May 21, 2025 • 37 mins
Chuck Zodda and Marc Fandetti discuss bond investors raising concerns over Trump's 'big, beautiful' tax bill. Is Target in danger of becoming the latest big box store to fade away? Lowe's sales beat expectations, bucking volatility from tariffs. Todd Lutsky joins the show to chat about planning your estate even if you don't think you have enough.
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Episode Transcript
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Speaker 1 (00:00):
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(00:43):
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(01:06):
Zada and Mark Fandetti, Chuck.
Speaker 2 (01:11):
Mark and Tucker with you here, and pretty light week
as far as economic data, there's just not a ton
out there, but still obviously you got some movement in
some different markets that we'll be talking about. We got
a tax bill that's trying to get through Congress, and
so that is kind of where we're going to start today,
(01:32):
is the intersection of taxes and bonds and the question
that is out there, which is, hey, look, bond yields
have started to move back up over the last couple
of weeks, and you've got this tax bill that is
making its way through Congress. Now they say this is
(01:53):
if you know, the tax bill has legs and it's
just strolling around like hey, congress person, how you do?
And Senator are good to see you. I'm a tax bill,
Nice to meet you. Hope I pass. Obviously that's not
quite how it happens. But I think the obvious question
that's out there is can you draw a line between
(02:16):
this tax bill and what's going on in bonds, and specifically,
a couple times in the past year or so we've
seen these upward moves in bond yields, and the answer
that you know has been given to us a couple
of times is well, it's because the deficits too big,
and that's why bond yields are going up, to which
(02:37):
I always respond after bond yields have subsequently gone back down, Gee,
did the deficit picture get better?
Speaker 1 (02:43):
Like?
Speaker 2 (02:44):
Did the deficit picture improve?
Speaker 3 (02:45):
Is?
Speaker 2 (02:46):
Is that what we're seeing here? And the answer is no,
it didn't. And so I think that you can put
to bed, at least for the last couple of years,
the idea that, hey, the level of debt outstanding has
been a major driver of bond yields. I just don't
think it has. I think it's been far more growth
and inflation that have been the drivers. Still, the question
(03:07):
on this is, here we have a concrete event that
has the potential to reshape what future deficits look like.
And in that case, is it different or is this
just people again looking for an explanation as to why
bond yields are moving and there's no there there when
(03:29):
it comes to the deficit.
Speaker 4 (03:31):
Yeah, probably a little bit of both. Deficits do matter
for rates, They're just not the only thing that matters.
Interest rates are just the compensation for deferring consumption. You
sacrifice today, you give your money to someone that needs it.
It could be a bank, it could be the government,
or indirectly through say a mutual fund. So interest rates
(03:54):
are determined, and they're that's plural, so there are lots
of different ones, but they're all they all have one
thing in common. They're determined by the supply and demand
for loanable funds. So to the extent that government deficits,
just the difference between what government takes in and what
it spends, to the extent that that goes up, that
will all else will put upward pressure on interest rates.
(04:16):
We've been really lucky though, for the past twenty years,
especially twenty five years now, I guess roughly since nine
to eleven, when the wheels really fell off our fiscal situation,
and we've never fully reattached them. International investors in particular
have been willing to buy our treasury debt and that's
helped keep rates low, not just here but all over
(04:39):
and developed economies all over the world. The question is,
I guess, has our luck run out?
Speaker 2 (04:45):
And I don't think that you know the answer to
that until you get past it, because that's right as
I've said over and over and over and over and
over and over and over. If you have tried to
make a career in the investment world over the last
fifty years, saying, Gee, the definit's too high, we got
(05:07):
to you know, this is a real problem, and then
you made an investment strategy based off of that, it
probably would not have worked out very well for you,
because your strategy would have been, well, I gotta get
short bonds because bond yields are gonna go up. And basically,
from nineteen eighty two through twenty twenty two they didn't.
(05:30):
Bond yields were on a you know, forty year march down.
And you also might have said, well, this is going
to crowd out investment, so I want to get light
on equities. I don't want to own much there because
you know equity performance is going to be bad, And
in fact it wasn't. So like the thesis of hey,
there's too much debt out there and this is a
(05:51):
problem has not really been viable for the last forty years.
The question of is it different this time, I think,
is a worthy one to at least ask. I don't
have the answer for it, but I think it's worthy
of asking for two reasons. They're kind of, you know, intertwined.
(06:11):
The first is the aggregate level of debt that's outstanding
has changed dramatically in the last ten years, in particular
to the upside and annual deficits, even with unemployment at
some of the lowest rates that we've ever seen. You know,
even with unemployment at four point two percent, you're running
(06:35):
annual deficits north of six percent, potentially challenging you know,
seven or eight percent in any kind of baseline scenario
over the next you know, five to seven years. And
that is a fundamentally different proposition than we have ever
seen in the United States out of either wartime or
in the midst of a recession. We have not run
(06:56):
annual deficits that high with low unemployment.
Speaker 1 (06:59):
Ever.
Speaker 4 (07:01):
Yeah, I think that's the key point. It's different. In
the nineteen eighties and nineteen nineties, did witness falling interest rates,
say use the ten year as the ten year US
Treasury as a reference point the nineteen eighties, though in
(07:23):
the early eighties the economy first swooned and then recovered,
and during that recovery, though, nominal interest rates were falling
along with inflation, and nominal just means you include inflation.
Most people aren't interested in nominal stuff because you don't
eat nominal, you eat real. You're interested in your standard
of living, and that's measured by real or after inflation concepts.
(07:44):
Thus the nominal real distinction. Real interest rates then shot
up in the very early in the mid nineteen eighties
up till nineteen eighty five, because the economy was expanding
vigorously and the demand for loanable funds went up, and
the budget deficit was exploding, and not coincidentally, because it's related,
the trade deficit was also exploding larger. Then, real interest
(08:05):
rates came down for various reasons in the late nineteen eighties,
and they stayed relatively placid throughout the nineteen nineties. Most
researchers think that's because we got our fiscal house in
order in the nineteen nineties, so a great stroke of
luck over the last twenty five years that interest rates
have not exploded higher coincident with this growing overall debt
(08:28):
to GDP gross domestic product, which is one way to
measure debt burden. Most researchers don't think the current fiscal
path that is to say, projected deficits which will explode
under this tax bill, which is astonishing given that the
economies experiencing a relatively robust expansion doesn't need stimulus. Most
(08:49):
researchers don't think it's sustainable.
Speaker 2 (08:51):
So it kind of leads to the question does not
beg the question? It raises the question, Okay, when is
it going to actually not be sustainable? Like when will
that actually show up? Because it's kind of binary, you know,
it's it's kind of binary in that, Hey, this either
(09:16):
is a problem or it's not. It's not just going
to be yeah, business as usual. What does it mean
when it shows up? And when does it actually show
up as that problem? And so I think that's that's
the question that I think is worth raising based on
what the bond market is saying right now, is Hey,
is the passage of a tax bill that has the
(09:36):
potential to dramatically increase deficits over the next decade. Is
that going to be the bridge too far?
Speaker 3 (09:44):
Maybe?
Speaker 2 (09:45):
But let's also keep the idea out there that maybe
it's not, because that's been the that's been how it's worked.
I'm not saying that it will or won't. I'm just
saying acknowledge both possibilities as being there, and we'll see
if this plays out. Because when it does happen, whether
it's in a week, a month, a year, a decade,
(10:05):
or one hundred years, when you finally see the size
of that deficit become an issue, you're going to know, right,
it's not just going to happen to be like oh,
like it's businesses. Usually like you will know.
Speaker 4 (10:17):
Yeah, you use the phrase this time is different to
researchers Ryan Hart and rogue Off. I'm just using their
last name. Yeah, wrote a book came out in two
thousand and nine, I think, but they published research that
underpinned it much earlier. Their red line was one hundred
percent debt to GDP, meaning the size of debt held
by the public treasury debt equals are a GDP. We're
(10:40):
now about at that red line. They didn't find the
they did it. They looked at a large cross section
over time, on mixing terms a little bit there to
come to that conclusion that one hundred percent debt to
GDP seems to be the red line. At that point,
growth slows and interest rates go up. Obviously that's not
(11:00):
a law, that's just a regulation that they observe, Right,
that's just a regularity that they observed. At some point
it will matter. We're crossing a potentially dangerous line. The
question is what happens when we get on the other side.
Speaker 2 (11:13):
What's the sample? Do you happen to know the sample
size on that? Just because I'm just trying to think
back historically, like how many how many countries are there
that have gotten into that shape where we have like
reliable economic data.
Speaker 4 (11:25):
For now, it's not large. For reasons that you talk about,
you need develop it needs to be a developed market
economy because only they have the record keeping to provide.
So there's always a bias.
Speaker 2 (11:36):
And oftentimes they're only the ones that can get to
that level of debt. Also because no one lends to
you if you're an emergency economy, and that's a certain point.
Speaker 4 (11:42):
Look at Japan, they're at two hundred percent debt to GDP.
Their circumstances are different, so the red line is different.
There there is one. We just don't know where it is.
Speaker 5 (11:52):
So I don't know.
Speaker 4 (11:53):
Small sample is conclusion.
Speaker 2 (11:54):
Nobody knows anything.
Speaker 4 (11:56):
No, I wouldn't go that far.
Speaker 5 (11:58):
Nobody knows.
Speaker 4 (11:59):
Nobody knows everything.
Speaker 2 (12:01):
Yeah, Welcome to the Financial Exchange, where nobody knows everything.
We're gonna take a quick break. When we come back,
talk about should we do target Yeah, we got some earnings,
let's do targeting lows.
Speaker 1 (12:12):
After this, find daily interviews and full shows of the
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(12:33):
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Speaker 6 (12:43):
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Speaker 2 (13:15):
Couple different retailers reporting earnings this morning. Let's start first
with Target. Target shares are down five percent because I
gotta tell you, I gotta tell you, and I didn't
come to this conclusion too lightly. I came to it
a little bit lightly, but not too lightly. I'm starting
(13:36):
to get the feeling about Target that we got ten
to fifteen years ago with Macy's and five or six
years ago with Cole's, and I guess what I'm getting
at here. So Target's quarter was not particularly good. In fact,
(13:59):
it was bad. Their comparable sales were down three point
eight percent. That was worse than expected. They expect net
sales to decline by a low single digit number this year,
and they basically said, like, look like things are not
going particularly well, and the you know, there were a
few mentions of you know, tariffs and this and that.
(14:20):
But I gotta tell you, there are plenty of other
retailers that have been reporting earnings and they have not
shown these kinds of numbers. So I think Target has
a problem here, And it could be any one of
a number of things that I think can best just
be summed up as they're not executing particularly well. It
could be their product mix.
Speaker 5 (14:42):
Is not very good.
Speaker 2 (14:43):
Anymore.
Speaker 5 (14:44):
I don't know.
Speaker 2 (14:45):
I'm not a I'm not a shoper at any of
these stores. I don't do it. I just it's it's
not me. So I don't know, you know, any of
this for certain. They've got, you know, again, maybe maybe
it's a mix of goods problem. Maybe it is a
problem with how they are marketing and not being able
to reach the customers they used to. Maybe it's something
(15:09):
where they're just not you know, they're just not operating
as efficiently as they can. I don't know what it is,
but something stinks there. And again, it's not necessarily that
the company's just gonna fall apart and be nothing, But
could you see it become one of these like Macy
situations where okay, there's sales are one hundred billion dollars
(15:30):
this year, and twenty years from now, their sales are
still one hundred billion dollars and they're selling you know,
stores off and trying. Yeah, like it's kind of got
that vibe to it at this point.
Speaker 4 (15:39):
Seems like a lot of unforced errors too. They're wading
into political debates, uh, coming in hot on one side,
backing off, getting boycotted by both ends. Everyone's boycotting that
by both ends of the spect they're being boycotted, which
is great for me because I walk in, get what
I want, and walk out. There's never a line.
Speaker 2 (16:00):
Well, even though they're not really being boycot by everyone
because they're stilling one hundred million dollars in salad, but.
Speaker 4 (16:04):
I'm a margin the direction of So it seems like
there's something wrong at the very top. Maybe it's bad judgment,
bad culture, bad management culture. I don't know how much
pain will share holders tolerate before they demand a cleaning
of the house and an entirely new direction from the
(16:25):
top down.
Speaker 5 (16:25):
I don't know.
Speaker 2 (16:26):
It's uh, it's it's just a real question, you know,
as to where they go from here.
Speaker 7 (16:35):
I just.
Speaker 2 (16:37):
I don't know what the answer is because ultimately, you've
got a million different places that you can buy stuff
right now, Why are you going to pick them?
Speaker 3 (16:47):
Why?
Speaker 2 (16:47):
Like, what what is the reason to pick them?
Speaker 5 (16:50):
With?
Speaker 2 (16:50):
With Walmart? I can explain it, and it's right in
their tagline always low prices, always like you walk into Walmart,
you feel like you're getting a value. You walk into
Where else do you buy stuff? Amazon? You know why
you buy stuff on Amazon? It's there tomorrow. That's why
you buy stuff on Amazon. They get everything there and
(17:13):
it's there tomorrow. What are other big stuff retailers stuff retailer?
Who's the biggest? Who are the other big stuff retailers
out that?
Speaker 6 (17:20):
Do you want to put any of the dollar store
retailers there?
Speaker 2 (17:23):
We're gonna talk about, like toss them on the list.
Why do you buy stuff there? It's even cheaper than Walmart.
I'll say this. We go to Target two to three
times a month. Yeah, just out of necessity and proximity.
There's not a Walmart close to us. Yeah, but it's
more of a convenience experience than it is a discount experience.
(17:44):
Like we don't seek out Target because of their day,
it's because it's there, correct, Yeah, so what's the selling
point for them? On the other hand, Lowe's the home
improvement retailer. They came out with earnings as well, and
their stock is down about one point six percent, but
they had, you know, pretty decent numbers for the quarter.
They still have some concerns out there as far as
(18:06):
how tariffs could could impact them, but overall it's something
where they say, yeah, we're expecting same store sales to
be up, you know, anywhere from flat to up one
percent this year, and given you know where the American
consumer is, and that's that's not all bad, like that's
that's not a bad place to be. So I think
that the the home improvement stores Home Deepo reported yesterday,
(18:31):
they're kind of telling you a story which is the
same as what we're hearing from like the rest of
the housing market, which is, Eah, the housing market's kind
of slow, but we're finding ways to moddel through and
we'll get there and it's not going to be like
this forever. That's what they're telling us right now. With housing,
it can obviously change in an instant. Interest rates go
up half a percent, things look pretty bad. They go
(18:52):
down half percent. Hey, look a lot of people are
buying you know, stuff at lows and home depot again.
But to this point, it's the same stories we're hearing
from you know, existing home sales and stuff like that,
which is, yeah, it's kind of sluggish out there. We're
finding ways to make the sales, but the numbers, you
know that they're gonna be what they're gonna be and
we'll live to fight another day. That's kind of what
(19:12):
you're hearing from them, No execution problems. It's just they're
operating in a slow segment of the market, whereas you know,
Target is going up against Walmart, who just keeps, you know,
hitting singles and doubles off the wall all day every day.
Let's take a quick break. When we come back, we
got Wall Street Watch and they were joined by Todd Lutsky.
Speaker 5 (19:31):
After this, like us.
Speaker 1 (19:40):
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 markets so far today
right here on the Financial Exchange Radio Work.
Speaker 6 (20:00):
Markets ourn negative territory as Wall Street monitors tax bill
developments out of Washington, and also react to more retailer
earnings this morning from.
Speaker 2 (20:09):
Target and Lows.
Speaker 6 (20:10):
Right now, the Dow is down by about one percent,
SMP five hundred is down by six tenths of a percent,
and the Nasdaq down by a third of a percent.
Russell two thousand is actually up by nine tenths of
a percent this morning. Ten year treasure yield up five
basis points and is now at four point five to
three percent, and crude oil up two thirds of a percent,
(20:32):
trating at sixty two dollars and forty two cents a barrel.
Target down by about five percent after the retail giant
came up short on first quarter revenue estimates and cut
its full year sales outlook. Executives blame tariff uncertainty, weaker
discretionary spending, and backlash to the company's rollback of diversity programs.
(20:52):
Target also noted it aims to keep price increases as
small as possible, as for lows that stock down by
one percent after the home improvement retailer reaffirmed its full
year forecast, put in the company on track for year
over year sales growth. Lowe's first quarter revenue did, however,
come up just short of expectations. Meanwhile, shares in Palo
(21:14):
Alto Networks down by six percent after the cybersecurity companies
sales outlook missed expectations. The company did still beat on
earnings and revenue expectations for the quarter. Elsewhere, VF posted
lower than expected quarterly revenue, as the owner of Van
Sneakers and The North Face said it accelerated production and
(21:34):
shipments into the US during the ninety day tariff pause.
That stock down by ten percent, Toll Brothers back to
its annual outlook despite software demand and a fall in
profit in the previous quarter. That stock is up by
three quarters of a percent and United Health down by
over five percent after HSBC downgraded the health insurance giants,
(21:55):
saying valuations are still elevated despite a recent out on
Tucker Silva. And that's Wall Street Watch.
Speaker 1 (22:04):
This is Ask 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 law.
(22:25):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:30):
Todd Lotsky joins us now for Ask Todd. We got
phone lines open at eight eight eight two zero five
two two six three, because that's the number to call
to Ask Todd your estate planning questions. Again, that number
is eight eight eight to zero five two two sixty three.
And the point of this segment is for you to
ask your questions live on air about your state plan,
(22:51):
and Todd will not send you a bill after doing so.
Mister Lotski, thanks for joining us.
Speaker 5 (22:57):
Thank you always a pleasure.
Speaker 2 (22:58):
Again, we got phone lines opening eight eight eight to
zero five two two six three get calling because we
usually only get through two or three. Last week we
did a record I think we got we did. We
got four, which ties the record for the most calls
we've ever gotten through. But otherwise we're usually a two
to three call per show. Deal again eight eight eight
to zero five two two six three to Is there
(23:19):
any size estate that is too small to benefit from
doing trust work?
Speaker 8 (23:25):
I mean I the way I look at estate planning
is a couple of things need to be accomplished.
Speaker 5 (23:32):
One, you know, obviously probates an issue.
Speaker 8 (23:35):
Is it?
Speaker 5 (23:35):
Is it the biggest issue? No?
Speaker 8 (23:37):
No, you probably don't have to plan just to avoid
probate if you don't want to. You know, taxes always
got to talk about taxes. Taxes may be an issue.
But obviously if you're a state small chuck, as you indicate,
maybe taxes isn't.
Speaker 5 (23:50):
A huge deal.
Speaker 8 (23:51):
But you can't ignore, you know, family, because a lot
of what you're doing. You know, whatever the size of
your estate, you know, how you get it to your
family or when they get it or why they get
it might be important to you. And if it is,
then then that might be a reason to plan. And
let me let me answer that by saying, what if
you're if you're younger, right, and and you have minor children,
(24:13):
you might not have a taxable estate yet, right, you
might not be over the Massachusetts two million dollar exemption,
so you don't need a trust to avoid the tax.
Hopefully you're going to grow if your asset, you know,
if you're younger and you're just starting out and your
assets going to grow. But if you pass away, you know,
unexpectedly at a young age, and you have young children.
(24:36):
Whatever you do have, even if it's just your home,
you want to make sure that that asset doesn't get
controlled by somebody like a guardian. You want it to
be controlled by a trust. So I might want to
trust for my family. So and so even if I'm
older and I don't have a taxable situation, but I
have some assets that I want to leave to a
(24:56):
family member in a certain way, do it if you
don't have a tax event, But you want to protect
assets from the nursing home. So I could have a
smaller estate under a million, but I want to protect
my house from the nursing.
Speaker 5 (25:07):
Home and do it. So.
Speaker 8 (25:08):
I guess at the end of the day, Chuck, I'm
probably at a point where I'm saying a lot of
it is family driven, but I also say it does
have to make economic sense.
Speaker 5 (25:20):
I get it.
Speaker 8 (25:20):
If I can tell you a way that's less expensive
than spending the full amount to do an estate plan,
I'll tell you right. So if it doesn't make economic
sense to spend the money now to provide the family benefit,
an economic benefit to the family, well then I say
don't do it, and I will tell you like if
I just want to avoid probate and give it all
(25:42):
to my kids, well then maybe just name designated beneficiaries
on all your accounts and be done with it. You
might have a little probate here and there, but they'll
get it.
Speaker 2 (25:49):
Talking with Todd Lotski from the law firm of Cushing
and Dolan, again we call the segment asked Tod because
it's your chance to ask Todd your estate planning questions.
Still got a little bit of room on the phone
lines eight to zero five two two six three. That
is the number to call to ask Todd your questions
live on air right now again eight eight eight to
(26:10):
zero five two two six three. We're going to take
a quick break here, but when we come back, it's
going to be right to your questions with Todd Ltsky.
That phone number one more time is eight eight eight
to zero five two two sixty three. Quick break than
your questions with Todd.
Speaker 1 (26:29):
Ask Todd with Todd Letsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. Todd Letsky
answers your questions about a state and elder life planning
every Wednesday at ten thirty right here on the Financial
Exchange Radio Network.
Speaker 2 (26:50):
All right, let's get right to your questions with Todd Lotsky.
First up, we got Patrick in Ludlow. Patrick, what's your
question for Todd?
Speaker 9 (26:59):
Hi, I'm a.
Speaker 7 (27:00):
Look curious as far as regards if if there's any
new loopholes for capital gains. I've seen rumors about this
administration possibly trying to get rid of that at some point,
But right now I have a rental property which my
wife and I have decided to get rid of it
and I know we're going to have to pay capital
(27:22):
gains on it. Is there any suggestions as far as
any new loopholes or anything like that where we could
avoid that.
Speaker 5 (27:28):
Do you want to buy another property or no?
Speaker 7 (27:32):
Not at this moment. No, And I know that there's
what is it.
Speaker 8 (27:36):
The ten thirty one exchange exactly, and we could delay,
you know, and never pay the tax if you're die
owning whatever property you're die owning. Well, so if that's out,
there's still ten thirty one exchanges, and they're called you
don't have to actually buy real estate, but you can
buy these Delaware trusts or whatever they are. There's some
(27:56):
sort of an investment. And again I don't want to
step out of my lane, but you know, check with
your investment advisor and and they might have these these
Delaware trust investments that you can buy and they hold
real estate and they qualify for a ten thirty one exchange.
Without buying real estate, you're buying an investment that qualifies.
Speaker 5 (28:18):
So that might be the way to go for you.
Speaker 8 (28:20):
That way, you don't have to have the property and
you can delay the you know, the taxes or whatever.
And but learn more about about how that works and
The only other issue I can think of is, well, no,
there isn't. I mean, as far as I know, capital
gains are still there and they're here to stay.
Speaker 5 (28:36):
But I don't.
Speaker 8 (28:36):
I don't know that that's in the even in the
new tax bill, unless they get rid of the entire
ir irs, which is possible.
Speaker 5 (28:44):
Who knows.
Speaker 8 (28:45):
So hopefully that helped a little gives you some ideas
on what to do, folks. Speaking of ideas on what
to do, many people don't do their estate planning. That's
a pothole. Right to me, I got a new guide here.
Potholes to avoid. We've been talking about it all month.
It it basically, you know, so many people like someone
dies and they forget that there's taxes that need to
be filed on these on these these trusts that existed.
(29:06):
Things change when someone dies. The type of tax return
for the trust might change. And please don't make the
mistake of taking everything out of one trust and putting
it in the surviving spouse's trust. These are potholes that
exist for people that have done their planning, or maybe
they're changing residency. What do you do, folks, There's many
things to think about. If you've done your planning, there
(29:27):
could still be potholes. Get the guide. If you haven't
done your planning. There's a whole list of things in
here that will help you to avoid when you're starting
out and doing your planning. So get the guide Potholes
to Avoid eight six six eight four eight five six
nine nine or Legal Exchange Show dot com again eight
(29:47):
six six eight four eight five six nine nine or
Legal Exchange Show dot Com.
Speaker 2 (29:54):
Got another one for you here, Let's go to David
on the Cape. David, you are on with Todd Alotski.
Speaker 3 (30:00):
Hi, good morning, Todd. My mother has your Vocable Medicaid trust.
I'm a trustee. She asked me to give my brother
twenty thousand dollars. So that's over the eighteen thousand dollars limit.
To see or I have to file a gift tax
forma DIARS.
Speaker 5 (30:16):
So is this money that you plan on gifting to
the brother coming from the trust account?
Speaker 3 (30:24):
It's coming from the trust. He's a lifetime beneficiary. I'm
named on the trust.
Speaker 8 (30:28):
Well, I think yeah, the trust probably says income to mom, right,
principal Mom cannot have okay, and principle, however, maybe in
your discretion as trustee, David, can make distributions out to
kids of all generations. I'm just gonna that's kind of
(30:51):
how our trusts are drafted. So I'm going to assume
this medicaid trust has similar language in it, which is
first of all, for everybody listening. That's why money twenty
grand can come out to the brother here that's a
child of mom. So let me ask you this. How
much is the amount of money in the trust potentially
(31:14):
able to generate more than twenty thousand dollars a year
in interest in dividends? Yes, okay, how much do you
think it generates and interest in dividends per year?
Speaker 3 (31:28):
I think last year file taxes about fifty thousand.
Speaker 8 (31:31):
So arguably, if mom doesn't need all fifty thousand dollars
you could use, you could make a distribution of twenty
thousand dollars to mom. That's not a taxable event, that's
not a gift, right, And that's technically income generated by
the trust. And so now mom got the income if
(31:52):
the trust provides, Mom's entitled to the income. So now
Mom's got the income, she's got the twenty grand. She
can turn around and make a gift to her son. Yes,
she technically would need to file a gift tax return
if it goes over nineteen. So my advice might be,
you know what, take the nineteen and let's just go
on from there. No need to file a gift tax
(32:14):
return for the one one k. That might be easier,
So I mean that's probably the answer. If not, then
the trust makes the gift out to the to the brother. Again,
I'd just stick with nineteen for one grand.
Speaker 5 (32:28):
I just wouldn't. I wouldn't worry about it.
Speaker 8 (32:31):
Would I would give the brother the nineteen there would
be that's technically a gift for mom, non reportable, non taxable,
and then the brother has it and you're all set.
So that would probably be the two options I would do. Otherwise, Yes,
if you do go over the nineteen thousand per year
per person number, you do have to file a gift
tax return, but there won't be any gift taxes do
(32:55):
because whether it's you or your brother or the mother,
we have a thirteen point nine million dollar gift tax
exemption once in a lifetime, so unless we exceed that,
we don't pay a tax. So if you gave twenty
nineteen is a freebie. One comes off of the thirteen
point nine million.
Speaker 2 (33:16):
Tod, I got another one here for you. Let us
go to Kevin in the car. Kevin, what's your question
for Todd A Lotski?
Speaker 9 (33:26):
Hi guys, good morning, Hey Todd. I had a question.
So I'm sixty three. I'm looking to retire and probably
in two to three years. I have a four to
one k My wife has the retirement. We own our house.
That's about it. We checked out a couple of years ago.
We were thinking of maybe doing some kind of trust
(33:46):
and kind of got talked on a bit. Oh some
people said we should do it, other people that take
it too early to do it. We have a will
and that's really all we have right now, and I'm
just curious, is it is this something else we should
be looking into as fire as uh, maybe doing the
trust right now and spending the money.
Speaker 4 (34:07):
To do it.
Speaker 5 (34:08):
So let me ask you this. You've got a house,
how much is that worth?
Speaker 9 (34:12):
One point two million?
Speaker 5 (34:13):
So you got that's a big asset.
Speaker 8 (34:15):
And then other than four to oh one k type money,
do you have other money cash investments? And how much? No, No,
it's all it's all four oh one k type money.
A little bit of money in the bank maybe, but
primarily a house and four to oh one k type money.
So how much are we looking at as a total
value of your estate you and your wife combined.
Speaker 9 (34:34):
It's probably somewhere two point five.
Speaker 8 (34:38):
And three million perfect And again one point two of
it is is the house, which is a big number.
Speaker 5 (34:44):
So you're pushing close to half of your estate is
a house. So you you.
Speaker 8 (34:48):
Should do planning, which which would involve a trust. The
kind of trust still remains to be determined, but if
you did a revocable trust, you're at least going to
avoid probate. And and with a three point five million
dollar estate, it will serve to not just reduce but
eliminate your Massachusetts of state tax okay, because we can
(35:10):
shelter up to four million dollars on the first death
if you're married and you plan okay, So that's what
the trust would do, so it will avoid probate, keep
you in control, eliminate the taxes, and provide how these
assets will get to your your family. Right, So there
(35:30):
might be you know, kids aren't good with money. I'm
worried about future divorces of the children. So there's a
lot that can happen after you die that a trust
can also provide for So I think that that you
have enough assets to certainly do planning from a tax
(35:51):
perspective and a probate perspective. And do you have children?
I didn't ask you about that.
Speaker 9 (35:57):
I do, Yeah, they're they're not children anymore.
Speaker 5 (36:01):
Twenty eight Do you have grandkids?
Speaker 2 (36:04):
Not yet?
Speaker 8 (36:05):
Okay, see, but planning for all of that might be
on your plate as well. And that's where the trust
lives on after you die, and we can take care
of them in whatever manner you want. So that's step one.
The only thing that I didn't describe that may or
may not be a concern of yours. Again sixty three
and over or sixty and over, I'm going to ask
the question nursing homes.
Speaker 5 (36:26):
You know, do I want to.
Speaker 8 (36:28):
Say, five years from now, have certain assets my home
and any other assets I can put in the trust
protected from the cost of nursing home care. If I do,
then we would, you know, address how an irrevocable trust works,
which would ultimately keep you in control of your assets
ninety eight percent and do everything the revocable trust does,
(36:50):
but also provide after five years protection from the cost
of long term care.
Speaker 5 (36:57):
So I think you're on the right track now.
Speaker 8 (36:59):
I think you need to sit down and figure out
which type of trust is right for you. But planning
certainly would be good for you. Mister Weltsky, thank you
for joining us today.
Speaker 5 (37:08):
Thanks so much.
Speaker 1 (37:10):
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(01:06):
Zada and Mark Fandetti, Chuck.
Speaker 2 (01:11):
Mark and Tucker with you here, and pretty light week
as far as economic data, there's just not a ton
out there, but still obviously you got some movement in
some different markets that we'll be talking about. We got
a tax bill that's trying to get through Congress, and
so that is kind of where we're going to start today,
(01:32):
is the intersection of taxes and bonds and the question
that is out there, which is, hey, look, bond yields
have started to move back up over the last couple
of weeks, and you've got this tax bill that is
making its way through Congress. Now they say this is
(01:53):
if you know, the tax bill has legs and it's
just strolling around like hey, congress person, how you do?
And Senator are good to see you. I'm a tax bill,
Nice to meet you. Hope I pass. Obviously that's not
quite how it happens. But I think the obvious question
that's out there is can you draw a line between
(02:16):
this tax bill and what's going on in bonds, and specifically,
a couple times in the past year or so we've
seen these upward moves in bond yields, and the answer
that you know has been given to us a couple
of times is well, it's because the deficits too big,
and that's why bond yields are going up, to which
(02:37):
I always respond after bond yields have subsequently gone back down, Gee,
did the deficit picture get better?
Speaker 1 (02:43):
Like?
Speaker 2 (02:44):
Did the deficit picture improve?
Speaker 3 (02:45):
Is?
Speaker 2 (02:46):
Is that what we're seeing here? And the answer is no,
it didn't. And so I think that you can put
to bed, at least for the last couple of years,
the idea that, hey, the level of debt outstanding has
been a major driver of bond yields. I just don't
think it has. I think it's been far more growth
and inflation that have been the drivers. Still, the question
(03:07):
on this is, here we have a concrete event that
has the potential to reshape what future deficits look like.
And in that case, is it different or is this
just people again looking for an explanation as to why
bond yields are moving and there's no there there when
(03:29):
it comes to the deficit.
Speaker 4 (03:31):
Yeah, probably a little bit of both. Deficits do matter
for rates, They're just not the only thing that matters.
Interest rates are just the compensation for deferring consumption. You
sacrifice today, you give your money to someone that needs it.
It could be a bank, it could be the government,
or indirectly through say a mutual fund. So interest rates
(03:54):
are determined, and they're that's plural, so there are lots
of different ones, but they're all they all have one
thing in common. They're determined by the supply and demand
for loanable funds. So to the extent that government deficits,
just the difference between what government takes in and what
it spends, to the extent that that goes up, that
will all else will put upward pressure on interest rates.
(04:16):
We've been really lucky though, for the past twenty years,
especially twenty five years now, I guess roughly since nine
to eleven, when the wheels really fell off our fiscal situation,
and we've never fully reattached them. International investors in particular
have been willing to buy our treasury debt and that's
helped keep rates low, not just here but all over
(04:39):
and developed economies all over the world. The question is,
I guess, has our luck run out?
Speaker 2 (04:45):
And I don't think that you know the answer to
that until you get past it, because that's right as
I've said over and over and over and over and
over and over and over. If you have tried to
make a career in the investment world over the last
fifty years, saying, Gee, the definit's too high, we got
(05:07):
to you know, this is a real problem, and then
you made an investment strategy based off of that, it
probably would not have worked out very well for you,
because your strategy would have been, well, I gotta get
short bonds because bond yields are gonna go up. And basically,
from nineteen eighty two through twenty twenty two they didn't.
(05:30):
Bond yields were on a you know, forty year march down.
And you also might have said, well, this is going
to crowd out investment, so I want to get light
on equities. I don't want to own much there because
you know equity performance is going to be bad, And
in fact it wasn't. So like the thesis of hey,
there's too much debt out there and this is a
(05:51):
problem has not really been viable for the last forty years.
The question of is it different this time, I think,
is a worthy one to at least ask. I don't
have the answer for it, but I think it's worthy
of asking for two reasons. They're kind of, you know, intertwined.
(06:11):
The first is the aggregate level of debt that's outstanding
has changed dramatically in the last ten years, in particular
to the upside and annual deficits, even with unemployment at
some of the lowest rates that we've ever seen. You know,
even with unemployment at four point two percent, you're running
(06:35):
annual deficits north of six percent, potentially challenging you know,
seven or eight percent in any kind of baseline scenario
over the next you know, five to seven years. And
that is a fundamentally different proposition than we have ever
seen in the United States out of either wartime or
in the midst of a recession. We have not run
(06:56):
annual deficits that high with low unemployment.
Speaker 1 (06:59):
Ever.
Speaker 4 (07:01):
Yeah, I think that's the key point. It's different. In
the nineteen eighties and nineteen nineties, did witness falling interest rates,
say use the ten year as the ten year US
Treasury as a reference point the nineteen eighties, though in
(07:23):
the early eighties the economy first swooned and then recovered,
and during that recovery, though, nominal interest rates were falling
along with inflation, and nominal just means you include inflation.
Most people aren't interested in nominal stuff because you don't
eat nominal, you eat real. You're interested in your standard
of living, and that's measured by real or after inflation concepts.
(07:44):
Thus the nominal real distinction. Real interest rates then shot
up in the very early in the mid nineteen eighties
up till nineteen eighty five, because the economy was expanding
vigorously and the demand for loanable funds went up, and
the budget deficit was exploding, and not coincidentally, because it's related,
the trade deficit was also exploding larger. Then, real interest
(08:05):
rates came down for various reasons in the late nineteen eighties,
and they stayed relatively placid throughout the nineteen nineties. Most
researchers think that's because we got our fiscal house in
order in the nineteen nineties, so a great stroke of
luck over the last twenty five years that interest rates
have not exploded higher coincident with this growing overall debt
(08:28):
to GDP gross domestic product, which is one way to
measure debt burden. Most researchers don't think the current fiscal
path that is to say, projected deficits which will explode
under this tax bill, which is astonishing given that the
economies experiencing a relatively robust expansion doesn't need stimulus. Most
(08:49):
researchers don't think it's sustainable.
Speaker 2 (08:51):
So it kind of leads to the question does not
beg the question? It raises the question, Okay, when is
it going to actually not be sustainable? Like when will
that actually show up? Because it's kind of binary, you know,
it's it's kind of binary in that, Hey, this either
(09:16):
is a problem or it's not. It's not just going
to be yeah, business as usual. What does it mean
when it shows up? And when does it actually show
up as that problem? And so I think that's that's
the question that I think is worth raising based on
what the bond market is saying right now, is Hey,
is the passage of a tax bill that has the
(09:36):
potential to dramatically increase deficits over the next decade. Is
that going to be the bridge too far?
Speaker 3 (09:44):
Maybe?
Speaker 2 (09:45):
But let's also keep the idea out there that maybe
it's not, because that's been the that's been how it's worked.
I'm not saying that it will or won't. I'm just
saying acknowledge both possibilities as being there, and we'll see
if this plays out. Because when it does happen, whether
it's in a week, a month, a year, a decade,
(10:05):
or one hundred years, when you finally see the size
of that deficit become an issue, you're going to know, right,
it's not just going to happen to be like oh,
like it's businesses. Usually like you will know.
Speaker 4 (10:17):
Yeah, you use the phrase this time is different to
researchers Ryan Hart and rogue Off. I'm just using their
last name. Yeah, wrote a book came out in two
thousand and nine, I think, but they published research that
underpinned it much earlier. Their red line was one hundred
percent debt to GDP, meaning the size of debt held
by the public treasury debt equals are a GDP. We're
(10:40):
now about at that red line. They didn't find the
they did it. They looked at a large cross section
over time, on mixing terms a little bit there to
come to that conclusion that one hundred percent debt to
GDP seems to be the red line. At that point,
growth slows and interest rates go up. Obviously that's not
(11:00):
a law, that's just a regulation that they observe, Right,
that's just a regularity that they observed. At some point
it will matter. We're crossing a potentially dangerous line. The
question is what happens when we get on the other side.
Speaker 2 (11:13):
What's the sample? Do you happen to know the sample
size on that? Just because I'm just trying to think
back historically, like how many how many countries are there
that have gotten into that shape where we have like
reliable economic data.
Speaker 4 (11:25):
For now, it's not large. For reasons that you talk about,
you need develop it needs to be a developed market
economy because only they have the record keeping to provide.
So there's always a bias.
Speaker 2 (11:36):
And oftentimes they're only the ones that can get to
that level of debt. Also because no one lends to
you if you're an emergency economy, and that's a certain point.
Speaker 4 (11:42):
Look at Japan, they're at two hundred percent debt to GDP.
Their circumstances are different, so the red line is different.
There there is one. We just don't know where it is.
Speaker 5 (11:52):
So I don't know.
Speaker 4 (11:53):
Small sample is conclusion.
Speaker 2 (11:54):
Nobody knows anything.
Speaker 4 (11:56):
No, I wouldn't go that far.
Speaker 5 (11:58):
Nobody knows.
Speaker 4 (11:59):
Nobody knows everything.
Speaker 2 (12:01):
Yeah, Welcome to the Financial Exchange, where nobody knows everything.
We're gonna take a quick break. When we come back,
talk about should we do target Yeah, we got some earnings,
let's do targeting lows.
Speaker 1 (12:12):
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Speaker 6 (12:43):
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Speaker 2 (13:15):
Couple different retailers reporting earnings this morning. Let's start first
with Target. Target shares are down five percent because I
gotta tell you, I gotta tell you, and I didn't
come to this conclusion too lightly. I came to it
a little bit lightly, but not too lightly. I'm starting
(13:36):
to get the feeling about Target that we got ten
to fifteen years ago with Macy's and five or six
years ago with Cole's, and I guess what I'm getting
at here. So Target's quarter was not particularly good. In fact,
(13:59):
it was bad. Their comparable sales were down three point
eight percent. That was worse than expected. They expect net
sales to decline by a low single digit number this year,
and they basically said, like, look like things are not
going particularly well, and the you know, there were a
few mentions of you know, tariffs and this and that.
(14:20):
But I gotta tell you, there are plenty of other
retailers that have been reporting earnings and they have not
shown these kinds of numbers. So I think Target has
a problem here, And it could be any one of
a number of things that I think can best just
be summed up as they're not executing particularly well. It
could be their product mix.
Speaker 5 (14:42):
Is not very good.
Speaker 2 (14:43):
Anymore.
Speaker 5 (14:44):
I don't know.
Speaker 2 (14:45):
I'm not a I'm not a shoper at any of
these stores. I don't do it. I just it's it's
not me. So I don't know, you know, any of
this for certain. They've got, you know, again, maybe maybe
it's a mix of goods problem. Maybe it is a
problem with how they are marketing and not being able
to reach the customers they used to. Maybe it's something
(15:09):
where they're just not you know, they're just not operating
as efficiently as they can. I don't know what it is,
but something stinks there. And again, it's not necessarily that
the company's just gonna fall apart and be nothing, But
could you see it become one of these like Macy
situations where okay, there's sales are one hundred billion dollars
(15:30):
this year, and twenty years from now, their sales are
still one hundred billion dollars and they're selling you know,
stores off and trying. Yeah, like it's kind of got
that vibe to it at this point.
Speaker 4 (15:39):
Seems like a lot of unforced errors too. They're wading
into political debates, uh, coming in hot on one side,
backing off, getting boycotted by both ends. Everyone's boycotting that
by both ends of the spect they're being boycotted, which
is great for me because I walk in, get what
I want, and walk out. There's never a line.
Speaker 2 (16:00):
Well, even though they're not really being boycot by everyone
because they're stilling one hundred million dollars in salad, but.
Speaker 4 (16:04):
I'm a margin the direction of So it seems like
there's something wrong at the very top. Maybe it's bad judgment,
bad culture, bad management culture. I don't know how much
pain will share holders tolerate before they demand a cleaning
of the house and an entirely new direction from the
(16:25):
top down.
Speaker 5 (16:25):
I don't know.
Speaker 2 (16:26):
It's uh, it's it's just a real question, you know,
as to where they go from here.
Speaker 7 (16:35):
I just.
Speaker 2 (16:37):
I don't know what the answer is because ultimately, you've
got a million different places that you can buy stuff
right now, Why are you going to pick them?
Speaker 3 (16:47):
Why?
Speaker 2 (16:47):
Like, what what is the reason to pick them?
Speaker 5 (16:50):
With?
Speaker 2 (16:50):
With Walmart? I can explain it, and it's right in
their tagline always low prices, always like you walk into Walmart,
you feel like you're getting a value. You walk into
Where else do you buy stuff? Amazon? You know why
you buy stuff on Amazon? It's there tomorrow. That's why
you buy stuff on Amazon. They get everything there and
(17:13):
it's there tomorrow. What are other big stuff retailers stuff retailer?
Who's the biggest? Who are the other big stuff retailers
out that?
Speaker 6 (17:20):
Do you want to put any of the dollar store
retailers there?
Speaker 2 (17:23):
We're gonna talk about, like toss them on the list.
Why do you buy stuff there? It's even cheaper than Walmart.
I'll say this. We go to Target two to three
times a month. Yeah, just out of necessity and proximity.
There's not a Walmart close to us. Yeah, but it's
more of a convenience experience than it is a discount experience.
(17:44):
Like we don't seek out Target because of their day,
it's because it's there, correct, Yeah, so what's the selling
point for them? On the other hand, Lowe's the home
improvement retailer. They came out with earnings as well, and
their stock is down about one point six percent, but
they had, you know, pretty decent numbers for the quarter.
They still have some concerns out there as far as
(18:06):
how tariffs could could impact them, but overall it's something
where they say, yeah, we're expecting same store sales to
be up, you know, anywhere from flat to up one
percent this year, and given you know where the American
consumer is, and that's that's not all bad, like that's
that's not a bad place to be. So I think
that the the home improvement stores Home Deepo reported yesterday,
(18:31):
they're kind of telling you a story which is the
same as what we're hearing from like the rest of
the housing market, which is, Eah, the housing market's kind
of slow, but we're finding ways to moddel through and
we'll get there and it's not going to be like
this forever. That's what they're telling us right now. With housing,
it can obviously change in an instant. Interest rates go
up half a percent, things look pretty bad. They go
(18:52):
down half percent. Hey, look a lot of people are
buying you know, stuff at lows and home depot again.
But to this point, it's the same stories we're hearing
from you know, existing home sales and stuff like that,
which is, yeah, it's kind of sluggish out there. We're
finding ways to make the sales, but the numbers, you
know that they're gonna be what they're gonna be and
we'll live to fight another day. That's kind of what
(19:12):
you're hearing from them, No execution problems. It's just they're
operating in a slow segment of the market, whereas you know,
Target is going up against Walmart, who just keeps, you know,
hitting singles and doubles off the wall all day every day.
Let's take a quick break. When we come back, we
got Wall Street Watch and they were joined by Todd Lutsky.
Speaker 5 (19:31):
After this, like us.
Speaker 1 (19:40):
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 markets so far today
right here on the Financial Exchange Radio Work.
Speaker 6 (20:00):
Markets ourn negative territory as Wall Street monitors tax bill
developments out of Washington, and also react to more retailer
earnings this morning from.
Speaker 2 (20:09):
Target and Lows.
Speaker 6 (20:10):
Right now, the Dow is down by about one percent,
SMP five hundred is down by six tenths of a percent,
and the Nasdaq down by a third of a percent.
Russell two thousand is actually up by nine tenths of
a percent this morning. Ten year treasure yield up five
basis points and is now at four point five to
three percent, and crude oil up two thirds of a percent,
(20:32):
trating at sixty two dollars and forty two cents a barrel.
Target down by about five percent after the retail giant
came up short on first quarter revenue estimates and cut
its full year sales outlook. Executives blame tariff uncertainty, weaker
discretionary spending, and backlash to the company's rollback of diversity programs.
(20:52):
Target also noted it aims to keep price increases as
small as possible, as for lows that stock down by
one percent after the home improvement retailer reaffirmed its full
year forecast, put in the company on track for year
over year sales growth. Lowe's first quarter revenue did, however,
come up just short of expectations. Meanwhile, shares in Palo
(21:14):
Alto Networks down by six percent after the cybersecurity companies
sales outlook missed expectations. The company did still beat on
earnings and revenue expectations for the quarter. Elsewhere, VF posted
lower than expected quarterly revenue, as the owner of Van
Sneakers and The North Face said it accelerated production and
(21:34):
shipments into the US during the ninety day tariff pause.
That stock down by ten percent, Toll Brothers back to
its annual outlook despite software demand and a fall in
profit in the previous quarter. That stock is up by
three quarters of a percent and United Health down by
over five percent after HSBC downgraded the health insurance giants,
(21:55):
saying valuations are still elevated despite a recent out on
Tucker Silva. And that's Wall Street Watch.
Speaker 1 (22:04):
This is Ask 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 law.
(22:25):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:30):
Todd Lotsky joins us now for Ask Todd. We got
phone lines open at eight eight eight two zero five
two two six three, because that's the number to call
to Ask Todd your estate planning questions. Again, that number
is eight eight eight to zero five two two sixty three.
And the point of this segment is for you to
ask your questions live on air about your state plan,
(22:51):
and Todd will not send you a bill after doing so.
Mister Lotski, thanks for joining us.
Speaker 5 (22:57):
Thank you always a pleasure.
Speaker 2 (22:58):
Again, we got phone lines opening eight eight eight to
zero five two two six three get calling because we
usually only get through two or three. Last week we
did a record I think we got we did. We
got four, which ties the record for the most calls
we've ever gotten through. But otherwise we're usually a two
to three call per show. Deal again eight eight eight
to zero five two two six three to Is there
(23:19):
any size estate that is too small to benefit from
doing trust work?
Speaker 8 (23:25):
I mean I the way I look at estate planning
is a couple of things need to be accomplished.
Speaker 5 (23:32):
One, you know, obviously probates an issue.
Speaker 8 (23:35):
Is it?
Speaker 5 (23:35):
Is it the biggest issue? No?
Speaker 8 (23:37):
No, you probably don't have to plan just to avoid
probate if you don't want to. You know, taxes always
got to talk about taxes. Taxes may be an issue.
But obviously if you're a state small chuck, as you indicate,
maybe taxes isn't.
Speaker 5 (23:50):
A huge deal.
Speaker 8 (23:51):
But you can't ignore, you know, family, because a lot
of what you're doing. You know, whatever the size of
your estate, you know, how you get it to your
family or when they get it or why they get
it might be important to you. And if it is,
then then that might be a reason to plan. And
let me let me answer that by saying, what if
you're if you're younger, right, and and you have minor children,
(24:13):
you might not have a taxable estate yet, right, you
might not be over the Massachusetts two million dollar exemption,
so you don't need a trust to avoid the tax.
Hopefully you're going to grow if your asset, you know,
if you're younger and you're just starting out and your
assets going to grow. But if you pass away, you know,
unexpectedly at a young age, and you have young children.
(24:36):
Whatever you do have, even if it's just your home,
you want to make sure that that asset doesn't get
controlled by somebody like a guardian. You want it to
be controlled by a trust. So I might want to
trust for my family. So and so even if I'm
older and I don't have a taxable situation, but I
have some assets that I want to leave to a
(24:56):
family member in a certain way, do it if you
don't have a tax event, But you want to protect
assets from the nursing home. So I could have a
smaller estate under a million, but I want to protect
my house from the nursing.
Speaker 5 (25:07):
Home and do it. So.
Speaker 8 (25:08):
I guess at the end of the day, Chuck, I'm
probably at a point where I'm saying a lot of
it is family driven, but I also say it does
have to make economic sense.
Speaker 5 (25:20):
I get it.
Speaker 8 (25:20):
If I can tell you a way that's less expensive
than spending the full amount to do an estate plan,
I'll tell you right. So if it doesn't make economic
sense to spend the money now to provide the family benefit,
an economic benefit to the family, well then I say
don't do it, and I will tell you like if
I just want to avoid probate and give it all
(25:42):
to my kids, well then maybe just name designated beneficiaries
on all your accounts and be done with it. You
might have a little probate here and there, but they'll
get it.
Speaker 2 (25:49):
Talking with Todd Lotski from the law firm of Cushing
and Dolan, again we call the segment asked Tod because
it's your chance to ask Todd your estate planning questions.
Still got a little bit of room on the phone
lines eight to zero five two two six three. That
is the number to call to ask Todd your questions
live on air right now again eight eight eight to
(26:10):
zero five two two six three. We're going to take
a quick break here, but when we come back, it's
going to be right to your questions with Todd Ltsky.
That phone number one more time is eight eight eight
to zero five two two sixty three. Quick break than
your questions with Todd.
Speaker 1 (26:29):
Ask Todd with Todd Letsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. Todd Letsky
answers your questions about a state and elder life planning
every Wednesday at ten thirty right here on the Financial
Exchange Radio Network.
Speaker 2 (26:50):
All right, let's get right to your questions with Todd Lotsky.
First up, we got Patrick in Ludlow. Patrick, what's your
question for Todd?
Speaker 9 (26:59):
Hi, I'm a.
Speaker 7 (27:00):
Look curious as far as regards if if there's any
new loopholes for capital gains. I've seen rumors about this
administration possibly trying to get rid of that at some point,
But right now I have a rental property which my
wife and I have decided to get rid of it
and I know we're going to have to pay capital
(27:22):
gains on it. Is there any suggestions as far as
any new loopholes or anything like that where we could
avoid that.
Speaker 5 (27:28):
Do you want to buy another property or no?
Speaker 7 (27:32):
Not at this moment. No, And I know that there's
what is it.
Speaker 8 (27:36):
The ten thirty one exchange exactly, and we could delay,
you know, and never pay the tax if you're die
owning whatever property you're die owning. Well, so if that's out,
there's still ten thirty one exchanges, and they're called you
don't have to actually buy real estate, but you can
buy these Delaware trusts or whatever they are. There's some
(27:56):
sort of an investment. And again I don't want to
step out of my lane, but you know, check with
your investment advisor and and they might have these these
Delaware trust investments that you can buy and they hold
real estate and they qualify for a ten thirty one exchange.
Without buying real estate, you're buying an investment that qualifies.
Speaker 5 (28:18):
So that might be the way to go for you.
Speaker 8 (28:20):
That way, you don't have to have the property and
you can delay the you know, the taxes or whatever.
And but learn more about about how that works and
The only other issue I can think of is, well, no,
there isn't. I mean, as far as I know, capital
gains are still there and they're here to stay.
Speaker 5 (28:36):
But I don't.
Speaker 8 (28:36):
I don't know that that's in the even in the
new tax bill, unless they get rid of the entire
ir irs, which is possible.
Speaker 5 (28:44):
Who knows.
Speaker 8 (28:45):
So hopefully that helped a little gives you some ideas
on what to do, folks. Speaking of ideas on what
to do, many people don't do their estate planning. That's
a pothole. Right to me, I got a new guide here.
Potholes to avoid. We've been talking about it all month.
It it basically, you know, so many people like someone
dies and they forget that there's taxes that need to
be filed on these on these these trusts that existed.
(29:06):
Things change when someone dies. The type of tax return
for the trust might change. And please don't make the
mistake of taking everything out of one trust and putting
it in the surviving spouse's trust. These are potholes that
exist for people that have done their planning, or maybe
they're changing residency. What do you do, folks, There's many
things to think about. If you've done your planning, there
(29:27):
could still be potholes. Get the guide. If you haven't
done your planning. There's a whole list of things in
here that will help you to avoid when you're starting
out and doing your planning. So get the guide Potholes
to Avoid eight six six eight four eight five six
nine nine or Legal Exchange Show dot com again eight
(29:47):
six six eight four eight five six nine nine or
Legal Exchange Show dot Com.
Speaker 2 (29:54):
Got another one for you here, Let's go to David
on the Cape. David, you are on with Todd Alotski.
Speaker 3 (30:00):
Hi, good morning, Todd. My mother has your Vocable Medicaid trust.
I'm a trustee. She asked me to give my brother
twenty thousand dollars. So that's over the eighteen thousand dollars limit.
To see or I have to file a gift tax
forma DIARS.
Speaker 5 (30:16):
So is this money that you plan on gifting to
the brother coming from the trust account?
Speaker 3 (30:24):
It's coming from the trust. He's a lifetime beneficiary. I'm
named on the trust.
Speaker 8 (30:28):
Well, I think yeah, the trust probably says income to mom, right,
principal Mom cannot have okay, and principle, however, maybe in
your discretion as trustee, David, can make distributions out to
kids of all generations. I'm just gonna that's kind of
(30:51):
how our trusts are drafted. So I'm going to assume
this medicaid trust has similar language in it, which is
first of all, for everybody listening. That's why money twenty
grand can come out to the brother here that's a
child of mom. So let me ask you this. How
much is the amount of money in the trust potentially
(31:14):
able to generate more than twenty thousand dollars a year
in interest in dividends? Yes, okay, how much do you
think it generates and interest in dividends per year?
Speaker 3 (31:28):
I think last year file taxes about fifty thousand.
Speaker 8 (31:31):
So arguably, if mom doesn't need all fifty thousand dollars
you could use, you could make a distribution of twenty
thousand dollars to mom. That's not a taxable event, that's
not a gift, right, And that's technically income generated by
the trust. And so now mom got the income if
(31:52):
the trust provides, Mom's entitled to the income. So now
Mom's got the income, she's got the twenty grand. She
can turn around and make a gift to her son. Yes,
she technically would need to file a gift tax return
if it goes over nineteen. So my advice might be,
you know what, take the nineteen and let's just go
on from there. No need to file a gift tax
(32:14):
return for the one one k. That might be easier,
So I mean that's probably the answer. If not, then
the trust makes the gift out to the to the brother. Again,
I'd just stick with nineteen for one grand.
Speaker 5 (32:28):
I just wouldn't. I wouldn't worry about it.
Speaker 8 (32:31):
Would I would give the brother the nineteen there would
be that's technically a gift for mom, non reportable, non taxable,
and then the brother has it and you're all set.
So that would probably be the two options I would do. Otherwise, Yes,
if you do go over the nineteen thousand per year
per person number, you do have to file a gift
tax return, but there won't be any gift taxes do
(32:55):
because whether it's you or your brother or the mother,
we have a thirteen point nine million dollar gift tax
exemption once in a lifetime, so unless we exceed that,
we don't pay a tax. So if you gave twenty
nineteen is a freebie. One comes off of the thirteen
point nine million.
Speaker 2 (33:16):
Tod, I got another one here for you. Let us
go to Kevin in the car. Kevin, what's your question
for Todd A Lotski?
Speaker 9 (33:26):
Hi guys, good morning, Hey Todd. I had a question.
So I'm sixty three. I'm looking to retire and probably
in two to three years. I have a four to
one k My wife has the retirement. We own our house.
That's about it. We checked out a couple of years ago.
We were thinking of maybe doing some kind of trust
(33:46):
and kind of got talked on a bit. Oh some
people said we should do it, other people that take
it too early to do it. We have a will
and that's really all we have right now, and I'm
just curious, is it is this something else we should
be looking into as fire as uh, maybe doing the
trust right now and spending the money.
Speaker 4 (34:07):
To do it.
Speaker 5 (34:08):
So let me ask you this. You've got a house,
how much is that worth?
Speaker 9 (34:12):
One point two million?
Speaker 5 (34:13):
So you got that's a big asset.
Speaker 8 (34:15):
And then other than four to oh one k type money,
do you have other money cash investments? And how much? No, No,
it's all it's all four oh one k type money.
A little bit of money in the bank maybe, but
primarily a house and four to oh one k type money.
So how much are we looking at as a total
value of your estate you and your wife combined.
Speaker 9 (34:34):
It's probably somewhere two point five.
Speaker 8 (34:38):
And three million perfect And again one point two of
it is is the house, which is a big number.
Speaker 5 (34:44):
So you're pushing close to half of your estate is
a house. So you you.
Speaker 8 (34:48):
Should do planning, which which would involve a trust. The
kind of trust still remains to be determined, but if
you did a revocable trust, you're at least going to
avoid probate. And and with a three point five million
dollar estate, it will serve to not just reduce but
eliminate your Massachusetts of state tax okay, because we can
(35:10):
shelter up to four million dollars on the first death
if you're married and you plan okay, So that's what
the trust would do, so it will avoid probate, keep
you in control, eliminate the taxes, and provide how these
assets will get to your your family. Right, So there
(35:30):
might be you know, kids aren't good with money. I'm
worried about future divorces of the children. So there's a
lot that can happen after you die that a trust
can also provide for So I think that that you
have enough assets to certainly do planning from a tax
(35:51):
perspective and a probate perspective. And do you have children?
I didn't ask you about that.
Speaker 9 (35:57):
I do, Yeah, they're they're not children anymore.
Speaker 5 (36:01):
Twenty eight Do you have grandkids?
Speaker 2 (36:04):
Not yet?
Speaker 8 (36:05):
Okay, see, but planning for all of that might be
on your plate as well. And that's where the trust
lives on after you die, and we can take care
of them in whatever manner you want. So that's step one.
The only thing that I didn't describe that may or
may not be a concern of yours. Again sixty three
and over or sixty and over, I'm going to ask
the question nursing homes.
Speaker 5 (36:26):
You know, do I want to.
Speaker 8 (36:28):
Say, five years from now, have certain assets my home
and any other assets I can put in the trust
protected from the cost of nursing home care. If I do,
then we would, you know, address how an irrevocable trust works,
which would ultimately keep you in control of your assets
ninety eight percent and do everything the revocable trust does,
(36:50):
but also provide after five years protection from the cost
of long term care.
Speaker 5 (36:57):
So I think you're on the right track now.
Speaker 8 (36:59):
I think you need to sit down and figure out
which type of trust is right for you. But planning
certainly would be good for you. Mister Weltsky, thank you
for joining us today.
Speaker 5 (37:08):
Thanks so much.
Speaker 1 (37:10):
This has been Asked Odd on the Financial Exchange Radio network.
Ask 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
(37:31):
Cushing and Dolan. Armstrong Advisory does not provide any legal
or tax advice. Please consult with your legal or tax
advisor on such matters. Cushing and Armstrong do not endorse
each other and are not affiliated.
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