couple of months.
Speaker 3 (04:26):
Not really. I didn't read the minutes, I only read
a summary. But as they've stated repeatedly over the past
several years, they remain persuadable based on changes in economic news.
Said differently, more succinctly, they remained data dependent. The economy
has been strong in a statistical sense. I know there
(04:48):
are people who quibble or who bristle when they hear that,
what do you mean. I know a lot of people
are unemployed. We're not talking about everybody's lived experience here.
We're just talking about on average, strong growth. We got
that reiterated this morning. GDP annualized two point eight percent
after inflation last quarter. That's really strong for this century.
That would have been average for the last It's quite
(05:10):
strong for this century. It's been a good couple of
years for GDP and other economic measures.
Speaker 4 (05:15):
Too.
Speaker 3 (05:16):
Fed watches these closely. Trying to balance inflationary pressures, which
are the result of too much growth. Sounds like you
can't have too much of a good thing, but you
actually can't. Tries to balance those pressures with the societal
objective of keeping unemployment low, and they those two objectives, Chuck,
as we talk about, a lot are in perfect tension.
Speaker 4 (05:38):
They have a tough job mark.
Speaker 2 (05:40):
One of the things that the incoming administration is talking
about is look trying to build towards additional growth. It's
something that I think is front and center when you
talk about the incoming Trump administration. What's realistic as far
as how the US economy can grow in the long run,
(06:02):
and what are the governing factors that play into, you know,
how fast an economy can or cannot grow.
Speaker 3 (06:10):
First, I think we can disregard all the hyperbole coming
out of the incoming administration about four or five percent
economic growth. Trump said the same thing last time. I
think that's just a concept for him, and I'm willing
to chalk that up to him being him, because that's preposterous.
You're not going to get there. You asked exactly the
(06:31):
right question, what are the drivers of long term economic growth?
And this is common now. You hear from quarter to
quarter we talk about spending, we talk about investment. We
talk about spending consumer and government plus investment that equals GDP.
You may hear that from time to time. That's true
in an accounting sense, But in the long term, the
economy's capacity is dictated by how much the labor force grows,
(06:57):
how many people there are doing things, and how productive
they are, how much output they can generate in an hour.
That's literally just productivity, and the sum of those two
things equals the more or less. I'm simplifying a little
over simplifying a bit here, but more or less equals
the economy speed limit. You can find this online. The CEO,
(07:18):
the CBO Congressional Budget Office updates their estimates at least
once a year, maybe more often, of the economy's productive potential.
Of its potential GDP, it's one point eight percent right now.
So a quick rule of thumb is, if the economy
is growing faster, then CBO and other researchers confirm potential
GDP in about that range. If it's growing faster, that
(07:42):
translates into upward pressure on inflation, and we could tie
that into the report we got this morning that shows
underlying or core inflation remaining elevated about a three and
a half little more than three and a half percent
annualized rate.
Speaker 2 (07:56):
So when you talk about and administrate that's coming in
where look, the first Trump term that we saw playbook
was Hey, I want to generate more growth. I'm going
to cut taxes, rollback regulations and attempt to do so.
And we did see some faster growth as a result
of that. Briefly, yeah, when you look at this setup
(08:20):
that we have here where growth is already kind of
above that speed limit and inflation on the core level.
Remember when we talk about inflation having improved this year, Yes,
even the core numbers have improved, but the headline has
largely been helped by the fact that energy prices have
been falling over the last twelve months, and that's not
(08:41):
included in the core number. How does an administration now
that is focused on growth try to accelerate growth at
a time when inflation is already still a little bit
hotter than people would like to see.
Speaker 3 (08:57):
Yeah, it's hard to do without growing, say the productive
capacity of the economy, increasing the labor supply, or increasing capital,
more factories, or making those two things together, labor and
capital more productive, getting more out of one unit of each.
I'm oversimplifying, but that's one way to think about it.
Technology helps us do that. So absent Chuck an ai
(09:20):
miracle that makes us all more productive, makes us all
able to produce more in an hour of work, absent
big growth in the labor supply, and the incoming administration
is talking about just the opposite. They want to shrink
the labor supply by deporting people. Now they're not here legally,
so there's maybe a good political argument for making them
pay the price. But the economic consequences are clear. These
(09:44):
policies taken all together, are stagflationary. They're likely to slow,
not increase growth, and they're likely to increase price pressure,
not reduce it. And Kevin Hasset, incidentally the President's incoming
National Economic Council Chairman. The way his title is referred to, yeh,
he know. He is an accomplished academic economist and researcher.
(10:07):
He knows these things. But again, there are political considerations
and there are economic considerations.
Speaker 2 (10:14):
Let's take a quick break here. When we come back. Look,
we're heading right into the main holiday shopping season. We'll
talk a little bit about what households are looking for
in terms of deals as they get ready to stock up.
Speaker 1 (10:31):
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Speaker 5 (10:54):
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Speaker 2 (11:29):
The National Retail Federation expects holidays spending DERIVESE between two
and a half and three and a half percent this
year compared to three point nine percent last year, so
expecting a more muted holiday shopping season. And we get
this piece from Bloomberg talking about some of the things
people are doing in order to try to keep their
budgets in line. You've got someone from Portland, Oregon, who
(11:50):
drove three hours each way to purchase a pre owned
rowing machine at a third of the cost of buying
a new one. You've got people hutting back on budgets,
you know, looking for all kinds of different deals. What
kind of stuff are you here and what are you
seeing out there? As far as the holiday shopping.
Speaker 3 (12:09):
Season, I haven't heard about anybody driving three hours for
a used rowing machine.
Speaker 4 (12:14):
Why wouldn't you row for it?
Speaker 3 (12:18):
He had just gotten on a bike. He wouldn't have
to buy the machine. Yeah, I don't know, Chuck, This
is this is anecdotal. Some of the stories are amusing.
Some of them make you scratch your head and wonder, jeez,
what's the opportunity cost of this person's time? As my
dad would have said, why don't you get a job
and make more money. You seem to have some time
on your hands.
Speaker 4 (12:37):
I don't know.
Speaker 3 (12:38):
Everybody's situation is different, and there's not really much you
can glean from this that's generalizable. They do mention larger,
larger outfits Walmart and Target extending Black Friday deals, et cetera,
et cetera. That doesn't strike me as news or new.
Speaker 2 (12:56):
No, it feels like that's been happening for years at
this point in terms of Hey, it basically gets to
not even Halloween, it'll get to Columbus Day and it's like, oh,
here's our pre Black Friday sale, and it's like, well,
if you're gonna have stuff on sale for the last
three months of the year, is it really on sale
then or is that just the price? You know, it's what's.
Speaker 3 (13:16):
Yeah, and you're just pulling stuff forward, right, You're not
this This doesn't boost growth. I don't think these little
gimmicks because we're all so accustomed to them and have
learned how to game them.
Speaker 2 (13:27):
Doesn't it also feel I just want to read a
quote here as well. One example is Jamie Johnson Duplessi,
who is a nonprofit director in Atlanta who's planning and
spinning between two hundred and fifty and five hundred dollars
on each of her children's gifts this year, down from
a thousand to fifteen hundred in previous years. It feels like, again,
(13:49):
it feels like a big amount of money just to she.
Speaker 3 (13:51):
Getting a bitcoin.
Speaker 4 (13:54):
Well, it wouldn't be much of a bitcoin.
Speaker 2 (13:55):
It wouldn't be much of one, you know, yeah, exactly
of a bitcoin. But so also some of these anecdotes,
I think for you know, most people, it's kind of like, well,
that's not really realistic to begin with. I don't think
I think you see many families you know that are
around the median income of you know, seventy thousand dollars
a year in the US, being like, yeah, we're gonna
spend you know, fifteen hundred dollars on our kids Christmas gifts.
(14:16):
There's just not that money, that much money floating around
the budget typically. So I think that that's you know, again,
when we talk about these anecdotes, I think you have
to put them in context somewhat here. But the other
thing that is interesting, just from a a timing perspective
on this Thanksgivings tomorrow, it is the it is the
(14:37):
latest that it can fall on the calendar. It can't
fall any later than the twenty eighth. Normally you see
it somewhere between, like the twenty second and twenty fourth
is where it typically ends up falling. And so you
do have retailers. Part of the reason they've been saying
that they're pushing their sales earlier is because you have
one less week between Thanksgiving and Christmas, and so they're
(14:58):
they're saying, hey, like, we're tr trying to make up
for this because the you know, the landmarks in time
that people have to start shopping. One of the key
ones is different this year, and I do think there's
some truth to that, just because again, like I was
looking at pictures from last year right now, and like
my house was already decorated for Christmas, and granted, like
we started setting up this week just because I normally
(15:22):
have a hard and fast rule. Hey no, you know,
don't don't skip a holiday, don't go ahead. But ultimately,
I don't want to be setting up, you know, all
the Christmas stuff on like the seven to be like, great,
We've got this up for like two and a half
weeks and now we got to take it down again.
Speaker 4 (15:34):
So Chuck, you.
Speaker 3 (15:35):
Spend more time than most on average putting up Christmas decorations.
Is that fair? Am I getting too personal?
Speaker 4 (15:41):
No? No, it's uh, were you?
Speaker 3 (15:42):
It's more of a process.
Speaker 2 (15:44):
It's it's about a week to a week and a
half for us to get this all done. We're about
seventy percent there, I would say, at the moment. But
we're we're we're kind of Griswaldian in our nature. I
think we're we're we're gonna be running somewhere in the
(16:05):
ballpark of fifteen th eighteen thousand lights this year in these.
Speaker 3 (16:09):
Holy permit for that.
Speaker 2 (16:11):
No, but the Okay, so you've got this family talking about, hey,
like we're you know, we spend like way too much
on our you know, kids Christmas gifts. Admittedly, we spend
too much on our electric bill in December. It's it's
a problem. The electric bill does triple in the month
of December?
Speaker 3 (16:30):
Does does does traffic pile up? Do people go out
of their way to see your house?
Speaker 1 (16:34):
Is it?
Speaker 3 (16:34):
Is it a destination?
Speaker 4 (16:35):
I'm not.
Speaker 3 (16:35):
I'm not suggesting our listen, go to your house.
Speaker 2 (16:38):
No, of course, No, it's uh, it's not really further
people quite honestly.
Speaker 5 (16:43):
Yeah, music sinking to your lights or any No.
Speaker 2 (16:45):
I no, see, I don't believe in any of the cheese.
Speaker 4 (16:48):
I don't believe in that that's good.
Speaker 2 (16:51):
Predominantly white lights, not a whole bunch of you know, uh,
rainbow ones. Like it's you know, trying to keep it,
you know, relatively classy for you know, fifteen thousand lights
and things like that. But ultimately it's something where we
just kind of like doing it. It's also just been
an accumulation year after a year where okay, like we
(17:12):
did this last year, Hey, let's get a few hundred
more lights. And do this this year. It's not like
we suddenly woke up one day and we're like, hey,
we're just gonna go and you know, try to figure
out how to cover every square into the house and
Christmas lights. It was much more, Yeah, let's let's add
to this this year, let's do that. And so it's
it's kind of this gradual thing that builds up. And
the other thing that I will say, just from a
(17:32):
budget perspective, you do figure out, Okay, how do we
make it so that we don't have to be buying
a whole bunch of new ones and replacing them. So
you get pretty good at figuring out, you know, where
you have dead bulbs and how to replace them early
so that you're not having to get entire new you know,
entirely new strings and stuff like that. So you do
some work to make sure that you're staying on top
of it as well.
Speaker 3 (17:52):
Yeah, you're you're you're very committed. It's impressive.
Speaker 2 (17:55):
It's uh, yeah, it's it's something that we we spend
a little bit too much time on, but ultimately, hey,
look we have fun with it, and I think look
heading into the holiday season, I don't know, we're all
so serious so much of the time, and look if
if you can find some ways to have a little
bit of fun, and especially you know, now having a
(18:15):
couple of kids and you know they're starting to like
doing it as well and stuff like that. I don't know,
you gotta have a little bit of fun with it.
And so this I think is just kind of how
we end up doing it. So we're, uh, yeah, we're
We've been setting up for the last week or so
for Christmas, even though Thanksgiving has yet to happen. But
I blame that on the calendar this year more than
(18:37):
anything else. Let's see, so we've talked about Black Friday deals. Yeah,
I think that's kind of all we have on that
side of things. Taking a look at markets. I know
we're going to be doing Wall Street Watch in just
a little bit, but we've got things pretty mixed at
the moment. We'll see if we can hold these levels
at or near all time highs here still well, you know,
(19:00):
trying to get a little bit more momentum. Remember, we've
still kind of just been chopping around for the last
four weeks without any clear direction, and today with the
S and P being down, still can't really get too
much followed through to the upside, at least for the
broad indices at the moment. Let's take a quick break
right now, though. When we come back, we are going
to get right to Wall Street Watch, and then after
(19:23):
that we're gonna be joined by Todd Lutsky from Cushing
and Dolan for Ask Todd, get your estate planning questions ready.
It's coming up after this.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving market so
far today right here on the Financial links Change Radio Network.
Speaker 5 (20:01):
Markets our mixed territory as investors react to the core
PCE index this morning, the FEDS preferred measure of inflation,
which came in line with expectations. Right now, the Dow
up by seventy eight points, SMP five hundred is down
a quarter percent, and the Nasdaq is down by three
quarters of a percent. Ten year treasure reeled down by
three basis points at four point two six percent, and
(20:24):
crude oil up about a quarter percent higher, trading just
below sixty nine dollars a barrel. Dell Technology is sinking
by twelve percent after the PC maker offered a disappointing
outlook for the fourth quarter, where Dell executive executives said
consumers were proving slow to upgrade PCs. However, the company
did cite AI adoption as grounds for hope. Another computer maker,
(20:48):
and HP, also posted earnings guidance that came in below forecasts,
sending that stock down by twelve percent as well. Meanwhile,
cybersecurity company Crowdstrikes swung a quarterly loss following one the
worst computer outages ever a few months ago. However, the
company hiked it's full your outlook and posted higher revenue.
(21:08):
Shares in CrowdStrike currently down by five percent. Elsewhere, Workday
shares down by seven percent after the HR software company
offered a light fourth quarter guidance. Another software company is
seeing losses on the day on Autodesk after its quarterly
revenue missed analysts expectations. That stock also down by seven percent,
(21:29):
and shares an Urban Outfitters jumping by fifteen percent after
the retailer posted in earnings and revenue beat. I'm Tucker Silvan,
that's Wall Street watch?
Speaker 1 (21:38):
This is, asked Todd on the Financial Exchange Radio network.
If you have an existing estate plan or in the
market for one, Todd Letsky is here 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 more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate laws.
(22:00):
Is it Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:05):
We're now joined by Todd Lutsky from the law firm
of Cushing and Dolan for Ask Todd. This is your
chance to ask Todd your estate planning questions. And so
we got the studio lines open at eight eight eight
to zero five two two six three. That number again
is eight eight eight two zero five two two six three.
(22:26):
Todd's gonna help to answer some of your estate planning questions.
So if there's been one that's been on your mind,
this is your chance to speak with Todd live on
air right now. That number is eight eight eight to
zero five two two sixty three. Again eight eight eight
two zero five two two six three. Mister Lutsky, how
are you today?
Speaker 4 (22:46):
I am doing great as we head into the holidays.
How are you, uh, doing pretty well?
Speaker 2 (22:50):
I learned something new yesterday. Actually, yeah, do you know
where they signed the Declaration of Independence?
Speaker 4 (22:56):
Yeah? At the bottom. That's that, that is true at
the bottom.
Speaker 2 (23:01):
Yeah, it's amazing, fantastic, Todd. Let's talk a little bit
about gifting. We now have, you know, fewer than thirty
days to go until Christmas, so gifting's on everyone's mind.
We already did a Black Friday segment earlier today. A
lot of times we talk about gifting a house er,
we might talk about gifting money. I want to talk
about kind of something in between all those, which is,
(23:23):
let's say that you're someone who has a highly appreciated
financial asset, a stock or something along those lines. Pros
and cons of gifting that either to an individual or
to a charity during the course of your lifetime.
Speaker 4 (23:39):
Well, that's two very very different things, right, So whenever
you think about let's take charity first. Right, when you
think about charitable giving, and if it's a if it's
a highly appreciate you're saying investment, right, not like not
like a piece of property, right, like a stock. Yeah, okay,
So when we talk about that, like, if you want
(24:00):
to give that away to a charity. You know, you
could probably set that up in what we call a
charitable remainder trust. Whereas that way, when you put it
in there and sell it in there, the gain right
because it's highly appreciated, So there's income tax issues associated
with giving, and that's why we're doing this right, So
(24:21):
the gain associated with that would be taxed over time,
the full amount of the money could be invested versus
losing potentially twenty eight point eight percent federal and state
at least here in mass when you liquidate that asset
and so, and you'd have that much less right to invest.
(24:41):
This way, you have the full amount to invest and
the money can be generated, generating a nice cash flow
for you. So a charitable remainder trust allows you to
get a stream of income your whole life, and then
when you die, the balance goes to charity. So great,
it's included in your eight still, so if it grew,
you don't care because when it goes to charity, you
(25:04):
get an offsetting charitable estate tax deduction. So wonderful news there.
And meanwhile, your whole life, you got to live off
that income stream and you got to have more invested
to generate a higher income for you. Now that's one idea.
You could give it away to children without charities or
(25:24):
to family members. Problem with that is you likely don't
have use of it anymore. It's let's face it, it's
not yours. Right. You gave it away, sure, and more importantly,
you gave them the built in gain. So if you
give away that highly appreciated asset when they go to
sell it, they are gonna be stuck with that gain
(25:47):
and they're gonna have to pay twenty eight point eight
percent give or take right on the tax liability. Whereas
if you decided to hang onto that asset and let
them inherit it, then they would get the asset with
a step up in basis, eliminating the built in gain.
And instead of lowering your estate by giving away that asset,
(26:09):
maybe you've got high basis assets, stocks that you just
bought or cash. Cash is always king. Give that away
and that's what you use to reduce the estate for
estate taxes while keeping the highly high bay or the
low basis asset, the highly appreciated asset so that you
(26:29):
eliminate the built in gain. So you're winning on the
estate tax front and the income tax front when you
take a minute and figure out what to gift, if anything.
Speaker 2 (26:40):
Talking with Todd Lotski from the law firm of Cushing
in Dolan. This segment is called Ask Todd because it
is your chance to ask Todd your questions. We still
have a little bit of room on the phone lines
here at eight eight eight two zero five two two
six three. That number again is eight eight eight zero
five two two sixty three for your chance to ask
(27:03):
Todd your estate planning questions. We're gonna take a quick
break here, but again right to your questions when we
come back. Still some room on the phone line, so
if you've got a pressing one, this is your chance
eight eight eight to zero five two two sixty three
your questions when we return.
Speaker 1 (27:21):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (27:40):
All right, as promised, we're gonna get right to your
calls with Todd Lunsky. First up, we've got Joe in Bedford. Joe,
it's your question for Todd.
Speaker 6 (27:52):
I have irrevocable trust with medicaid planning. Okay, my house
is pod of the trust and I'm could be selling
the house shortly. Is there any way I can get
some of the money out of the trust to use
for other expenses?
Speaker 4 (28:10):
So, Joe, I don't know. Obviously, did we do this
trust for you at Cushing and Dolan or is this
done by some other attorney?
Speaker 6 (28:19):
No, you did it.
Speaker 4 (28:20):
Oh, then I can speak to it because I wrote it,
so I know what it says. So good news all
the way around. One, certainly you can sell it, and
what will happen? And by the way, I'd strongly encourage
you to use our firm to represent you at the sale.
Only reason I say that is so many other people
just could mess up your five year waiting period if
(28:43):
you don't get the right advice from you know, another
attorney who maybe is not a trust attorney. Not that
they're doing anything wrong, they just don't understand trust. So uh,
that's just my advice. So what will happen is the
house will likely go out of the trust to the
buyer and in will come all the money. Okay, assuming
there's no life estate, so in will come all the money? Now,
(29:06):
because this is a grand or trust. I've treated your
It treats you as if you are the owner for
income tax purposes. So is this your primary residence Joe?
Speaker 6 (29:18):
Yes?
Speaker 4 (29:19):
And so do you think the game? Are you married?
Speaker 6 (29:24):
Yes?
Speaker 4 (29:25):
Good? Good? And so do you think the gain on
this house when you sell it fair market value minus
cost plus improvements is more than or less than five
hundred thousand dollars of gain?
Speaker 6 (29:40):
It'll probably be a bit more than five hundred.
Speaker 4 (29:43):
Okay, so good news. If it's a bit more than
five hundred. Because this is a grand tour trust, make
sure you tell your tax preparer that and they in
case they don't know it, that this is a grand
tour trust. So you are entitled to that five one
hundred thousand dollars Code Section one twenty one capital gains
(30:04):
exclusion associated with the sale of your home. Okay, your
primary residents. So if, for example, you calculate the gain
to be six hundred thousand dollars, remember that's not fair,
that's not proceeds, that's just gain. If it's six hundred
thousand dollars, you get a five hundred thousand dollars exclusion
(30:25):
and you only pay tax on the one hundred, so great,
big win for you guys. Now the money, if you
do this right, the money will be sitting inside the trust.
And by the way you direct this whole sale, you
tell the trustee to sell it. No problem. Now, of
course I don't know if you have another house or not,
but technically I guess you're homeless, so it sounds funny.
(30:45):
But you can then take the house or take the
money and buy another house and downsize. Even if you
want to. Out would go the money and in would
come a new house. Again, no borrowing, and that would
not restart the five year waiting period. So that's all
that said. Now you asked me about getting it out, Okay, Todd, Well,
what if I'm going to just use that money, invest
(31:06):
it and rent it and rent somewhere and collect the money,
collect the income. So first and foremost, you get all
the income directly, So if it's generating interest and dividends,
you get it. Now, if you want to reach into
the principle and take out some of the money, you
probably cannot do that directly. But you are allowed to
make distributions out of the trust to a class consisting
(31:29):
of and it would be defined if you had children,
we probably said equally to you, you know, to any
child or grandchild, and then you just have to ask
that child or grandchild if they would gift it back
so you can get it out in a two step approach.
Remember they don't have to, but at least once you
gift it to them, they can gift it back to
(31:49):
you and you can have that put back into your
pocket to go spend on these other expenses. So hope
that helps a little bit. And again it just really
shows the flexibility of these irrevocable trusts that we have
talked about over the years. Speaking of flexibility, you might
want to think about gifting your assets, and if you're
(32:10):
going to gift them, you need to know how to
do it, why to do it, when to do it right. Remember, folks,
you don't think about it, but when you make a gift,
it causes creditor problems. Right, if you throw a person's
name on a house, you got creditor problems, or on
a joint bank account, you could have creditor problems. We
just talked about gifting away low basis assets in the
(32:30):
earlier part of the segment. Don't do that. Gift high
basis assets you don't even think about it. You might
set up a life estate and did you make a
gift ll you did, there could be ramifications on that
right when you add kids' names to joint bank accounts. Folks.
There's so many things to think about. And for higher
net worth people, there's ways of leveraging your gifts by
(32:52):
taking advantage of discounts on non voting shares of LLCs
and the like. This guide gives you all the examples
on how to gift, what to gift, and lastly, if
to gift, maybe you don't even want to do it,
and certainly if you're gonna gift, put it in in
trust rather than in the hands of these beneficiaries. Folks,
so many things to think about. It's right near the
(33:14):
end of the month, especially with the holidays, so this
is probably gonna be getting closer and closer to the
last chance to get it eight six six eight four
eight five six nine nine or Legal Exchange Show dot
com again, making the most of Gifting Assets eight six
six eight four eight five six nine nine or Legal
Exchange Show dot Com.
Speaker 2 (33:36):
Todd, I've got another one here for you. Let's go
to Randall in Maine. Randall you are on with Todd Lutsky.
Speaker 7 (33:43):
Hello, Todd, So this isn't exactly a mistake question. I'm retired,
I'm currently collecting Social Security. I've been a landlord for
almost forty years, currently only just two properties. I was
recently told that I could sell the property and do
a ten thirty one to a real estate investment. Is
(34:07):
that something I'm allowed to do? I mean, is that
a tense? I didn't know I could do a ten
thirty one to a real estate investment.
Speaker 4 (34:14):
Well, I don't necessarily know what they're exactly talking about
on the repurchase side. So there are these things called
I don't know, are there Delaware statutory trust DSTs? I
hear those offered a lot. Maybe this is what you're
buying into. Is some kind of a reate, some kind
of a real estate investment trust, you know, like fund
or something. So as long as you're buying into something
(34:37):
that qualifies as a real estate holding. And again I
can't comment on the real estate holding piece that you're
describing because I don't really know what it is. But
I can tell you that yes, ten thirty one exchanges
you are allowed to do. And for everybody who doesn't
understand them. If you have this property as Randall does,
(35:03):
and there's probably a lot of built in gain because
he's been renting, he said, for years. He's been renting it,
so he's probably depreciated the cost basis down to close
to zero. And if he's done that, selling it would
incur a large capital gain, And unlike selling your primary residence,
there's no exclusion. You're paying the tax. So if you say,
(35:26):
you know what, I'd rather buy another piece of property
and defer the gain maybe until I die, and then
get a step up in basis as we just discussed,
and wipe out that gain. This is the way to go.
You sell your property that you want to get rid of,
and you identify what they call replacement property. Now you
(35:48):
must have to identify the property within forty five days
of the sale, and if it's a deferred exchange, you
have to buy the new property or what they call
the replacement property, within one hundred and eighty days of
the sale. Okay, so those are your timetables. But yes,
then when you sell and buy, as long as you
(36:11):
reinvest all the money, the gain remains built into the
new property, but you don't have to pay any capital
gains tax. It's deferred, and it's a wonderful way of
getting a new asset and then saying I'm going to
collect rent off my new asset, and you know what,
I'm happy with this. I'll just do my estate planning,
maybe put it into a maybe an irrevocable trust if
(36:33):
I want to protect it from the nursing home and
get that clock running and save it for my family.
And when they inherit it, they will get it with
a brand new basis, eliminating all the built in gain
that you've built up over the years. So that is
a wonderful way to go for some people if they
want to continue to be landlords. And Randall, yes, you
(36:56):
would be eligible to do that, so please look into it.
Hope that helps folks, and I hope everybody has a
happy Thanksgiving.
Speaker 2 (37:03):
Mister Lutsky, thank you so much for joining us to
have a happy Thanksgiving as well.
Speaker 4 (37:07):
Thank you always a pleasure.
Speaker 1 (37:10):
This has been asked Todd on the Financial Exchange Radio
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Veterans Development Corporation faces the Financial Exchange with Chuck Zada
and Mark Vandetti.
Speaker 2 (01:13):
Chuck Market Tucker with you, and if you are on
the road to wherever you are going to be spending Thanksgiving,
hopefully there's no traffic, but if there is, you get
us to listen to for the next couple hours here
as you head towards your Thanksgiving destination. Mark, as we
kick things off today, we do have a little bit
of economic data that we'll get to as we go
(01:36):
forward here, but ultimately I also just want to talk
a little bit about where this market is right now
and just kind of set the stage for again the
last month of the year, but more importantly, you know,
starting to build towards twenty twenty five, just because again
everyone's kind of looking ahead now with a new administration
coming in. It's all about, hey, what are the policies
(01:59):
that you're going to get that potentially impact the US
economy here and so we have a market that yesterday
did finally close at a new all time high after
a couple weeks of nothing big, but just you know,
some little waivers here and there that we saw in markets.
The S and P five hundred, closing above six thousand
yesterday and sitting here today still above six thousand, and
(02:20):
this continues to be a market that is expensive. But
we've noted before that markets being expensive is simply not
something that tells you about how they are going to
perform in the short term, even though you know clearly
in the long run it can impact, you know, future
growth of stocks, just because so much that growth might
(02:40):
be priced in already.
Speaker 3 (02:42):
Yeah, it'll be the second straight year if the twenty
seven some odd percent gain on the broad market Proxys
and P five hundred index of leading US companies, If
that year to date through yesterday gain again up about
twenty seven percent. If that holds, it'll be the second
consecutive year of twenty plus RETI turns for the first
time since the late nineteen nineties when we had a
(03:04):
string of them. So it is pretty extraordinary. It's also
the case, Chuck, is you point out that stocks, when
measured relative to the last roughly decades worth of inflation
adjusted earnings, are quite pricey expensive. There are a lot
of ways to measure price relative to earnings, but a
good way is that smooth measure, sometimes called the Shiller
(03:27):
PE or the cyclically adjusted pe so called cape. Stocks
are pricing. No matter how you define earnings in your
price to earnings calculation, is that justified? As you again
pointed out, time will tell. If the economy remains strong,
it has been strong, that economic backdrop has been supportive
of earnings and thus equity prices. If it stays strong,
(03:50):
high pees might not be cause for concern. If it
gets wobbly, then in retrospect, they will have been a
warning sign.
Speaker 2 (03:58):
When we look at yesterday what we got from the
Fed minutes, I know that these are, you know, again
talking about a meeting that occurred nearly four weeks ago
or nearly three weeks ago. They might already be out
of date at this point. Anything that you gleaned from
those meeting minutes as far as how the Fed may
(04:20):
be thinking about this economy right now and how it
may have evolved over the last couple of months.
Speaker 3 (04:26):
Not really. I didn't read the minutes, I only read
a summary. But as they've stated repeatedly over the past
several years, they remain persuadable based on changes in economic news.
Said differently, more succinctly, they remained data dependent. The economy
has been strong in a statistical sense. I know there
(04:48):
are people who quibble or who bristle when they hear that,
what do you mean. I know a lot of people
are unemployed. We're not talking about everybody's lived experience here.
We're just talking about on average, strong growth. We got
that reiterated this morning. GDP annualized two point eight percent
after inflation last quarter. That's really strong for this century.
That would have been average for the last It's quite
(05:10):
strong for this century. It's been a good couple of
years for GDP and other economic measures.
Speaker 4 (05:15):
Too.
Speaker 3 (05:16):
Fed watches these closely. Trying to balance inflationary pressures, which
are the result of too much growth. Sounds like you
can't have too much of a good thing, but you
actually can't. Tries to balance those pressures with the societal
objective of keeping unemployment low, and they those two objectives, Chuck,
as we talk about, a lot are in perfect tension.
Speaker 4 (05:38):
They have a tough job mark.
Speaker 2 (05:40):
One of the things that the incoming administration is talking
about is look trying to build towards additional growth. It's
something that I think is front and center when you
talk about the incoming Trump administration. What's realistic as far
as how the US economy can grow in the long run,
(06:02):
and what are the governing factors that play into, you know,
how fast an economy can or cannot grow.
Speaker 3 (06:10):
First, I think we can disregard all the hyperbole coming
out of the incoming administration about four or five percent
economic growth. Trump said the same thing last time. I
think that's just a concept for him, and I'm willing
to chalk that up to him being him, because that's preposterous.
You're not going to get there. You asked exactly the
(06:31):
right question, what are the drivers of long term economic growth?
And this is common now. You hear from quarter to
quarter we talk about spending, we talk about investment. We
talk about spending consumer and government plus investment that equals GDP.
You may hear that from time to time. That's true
in an accounting sense, But in the long term, the
economy's capacity is dictated by how much the labor force grows,
(06:57):
how many people there are doing things, and how productive
they are, how much output they can generate in an hour.
That's literally just productivity, and the sum of those two
things equals the more or less. I'm simplifying a little
over simplifying a bit here, but more or less equals
the economy speed limit. You can find this online. The CEO,
(07:18):
the CBO Congressional Budget Office updates their estimates at least
once a year, maybe more often, of the economy's productive potential.
Of its potential GDP, it's one point eight percent right now.
So a quick rule of thumb is, if the economy
is growing faster, then CBO and other researchers confirm potential
GDP in about that range. If it's growing faster, that
(07:42):
translates into upward pressure on inflation, and we could tie
that into the report we got this morning that shows
underlying or core inflation remaining elevated about a three and
a half little more than three and a half percent
annualized rate.
Speaker 2 (07:56):
So when you talk about and administrate that's coming in
where look, the first Trump term that we saw playbook
was Hey, I want to generate more growth. I'm going
to cut taxes, rollback regulations and attempt to do so.
And we did see some faster growth as a result
of that. Briefly, yeah, when you look at this setup
(08:20):
that we have here where growth is already kind of
above that speed limit and inflation on the core level.
Remember when we talk about inflation having improved this year, Yes,
even the core numbers have improved, but the headline has
largely been helped by the fact that energy prices have
been falling over the last twelve months, and that's not
(08:41):
included in the core number. How does an administration now
that is focused on growth try to accelerate growth at
a time when inflation is already still a little bit
hotter than people would like to see.
Speaker 3 (08:57):
Yeah, it's hard to do without growing, say the productive
capacity of the economy, increasing the labor supply, or increasing capital,
more factories, or making those two things together, labor and
capital more productive, getting more out of one unit of each.
I'm oversimplifying, but that's one way to think about it.
Technology helps us do that. So absent Chuck an ai
(09:20):
miracle that makes us all more productive, makes us all
able to produce more in an hour of work, absent
big growth in the labor supply, and the incoming administration
is talking about just the opposite. They want to shrink
the labor supply by deporting people. Now they're not here legally,
so there's maybe a good political argument for making them
pay the price. But the economic consequences are clear. These
(09:44):
policies taken all together, are stagflationary. They're likely to slow,
not increase growth, and they're likely to increase price pressure,
not reduce it. And Kevin Hasset, incidentally the President's incoming
National Economic Council Chairman. The way his title is referred to, yeh,
he know. He is an accomplished academic economist and researcher.
(10:07):
He knows these things. But again, there are political considerations
and there are economic considerations.
Speaker 2 (10:14):
Let's take a quick break here. When we come back. Look,
we're heading right into the main holiday shopping season. We'll
talk a little bit about what households are looking for
in terms of deals as they get ready to stock up.
Speaker 1 (10:31):
This is your home for the most comprehensive coverage of
the economy and the trends on Wall Street. This is
the Financial Exchange Radio Network. The Financial Exchange streams live
on YouTube. Like our page and stay up to date
on breaking business news all morning long. This is the
Financial Exchange Radio Network.
Speaker 5 (10:54):
This segment of The Financial Exchange is brought to you
in part by the US Virgin Islands Department of Tourism,
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fallen full swing. Now's the time to start looking at
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That's visit USVII dot com mark.
Speaker 2 (11:29):
The National Retail Federation expects holidays spending DERIVESE between two
and a half and three and a half percent this
year compared to three point nine percent last year, so
expecting a more muted holiday shopping season. And we get
this piece from Bloomberg talking about some of the things
people are doing in order to try to keep their
budgets in line. You've got someone from Portland, Oregon, who
(11:50):
drove three hours each way to purchase a pre owned
rowing machine at a third of the cost of buying
a new one. You've got people hutting back on budgets,
you know, looking for all kinds of different deals. What
kind of stuff are you here and what are you
seeing out there? As far as the holiday shopping.
Speaker 3 (12:09):
Season, I haven't heard about anybody driving three hours for
a used rowing machine.
Speaker 4 (12:14):
Why wouldn't you row for it?
Speaker 3 (12:18):
He had just gotten on a bike. He wouldn't have
to buy the machine. Yeah, I don't know, Chuck, This
is this is anecdotal. Some of the stories are amusing.
Some of them make you scratch your head and wonder, jeez,
what's the opportunity cost of this person's time? As my
dad would have said, why don't you get a job
and make more money. You seem to have some time
on your hands.
Speaker 4 (12:37):
I don't know.
Speaker 3 (12:38):
Everybody's situation is different, and there's not really much you
can glean from this that's generalizable. They do mention larger,
larger outfits Walmart and Target extending Black Friday deals, et cetera,
et cetera. That doesn't strike me as news or new.
Speaker 2 (12:56):
No, it feels like that's been happening for years at
this point in terms of Hey, it basically gets to
not even Halloween, it'll get to Columbus Day and it's like, oh,
here's our pre Black Friday sale, and it's like, well,
if you're gonna have stuff on sale for the last
three months of the year, is it really on sale
then or is that just the price? You know, it's what's.
Speaker 3 (13:16):
Yeah, and you're just pulling stuff forward, right, You're not
this This doesn't boost growth. I don't think these little
gimmicks because we're all so accustomed to them and have
learned how to game them.
Speaker 2 (13:27):
Doesn't it also feel I just want to read a
quote here as well. One example is Jamie Johnson Duplessi,
who is a nonprofit director in Atlanta who's planning and
spinning between two hundred and fifty and five hundred dollars
on each of her children's gifts this year, down from
a thousand to fifteen hundred in previous years. It feels like, again,
(13:49):
it feels like a big amount of money just to she.
Speaker 3 (13:51):
Getting a bitcoin.
Speaker 4 (13:54):
Well, it wouldn't be much of a bitcoin.
Speaker 2 (13:55):
It wouldn't be much of one, you know, yeah, exactly
of a bitcoin. But so also some of these anecdotes,
I think for you know, most people, it's kind of like, well,
that's not really realistic to begin with. I don't think
I think you see many families you know that are
around the median income of you know, seventy thousand dollars
a year in the US, being like, yeah, we're gonna
spend you know, fifteen hundred dollars on our kids Christmas gifts.
(14:16):
There's just not that money, that much money floating around
the budget typically. So I think that that's you know, again,
when we talk about these anecdotes, I think you have
to put them in context somewhat here. But the other
thing that is interesting, just from a a timing perspective
on this Thanksgivings tomorrow, it is the it is the
(14:37):
latest that it can fall on the calendar. It can't
fall any later than the twenty eighth. Normally you see
it somewhere between, like the twenty second and twenty fourth
is where it typically ends up falling. And so you
do have retailers. Part of the reason they've been saying
that they're pushing their sales earlier is because you have
one less week between Thanksgiving and Christmas, and so they're
(14:58):
they're saying, hey, like, we're tr trying to make up
for this because the you know, the landmarks in time
that people have to start shopping. One of the key
ones is different this year, and I do think there's
some truth to that, just because again, like I was
looking at pictures from last year right now, and like
my house was already decorated for Christmas, and granted, like
we started setting up this week just because I normally
(15:22):
have a hard and fast rule. Hey no, you know,
don't don't skip a holiday, don't go ahead. But ultimately,
I don't want to be setting up, you know, all
the Christmas stuff on like the seven to be like, great,
We've got this up for like two and a half
weeks and now we got to take it down again.
Speaker 4 (15:34):
So Chuck, you.
Speaker 3 (15:35):
Spend more time than most on average putting up Christmas decorations.
Is that fair? Am I getting too personal?
Speaker 4 (15:41):
No? No, it's uh, were you?
Speaker 3 (15:42):
It's more of a process.
Speaker 2 (15:44):
It's it's about a week to a week and a
half for us to get this all done. We're about
seventy percent there, I would say, at the moment. But
we're we're we're kind of Griswaldian in our nature. I
think we're we're we're gonna be running somewhere in the
(16:05):
ballpark of fifteen th eighteen thousand lights this year in these.
Speaker 3 (16:09):
Holy permit for that.
Speaker 2 (16:11):
No, but the Okay, so you've got this family talking about, hey,
like we're you know, we spend like way too much
on our you know, kids Christmas gifts. Admittedly, we spend
too much on our electric bill in December. It's it's
a problem. The electric bill does triple in the month
of December?
Speaker 3 (16:30):
Does does does traffic pile up? Do people go out
of their way to see your house?
Speaker 1 (16:34):
Is it?
Speaker 3 (16:34):
Is it a destination?
Speaker 4 (16:35):
I'm not.
Speaker 3 (16:35):
I'm not suggesting our listen, go to your house.
Speaker 2 (16:38):
No, of course, No, it's uh, it's not really further
people quite honestly.
Speaker 5 (16:43):
Yeah, music sinking to your lights or any No.
Speaker 2 (16:45):
I no, see, I don't believe in any of the cheese.
Speaker 4 (16:48):
I don't believe in that that's good.
Speaker 2 (16:51):
Predominantly white lights, not a whole bunch of you know, uh,
rainbow ones. Like it's you know, trying to keep it,
you know, relatively classy for you know, fifteen thousand lights
and things like that. But ultimately it's something where we
just kind of like doing it. It's also just been
an accumulation year after a year where okay, like we
(17:12):
did this last year, Hey, let's get a few hundred
more lights. And do this this year. It's not like
we suddenly woke up one day and we're like, hey,
we're just gonna go and you know, try to figure
out how to cover every square into the house and
Christmas lights. It was much more, Yeah, let's let's add
to this this year, let's do that. And so it's
it's kind of this gradual thing that builds up. And
the other thing that I will say, just from a
(17:32):
budget perspective, you do figure out, Okay, how do we
make it so that we don't have to be buying
a whole bunch of new ones and replacing them. So
you get pretty good at figuring out, you know, where
you have dead bulbs and how to replace them early
so that you're not having to get entire new you know,
entirely new strings and stuff like that. So you do
some work to make sure that you're staying on top
of it as well.
Speaker 3 (17:52):
Yeah, you're you're you're very committed. It's impressive.
Speaker 2 (17:55):
It's uh, yeah, it's it's something that we we spend
a little bit too much time on, but ultimately, hey,
look we have fun with it, and I think look
heading into the holiday season, I don't know, we're all
so serious so much of the time, and look if
if you can find some ways to have a little
bit of fun, and especially you know, now having a
(18:15):
couple of kids and you know they're starting to like
doing it as well and stuff like that. I don't know,
you gotta have a little bit of fun with it.
And so this I think is just kind of how
we end up doing it. So we're, uh, yeah, we're
We've been setting up for the last week or so
for Christmas, even though Thanksgiving has yet to happen. But
I blame that on the calendar this year more than
(18:37):
anything else. Let's see, so we've talked about Black Friday deals. Yeah,
I think that's kind of all we have on that
side of things. Taking a look at markets. I know
we're going to be doing Wall Street Watch in just
a little bit, but we've got things pretty mixed at
the moment. We'll see if we can hold these levels
at or near all time highs here still well, you know,
(19:00):
trying to get a little bit more momentum. Remember, we've
still kind of just been chopping around for the last
four weeks without any clear direction, and today with the
S and P being down, still can't really get too
much followed through to the upside, at least for the
broad indices at the moment. Let's take a quick break
right now, though. When we come back, we are going
to get right to Wall Street Watch, and then after
(19:23):
that we're gonna be joined by Todd Lutsky from Cushing
and Dolan for Ask Todd, get your estate planning questions ready.
It's coming up after this.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving market so
far today right here on the Financial links Change Radio Network.
Speaker 5 (20:01):
Markets our mixed territory as investors react to the core
PCE index this morning, the FEDS preferred measure of inflation,
which came in line with expectations. Right now, the Dow
up by seventy eight points, SMP five hundred is down
a quarter percent, and the Nasdaq is down by three
quarters of a percent. Ten year treasure reeled down by
three basis points at four point two six percent, and
(20:24):
crude oil up about a quarter percent higher, trading just
below sixty nine dollars a barrel. Dell Technology is sinking
by twelve percent after the PC maker offered a disappointing
outlook for the fourth quarter, where Dell executive executives said
consumers were proving slow to upgrade PCs. However, the company
did cite AI adoption as grounds for hope. Another computer maker,
(20:48):
and HP, also posted earnings guidance that came in below forecasts,
sending that stock down by twelve percent as well. Meanwhile,
cybersecurity company Crowdstrikes swung a quarterly loss following one the
worst computer outages ever a few months ago. However, the
company hiked it's full your outlook and posted higher revenue.
(21:08):
Shares in CrowdStrike currently down by five percent. Elsewhere, Workday
shares down by seven percent after the HR software company
offered a light fourth quarter guidance. Another software company is
seeing losses on the day on Autodesk after its quarterly
revenue missed analysts expectations. That stock also down by seven percent,
(21:29):
and shares an Urban Outfitters jumping by fifteen percent after
the retailer posted in earnings and revenue beat. I'm Tucker Silvan,
that's Wall Street watch?
Speaker 1 (21:38):
This is, asked Todd on the Financial Exchange Radio network.
If you have an existing estate plan or in the
market for one, Todd Letsky is here 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 more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate laws.
(22:00):
Is it Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:05):
We're now joined by Todd Lutsky from the law firm
of Cushing and Dolan for Ask Todd. This is your
chance to ask Todd your estate planning questions. And so
we got the studio lines open at eight eight eight
to zero five two two six three. That number again
is eight eight eight two zero five two two six three.
(22:26):
Todd's gonna help to answer some of your estate planning questions.
So if there's been one that's been on your mind,
this is your chance to speak with Todd live on
air right now. That number is eight eight eight to
zero five two two sixty three. Again eight eight eight
two zero five two two six three. Mister Lutsky, how
are you today?
Speaker 4 (22:46):
I am doing great as we head into the holidays.
How are you, uh, doing pretty well?
Speaker 2 (22:50):
I learned something new yesterday. Actually, yeah, do you know
where they signed the Declaration of Independence?
Speaker 4 (22:56):
Yeah? At the bottom. That's that, that is true at
the bottom.
Speaker 2 (23:01):
Yeah, it's amazing, fantastic, Todd. Let's talk a little bit
about gifting. We now have, you know, fewer than thirty
days to go until Christmas, so gifting's on everyone's mind.
We already did a Black Friday segment earlier today. A
lot of times we talk about gifting a house er,
we might talk about gifting money. I want to talk
about kind of something in between all those, which is,
(23:23):
let's say that you're someone who has a highly appreciated
financial asset, a stock or something along those lines. Pros
and cons of gifting that either to an individual or
to a charity during the course of your lifetime.
Speaker 4 (23:39):
Well, that's two very very different things, right, So whenever
you think about let's take charity first. Right, when you
think about charitable giving, and if it's a if it's
a highly appreciate you're saying investment, right, not like not
like a piece of property, right, like a stock. Yeah, okay,
So when we talk about that, like, if you want
(24:00):
to give that away to a charity. You know, you
could probably set that up in what we call a
charitable remainder trust. Whereas that way, when you put it
in there and sell it in there, the gain right
because it's highly appreciated, So there's income tax issues associated
with giving, and that's why we're doing this right, So
(24:21):
the gain associated with that would be taxed over time,
the full amount of the money could be invested versus
losing potentially twenty eight point eight percent federal and state
at least here in mass when you liquidate that asset
and so, and you'd have that much less right to invest.
(24:41):
This way, you have the full amount to invest and
the money can be generated, generating a nice cash flow
for you. So a charitable remainder trust allows you to
get a stream of income your whole life, and then
when you die, the balance goes to charity. So great,
it's included in your eight still, so if it grew,
you don't care because when it goes to charity, you
(25:04):
get an offsetting charitable estate tax deduction. So wonderful news there.
And meanwhile, your whole life, you got to live off
that income stream and you got to have more invested
to generate a higher income for you. Now that's one idea.
You could give it away to children without charities or
(25:24):
to family members. Problem with that is you likely don't
have use of it anymore. It's let's face it, it's
not yours. Right. You gave it away, sure, and more importantly,
you gave them the built in gain. So if you
give away that highly appreciated asset when they go to
sell it, they are gonna be stuck with that gain
(25:47):
and they're gonna have to pay twenty eight point eight
percent give or take right on the tax liability. Whereas
if you decided to hang onto that asset and let
them inherit it, then they would get the asset with
a step up in basis, eliminating the built in gain.
And instead of lowering your estate by giving away that asset,
(26:09):
maybe you've got high basis assets, stocks that you just
bought or cash. Cash is always king. Give that away
and that's what you use to reduce the estate for
estate taxes while keeping the highly high bay or the
low basis asset, the highly appreciated asset so that you
(26:29):
eliminate the built in gain. So you're winning on the
estate tax front and the income tax front when you
take a minute and figure out what to gift, if anything.
Speaker 2 (26:40):
Talking with Todd Lotski from the law firm of Cushing
in Dolan. This segment is called Ask Todd because it
is your chance to ask Todd your questions. We still
have a little bit of room on the phone lines
here at eight eight eight two zero five two two
six three. That number again is eight eight eight zero
five two two sixty three for your chance to ask
(27:03):
Todd your estate planning questions. We're gonna take a quick
break here, but again right to your questions when we
come back. Still some room on the phone line, so
if you've got a pressing one, this is your chance
eight eight eight to zero five two two sixty three
your questions when we return.
Speaker 1 (27:21):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (27:40):
All right, as promised, we're gonna get right to your
calls with Todd Lunsky. First up, we've got Joe in Bedford. Joe,
it's your question for Todd.
Speaker 6 (27:52):
I have irrevocable trust with medicaid planning. Okay, my house
is pod of the trust and I'm could be selling
the house shortly. Is there any way I can get
some of the money out of the trust to use
for other expenses?
Speaker 4 (28:10):
So, Joe, I don't know. Obviously, did we do this
trust for you at Cushing and Dolan or is this
done by some other attorney?
Speaker 6 (28:19):
No, you did it.
Speaker 4 (28:20):
Oh, then I can speak to it because I wrote it,
so I know what it says. So good news all
the way around. One, certainly you can sell it, and
what will happen? And by the way, I'd strongly encourage
you to use our firm to represent you at the sale.
Only reason I say that is so many other people
just could mess up your five year waiting period if
(28:43):
you don't get the right advice from you know, another
attorney who maybe is not a trust attorney. Not that
they're doing anything wrong, they just don't understand trust. So uh,
that's just my advice. So what will happen is the
house will likely go out of the trust to the
buyer and in will come all the money. Okay, assuming
there's no life estate, so in will come all the money? Now,
(29:06):
because this is a grand or trust. I've treated your
It treats you as if you are the owner for
income tax purposes. So is this your primary residence Joe?
Speaker 6 (29:18):
Yes?
Speaker 4 (29:19):
And so do you think the game? Are you married?
Speaker 6 (29:24):
Yes?
Speaker 4 (29:25):
Good? Good? And so do you think the gain on
this house when you sell it fair market value minus
cost plus improvements is more than or less than five
hundred thousand dollars of gain?
Speaker 6 (29:40):
It'll probably be a bit more than five hundred.
Speaker 4 (29:43):
Okay, so good news. If it's a bit more than
five hundred. Because this is a grand tour trust, make
sure you tell your tax preparer that and they in
case they don't know it, that this is a grand
tour trust. So you are entitled to that five one
hundred thousand dollars Code Section one twenty one capital gains
(30:04):
exclusion associated with the sale of your home. Okay, your
primary residents. So if, for example, you calculate the gain
to be six hundred thousand dollars, remember that's not fair,
that's not proceeds, that's just gain. If it's six hundred
thousand dollars, you get a five hundred thousand dollars exclusion
(30:25):
and you only pay tax on the one hundred, so great,
big win for you guys. Now the money, if you
do this right, the money will be sitting inside the trust.
And by the way you direct this whole sale, you
tell the trustee to sell it. No problem. Now, of
course I don't know if you have another house or not,
but technically I guess you're homeless, so it sounds funny.
(30:45):
But you can then take the house or take the
money and buy another house and downsize. Even if you
want to. Out would go the money and in would
come a new house. Again, no borrowing, and that would
not restart the five year waiting period. So that's all
that said. Now you asked me about getting it out, Okay, Todd, Well,
what if I'm going to just use that money, invest
(31:06):
it and rent it and rent somewhere and collect the money,
collect the income. So first and foremost, you get all
the income directly, So if it's generating interest and dividends,
you get it. Now, if you want to reach into
the principle and take out some of the money, you
probably cannot do that directly. But you are allowed to
make distributions out of the trust to a class consisting
(31:29):
of and it would be defined if you had children,
we probably said equally to you, you know, to any
child or grandchild, and then you just have to ask
that child or grandchild if they would gift it back
so you can get it out in a two step approach.
Remember they don't have to, but at least once you
gift it to them, they can gift it back to
(31:49):
you and you can have that put back into your
pocket to go spend on these other expenses. So hope
that helps a little bit. And again it just really
shows the flexibility of these irrevocable trusts that we have
talked about over the years. Speaking of flexibility, you might
want to think about gifting your assets, and if you're
(32:10):
going to gift them, you need to know how to
do it, why to do it, when to do it right. Remember, folks,
you don't think about it, but when you make a gift,
it causes creditor problems. Right, if you throw a person's
name on a house, you got creditor problems, or on
a joint bank account, you could have creditor problems. We
just talked about gifting away low basis assets in the
(32:30):
earlier part of the segment. Don't do that. Gift high
basis assets you don't even think about it. You might
set up a life estate and did you make a
gift ll you did, there could be ramifications on that
right when you add kids' names to joint bank accounts. Folks.
There's so many things to think about. And for higher
net worth people, there's ways of leveraging your gifts by
(32:52):
taking advantage of discounts on non voting shares of LLCs
and the like. This guide gives you all the examples
on how to gift, what to gift, and lastly, if
to gift, maybe you don't even want to do it,
and certainly if you're gonna gift, put it in in
trust rather than in the hands of these beneficiaries. Folks,
so many things to think about. It's right near the
(33:14):
end of the month, especially with the holidays, so this
is probably gonna be getting closer and closer to the
last chance to get it eight six six eight four
eight five six nine nine or Legal Exchange Show dot
com again, making the most of Gifting Assets eight six
six eight four eight five six nine nine or Legal
Exchange Show dot Com.
Speaker 2 (33:36):
Todd, I've got another one here for you. Let's go
to Randall in Maine. Randall you are on with Todd Lutsky.
Speaker 7 (33:43):
Hello, Todd, So this isn't exactly a mistake question. I'm retired,
I'm currently collecting Social Security. I've been a landlord for
almost forty years, currently only just two properties. I was
recently told that I could sell the property and do
a ten thirty one to a real estate investment. Is
(34:07):
that something I'm allowed to do? I mean, is that
a tense? I didn't know I could do a ten
thirty one to a real estate investment.
Speaker 4 (34:14):
Well, I don't necessarily know what they're exactly talking about
on the repurchase side. So there are these things called
I don't know, are there Delaware statutory trust DSTs? I
hear those offered a lot. Maybe this is what you're
buying into. Is some kind of a reate, some kind
of a real estate investment trust, you know, like fund
or something. So as long as you're buying into something
(34:37):
that qualifies as a real estate holding. And again I
can't comment on the real estate holding piece that you're
describing because I don't really know what it is. But
I can tell you that yes, ten thirty one exchanges
you are allowed to do. And for everybody who doesn't
understand them. If you have this property as Randall does,
(35:03):
and there's probably a lot of built in gain because
he's been renting, he said, for years. He's been renting it,
so he's probably depreciated the cost basis down to close
to zero. And if he's done that, selling it would
incur a large capital gain, And unlike selling your primary residence,
there's no exclusion. You're paying the tax. So if you say,
(35:26):
you know what, I'd rather buy another piece of property
and defer the gain maybe until I die, and then
get a step up in basis as we just discussed,
and wipe out that gain. This is the way to go.
You sell your property that you want to get rid of,
and you identify what they call replacement property. Now you
(35:48):
must have to identify the property within forty five days
of the sale, and if it's a deferred exchange, you
have to buy the new property or what they call
the replacement property, within one hundred and eighty days of
the sale. Okay, so those are your timetables. But yes,
then when you sell and buy, as long as you
(36:11):
reinvest all the money, the gain remains built into the
new property, but you don't have to pay any capital
gains tax. It's deferred, and it's a wonderful way of
getting a new asset and then saying I'm going to
collect rent off my new asset, and you know what,
I'm happy with this. I'll just do my estate planning,
maybe put it into a maybe an irrevocable trust if
(36:33):
I want to protect it from the nursing home and
get that clock running and save it for my family.
And when they inherit it, they will get it with
a brand new basis, eliminating all the built in gain
that you've built up over the years. So that is
a wonderful way to go for some people if they
want to continue to be landlords. And Randall, yes, you
(36:56):
would be eligible to do that, so please look into it.
Hope that helps folks, and I hope everybody has a
happy Thanksgiving.
Speaker 2 (37:03):
Mister Lutsky, thank you so much for joining us to
have a happy Thanksgiving as well.
Speaker 4 (37:07):
Thank you always a pleasure.
Speaker 1 (37:10):
This has been asked Todd on the Financial Exchange Radio
network Aske Todd with Todd. Lutsky has been presented by
Cushing and Dolan, serving Massachusetts and New England for more
than thirty years, helping families with the state and tax planning,
Medicaid Planning and Probate law. Call eight hundred three nine
three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(37:30):
Cushing and Dolan. Armstrong Advisory does not provide any legal
or tax advice. Please consult with your illegal or tax
advisor on such matters. Cushing and Armstrong do not endorse
each other and are not affiliated
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