October 15, 2025 • 38 mins
Chuck Zodda and Paul Lane discuss China, betting it can with a trade war, is playing hardball with Trump. Powell keeps the Fed on track to lower rates again this year. Todd Lutsky joins the show for his weekly segment, Ask Todd. This week, Todd explains why gifting real estate is almost always a bad idea.
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Episode Transcript
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Speaker 1 (00:00):
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(01:06):
and Paul.
Speaker 2 (01:06):
Lane, Chuck Paul Tucker with you here on a Wednesday,
and we're gonna kick things off with a little US
China chatter just because I don't know. It seems like
you're getting some renewed, renewed stories on that front, and
(01:29):
big publications are happy to run with it. And so
if everyone's talking about it, Gollagy Wilkers, we don't want
to be left out. We certainly want to be included
in the fun.
Speaker 3 (01:39):
Do we not want to be left out? Quite honest,
I might want to be left out, but I will part.
Speaker 2 (01:44):
We'd prefer to be left out, but we we must discuss.
So you got a piece in the Wall Street Journal here.
It's titled China betting it can win a trade war?
Is playing hardball with Trump? I don't really know what
to do with this piece, just because again, ultimately, as
(02:05):
we've said before, this is a game of chicken, and
games of chicken, if you look at the game theory
of them, they don't have a stable equilibrium that you
get to. This is not, you know, the prisoner's dilemma.
This is something where you say, gee, I don't know
where this is going to land, because ultimately, what you're
talking about is who blinks first and who can stomach
(02:28):
more pain? And so there is nothing that Paul or
I can say where we're like, well, I think that,
you know, the US is gonna win because we're tougher,
and then the other person says, no, I think that
China's gonna win because they're I got no clue. And ultimately,
when we look at this, what I do think that
(02:49):
we can say that's interesting about this and kind of
where I've landed is I think that for both the
United States and China right now, there's kind of this
there's this window in particular for China over the next
five to seven years where they've got to make hey,
(03:09):
otherwise they're not really going to be able to And
let me explain what I mean by this, Hey is yes, exactly.
So couple things. The first thing that I want to
point out is Jijingping's age. He's seventy two years old
right now, and he has been running the Chinese Communist
(03:30):
Party as the President of China since twenty thirteen. It's
been twelve years now, and all you know, everything that
you read out there is basically, look, you'd like to
make it through until the day he dies continuing to
lead China. Realistically, just based on what we know about
aging in the human body, you're probably talking somewhere in
the range of ten to fifteen years is the most
(03:52):
likely outcome there. And so he sees a finite window
for him to really leave his mark on the wa
world and say, here's what I was able to do
with China during my time. Other things that you're seeing,
the population of China, specifically the working age population of
China is declining right now. There are not enough people
(04:14):
that are excuse me, coming into the workforce to replace
those that are exiting in China. Similar problem here, yeah, similar,
but not not at the scale of what China see you.
And so when you look at China from that perspective,
it's very you know, clear to policy makers that they're saying, okay,
like this is you know, we're gonna lose some of
(04:35):
the edge that we have as our workforce deteriorates over time.
Maybe this is part of the reason why they're trying
to get so heavily into robot workers now, is because
they see what's going on. Other things. When we talk
about the the rare earth piece that's been chatted about
over the last six months or so, and in particular
in the last week with the new rare earth export restrictions.
(04:58):
While it's probably well, well, it's really likely that the
US and other countries are not going to be able
to get any kind of you know, meaningful production and
refining of rare earths up and running in the next
you know, six to twelve months.
Speaker 3 (05:12):
Yeah, definitely not.
Speaker 1 (05:13):
Yep.
Speaker 2 (05:14):
Everyone in their grandmother knows about this now and is
paying attention to it, and so I think it's pretty
likely that either the US or other countries that are
more friendly to the US than China are producing larger
quantities of rare earths over the next five to seven years,
to the point where maybe you can fill you know,
forty to sixty percent of your needs through non China
rare earths. And if that's the case, China loses a
(05:37):
lot of the leverage that's out there. So I kind
of roll this all up and I say, hey, based
on that, it puts you in a position where China
really sees the back half of the twenty twenties as
their chance to cement the position that they want to
be in, whether that is through economic, whether it is
(06:01):
through military action on Taiwan. The next five years, I
see China being more aggressive than they've been, simply because
I think that things start to look not so bubbly
and rosy for them as you get past twenty thirty
and the demographic issues become problematic, And I think she
also sees his own mortality there, and it's like, you know,
(06:22):
like I kind of want to get this done before
I'm gone.
Speaker 3 (06:26):
In addition to that, looking backwards, it's been a really
poor last five years for the Chinese economy. You have
a property market collapse, you have very weak consumer sentiment
and spending, You've got rising deaths. So to your point
of trying to round out your legacy as a leader,
the last five years have just been awful. They really
(06:47):
have not been strong at all. So over the course
of the next five years, like you mentioned, you have
to focus on reshaping that. And it seems like, you know,
exporting goods continues to be the main focus here. Trying
to establish dumb on the semiconductor and technology side of things, robots,
anything AI that's definitely one frontier. You can see what
they've done with electric vehicles and flooding of the market
(07:11):
supply with BYD that has been a point, but it
seems like for the near term, the rare earth metals
have been the pun intended here, the Trump card that
they have played, so did Hey, the most that they've
done here is leaning on this because they have found
significant leverage behind the rare earth metals. So it seems
(07:32):
like that is going to be the card that they
continue to play the strongest because that did merit sort
of a softening of the policy stance from President Trump
initially when that was brought out. So, like you said,
if I were to summarize this whole story in three words,
(07:53):
you led with it. It's a game of chicken. That's
That's what this is and what it will continue to
be unless we get further developments later this month when
President g and President Trump will get together in South Korea,
I believe, right for that Eason Pacific conference.
Speaker 2 (08:09):
Yes, so you've got you know, everyone kind of has there.
You know, everyone's getting all prickly in advance of this now,
you know, talking about the US now saying hey, maybe
we'll stop buying you know, Chinese cooking oil, which did
not have that My being over right, didn't even know
it was a thing, but apparently it is a thing.
Speaker 3 (08:27):
You learn something new every day. I did not think
we'd be discussing cooking oil and soybean sales today.
Speaker 2 (08:35):
No, And here's the thing that I will say, the look,
the US economy has dealt with a lot of uncertainty
over the course of this year to this point. Like again,
you look at basically everything in the aggregate, and I'm
not saying that things are perfect, because like we've talked
about the areas where there's some slowdowns going on in
areas of concern and this and that, but buy and large.
When you look at the GDP numbers for this year,
(08:57):
they're probably and again we won't really know because of
this government shutdown that's going on, but you're probably looking
somewhere in like the one and a half to two
percent range, just kind of where things are looking like
they're landing, which is perfectly fine. It's perfectly cromulent. You
don't have to worry like it's that's fine. And so
I keep coming back to the fact that ultimately it
(09:18):
takes a lot to derail the US economy because it's
so big, it's so dynamic, and so resilient that it
takes a lot to do it. The only thing that
I actually think could is if there were any extended period,
like not only thing, but the only thing that's like
been discussed this year that I think would is if
there were any extended period where rare earth could not
(09:38):
be imported into the US, just because they're so critical
in everything from making cars too. I mean, like you
go down the list, and it's just it's it's critically
important to even you think about just you know, hey,
if your cell phones, anything related to magnets, ye in
electronics has some component of rare earth in it most likely,
and so like whether you're talking like batteries and stuff
(10:01):
like that. Like there's all these things that basically make
modern society work. I mean, modern society basically functions because
of electricity. Magnets and electric motors and the internal combustion engine,
and all those need some type of rare earth in
them in order to like, in order to produce them
(10:21):
in their relative respective industries.
Speaker 3 (10:22):
And that's a backdrop against what's a weak manufacturing sector
here domestically as it is. You know, it would only
further exaggerate what's been pretty weak on the manufacturing side.
Speaker 1 (10:31):
Your day.
Speaker 2 (10:32):
Domestically, I think the Trump administration they obviously know this.
They're starting to make some, you know, fairly sizable strategic
investments in that fashion. I think that they're moving as
quickly as they possibly can there, but it's still is
going to be like three to five years I think
before you have any credible deterrent on that side of things.
(10:52):
And so ultimately, I think China's looking at this saying, yeah,
this is our chance to really press the issue because
we're going to lose a lot of our leverage over
the come years. And I think that's why, you know,
part of the reason why we're where we are right now.
Speaker 3 (11:04):
In three to five years may be ambitious, it's a
very hard rarest mining is a very difficult process and
something that we have never been incredibly successful.
Speaker 2 (11:14):
It was messy, right, Like we used to do a
decent amount of it back in like the nineties, and
we're like, yeah, this is part of gross let's let's
move this somewhere else.
Speaker 3 (11:22):
Typical is just the margins on it. It has to be
heavily subsidized. That's kind of what I'm saying.
Speaker 2 (11:26):
Yeah, it's not lucrative. No, the process is actually pretty easy.
It's just like chemically and financially intensive and it's pretty
gross and you don't really make much money doing it. Yeah,
and so we were like, yeah, China, you guys go
do this and like pollute your own you know, waters
and you know. And now we've kind of realized, Okay,
(11:46):
like yeah, we don't want to do this domestically, but.
Speaker 1 (11:49):
Golley, g you will.
Speaker 4 (11:51):
We have to.
Speaker 2 (11:52):
So let's take a quick break. When we come back,
let's talk j Powell, and let's talk banks. After this.
Speaker 1 (12:00):
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Speaker 4 (12:32):
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Speaker 2 (13:04):
J Powell was doing what he often does on a Tuesday,
which is give a speech talking about, you know, what
the FED is doing and not too many surprises. Really again,
Jay's pretty buttoned up at this point. Occasionally, you know,
he kind of lets loose with his version of, you know,
a zinger, but it's like Jay's not really you know,
(13:26):
one to you know, just throw words around, you know,
willy nilly. But pretty much what he said is, look,
we are getting to the point where we might stop
our quantitative tightening program. Meeting the fed's balance sheet runoff
would likely stop in the coming months. He didn't give
any prognostications on exactly where interest rates would be going,
(13:46):
but ultimately I think that when you look at this,
it points toward the FED continuing to reduce rates at
their upcoming meetings, most likely by a quarter percent on
a per meeting basis and not really looking to change
course too dramatically based on what he's saying here.
Speaker 3 (14:07):
Yeah, there isn't a whole lot to really chew on here.
This is more of the same. Like you mentioned, it
was interesting a little bit some of the commentary on
the reduction of the asset portfolio, just kind of trying
to be careful with some of the maturities on those
securities that they had bought back in twenty twenty. But ultimately,
(14:27):
the two major takeaways I had, and these weren't new necessarily,
is that Powell mentioned that inflation is still gradually increasing,
and you've got a labor market in which both supply
and demand has declined quite sharply. So again, those are
things that we've covered on the show and talked about,
but those were probably two of the biggest takeaways that
I had from his commentary other than that it's kind
(14:49):
of steady as she goes for a cut on the
twenty eighth and twenty ninth when they get together again
or I guess the twenty ninth, which.
Speaker 2 (14:56):
Does bring us to the question that is asked by
this piece in Bloomberg Opinion, big banks are on fire,
Oh dear well, someone called the fire department. Why is
the FED eyeing more fuel? And what we're talking about
here is when we talk about on fire again like
kind of a it's kind of a tough phrase, right,
like is that good or bad? When you say they're
(15:16):
on fire, you get you know, NBA jam, like, oh,
he's on fire, it's like really good. But when you
talk about banks being on fire, it's kind of like, oh,
like is that the bad kind of on fire? I
would say dumpster fire because we hear when they're smoke,
there's fire, true, And so it's kind of like, well,
which one is it? The good or the bad? In
this case? Look, big banks have been reporting earnings all week.
(15:38):
They have been knocking really out of the park. It
is NBA jam, you know, he's on fire. And so
I think that when you look at this, here's what
we've seen from the banks, by the way, investment banking
revenue through the freaking roof, trading revenue through the freaking roof.
(16:00):
Mortgage revenue slow and steady, it's fine, nothing too interesting there,
credit card revenue moving along with some aside from Bank
of America, who had you know, everything looks great, some
very modest deterioration in credit, you know, showing up in
charge offs and things like that, but very very modest, like,
(16:21):
not not much to be concerned about there. So the
point that this piece brings up is, look, the FED
typically engages in cutting interest rates when they are concerned
about aggregate demand and you know, potentially some questions about
you know, hey, are we going to see enough lending
going on? And capital markets are still pretty strong. There's
(16:42):
no signs at banks of major stresses in lending. And
so the point that this piece asks is, look, what
what what gives? Like, why are you you know, cutting
rates when things don't look bad there? And I think
the answer is, look, most of the time, unless it's
a true financial crisis, banks are not usually at the
(17:04):
epicenter of the problem. They're not necessarily the proximate cause
I know they were in two thousand and eight, they
were in nineteen ninety one. But during the tech bubble,
as an example, it wasn't that banks started blowing up
left and right and you know, saying, oh, g you like,
we need help. It was somewhere else, was a regular
business cycle that kind of caused things.
Speaker 3 (17:24):
It's the Wall Street versus Main Street sort of debate
where the FED is more concerned about what's going on
on main street. In terms of the labor market, that
is really the primary focus, and that's why you have
the FED indicating that they're cutting rates, is to potentially
stave off a slowdown in the labor market. I mean, also,
they are the backdrop concerns with inflation, where cutting rates
(17:46):
doesn't really help you. But ultimately, with these banks, if
for some reason, let's say the labor market does worsen
and we see unemployment tick up to five percent over
the course of the next six to twelve months or
something like that, the results that we're seeing from banks,
I would think you would see a weakening market and
weakening capital, you know, concerns, and you wouldn't see these
(18:08):
type of strong bank results. So to kind of counter
that point that, you know, why the cutting banks are
doing so well, if this issue arises of the labor
market weakening, you won't see banks, in my opinion, fair
as well as they have over the course of this year.
Speaker 2 (18:23):
And I gotta be honest, we're not really seeing a
ton of indication right now that lower rates are generating
more economic activity. I know we always talk about Hey,
it's kind of this long and you know, unpredictable cycle
in terms of when it hits. But ultimately we've seen
mortgage rates come down, you know, about a quarter to
(18:46):
a half percent from where they were over the course
of the summer. The NBA Mortgage Purchase Index, you know,
just fell by about two and a half percent over
the last week and is now down you know, about
six seven percent in mid September when rates first came
down that far. And so I kind of look at
it and yeah, you had this the initial wave of
(19:07):
REFI activity that was you know through the roof that
has subsequently not fully reversed, but it's kind of retrenched,
you know, about sixty seventy percent of that activity level.
Mortgages aren't really seeing any uptick in overall activity. I mean,
they've basically been flat since mid April, and so I'm
just not sure that rate cuts are going to have
(19:28):
a huge impact on the economy. I guess is where
I'm landing. Let's take a quick break. When we come back,
it's Wall Street Watch and ask Todd.
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 and what's moving markets so far
today right here on the Financial Exchange Radio work.
Speaker 4 (20:04):
Market sern rally mode. Despite the tit for tat trade
threats between the US and China's investors are encouraged by
a flurry of strong third quarter bank earnings. Right now,
the Dow is up by three quarters of a percent,
or three hundred and forty five points, SMP five hundred
up over one percent now were seventy three points higher,
Nasdaq up one point four percent or three hundred and
(20:26):
twelve points. Russell two thousand is up over one and
a half percent, Tenure Treasure Feled is flat at four
point zero one three percent, and crude oil up about
four tenths of one percent, trading just below fifty nine.
Speaker 2 (20:39):
Dollars a barrel.
Speaker 4 (20:41):
Well similar to its peers, Bank of America had a
solid third quarter, driven by stronger than expected investment banking revenue.
The bank said its profit climbed twenty three percent from
a year ago to eight and a half billion dollars.
Bank of America shares are up nearly five percent at
the moment. Brgan Stanley also impressed with its third quarter results,
(21:03):
posting earnings that exceeded expectations by the largest margin in
nearly five years. The bank saw its profit jump forty
five percent from a year ago to four point six
billion dollars. Morgan Stanley shares are up six percent. Elsewhere
PNC Financials. That stock is down four percent, despite the
lender logging higher profit and revenue in the previous quarter
(21:25):
as it continued adding customers. Meanwhile, chip maker asml stock
rising over one percent after the company said it expects
twenty twenty six total net sales to top those from
this year. Asmlo also posted mixed results for the third quarter.
According to Reuter's, Apollo Global Management has offered a new
(21:47):
bid to take Papa John's private at sixty four dollars
a share. The pizza chain stock is jumping over seven
percent on that news. And after today's close, we'll see
third quarter results from United Airlines. On Tucker SOOVA and
that is Walltree 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 (22:31):
Todd Lotsky joins us now for Ask Todd. Your chance
to ask Todd your estate planning questions live on air
right now. Phone lines are wide open at eight eight
eight two zero five two two six three, So get
calling so you can ask Todd your state plan state
planning questions right now again. Eight eight eight two zero
(22:52):
five two two sixty three is the number. We currently
have no one in line, so remember we can get
through usually two to three of your questions per show.
This is your chance to get right to the top
of the line at eight eight eight to zero five
two two six three. Again. The number to call to
ask Todd your estate planning questions is eight eight eight
(23:13):
to zero five two two six three. Mister Lutsky, how
are you doing today?
Speaker 5 (23:19):
I am never better? How you doing not great? No,
something's always wrong with you.
Speaker 2 (23:23):
Tuba margin fell on my foot three weeks ago and
it still hurts. It does I can't believe it's not better.
Speaker 5 (23:29):
Yeah, me neither.
Speaker 2 (23:30):
Todd want to talk to you a little bit about
gifting real estate. Is it always a bad idea?
Speaker 5 (23:39):
You hate to answer questions like that. The carte blanche
answer is complicated. So I'm gonna do it this way lawyers. Yeah, yeah,
it depends right. I could say that, but I don't
like to say that, So so what I'm gonna say
is that generally it's probably not a great idea. And
(24:02):
he'll come and why, Well, you know, generally, you have
probably purchased the real estate long ago, and first of all,
if it's your home, you probably don't want to give
away your home because, for obvious reasons, it's your home
and you want to continue to control it and own it,
enjoy it. But other types of real estate, maybe it's
that vacation home you bought long ago and you think
(24:23):
getting it out of your you know, your name into
a trust for the benefit of children sounds like a
great idea. Or that rental property that I may have
purchased long ago but have been renting it for let's say,
over twenty seven and a half years. I use that
because that's the time in which you can fully depreciate
(24:44):
your basis on rental property. And so if you give
those away, likely those have appreciated over time, and so
the built in gain. And I'll just stick with the
idea of a rental property because they say, oh, get
that out of my eight Let's say I bought it
for one hundred thousand dollars, depreciated it to zero, it's
(25:05):
worth a million today. That, by the way, is not
an uncommon situation. I make it sound like that's a
crazy result. Sure, and if you give that away, that
means there's a million dollars of gain built in to
that to that property, because thats zero basis. And by
the way, some of the gain, the one hundred thousand
dollars that's associated with depreciation, is taxed at ordinary income,
(25:28):
not capital gains rate. So let's just say thirty percent
for easy numbers on everything. And I can't say thirty
percent because we've got this Massachusetts millionaire's tax of four percent,
so you could run into that if you're slightly over
that amount. So if you give that away, you're trapping
a million dollars of gain at thirty percent. If my
(25:51):
estate is not over fifteen million come January one, twenty
twenty six. I'm not giving it away to save any
federalist at tax. So that's a forty percent number, plus
Massachusetts another twelve percent. That's fifty two percent. Well that's
that's a good idea. But if I'm only giving it
away to save Massachusetts state tax because I'm under the
(26:14):
exemption amount, well then I'm only saving twelve percent. Well,
I'm trapping thirty percent capital gains to save twelve Probably
not a good idea. So that's why generally that's not
a good idea to give away. But you know, if
your assets have if you're if you're saving the fifty
two percent, then then so be it might might be okay.
(26:35):
So that that's why it's it's probably gonna be the
ninety percent of the time. Probably not unless you recently
bought something and has fully stepped up already. Well, then
maybe that's okay because it has high basis. So hope
that answers your question.
Speaker 2 (26:49):
Talking with Todd Lotski from Kushing and Dolan. Todd's available
to answer your questions live on air right now during
Ask Todd. Phone number here at the studio is eight
eight eight two zero five two two six three. Still
room on the phone line, So get calling early and
often so that you can get your question answered by Todd.
(27:09):
Eight eight eight to zero five two two sixty three
is the number. We're gonna take a quick break here,
but when we come back, we are gonna get to
your questions with Todd. That phone number is eight eight
eight to zero five two two six three. Again it
is eight eight eight to zero five two two sixty three.
Speaker 1 (27:31):
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 (27:55):
All right, let's get to your calls with Todd. First up,
we got Paul in Lester. Paul, what is your question
for Todd?
Speaker 6 (28:05):
Thanks for taking my call. So, my mother we have
a summer home in Maine on a lake, and my
mother passed away ten years ago left it to me
and my four siblings in her will, and it's not
I think the wording is basically it goes to all
of us equal shares until somebody dies and everybody else
(28:27):
gets another portion, and it's still in my mother's name.
You know, it's never been The tax bill comes made
out to my mother, and I'm wondering if there's something
I need to do or should do or.
Speaker 1 (28:43):
So.
Speaker 5 (28:44):
So, Yeah, this is a you need to be very
clear about what the will actually says. In other words,
Generally wills don't end up holding things in trust because
they're will. I mean, could it. It could, but you
need to see what the trust actually says. In other words,
if it says, I leave all my real estate equally
(29:06):
to my kids, if living, pay it out, give it
to them, does it say that or does it say
hold it in trust for them for their life? Do
you know what it said? Do you know what it
actually says? I just it's very important. Makes a huge difference. Okay,
do you know what it says?
Speaker 6 (29:27):
Yeah, I'm not exactly a hundred potential what it says.
Speaker 5 (29:32):
So here's why it's a huge difference. If it says,
and it sounds like it probably does say that, it
would say to my kids if living, if not living,
then their peace would go to either their kids or
back to the ones that are still alive. And so
if if it says pay it out, and you all
(29:54):
four were living on the date of mom's death, then
even though the deed has not changed from mom's name,
and this happens all the time, the law says that
if it's paid, if it says give to my kids,
then the moment mom died, you four kids became title
(30:17):
owners to that property at that moment, even though there's
no deed out of the estate to you. Okay, it's
not required, but a lot of times people do prepare it.
And so what that means is that all four of
you kids actually own it right now. So if there
was a lawsuit or someone got hurt on the property,
(30:37):
they're going to sue all four of you. All four
of you are legally obligated to maintain the property, pay
the real estate tax bills, utilities up keep maintenance. I mean,
I assume you guys are all doing that now, is
that correct?
Speaker 6 (30:49):
It's sadly yift.
Speaker 5 (30:50):
Well again, that's where the sadly part comes in, Right,
we left it to four people. Now what well, what
if all four don't want it? Well, you guys could
get together and say I want to you know, whoever
wants it can buy out the interest of the ones
who don't. If no one wants to do that, you
can always force a sale by petitioning the court to
partition the property, and the court will basically do the
(31:11):
same things. They either sell it or buy each other out.
And so you know that's really where you are with that.
But at this point it's part of your estate. So
if you died, your estate would likely direct where your
one quarter interest in that property goes, not necessarily to them,
(31:33):
but to your kids or your spouse. So you really
need to plan your estate and figure out what you
want to do with it. But this is an arrangement
that's probably not the way to go. Hope that helps
a little, folks, Planning is always better. In this case,
mom didn't give away the asset. Mom died owning it,
and there's benefits to that. The guide we're giving away
is making the most of gifting assets. Sometimes we gift,
(31:56):
sometimes we don't. As Chuck asked, do we give away
real estate might not be a great item to give?
More importantly, how do we give? Do we give outright?
Do we give to irrevocable gifting? Trust for the kids?
What if I want to give something away. That's large
and I want to still enjoy it. Well, you can,
but you got to use espousal lifetime access trust. Folks,
(32:17):
so many income and gift tax and estate tax issues
to think about when you gift, as well as how
you gift. Learn if gifting is right for you, and
how to do it. Get the guide Making the Most
of Gifting Assets eight sixty six eight four eight five
six nine nine or Legal Exchange Show dot com again
(32:39):
eight sixty six eight four eight five six ninety nine
or Legal Exchange Show dot com.
Speaker 2 (32:46):
Todd got another one queued up for you.
Speaker 3 (32:47):
Here.
Speaker 2 (32:48):
We've got Tim in Pittsfield. Tim, you are on with
Todd Lutski.
Speaker 7 (32:54):
I thank you for day for my calls. So we
have my wife and I are both seventy and we
have only we only have four or five properties. Debt
total are worth less than three million. Okay, So do
we go about I'm just going by your information provided earlier,
(33:15):
trusting it or I guess the will doesn't sound like
the best thing either right now?
Speaker 6 (33:20):
Yeah? Probably not?
Speaker 7 (33:23):
Or do we sell them to them at a reduced rate.
Speaker 5 (33:27):
To your kids?
Speaker 7 (33:29):
Yes?
Speaker 5 (33:30):
So what other assets do you have add to the
three million? The value of your investment stocks, bonds, mutual funds,
IRA accounts, banks.
Speaker 7 (33:39):
Rough number, probably no more than three hundred to three
point five million, so.
Speaker 5 (33:44):
Another another five hundred thousand, So the total estate is
three point five yes, okay, so five hundred of of
what we call money assets.
Speaker 1 (33:53):
Okay.
Speaker 5 (33:54):
So first and foremost, you mentioned selling it to your
kids at a reduced value. First of all, why on
earth would I even want to do that. I don't
see any benefit unless there's some reason I'm not seeing
that your family, your kids need to own this real estate. Now,
there's really no benefit in one gifting it to them,
because I'm sure there's built in gain, meaning you bought
it a while ago, rented it, depreciated it, so there's
(34:16):
probably a lot of built in gain here. So so
getting an asset by gifting it to kids out of
the estate is not helpful because I'm trapping all the
capital gain. It's not helpful for you because your entire
estate is under four million dollars. And with basic trust planning,
we can eliminate your Massachusetts state tax. You're already under
(34:39):
the federal exemption, so you have no forty percent federal
tax to deal with, and So if I gifted away,
I save nothing on the tax front, but I trap
a thirty percent capital gain. Whereas if I do trust
planning and keep it for each other first and then
the kids, now I can pay nothing on the estate
(35:02):
tax front, and then by dying owning it, get a
full step up in basis on these assets, which means
that the fair market value will equal the basis for
the children. So if they later sell it, there's zero
capital gains tax. So now we're winning on the estate
tax front and the capital gains tax front. Home run. Also,
(35:26):
I've not exposed it to my kids creditors sooner than
I need to, So selling it for a less amount
or gifting it, I'm thinking, is a bad idea. Now,
having said that, what should you do? Well you're seventy.
If I want to make sure these assets go to
my children later, I would set up two irrevocable medicaid trusts.
(35:49):
Why because I want to make sure they go there.
I want to make sure that if I keep them
my whole life, that there's nothing that could interfere with
them getting it, like taxes or like a nursing home
or some other you know, medical event that takes these
assets because we have to sell to pay bills. So
(36:10):
that's where I would set up the irrevocable trusts and
you could remain in control of these assets. You can
continue to rent them and collect your rent, which I
know is important. And again, why would I want to
give away my rent? This could be something I use
in my retirement. And you can still control the ability
to perhaps gift them away if you want to gift
them away later, or sell them later and you know,
(36:33):
replace them with something else. So you will get to
keep a lot of control over these assets. And at
the same time eliminate the capital gains tax by getting
a step up in basis, and eliminate the federal and
state estate tax. So this is a great question, folks.
Please don't just give away assets. Here not always the
(36:59):
smartest tax play.
Speaker 2 (37:00):
Todd, appreciate you joining us today. Thank you so much
for the time. Always a pleasure.
Speaker 1 (37:06):
This has been asked Odd on the Financial Exchange Radio network.
Ask Tod 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 and three
nine three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(37:27):
Cushing and Dolan Armstrong advisor. He 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.
Speaker 2 (37:39):
Excuse me, I couldn't quite catch my breadth there.
Speaker 1 (37:42):
Good time.
Speaker 2 (37:43):
I just say it was just great listening to Todd.
You know, let's talk a little bit. In the second hour,
we're going to be talking about AI and how big
of an impact is actually having on the US economy.
Also talking a little bit more about the auto industry
and what is going on there, some gross three prices chatter,
and then we're gonna be talking about gold because everyone
(38:05):
wants to talk about gold. Now we'll join in and
we'll talk about it too. We got all that and
more coming up on the Financial Exchange.
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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the hosts, do not reflect the opinions of Armstrong Advisory
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(00:20):
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donation today. This is the Financial Exchange with Chuck Zada
(01:06):
and Paul.
Speaker 2 (01:06):
Lane, Chuck Paul Tucker with you here on a Wednesday,
and we're gonna kick things off with a little US
China chatter just because I don't know. It seems like
you're getting some renewed, renewed stories on that front, and
(01:29):
big publications are happy to run with it. And so
if everyone's talking about it, Gollagy Wilkers, we don't want
to be left out. We certainly want to be included
in the fun.
Speaker 3 (01:39):
Do we not want to be left out? Quite honest,
I might want to be left out, but I will part.
Speaker 2 (01:44):
We'd prefer to be left out, but we we must discuss.
So you got a piece in the Wall Street Journal here.
It's titled China betting it can win a trade war?
Is playing hardball with Trump? I don't really know what
to do with this piece, just because again, ultimately, as
(02:05):
we've said before, this is a game of chicken, and
games of chicken, if you look at the game theory
of them, they don't have a stable equilibrium that you
get to. This is not, you know, the prisoner's dilemma.
This is something where you say, gee, I don't know
where this is going to land, because ultimately, what you're
talking about is who blinks first and who can stomach
(02:28):
more pain? And so there is nothing that Paul or
I can say where we're like, well, I think that,
you know, the US is gonna win because we're tougher,
and then the other person says, no, I think that
China's gonna win because they're I got no clue. And ultimately,
when we look at this, what I do think that
(02:49):
we can say that's interesting about this and kind of
where I've landed is I think that for both the
United States and China right now, there's kind of this
there's this window in particular for China over the next
five to seven years where they've got to make hey,
(03:09):
otherwise they're not really going to be able to And
let me explain what I mean by this, Hey is yes, exactly.
So couple things. The first thing that I want to
point out is Jijingping's age. He's seventy two years old
right now, and he has been running the Chinese Communist
(03:30):
Party as the President of China since twenty thirteen. It's
been twelve years now, and all you know, everything that
you read out there is basically, look, you'd like to
make it through until the day he dies continuing to
lead China. Realistically, just based on what we know about
aging in the human body, you're probably talking somewhere in
the range of ten to fifteen years is the most
(03:52):
likely outcome there. And so he sees a finite window
for him to really leave his mark on the wa
world and say, here's what I was able to do
with China during my time. Other things that you're seeing,
the population of China, specifically the working age population of
China is declining right now. There are not enough people
(04:14):
that are excuse me, coming into the workforce to replace
those that are exiting in China. Similar problem here, yeah, similar,
but not not at the scale of what China see you.
And so when you look at China from that perspective,
it's very you know, clear to policy makers that they're saying, okay,
like this is you know, we're gonna lose some of
(04:35):
the edge that we have as our workforce deteriorates over time.
Maybe this is part of the reason why they're trying
to get so heavily into robot workers now, is because
they see what's going on. Other things. When we talk
about the the rare earth piece that's been chatted about
over the last six months or so, and in particular
in the last week with the new rare earth export restrictions.
(04:58):
While it's probably well, well, it's really likely that the
US and other countries are not going to be able
to get any kind of you know, meaningful production and
refining of rare earths up and running in the next
you know, six to twelve months.
Speaker 3 (05:12):
Yeah, definitely not.
Speaker 1 (05:13):
Yep.
Speaker 2 (05:14):
Everyone in their grandmother knows about this now and is
paying attention to it, and so I think it's pretty
likely that either the US or other countries that are
more friendly to the US than China are producing larger
quantities of rare earths over the next five to seven years,
to the point where maybe you can fill you know,
forty to sixty percent of your needs through non China
rare earths. And if that's the case, China loses a
(05:37):
lot of the leverage that's out there. So I kind
of roll this all up and I say, hey, based
on that, it puts you in a position where China
really sees the back half of the twenty twenties as
their chance to cement the position that they want to
be in, whether that is through economic, whether it is
(06:01):
through military action on Taiwan. The next five years, I
see China being more aggressive than they've been, simply because
I think that things start to look not so bubbly
and rosy for them as you get past twenty thirty
and the demographic issues become problematic, And I think she
also sees his own mortality there, and it's like, you know,
(06:22):
like I kind of want to get this done before
I'm gone.
Speaker 3 (06:26):
In addition to that, looking backwards, it's been a really
poor last five years for the Chinese economy. You have
a property market collapse, you have very weak consumer sentiment
and spending, You've got rising deaths. So to your point
of trying to round out your legacy as a leader,
the last five years have just been awful. They really
(06:47):
have not been strong at all. So over the course
of the next five years, like you mentioned, you have
to focus on reshaping that. And it seems like, you know,
exporting goods continues to be the main focus here. Trying
to establish dumb on the semiconductor and technology side of things, robots,
anything AI that's definitely one frontier. You can see what
they've done with electric vehicles and flooding of the market
(07:11):
supply with BYD that has been a point, but it
seems like for the near term, the rare earth metals
have been the pun intended here, the Trump card that
they have played, so did Hey, the most that they've
done here is leaning on this because they have found
significant leverage behind the rare earth metals. So it seems
(07:32):
like that is going to be the card that they
continue to play the strongest because that did merit sort
of a softening of the policy stance from President Trump
initially when that was brought out. So, like you said,
if I were to summarize this whole story in three words,
(07:53):
you led with it. It's a game of chicken. That's
That's what this is and what it will continue to
be unless we get further developments later this month when
President g and President Trump will get together in South Korea,
I believe, right for that Eason Pacific conference.
Speaker 2 (08:09):
Yes, so you've got you know, everyone kind of has there.
You know, everyone's getting all prickly in advance of this now,
you know, talking about the US now saying hey, maybe
we'll stop buying you know, Chinese cooking oil, which did
not have that My being over right, didn't even know
it was a thing, but apparently it is a thing.
Speaker 3 (08:27):
You learn something new every day. I did not think
we'd be discussing cooking oil and soybean sales today.
Speaker 2 (08:35):
No, And here's the thing that I will say, the look,
the US economy has dealt with a lot of uncertainty
over the course of this year to this point. Like again,
you look at basically everything in the aggregate, and I'm
not saying that things are perfect, because like we've talked
about the areas where there's some slowdowns going on in
areas of concern and this and that, but buy and large.
When you look at the GDP numbers for this year,
(08:57):
they're probably and again we won't really know because of
this government shutdown that's going on, but you're probably looking
somewhere in like the one and a half to two
percent range, just kind of where things are looking like
they're landing, which is perfectly fine. It's perfectly cromulent. You
don't have to worry like it's that's fine. And so
I keep coming back to the fact that ultimately it
(09:18):
takes a lot to derail the US economy because it's
so big, it's so dynamic, and so resilient that it
takes a lot to do it. The only thing that
I actually think could is if there were any extended period,
like not only thing, but the only thing that's like
been discussed this year that I think would is if
there were any extended period where rare earth could not
(09:38):
be imported into the US, just because they're so critical
in everything from making cars too. I mean, like you
go down the list, and it's just it's it's critically
important to even you think about just you know, hey,
if your cell phones, anything related to magnets, ye in
electronics has some component of rare earth in it most likely,
and so like whether you're talking like batteries and stuff
(10:01):
like that. Like there's all these things that basically make
modern society work. I mean, modern society basically functions because
of electricity. Magnets and electric motors and the internal combustion engine,
and all those need some type of rare earth in
them in order to like, in order to produce them
(10:21):
in their relative respective industries.
Speaker 3 (10:22):
And that's a backdrop against what's a weak manufacturing sector
here domestically as it is. You know, it would only
further exaggerate what's been pretty weak on the manufacturing side.
Speaker 1 (10:31):
Your day.
Speaker 2 (10:32):
Domestically, I think the Trump administration they obviously know this.
They're starting to make some, you know, fairly sizable strategic
investments in that fashion. I think that they're moving as
quickly as they possibly can there, but it's still is
going to be like three to five years I think
before you have any credible deterrent on that side of things.
(10:52):
And so ultimately, I think China's looking at this saying, yeah,
this is our chance to really press the issue because
we're going to lose a lot of our leverage over
the come years. And I think that's why, you know,
part of the reason why we're where we are right now.
Speaker 3 (11:04):
In three to five years may be ambitious, it's a
very hard rarest mining is a very difficult process and
something that we have never been incredibly successful.
Speaker 2 (11:14):
It was messy, right, Like we used to do a
decent amount of it back in like the nineties, and
we're like, yeah, this is part of gross let's let's
move this somewhere else.
Speaker 3 (11:22):
Typical is just the margins on it. It has to be
heavily subsidized. That's kind of what I'm saying.
Speaker 2 (11:26):
Yeah, it's not lucrative. No, the process is actually pretty easy.
It's just like chemically and financially intensive and it's pretty
gross and you don't really make much money doing it. Yeah,
and so we were like, yeah, China, you guys go
do this and like pollute your own you know, waters
and you know. And now we've kind of realized, Okay,
(11:46):
like yeah, we don't want to do this domestically, but.
Speaker 1 (11:49):
Golley, g you will.
Speaker 4 (11:51):
We have to.
Speaker 2 (11:52):
So let's take a quick break. When we come back,
let's talk j Powell, and let's talk banks. After this.
Speaker 1 (12:00):
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Speaker 2 (13:04):
J Powell was doing what he often does on a Tuesday,
which is give a speech talking about, you know, what
the FED is doing and not too many surprises. Really again,
Jay's pretty buttoned up at this point. Occasionally, you know,
he kind of lets loose with his version of, you know,
a zinger, but it's like Jay's not really you know,
(13:26):
one to you know, just throw words around, you know,
willy nilly. But pretty much what he said is, look,
we are getting to the point where we might stop
our quantitative tightening program. Meeting the fed's balance sheet runoff
would likely stop in the coming months. He didn't give
any prognostications on exactly where interest rates would be going,
(13:46):
but ultimately I think that when you look at this,
it points toward the FED continuing to reduce rates at
their upcoming meetings, most likely by a quarter percent on
a per meeting basis and not really looking to change
course too dramatically based on what he's saying here.
Speaker 3 (14:07):
Yeah, there isn't a whole lot to really chew on here.
This is more of the same. Like you mentioned, it
was interesting a little bit some of the commentary on
the reduction of the asset portfolio, just kind of trying
to be careful with some of the maturities on those
securities that they had bought back in twenty twenty. But ultimately,
(14:27):
the two major takeaways I had, and these weren't new necessarily,
is that Powell mentioned that inflation is still gradually increasing,
and you've got a labor market in which both supply
and demand has declined quite sharply. So again, those are
things that we've covered on the show and talked about,
but those were probably two of the biggest takeaways that
I had from his commentary other than that it's kind
(14:49):
of steady as she goes for a cut on the
twenty eighth and twenty ninth when they get together again
or I guess the twenty ninth, which.
Speaker 2 (14:56):
Does bring us to the question that is asked by
this piece in Bloomberg Opinion, big banks are on fire,
Oh dear well, someone called the fire department. Why is
the FED eyeing more fuel? And what we're talking about
here is when we talk about on fire again like
kind of a it's kind of a tough phrase, right,
like is that good or bad? When you say they're
(15:16):
on fire, you get you know, NBA jam, like, oh,
he's on fire, it's like really good. But when you
talk about banks being on fire, it's kind of like, oh,
like is that the bad kind of on fire? I
would say dumpster fire because we hear when they're smoke,
there's fire, true, And so it's kind of like, well,
which one is it? The good or the bad? In
this case? Look, big banks have been reporting earnings all week.
(15:38):
They have been knocking really out of the park. It
is NBA jam, you know, he's on fire. And so
I think that when you look at this, here's what
we've seen from the banks, by the way, investment banking
revenue through the freaking roof, trading revenue through the freaking roof.
(16:00):
Mortgage revenue slow and steady, it's fine, nothing too interesting there,
credit card revenue moving along with some aside from Bank
of America, who had you know, everything looks great, some
very modest deterioration in credit, you know, showing up in
charge offs and things like that, but very very modest, like,
(16:21):
not not much to be concerned about there. So the
point that this piece brings up is, look, the FED
typically engages in cutting interest rates when they are concerned
about aggregate demand and you know, potentially some questions about
you know, hey, are we going to see enough lending
going on? And capital markets are still pretty strong. There's
(16:42):
no signs at banks of major stresses in lending. And
so the point that this piece asks is, look, what
what what gives? Like, why are you you know, cutting
rates when things don't look bad there? And I think
the answer is, look, most of the time, unless it's
a true financial crisis, banks are not usually at the
(17:04):
epicenter of the problem. They're not necessarily the proximate cause
I know they were in two thousand and eight, they
were in nineteen ninety one. But during the tech bubble,
as an example, it wasn't that banks started blowing up
left and right and you know, saying, oh, g you like,
we need help. It was somewhere else, was a regular
business cycle that kind of caused things.
Speaker 3 (17:24):
It's the Wall Street versus Main Street sort of debate
where the FED is more concerned about what's going on
on main street. In terms of the labor market, that
is really the primary focus, and that's why you have
the FED indicating that they're cutting rates, is to potentially
stave off a slowdown in the labor market. I mean, also,
they are the backdrop concerns with inflation, where cutting rates
(17:46):
doesn't really help you. But ultimately, with these banks, if
for some reason, let's say the labor market does worsen
and we see unemployment tick up to five percent over
the course of the next six to twelve months or
something like that, the results that we're seeing from banks,
I would think you would see a weakening market and
weakening capital, you know, concerns, and you wouldn't see these
(18:08):
type of strong bank results. So to kind of counter
that point that, you know, why the cutting banks are
doing so well, if this issue arises of the labor
market weakening, you won't see banks, in my opinion, fair
as well as they have over the course of this year.
Speaker 2 (18:23):
And I gotta be honest, we're not really seeing a
ton of indication right now that lower rates are generating
more economic activity. I know we always talk about Hey,
it's kind of this long and you know, unpredictable cycle
in terms of when it hits. But ultimately we've seen
mortgage rates come down, you know, about a quarter to
(18:46):
a half percent from where they were over the course
of the summer. The NBA Mortgage Purchase Index, you know,
just fell by about two and a half percent over
the last week and is now down you know, about
six seven percent in mid September when rates first came
down that far. And so I kind of look at
it and yeah, you had this the initial wave of
(19:07):
REFI activity that was you know through the roof that
has subsequently not fully reversed, but it's kind of retrenched,
you know, about sixty seventy percent of that activity level.
Mortgages aren't really seeing any uptick in overall activity. I mean,
they've basically been flat since mid April, and so I'm
just not sure that rate cuts are going to have
(19:28):
a huge impact on the economy. I guess is where
I'm landing. Let's take a quick break. When we come back,
it's Wall Street Watch and ask Todd.
Speaker 1 (19:41):
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Speaker 4 (20:04):
Market sern rally mode. Despite the tit for tat trade
threats between the US and China's investors are encouraged by
a flurry of strong third quarter bank earnings. Right now,
the Dow is up by three quarters of a percent,
or three hundred and forty five points, SMP five hundred
up over one percent now were seventy three points higher,
Nasdaq up one point four percent or three hundred and
(20:26):
twelve points. Russell two thousand is up over one and
a half percent, Tenure Treasure Feled is flat at four
point zero one three percent, and crude oil up about
four tenths of one percent, trading just below fifty nine.
Speaker 2 (20:39):
Dollars a barrel.
Speaker 4 (20:41):
Well similar to its peers, Bank of America had a
solid third quarter, driven by stronger than expected investment banking revenue.
The bank said its profit climbed twenty three percent from
a year ago to eight and a half billion dollars.
Bank of America shares are up nearly five percent at
the moment. Brgan Stanley also impressed with its third quarter results,
(21:03):
posting earnings that exceeded expectations by the largest margin in
nearly five years. The bank saw its profit jump forty
five percent from a year ago to four point six
billion dollars. Morgan Stanley shares are up six percent. Elsewhere
PNC Financials. That stock is down four percent, despite the
lender logging higher profit and revenue in the previous quarter
(21:25):
as it continued adding customers. Meanwhile, chip maker asml stock
rising over one percent after the company said it expects
twenty twenty six total net sales to top those from
this year. Asmlo also posted mixed results for the third quarter.
According to Reuter's, Apollo Global Management has offered a new
(21:47):
bid to take Papa John's private at sixty four dollars
a share. The pizza chain stock is jumping over seven
percent on that news. And after today's close, we'll see
third quarter results from United Airlines. On Tucker SOOVA and
that is Walltree 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 (22:31):
Todd Lotsky joins us now for Ask Todd. Your chance
to ask Todd your estate planning questions live on air
right now. Phone lines are wide open at eight eight
eight two zero five two two six three, So get
calling so you can ask Todd your state plan state
planning questions right now again. Eight eight eight two zero
(22:52):
five two two sixty three is the number. We currently
have no one in line, so remember we can get
through usually two to three of your questions per show.
This is your chance to get right to the top
of the line at eight eight eight to zero five
two two six three. Again. The number to call to
ask Todd your estate planning questions is eight eight eight
(23:13):
to zero five two two six three. Mister Lutsky, how
are you doing today?
Speaker 5 (23:19):
I am never better? How you doing not great? No,
something's always wrong with you.
Speaker 2 (23:23):
Tuba margin fell on my foot three weeks ago and
it still hurts. It does I can't believe it's not better.
Speaker 5 (23:29):
Yeah, me neither.
Speaker 2 (23:30):
Todd want to talk to you a little bit about
gifting real estate. Is it always a bad idea?
Speaker 5 (23:39):
You hate to answer questions like that. The carte blanche
answer is complicated. So I'm gonna do it this way lawyers. Yeah, yeah,
it depends right. I could say that, but I don't
like to say that, So so what I'm gonna say
is that generally it's probably not a great idea. And
(24:02):
he'll come and why, Well, you know, generally, you have
probably purchased the real estate long ago, and first of all,
if it's your home, you probably don't want to give
away your home because, for obvious reasons, it's your home
and you want to continue to control it and own it,
enjoy it. But other types of real estate, maybe it's
that vacation home you bought long ago and you think
(24:23):
getting it out of your you know, your name into
a trust for the benefit of children sounds like a
great idea. Or that rental property that I may have
purchased long ago but have been renting it for let's say,
over twenty seven and a half years. I use that
because that's the time in which you can fully depreciate
(24:44):
your basis on rental property. And so if you give
those away, likely those have appreciated over time, and so
the built in gain. And I'll just stick with the
idea of a rental property because they say, oh, get
that out of my eight Let's say I bought it
for one hundred thousand dollars, depreciated it to zero, it's
(25:05):
worth a million today. That, by the way, is not
an uncommon situation. I make it sound like that's a
crazy result. Sure, and if you give that away, that
means there's a million dollars of gain built in to
that to that property, because thats zero basis. And by
the way, some of the gain, the one hundred thousand
dollars that's associated with depreciation, is taxed at ordinary income,
(25:28):
not capital gains rate. So let's just say thirty percent
for easy numbers on everything. And I can't say thirty
percent because we've got this Massachusetts millionaire's tax of four percent,
so you could run into that if you're slightly over
that amount. So if you give that away, you're trapping
a million dollars of gain at thirty percent. If my
(25:51):
estate is not over fifteen million come January one, twenty
twenty six. I'm not giving it away to save any
federalist at tax. So that's a forty percent number, plus
Massachusetts another twelve percent. That's fifty two percent. Well that's
that's a good idea. But if I'm only giving it
away to save Massachusetts state tax because I'm under the
(26:14):
exemption amount, well then I'm only saving twelve percent. Well,
I'm trapping thirty percent capital gains to save twelve Probably
not a good idea. So that's why generally that's not
a good idea to give away. But you know, if
your assets have if you're if you're saving the fifty
two percent, then then so be it might might be okay.
(26:35):
So that that's why it's it's probably gonna be the
ninety percent of the time. Probably not unless you recently
bought something and has fully stepped up already. Well, then
maybe that's okay because it has high basis. So hope
that answers your question.
Speaker 2 (26:49):
Talking with Todd Lotski from Kushing and Dolan. Todd's available
to answer your questions live on air right now during
Ask Todd. Phone number here at the studio is eight
eight eight two zero five two two six three. Still
room on the phone line, So get calling early and
often so that you can get your question answered by Todd.
(27:09):
Eight eight eight to zero five two two sixty three
is the number. We're gonna take a quick break here,
but when we come back, we are gonna get to
your questions with Todd. That phone number is eight eight
eight to zero five two two six three. Again it
is eight eight eight to zero five two two sixty three.
Speaker 1 (27:31):
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 (27:55):
All right, let's get to your calls with Todd. First up,
we got Paul in Lester. Paul, what is your question
for Todd?
Speaker 6 (28:05):
Thanks for taking my call. So, my mother we have
a summer home in Maine on a lake, and my
mother passed away ten years ago left it to me
and my four siblings in her will, and it's not
I think the wording is basically it goes to all
of us equal shares until somebody dies and everybody else
(28:27):
gets another portion, and it's still in my mother's name.
You know, it's never been The tax bill comes made
out to my mother, and I'm wondering if there's something
I need to do or should do or.
Speaker 1 (28:43):
So.
Speaker 5 (28:44):
So, Yeah, this is a you need to be very
clear about what the will actually says. In other words,
Generally wills don't end up holding things in trust because
they're will. I mean, could it. It could, but you
need to see what the trust actually says. In other words,
if it says, I leave all my real estate equally
(29:06):
to my kids, if living, pay it out, give it
to them, does it say that or does it say
hold it in trust for them for their life? Do
you know what it said? Do you know what it
actually says? I just it's very important. Makes a huge difference. Okay,
do you know what it says?
Speaker 6 (29:27):
Yeah, I'm not exactly a hundred potential what it says.
Speaker 5 (29:32):
So here's why it's a huge difference. If it says,
and it sounds like it probably does say that, it
would say to my kids if living, if not living,
then their peace would go to either their kids or
back to the ones that are still alive. And so
if if it says pay it out, and you all
(29:54):
four were living on the date of mom's death, then
even though the deed has not changed from mom's name,
and this happens all the time, the law says that
if it's paid, if it says give to my kids,
then the moment mom died, you four kids became title
(30:17):
owners to that property at that moment, even though there's
no deed out of the estate to you. Okay, it's
not required, but a lot of times people do prepare it.
And so what that means is that all four of
you kids actually own it right now. So if there
was a lawsuit or someone got hurt on the property,
(30:37):
they're going to sue all four of you. All four
of you are legally obligated to maintain the property, pay
the real estate tax bills, utilities up keep maintenance. I mean,
I assume you guys are all doing that now, is
that correct?
Speaker 6 (30:49):
It's sadly yift.
Speaker 5 (30:50):
Well again, that's where the sadly part comes in, Right,
we left it to four people. Now what well, what
if all four don't want it? Well, you guys could
get together and say I want to you know, whoever
wants it can buy out the interest of the ones
who don't. If no one wants to do that, you
can always force a sale by petitioning the court to
partition the property, and the court will basically do the
(31:11):
same things. They either sell it or buy each other out.
And so you know that's really where you are with that.
But at this point it's part of your estate. So
if you died, your estate would likely direct where your
one quarter interest in that property goes, not necessarily to them,
(31:33):
but to your kids or your spouse. So you really
need to plan your estate and figure out what you
want to do with it. But this is an arrangement
that's probably not the way to go. Hope that helps
a little, folks, Planning is always better. In this case,
mom didn't give away the asset. Mom died owning it,
and there's benefits to that. The guide we're giving away
is making the most of gifting assets. Sometimes we gift,
(31:56):
sometimes we don't. As Chuck asked, do we give away
real estate might not be a great item to give?
More importantly, how do we give? Do we give outright?
Do we give to irrevocable gifting? Trust for the kids?
What if I want to give something away. That's large
and I want to still enjoy it. Well, you can,
but you got to use espousal lifetime access trust. Folks,
(32:17):
so many income and gift tax and estate tax issues
to think about when you gift, as well as how
you gift. Learn if gifting is right for you, and
how to do it. Get the guide Making the Most
of Gifting Assets eight sixty six eight four eight five
six nine nine or Legal Exchange Show dot com again
(32:39):
eight sixty six eight four eight five six ninety nine
or Legal Exchange Show dot com.
Speaker 2 (32:46):
Todd got another one queued up for you.
Speaker 3 (32:47):
Here.
Speaker 2 (32:48):
We've got Tim in Pittsfield. Tim, you are on with
Todd Lutski.
Speaker 7 (32:54):
I thank you for day for my calls. So we
have my wife and I are both seventy and we
have only we only have four or five properties. Debt
total are worth less than three million. Okay, So do
we go about I'm just going by your information provided earlier,
(33:15):
trusting it or I guess the will doesn't sound like
the best thing either right now?
Speaker 6 (33:20):
Yeah? Probably not?
Speaker 7 (33:23):
Or do we sell them to them at a reduced rate.
Speaker 5 (33:27):
To your kids?
Speaker 7 (33:29):
Yes?
Speaker 5 (33:30):
So what other assets do you have add to the
three million? The value of your investment stocks, bonds, mutual funds,
IRA accounts, banks.
Speaker 7 (33:39):
Rough number, probably no more than three hundred to three
point five million, so.
Speaker 5 (33:44):
Another another five hundred thousand, So the total estate is
three point five yes, okay, so five hundred of of
what we call money assets.
Speaker 1 (33:53):
Okay.
Speaker 5 (33:54):
So first and foremost, you mentioned selling it to your
kids at a reduced value. First of all, why on
earth would I even want to do that. I don't
see any benefit unless there's some reason I'm not seeing
that your family, your kids need to own this real estate. Now,
there's really no benefit in one gifting it to them,
because I'm sure there's built in gain, meaning you bought
it a while ago, rented it, depreciated it, so there's
(34:16):
probably a lot of built in gain here. So so
getting an asset by gifting it to kids out of
the estate is not helpful because I'm trapping all the
capital gain. It's not helpful for you because your entire
estate is under four million dollars. And with basic trust planning,
we can eliminate your Massachusetts state tax. You're already under
(34:39):
the federal exemption, so you have no forty percent federal
tax to deal with, and So if I gifted away,
I save nothing on the tax front, but I trap
a thirty percent capital gain. Whereas if I do trust
planning and keep it for each other first and then
the kids, now I can pay nothing on the estate
(35:02):
tax front, and then by dying owning it, get a
full step up in basis on these assets, which means
that the fair market value will equal the basis for
the children. So if they later sell it, there's zero
capital gains tax. So now we're winning on the estate
tax front and the capital gains tax front. Home run. Also,
(35:26):
I've not exposed it to my kids creditors sooner than
I need to, So selling it for a less amount
or gifting it, I'm thinking, is a bad idea. Now,
having said that, what should you do? Well you're seventy.
If I want to make sure these assets go to
my children later, I would set up two irrevocable medicaid trusts.
(35:49):
Why because I want to make sure they go there.
I want to make sure that if I keep them
my whole life, that there's nothing that could interfere with
them getting it, like taxes or like a nursing home
or some other you know, medical event that takes these
assets because we have to sell to pay bills. So
(36:10):
that's where I would set up the irrevocable trusts and
you could remain in control of these assets. You can
continue to rent them and collect your rent, which I
know is important. And again, why would I want to
give away my rent? This could be something I use
in my retirement. And you can still control the ability
to perhaps gift them away if you want to gift
them away later, or sell them later and you know,
(36:33):
replace them with something else. So you will get to
keep a lot of control over these assets. And at
the same time eliminate the capital gains tax by getting
a step up in basis, and eliminate the federal and
state estate tax. So this is a great question, folks.
Please don't just give away assets. Here not always the
(36:59):
smartest tax play.
Speaker 2 (37:00):
Todd, appreciate you joining us today. Thank you so much
for the time. Always a pleasure.
Speaker 1 (37:06):
This has been asked Odd on the Financial Exchange Radio network.
Ask Tod 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 and three
nine three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(37:27):
Cushing and Dolan Armstrong advisor. He 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.
Speaker 2 (37:39):
Excuse me, I couldn't quite catch my breadth there.
Speaker 1 (37:42):
Good time.
Speaker 2 (37:43):
I just say it was just great listening to Todd.
You know, let's talk a little bit. In the second hour,
we're going to be talking about AI and how big
of an impact is actually having on the US economy.
Also talking a little bit more about the auto industry
and what is going on there, some gross three prices chatter,
and then we're gonna be talking about gold because everyone
(38:05):
wants to talk about gold. Now we'll join in and
we'll talk about it too. We got all that and
more coming up on the Financial Exchange.
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