December 10, 2025 • 38 mins
Chuck Zodda and Paul Lane explain how rate cuts by the Federal Reserve impact average Americans. Why this may be the last rate cut for awhile. Warner Brothers' bidders brace for a fight that will last months. Todd Lutsky joins the show to explain how to know when it is time to update your estate plan.
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Episode Transcript
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Speaker 1 (00:00):
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(01:06):
and Paul Lane.
Speaker 2 (01:09):
Chuck Paul Tucker with you today on the Financial Exchange.
It's a FED day, which means, quite honestly, basically nothing
happens until two pm and then you usually get like
a flurry of activity for like an hour and a half,
and then a lot of times you end up like
(01:30):
not really closing anywhere different from where he started the
day for the stock market, Yes, yes, does anything else matters?
You know, what are we really doing here? So I
do think just in terms of, you know, what we
see on these days, I do think this is kind
of interesting in that if you look at the last
(01:51):
three years on FED days, the return has averaged just
under a quarter percent for the last three years. Okay,
the average turn on a non fed day is point
zero five percent, So in general, FED days have been
better than non fed days for the last three years.
Speaker 3 (02:11):
That was gonna be would have been my prediction, but
I wouldn't have imagined it to be that small. It
just seems like a small percentage gain to have a
quarter percent.
Speaker 2 (02:18):
But here's the wild thing again. You're not talking about
a huge sample size. There's eighty a year, okay, So
you're talking about over the last three years, there's twenty
four instances. The standard deviation of the returns is one
point six percent, which means, yeah, most of the time
it averages out and nothing you know, important really happens,
like slight positive bias. But there's a wide range of
(02:42):
where those actually go, and it's generally not even depending
on what the Fed says, it's kind of okay, what
if market's been doing leading up to it, how are
people positioned? And that's kind of what you get. So
I think that overall, you know, where we sit here
the expectation for the market, and this is what I like,
Basically everyone is saying, it's kind of where I am to.
(03:05):
The expectation is for you know, what we'll call a
hawkish cut, which is the FED cuts interest rates by
another quarter percent and then strongly signals in the press
conference after where J. Powell puts his purple tie on
and says, here's what I think that the bar for
future cuts is going to be high, and don't expect
(03:29):
that you're necessarily going to get more of them. That's
the expectation for most people.
Speaker 3 (03:32):
Right that is the case. We're sitting at ninety percent probability.
According to CEMA futures that we see that quarterbased cut.
So it's that's pretty much baked in really where there
will be a lot more scrutiny and analysis and I'm
not sure if it really moves the needle tremendously. Check
will be on who within the party the Fed Governor's
(03:54):
is dissenting, what is the drama underlying this FED rate decision,
and what is some of the not explicit commentary because
you won't get that of the members. But what will
the voting stack up look like. I think that will
probably be parsed through by economists and investors alike.
Speaker 2 (04:11):
Now, the other piece on this is remember for you know,
for how this impacts the average individual, it's not you know,
it's not cut and dry in terms of, oh, the
Feds cutting and that means things are going to get
cheaper if I need to borrow money the Federal Reserve.
If you look back, like over the last couple of years,
(04:34):
the Federal Reserve started cutting interest rates in September of
last year. Okay, the first cut that we saw was
in it was on September twenty fifth, I think it
was of last year, somewhere around then, and we went
down by half a percent. So let's go to just
(04:56):
before that. On September eighteenth, the week prior, So September
eight eighteenth of last year, and I'm pulling this data
from Mortgage News Daily, the average thirty year fixed rate
mortgage in the United States was six point one five percent.
So if you wanted to go and borrow money to
buy a house mid September last year, your rate was
(05:20):
going to be, you know, on average, six point one
five percent, and no one actually offers that rate, like
they're all basically in like ace of an percent, So
generally you'd say, like six and an eighth is where
you know, you would have been six point one twenty
five today, despite the Federal Reserve already having done one
hundred and fifty basis points one and a half percentage
(05:41):
points of cuts to the Fed funds rate and expected
to do another quarter percent today. Paul, I'm looking at
this and I'm I'm I'm confunneled. The thirty year fixed
rate mortgage the average, according to Mortgage News Daily, is
at six point three five percent, which, if my advanced
(06:02):
mathematic skills are correct, is zero point two percent higher
than just before the Fed started cutting last year. Can
you double check my math.
Speaker 3 (06:14):
Math is spot on. The math is right, the math
is right on the money, and it echoes a conversation
I was having this weekend. I was a little disappointed
another financial advisor at the table remarking that, hey, the
FED has cut interest rates over this period of time,
but there's been no impact to mortgages. He should know,
of all people, that when you're talking about interest rates,
(06:36):
there's two different ends of the spectrum. There's the short term,
the short end, which we're talking about right now with
the Fed cutting rates, and then there's the long term,
which the thirty year fixed mortgage is based on the
US ten year Treasury. And while it's fair to say
perhaps influenced slightly by what happens on the short end
of the curve with what the Federal Reserve does, it
(06:57):
is not a direct one to one correlation at all
that the FED cuts rates and immediately you see a
change to the thirty year fixed mortgages out there. It
is much more influential on a lot of the more
variable interest rate products out there, like home echuy, lines
of credit, or those people who would credit card for
an adjustable rate mortgage, credit cards, money markets, money markets
(07:18):
big time. That's an easy one to see. That really
is the divergence between the two. So important to note
that whenever you're talking rates.
Speaker 2 (07:27):
Now, the other thing that I want to note on
is you mentioned the ten year treasury. So ten year
treasury yields have been going up over the last couple
of weeks, and I want to talk about why that
is the case, because again, think about it this way.
Let's say that you are a person with a billion dollars,
(07:49):
and let's say that you decide to lend money, and
you come up with a word, and you say, I'm
gonna call myself a bank, and I'm gonna lend money
if I can lend the US off me here like
this is the basic way that all banks think about this.
If I can lend the US government money with no
risk of them repaying me for ten years at four
point one seven percent, then in order to lend Paul
(08:13):
Lane money over an additional twenty years, and he's with
the credit risk that he has very little with you know, club,
with the credit risk that Paul has, they're still gonna say,
you know what, we might need a couple percentage points
above that, because look, weird things can happen over a
(08:33):
thirty year time period, and so yeah, Paul, we're going
to charge you six to quarter percent because they can
go to the federal government and lend them that at
four percent and they're they'd be happy as a clam
doing that. So I want to talk about this move
up in the ten year yield because when we talk
about yields, there are two different components to them. Actually,
that four point one seven percent, it's made up of
(08:55):
two different pieces. The first is basically, hey, what's going
going on with inflation and we can measure that through
treasury break evens. Basically, there are certain treasuries that are
indexed for inflation, and we can compare the yields on
those to the yields on regular tenure treasuries and say
how much of this is an inflation premium, and right
(09:15):
now it's about two point three percent of it. The
other component is what real rates? How much is reflected
in terms of you know, real growth projections, and what
we've seen over the last couple of weeks, the move
has been in real rates. It's what we have been seeing,
which is market saying markets right now are trying to
(09:35):
call a bottom in the labor market and housing market,
and they may be right, they may not be. But
markets are saying, hey, we think growth is going to
inflect higher next year. It may it may not. Markets
are not always right, they're in fact wrong quite often.
But when we talk about why we're seeing the moves
that we are seeing in the treasury market, it's because
(09:59):
markets are saying, yeah, I think there's a chance that
you're going to see some higher growth next year. And
so this gets at, you know, kind of the the
what the Fed's trying to sort through here, which is, yeah,
the labor market doesn't look particularly good right now, but
the Fed also has not been able to impact the
areas of the you know, the interest rate markets that
(10:22):
that they would like to just because again normally lower
mortgage rates are what influences housing and drives more activity.
And so there's a very real question as to look,
the FED might be trying to cut rates to stimulate
the economy. It's pretty unclear that they're actually able to
do that given the dynamic that's out there right now.
(10:43):
It's just kind of it's it's kind of pushing on
a string a little bit. So let's take a quick
break and when we come back. Do we want to
talk the next fed chair after this? Not really, we don't,
and so instead look, quite honestly, like one any time.
We'll have plenty of time to do that. We'll also
have plenty of time for this story. But I am
(11:04):
just so juiced by this one here Warner Brothers again.
You got this fight that's going to be happening between
Paramount and Netflix, and I am entirely here just to
watch a bunch of billionaires battle over media empires for
the next six to twelve months. It's going to be
incredibly entertaining, more entertaining than any of the programming they
(11:26):
put out themselves. And so let's do that after this.
Speaker 1 (11:31):
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Speaker 2 (13:12):
All right, let's talk a little bit more about what's
going on with Warner Brothers Discovery. So late last week,
Netflix and Warner Brothers announced that they had agreed to
an acquisition where Netflix was going to buy Warner Brothers Discovery.
Then earlier this week on Monday, Paramounts Guidance comes out
and says, hey, hostile takeover, which again, it's not entirely
(13:36):
as aggressive as as it sounds. Hostile takeover simply means
that you are not going through the board in order
to buy the company, but rather taking usually a tender
offer directly to shareholders, saying your board is not doing
a good job serving you. Here's a better offer. And
we don't really see too many of these like these
(13:57):
are not things that happened that often anymore. You might see,
you know, every couple of years a major one, but
it's not something that is, you know, happening all the time.
And look, this is going to get very, very messy
for a number of reasons, the biggest ones being number one,
(14:23):
neither of these companies, Netflix nor Warner Brothers are I'm sorry,
Netflix nor Paramount are cash rich, meaning in Paramounts case,
they're going to be trying to use fifty plus billion
dollars worth of debt to finance this. Netflix is doing
a cash plus stock deal to not have to try
to do as much through debt markets. So there are
(14:45):
some real limits as to how far you can go
on this. There's also a whole bunch of international intrigue
because Paramount's bid is backed by a you know, tens
of billions of dollars from Middle Eastern sovereign wealth funds,
so you've got that attached to it as well.
Speaker 3 (15:02):
You've got political angle with anti trust.
Speaker 2 (15:04):
Political angle with anti trust. You've got all of Hollywood
basically hating Netflix because of what they think become a
done team industry, which, by the way, it's not really
what Netflix has done. It's just our personal preferences are
being revealed that we don't want to spend the sums
that are required to go to movie theaters for most movies.
But that's neither here nor there.
Speaker 6 (15:26):
Uh.
Speaker 2 (15:26):
And so you've got all these different angles, and this
is before you even get into just some of like
the insane stuff that you can see during these hostile takeovers.
In terms of what companies can try to do in
order to fend them off some of the maneuvering and
posturing that you can see here. My favorite one, of course,
(15:49):
is the pac Man defense. Tucker, can you cueue up
the pac Mans again? I know we had them last week.
So the pac Man defense, Paul, you've played pac Man
of course. Okay, you're chomping around, You're you're you know,
chopping around, and you say, uh oh, thank you for
firing it up. Anyways, you're going along and you eat
(16:15):
a power pill right, one of the big things, and
immediately you get you're on fire. You're not on fire.
This is an NBA jam. Well, but yeah, you can
just take down anything exactly. So the pac Man defense
is you can't eat me, I'm going to eat you.
Speaker 1 (16:28):
Right.
Speaker 2 (16:31):
The best example of this is back in the early
nineteen eighties, a company called Bendix at the time major
industrial manufacturer, tried to take over Martin Marietta, and Bendix
actually bought like over half the shares of Martin Marietta
to try to then basically take the tender offer to
themselves and say yes, we want to do this. Martin
(16:53):
Marietta comes out and says no, instead, what we are
going to do. We're gonna sell off some of the
businesses that we own that aren't, you know, core to
our company, and with that money we've raised, we're going
to buy you instead. And so Bendix is now facing
its own hostile takeover bid, and Martin Marietta actually recruits
(17:16):
United Technologies to join the bid, And at the end
of this whole thing, Bendix has to get bought by
Allied Corporation, who comes into pretty much save them from
being bought by United and Martin Marietta, And eventually they
end up getting bought by Honeywell in this whole mess
that they started. So like, if you actually look, Bendix
is still a brand that's offered under the Honeywell umbrella today.
(17:41):
But so these are some of the things that you
can see as you go through this. And I gotta
tell you, I am entirely here to watch a bunch
of wealthy billionaires spend hundreds of millions of dollars in
legal fees just fighting over this stuff.
Speaker 3 (17:57):
The one that I've been ironically reading about recent only
is Dell's take private back in twenty thirteen, where a
Carl Icon tried to jump in and sort of highjack
the deal and so ironically, yeah, I'm reading the play
Nights but Wind, which is Michael Dell's kind of I
wouldn't say autobiography, but it really focuses on the transaction.
And I forgot because it was early in my career.
How just the tensions were extremely elevated and it drags
(18:23):
on forever and ever, and you have all this public
posturing that goes on in terms of icon in this case,
his use of the media to just mention, you know,
just disparage Michael Dell and everything that he was doing,
and so just they're fascinating when they come about, particularly
these ones of such great size and scale, like the
Warner Brothers. You know, there's been there's smaller examples all
(18:45):
the time. Leverage, buyouts and takeovers are they're not just
an everyday occurrence, but there are lesser ones that do occur.
But when it gets to this big of a stage
and where so much is at stake, I mean, we
hit on four or five things that you can monitor
with this. If you're a Hollywood fan in terms of content,
there's something in for you. If you want antitrust and
political power, there's something in for you. If you're just
(19:05):
fascinated by really rich guys throwing around billions of dollars,
there's something there for you. So it's a great story
for us from a content perspective. It's just fascinating to
see what's going to play out. Then you've got the
little known cable networks kind of on the little side
dish here, what's going to happen with them with CNN
and TNT and others, Like how they'll get spun out
with Paramount they want to just buy them up, but
(19:27):
Warner Brothers doesn't like the valuation. Netflix doesn't care about those,
so they wouldn't be purchasing them. So just a lot
at stake, A very fascinating story to cover.
Speaker 2 (19:36):
So the good news on this is we're going to
be covering this for a while. The bad news is
that we're going to be covering this for a lot.
Speaker 3 (19:43):
There could be.
Speaker 2 (19:44):
Fatigued and like at some point you will get me
coming in and being like, all right, we got to
talk about it again, because like this happens with every story.
But I think that the entertainment value on this one
is going to be rather high. Quick Break Wall Street
Watch ask Todd after this get your estate planning questions ready.
Speaker 1 (20:11):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look at what's moving markets so far
today right here on the Financial Exchange Radio Network.
Speaker 5 (20:31):
Red meeting days Finally, here, markets are all expecting another
twenty five basis point interest rate cut at the conclusion
of the Central Bank's final monetary policy meeting of the year.
All eyes will shift to FED Chairman Jerome Powell at
two thirty this afternoon. Right now, the Dow is up
two tenths of one percent, or ninety five points higher,
(20:52):
SMP five hundred is dipping only three points, Nasdaq is
down over a quarter percent or sixty seven points. Russell
two thousand is up a tenth of a percent. Tenure
Treasure reeled is down one basis points at one basis
point at four point one six eight percent, and crude
oil down about seven cents of one percent, trading just
(21:12):
below fifty eight dollars a barrel. Game stock falling five
percent after the video game retailer's quarterly revenue fell short
of forecasts. As hardware assessories and software sales declined. Meanwhile,
ge Vernova's stock is rallying over eleven percent after the
energy giant said its twenty twenty five revenue was trending
higher toward the higher end of its guidance. The company
(21:35):
also doubled its quarterly dividend to fifty cents per share.
Elsewhere shares and Cracker Barrel falling over one percent after
the restaurant changed. Quarterly revenue missed expectations. However, the company
cut its annual outlook as controversy surrounding its new logo
impacted sales. Online pet food retailer Chewy is mostly flat
(21:57):
at the moment after posting its quarterly results, and after
two today's closing bell, we'll see noteworthy tech earnings from
Oracle and Adobe.
Speaker 1 (22:07):
I'm Tucker Silvan. That is Wall Street Watch. 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
(22:29):
and tax planning, Medicaid planning and probate law. Visit Cushingdolan
dot com. Now here's Todd Lutsky.
Speaker 2 (22:38):
Todd Lotsky does now join us for ask Todd. It's
your chance to ask Todd your estate planning questions live
on air right now. Studio line is open at eight
eight eight two zero five two two six three. So
get calng so you can get in line to ask
Todd your estate planning questions. Usually we can get through
(23:00):
two to three of them, so make sure you call
early so we can get to you again. That number
is eight eight eight to zero five two two six three.
And this again is your chance to ask Todd your
state planning questions right now, live on air. That number
again is eight eight eight to zero five two two
(23:20):
six three. Mister Lutsky, how are you doing?
Speaker 7 (23:23):
I am doing okay, I've been better. You don't sound great,
that's the problem. I mean, like you worse than normal? Yeah,
well that's thank you. Yeah, somehow a backdoor compliment. Yeah yeah,
I'm I'm feeling all right, but just not talking.
Speaker 2 (23:37):
Well that's fine, it's just radio.
Speaker 7 (23:39):
How are you?
Speaker 3 (23:40):
Uh good?
Speaker 2 (23:41):
I tried a frog flavored beer yesterday.
Speaker 7 (23:43):
They coming out with all kind of stuff these days.
Speaker 2 (23:45):
Yeah, you could really taste the hops. Yeah, there's good.
Todd want to talk to you about the evolution of
a state planning in the last you know, five six years,
there's been all kinds of tax law changes and all
kinds of different things. How does someone who's done in
a state plan know when they may need to update it?
Speaker 7 (24:06):
So one of the things you should always look at
is value of your estate, right, that's things that change
that you know, Folks like us in the estate planning world,
we don't know about right. We don't know how well
your portfolio is doing and your real estate has grown,
and so to the extent you feel your assets have
(24:28):
really you know, appreciated in value might be worth you know,
sitting down with your estate planning attorney, assuming you've already
done your plan and seeing how you might want to
adjust it, or if you've never done your plan. I
think looking at value is always one of the first
things to think about, right because depending on how much
(24:51):
your worth will drive the type of a state plan
that you might need. Like, for example, if you're over
let's say fifteen million, which is the new federal estate
tax exemption come January one, twenty twenty six. Well, obviously,
(25:11):
if I'm married and I'm over fifteen million, then I
need to think about estate planning because by being married
and doing an estate plan, doing a trust, you are
going to be able to shelter up to thirty million
through the use of these trusts. In fact, I have
a real life story if I could share it. Absolutely,
(25:34):
had a client come in sits down. I worked about
thirty nine million, not married, been together, I don't know,
thirty years kids from separate relationships. Explain to them that
if you get married, we can save about twenty million
(25:56):
dollars in a state tax. Wow, I think we're going
to head to the courthouse right away. Sure, I mean
it's that important. Right By being married and using trusts,
you're able to you know, shelter up to you know,
thirty million dollars from a state taxes. But again, basic
a state planning would accomplish that. Now the flip side
(26:20):
is what if you're worth four million. Well, here in
Massachusetts the exemption is two million per person. Again, if
you're married and you do basic state planning through the
use of trusts, we talk about them all the time,
the marital share and the remainder share, and those are
the buckets that provide the shelter on the first death
(26:43):
to use up the exemption so that it's not taxed
on the second death. Well, again, if you're married, we
can eliminate four million dollars from Massachusetts of state tax
and eliminate your state tax. If you are married and
you don't do anything, the whole four million likely will
pass to the surviving spouse. And if the surviving spouse
(27:06):
died with say five million, because they lived a while,
they would be worth the tax would be about three
hundred thousand to mass So you kind of are wasting
giving money to the state by not doing some basic
estate planning.
Speaker 2 (27:21):
Talking with Todd Lutsky from Cushingen Dolan, this is your
chance to ask Todd your estate planning questions live on
air right now, still room at the phone line at
eight eight eight to zero five two two six three.
Again that number is eight eight eight to zero five
two two sixty three, and it's your chance to ask
Todd your estate planning questions. We're going to take a
(27:44):
quick break now, but when we come back, we are
going to get to your questions. 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 six three.
Speaker 1 (28:00):
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 (28:25):
Talking with Todd Lotsky from Kushing and Dolan. We do
still have some room on the phone lines for your
questions for Todd at eight eight eight to zero five
two two six three. Again, it's your opportunity to ask
Todd your estate planning questions, and that phone number is
eight eight eight to zero five two two six three.
(28:45):
Let's go to Michael in Boston. Michael, what is your
question for Todd A.
Speaker 1 (28:49):
Lotsky?
Speaker 6 (28:51):
Oh, good morning, thank you. I have an irrevocable trust.
I'm the grantor. The trust is about eleven years old,
and I wondered for the beneficiary taxes. So as the
grantor of the trust, now I'm taking for myself any
(29:13):
dividends and interest or income that of any kind that
accumulate on the trust, which I understand I'm entitled to do.
If I'm not around anymore in the future, my beneficiary
will get a certain amount of money every month. What
(29:35):
is taxable to him he'll have to do I imagine
at ten forty one in addition to his ten forty
for the trust income. But if he takes out let's
say twenty five hundred dollars a month, if that's designated
by my trust, that he is able to take out
(29:56):
up to that amount, what is actually taxing on his ten.
Speaker 7 (30:01):
Forty So let me ask you a couple of follow
up questions. So, first, you're the granteur of the trust.
Who's the trustee?
Speaker 6 (30:13):
I have two, one of which is a beneficiary, So
for right.
Speaker 7 (30:19):
Now, it's not you, and that's important.
Speaker 6 (30:22):
Good.
Speaker 7 (30:23):
So, so, well you're living. You're saying, the trust allows
you to pay income to yourself, right, interest and dividends, right,
so the trustee can give you the income. That's what
the trust says. Well, you're alive, correct.
Speaker 6 (30:38):
I understand that. I've understood that as grantor of the trust,
I do take out interest and dividends when I need them.
Speaker 7 (30:44):
Okay, so you don't. The trustee gives it to you
or it comes out from the trust. But yeah, we're
saying the same thing. So if you're getting the income,
and let's say the trust says just for other people's education.
If the trust says that the income shall be paid
to you, which is not uncommon, we draft our medicaid
(31:04):
irrevocable trust like this all the time, then it likely
is a grant to or trust and you will be
able to pick up the income on your personal return.
No problem. But the trust should still be filing a
ten forty one grant or trust tax return. It will
end up showing zero on it, and it will kick
(31:26):
out a letter to you saying whether you took the
income or not. Physically, it still gets picked up on
your tax return, so no problem, you're paying the tax.
Speaker 6 (31:36):
At your rate.
Speaker 7 (31:38):
Now fast forward to you dying. When you die, the
trust is no longer a grant tor trust because you died,
so therefore it's going to be a non grant tor
trust and a new tax ID number will be obtained,
likely by the trustee. At that point, the trust will
pay the income taxes on the income, depending on how
(32:02):
it's drafted, but likely if it says hold stuff in trust,
for my beneficiaries, and they can get you know, income
and the trustees discretion, or they can get you know,
twenty five hundred a month or whatever the rule is.
Then to the extent the income comes out of the
trust physically to the kids, then the trust would take
(32:26):
an income distribution deduction and not pay tax on it,
and the kids would pick it up on their personal return.
So it's just a function of how much comes out
at that time. So that's a little bit about how
taxes work with these irrevocable trusts. Folks, speaking of taxes,
our guide this month balancing asset protection and avoiding a
(32:50):
state taxes at the same time, explains to you what
we were talking about earlier, portability, the pros and cons.
It explains to you this marital share remainder share and
actually walks you through how they are designed to shelter
the assets from estate taxes. And it does the same
(33:10):
thing for an irrevocable trust in case you don't need
the revocable trust and you're more concerned about protecting assets
from the nursing home as well. And so it also
gives you all the tables as to how to calculate
the estate tax so you can put your own numbers in.
It's really a great idea to help you figure out
which path is right for you in estate planning. Call
(33:31):
and get the guide eight six six eight four eight
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Speaker 2 (33:47):
Todd, I got another one here four you. Let's go
to Tom in Charlestown. Tom, what is your question for Todd?
Speaker 8 (33:54):
Good morning. My question has to do is I've heard
you mentioned that Merritson's deduction that capped. For example, if
you know, for federal tax purposes, you talked about fifteen
million for each person a wife. So if the state
is thirty nine for example, like let's say when the
husband dies, that nine million become taxable because only the
(34:18):
thirty million is entitled to the marital deduction.
Speaker 7 (34:21):
No, no, no, no, So it's a great, great question.
So the fifteen million is the cap right per person
that you can leave to someone other than a spouse,
but doesn't matter this person and I'll make up an example.
The person can be worth one hundred million. When you die,
(34:42):
you can leave one hundred million to your spouse and
there is zero tax to And remember while that sounds great,
it's not really great. Why because the survivor has one
hundred million, and the government's just waiting until the survivor
dies to get way more taxes than they would get
(35:03):
if you did planning. So under the forty million dollar example, right,
you know, I don't want to leave forty million have
them pay forty percent on the amount over fifteen million,
which is what would happen when the survivor dies. So
does that Does that help out?
Speaker 8 (35:20):
It does very much, Thank you very much.
Speaker 7 (35:21):
No, you're welcome. So I think a lot of people
are confused by these exemptions sometimes, Chuck and I think
it's important for them to understand that this exemption, although
we speak about it today, not only works the way
I said that's the cap. It also goes up and down,
so we have laws that change, Like since twenty eleven,
(35:44):
this exemption has been all over the map, and that's
why it's so important for people to do their planning
to grab whatever exemption is in place when you die.
Speaker 2 (35:55):
Has there been any indication of kind of where that
exemption is going in future years? Like what is the
tax bill from this year? What does that specify things
look like over the next decade or so.
Speaker 7 (36:08):
You know, it basically gives us the idea that the
fifteen million is still indexed for inflation, so it's tied
to some tables every year. So I think for the
next three years, anyway, we can kind of envision this,
you know, going up. I don't know exactly how high
it will go up, but I envision it going up
(36:28):
over the next three years. Now, the bill itself says, oh, well,
you know, it's permanent. But folks, you know, we don't
want to be lulled into a sense of security. It's
not permanent. It's not permanent any more than any other
bill that came out in the past that says it's permanent.
It's permanent until you have a new administration. And when
(36:50):
you have a new administration, they're allowed to change things.
As you see from this one, right, you can change
other rules, past new tax laws, past new initiatives, et cetera.
So I expect I just can't see it staying so high.
I think the government needs money, and I think ultimately,
(37:10):
you know, after we get to the next administration, that
we'll probably see some downward pressure on these exemptions go way.
Speaker 2 (37:21):
A couple seconds left. Any movement at the state level
for either new state level of state taxes or change
is happening to them.
Speaker 7 (37:29):
Interestingly enough, we know it went recently from one million
to two million and twenty twenty three, and that was
in Massachusetts, and Massachusetts took a long time, and I've
actually seen some new legislation on that that maybe they'll
change again.
Speaker 2 (37:41):
Mister Wotski, Thanks for joining us.
Speaker 7 (37:42):
Always a pleasure.
Speaker 1 (37:44):
This has been asked on on the Financial Exchange Radio network.
Asked with Todd Luedskey has been presented by Cushing and Dolan,
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(01:06):
and Paul Lane.
Speaker 2 (01:09):
Chuck Paul Tucker with you today on the Financial Exchange.
It's a FED day, which means, quite honestly, basically nothing
happens until two pm and then you usually get like
a flurry of activity for like an hour and a half,
and then a lot of times you end up like
(01:30):
not really closing anywhere different from where he started the
day for the stock market, Yes, yes, does anything else matters?
You know, what are we really doing here? So I
do think just in terms of, you know, what we
see on these days, I do think this is kind
of interesting in that if you look at the last
(01:51):
three years on FED days, the return has averaged just
under a quarter percent for the last three years. Okay,
the average turn on a non fed day is point
zero five percent, So in general, FED days have been
better than non fed days for the last three years.
Speaker 3 (02:11):
That was gonna be would have been my prediction, but
I wouldn't have imagined it to be that small. It
just seems like a small percentage gain to have a
quarter percent.
Speaker 2 (02:18):
But here's the wild thing again. You're not talking about
a huge sample size. There's eighty a year, okay, So
you're talking about over the last three years, there's twenty
four instances. The standard deviation of the returns is one
point six percent, which means, yeah, most of the time
it averages out and nothing you know, important really happens,
like slight positive bias. But there's a wide range of
(02:42):
where those actually go, and it's generally not even depending
on what the Fed says, it's kind of okay, what
if market's been doing leading up to it, how are
people positioned? And that's kind of what you get. So
I think that overall, you know, where we sit here
the expectation for the market, and this is what I like,
Basically everyone is saying, it's kind of where I am to.
(03:05):
The expectation is for you know, what we'll call a
hawkish cut, which is the FED cuts interest rates by
another quarter percent and then strongly signals in the press
conference after where J. Powell puts his purple tie on
and says, here's what I think that the bar for
future cuts is going to be high, and don't expect
(03:29):
that you're necessarily going to get more of them. That's
the expectation for most people.
Speaker 3 (03:32):
Right that is the case. We're sitting at ninety percent probability.
According to CEMA futures that we see that quarterbased cut.
So it's that's pretty much baked in really where there
will be a lot more scrutiny and analysis and I'm
not sure if it really moves the needle tremendously. Check
will be on who within the party the Fed Governor's
(03:54):
is dissenting, what is the drama underlying this FED rate decision,
and what is some of the not explicit commentary because
you won't get that of the members. But what will
the voting stack up look like. I think that will
probably be parsed through by economists and investors alike.
Speaker 2 (04:11):
Now, the other piece on this is remember for you know,
for how this impacts the average individual, it's not you know,
it's not cut and dry in terms of, oh, the
Feds cutting and that means things are going to get
cheaper if I need to borrow money the Federal Reserve.
If you look back, like over the last couple of years,
(04:34):
the Federal Reserve started cutting interest rates in September of
last year. Okay, the first cut that we saw was
in it was on September twenty fifth, I think it
was of last year, somewhere around then, and we went
down by half a percent. So let's go to just
(04:56):
before that. On September eighteenth, the week prior, So September
eight eighteenth of last year, and I'm pulling this data
from Mortgage News Daily, the average thirty year fixed rate
mortgage in the United States was six point one five percent.
So if you wanted to go and borrow money to
buy a house mid September last year, your rate was
(05:20):
going to be, you know, on average, six point one
five percent, and no one actually offers that rate, like
they're all basically in like ace of an percent, So
generally you'd say, like six and an eighth is where
you know, you would have been six point one twenty
five today, despite the Federal Reserve already having done one
hundred and fifty basis points one and a half percentage
(05:41):
points of cuts to the Fed funds rate and expected
to do another quarter percent today. Paul, I'm looking at
this and I'm I'm I'm confunneled. The thirty year fixed
rate mortgage the average, according to Mortgage News Daily, is
at six point three five percent, which, if my advanced
(06:02):
mathematic skills are correct, is zero point two percent higher
than just before the Fed started cutting last year. Can
you double check my math.
Speaker 3 (06:14):
Math is spot on. The math is right, the math
is right on the money, and it echoes a conversation
I was having this weekend. I was a little disappointed
another financial advisor at the table remarking that, hey, the
FED has cut interest rates over this period of time,
but there's been no impact to mortgages. He should know,
of all people, that when you're talking about interest rates,
(06:36):
there's two different ends of the spectrum. There's the short term,
the short end, which we're talking about right now with
the Fed cutting rates, and then there's the long term,
which the thirty year fixed mortgage is based on the
US ten year Treasury. And while it's fair to say
perhaps influenced slightly by what happens on the short end
of the curve with what the Federal Reserve does, it
(06:57):
is not a direct one to one correlation at all
that the FED cuts rates and immediately you see a
change to the thirty year fixed mortgages out there. It
is much more influential on a lot of the more
variable interest rate products out there, like home echuy, lines
of credit, or those people who would credit card for
an adjustable rate mortgage, credit cards, money markets, money markets
(07:18):
big time. That's an easy one to see. That really
is the divergence between the two. So important to note
that whenever you're talking rates.
Speaker 2 (07:27):
Now, the other thing that I want to note on
is you mentioned the ten year treasury. So ten year
treasury yields have been going up over the last couple
of weeks, and I want to talk about why that
is the case, because again, think about it this way.
Let's say that you are a person with a billion dollars,
(07:49):
and let's say that you decide to lend money, and
you come up with a word, and you say, I'm
gonna call myself a bank, and I'm gonna lend money
if I can lend the US off me here like
this is the basic way that all banks think about this.
If I can lend the US government money with no
risk of them repaying me for ten years at four
point one seven percent, then in order to lend Paul
(08:13):
Lane money over an additional twenty years, and he's with
the credit risk that he has very little with you know, club,
with the credit risk that Paul has, they're still gonna say,
you know what, we might need a couple percentage points
above that, because look, weird things can happen over a
(08:33):
thirty year time period, and so yeah, Paul, we're going
to charge you six to quarter percent because they can
go to the federal government and lend them that at
four percent and they're they'd be happy as a clam
doing that. So I want to talk about this move
up in the ten year yield because when we talk
about yields, there are two different components to them. Actually,
that four point one seven percent, it's made up of
(08:55):
two different pieces. The first is basically, hey, what's going
going on with inflation and we can measure that through
treasury break evens. Basically, there are certain treasuries that are
indexed for inflation, and we can compare the yields on
those to the yields on regular tenure treasuries and say
how much of this is an inflation premium, and right
(09:15):
now it's about two point three percent of it. The
other component is what real rates? How much is reflected
in terms of you know, real growth projections, and what
we've seen over the last couple of weeks, the move
has been in real rates. It's what we have been seeing,
which is market saying markets right now are trying to
(09:35):
call a bottom in the labor market and housing market,
and they may be right, they may not be. But
markets are saying, hey, we think growth is going to
inflect higher next year. It may it may not. Markets
are not always right, they're in fact wrong quite often.
But when we talk about why we're seeing the moves
that we are seeing in the treasury market, it's because
(09:59):
markets are saying, yeah, I think there's a chance that
you're going to see some higher growth next year. And
so this gets at, you know, kind of the the
what the Fed's trying to sort through here, which is, yeah,
the labor market doesn't look particularly good right now, but
the Fed also has not been able to impact the
areas of the you know, the interest rate markets that
(10:22):
that they would like to just because again normally lower
mortgage rates are what influences housing and drives more activity.
And so there's a very real question as to look,
the FED might be trying to cut rates to stimulate
the economy. It's pretty unclear that they're actually able to
do that given the dynamic that's out there right now.
(10:43):
It's just kind of it's it's kind of pushing on
a string a little bit. So let's take a quick
break and when we come back. Do we want to
talk the next fed chair after this? Not really, we don't,
and so instead look, quite honestly, like one any time.
We'll have plenty of time to do that. We'll also
have plenty of time for this story. But I am
(11:04):
just so juiced by this one here Warner Brothers again.
You got this fight that's going to be happening between
Paramount and Netflix, and I am entirely here just to
watch a bunch of billionaires battle over media empires for
the next six to twelve months. It's going to be
incredibly entertaining, more entertaining than any of the programming they
(11:26):
put out themselves. And so let's do that after this.
Speaker 1 (11:31):
Business and financial news affecting the markets and your wallet.
We've got it all straight from Wall Street right here
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Speaker 2 (13:12):
All right, let's talk a little bit more about what's
going on with Warner Brothers Discovery. So late last week,
Netflix and Warner Brothers announced that they had agreed to
an acquisition where Netflix was going to buy Warner Brothers Discovery.
Then earlier this week on Monday, Paramounts Guidance comes out
and says, hey, hostile takeover, which again, it's not entirely
(13:36):
as aggressive as as it sounds. Hostile takeover simply means
that you are not going through the board in order
to buy the company, but rather taking usually a tender
offer directly to shareholders, saying your board is not doing
a good job serving you. Here's a better offer. And
we don't really see too many of these like these
(13:57):
are not things that happened that often anymore. You might see,
you know, every couple of years a major one, but
it's not something that is, you know, happening all the time.
And look, this is going to get very, very messy
for a number of reasons, the biggest ones being number one,
(14:23):
neither of these companies, Netflix nor Warner Brothers are I'm sorry,
Netflix nor Paramount are cash rich, meaning in Paramounts case,
they're going to be trying to use fifty plus billion
dollars worth of debt to finance this. Netflix is doing
a cash plus stock deal to not have to try
to do as much through debt markets. So there are
(14:45):
some real limits as to how far you can go
on this. There's also a whole bunch of international intrigue
because Paramount's bid is backed by a you know, tens
of billions of dollars from Middle Eastern sovereign wealth funds,
so you've got that attached to it as well.
Speaker 3 (15:02):
You've got political angle with anti trust.
Speaker 2 (15:04):
Political angle with anti trust. You've got all of Hollywood
basically hating Netflix because of what they think become a
done team industry, which, by the way, it's not really
what Netflix has done. It's just our personal preferences are
being revealed that we don't want to spend the sums
that are required to go to movie theaters for most movies.
But that's neither here nor there.
Speaker 6 (15:26):
Uh.
Speaker 2 (15:26):
And so you've got all these different angles, and this
is before you even get into just some of like
the insane stuff that you can see during these hostile takeovers.
In terms of what companies can try to do in
order to fend them off some of the maneuvering and
posturing that you can see here. My favorite one, of course,
(15:49):
is the pac Man defense. Tucker, can you cueue up
the pac Mans again? I know we had them last week.
So the pac Man defense, Paul, you've played pac Man
of course. Okay, you're chomping around, You're you're you know,
chopping around, and you say, uh oh, thank you for
firing it up. Anyways, you're going along and you eat
(16:15):
a power pill right, one of the big things, and
immediately you get you're on fire. You're not on fire.
This is an NBA jam. Well, but yeah, you can
just take down anything exactly. So the pac Man defense
is you can't eat me, I'm going to eat you.
Speaker 1 (16:28):
Right.
Speaker 2 (16:31):
The best example of this is back in the early
nineteen eighties, a company called Bendix at the time major
industrial manufacturer, tried to take over Martin Marietta, and Bendix
actually bought like over half the shares of Martin Marietta
to try to then basically take the tender offer to
themselves and say yes, we want to do this. Martin
(16:53):
Marietta comes out and says no, instead, what we are
going to do. We're gonna sell off some of the
businesses that we own that aren't, you know, core to
our company, and with that money we've raised, we're going
to buy you instead. And so Bendix is now facing
its own hostile takeover bid, and Martin Marietta actually recruits
(17:16):
United Technologies to join the bid, And at the end
of this whole thing, Bendix has to get bought by
Allied Corporation, who comes into pretty much save them from
being bought by United and Martin Marietta, And eventually they
end up getting bought by Honeywell in this whole mess
that they started. So like, if you actually look, Bendix
is still a brand that's offered under the Honeywell umbrella today.
(17:41):
But so these are some of the things that you
can see as you go through this. And I gotta
tell you, I am entirely here to watch a bunch
of wealthy billionaires spend hundreds of millions of dollars in
legal fees just fighting over this stuff.
Speaker 3 (17:57):
The one that I've been ironically reading about recent only
is Dell's take private back in twenty thirteen, where a
Carl Icon tried to jump in and sort of highjack
the deal and so ironically, yeah, I'm reading the play
Nights but Wind, which is Michael Dell's kind of I
wouldn't say autobiography, but it really focuses on the transaction.
And I forgot because it was early in my career.
How just the tensions were extremely elevated and it drags
(18:23):
on forever and ever, and you have all this public
posturing that goes on in terms of icon in this case,
his use of the media to just mention, you know,
just disparage Michael Dell and everything that he was doing,
and so just they're fascinating when they come about, particularly
these ones of such great size and scale, like the
Warner Brothers. You know, there's been there's smaller examples all
(18:45):
the time. Leverage, buyouts and takeovers are they're not just
an everyday occurrence, but there are lesser ones that do occur.
But when it gets to this big of a stage
and where so much is at stake, I mean, we
hit on four or five things that you can monitor
with this. If you're a Hollywood fan in terms of content,
there's something in for you. If you want antitrust and
political power, there's something in for you. If you're just
(19:05):
fascinated by really rich guys throwing around billions of dollars,
there's something there for you. So it's a great story
for us from a content perspective. It's just fascinating to
see what's going to play out. Then you've got the
little known cable networks kind of on the little side
dish here, what's going to happen with them with CNN
and TNT and others, Like how they'll get spun out
with Paramount they want to just buy them up, but
(19:27):
Warner Brothers doesn't like the valuation. Netflix doesn't care about those,
so they wouldn't be purchasing them. So just a lot
at stake, A very fascinating story to cover.
Speaker 2 (19:36):
So the good news on this is we're going to
be covering this for a while. The bad news is
that we're going to be covering this for a lot.
Speaker 3 (19:43):
There could be.
Speaker 2 (19:44):
Fatigued and like at some point you will get me
coming in and being like, all right, we got to
talk about it again, because like this happens with every story.
But I think that the entertainment value on this one
is going to be rather high. Quick Break Wall Street
Watch ask Todd after this get your estate planning questions ready.
Speaker 1 (20:11):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look at what's moving markets so far
today right here on the Financial Exchange Radio Network.
Speaker 5 (20:31):
Red meeting days Finally, here, markets are all expecting another
twenty five basis point interest rate cut at the conclusion
of the Central Bank's final monetary policy meeting of the year.
All eyes will shift to FED Chairman Jerome Powell at
two thirty this afternoon. Right now, the Dow is up
two tenths of one percent, or ninety five points higher,
(20:52):
SMP five hundred is dipping only three points, Nasdaq is
down over a quarter percent or sixty seven points. Russell
two thousand is up a tenth of a percent. Tenure
Treasure reeled is down one basis points at one basis
point at four point one six eight percent, and crude
oil down about seven cents of one percent, trading just
(21:12):
below fifty eight dollars a barrel. Game stock falling five
percent after the video game retailer's quarterly revenue fell short
of forecasts. As hardware assessories and software sales declined. Meanwhile,
ge Vernova's stock is rallying over eleven percent after the
energy giant said its twenty twenty five revenue was trending
higher toward the higher end of its guidance. The company
(21:35):
also doubled its quarterly dividend to fifty cents per share.
Elsewhere shares and Cracker Barrel falling over one percent after
the restaurant changed. Quarterly revenue missed expectations. However, the company
cut its annual outlook as controversy surrounding its new logo
impacted sales. Online pet food retailer Chewy is mostly flat
(21:57):
at the moment after posting its quarterly results, and after
two today's closing bell, we'll see noteworthy tech earnings from
Oracle and Adobe.
Speaker 1 (22:07):
I'm Tucker Silvan. That is Wall Street Watch. 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
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more than thirty five years, helping families with a state
(22:29):
and tax planning, Medicaid planning and probate law. Visit Cushingdolan
dot com. Now here's Todd Lutsky.
Speaker 2 (22:38):
Todd Lotsky does now join us for ask Todd. It's
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eight eight two zero five two two six three. So
get calng so you can get in line to ask
Todd your estate planning questions. Usually we can get through
(23:00):
two to three of them, so make sure you call
early so we can get to you again. That number
is eight eight eight to zero five two two six three.
And this again is your chance to ask Todd your
state planning questions right now, live on air. That number
again is eight eight eight to zero five two two
(23:20):
six three. Mister Lutsky, how are you doing?
Speaker 7 (23:23):
I am doing okay, I've been better. You don't sound great,
that's the problem. I mean, like you worse than normal? Yeah,
well that's thank you. Yeah, somehow a backdoor compliment. Yeah yeah,
I'm I'm feeling all right, but just not talking.
Speaker 2 (23:37):
Well that's fine, it's just radio.
Speaker 7 (23:39):
How are you?
Speaker 3 (23:40):
Uh good?
Speaker 2 (23:41):
I tried a frog flavored beer yesterday.
Speaker 7 (23:43):
They coming out with all kind of stuff these days.
Speaker 2 (23:45):
Yeah, you could really taste the hops. Yeah, there's good.
Todd want to talk to you about the evolution of
a state planning in the last you know, five six years,
there's been all kinds of tax law changes and all
kinds of different things. How does someone who's done in
a state plan know when they may need to update it?
Speaker 7 (24:06):
So one of the things you should always look at
is value of your estate, right, that's things that change
that you know, Folks like us in the estate planning world,
we don't know about right. We don't know how well
your portfolio is doing and your real estate has grown,
and so to the extent you feel your assets have
(24:28):
really you know, appreciated in value might be worth you know,
sitting down with your estate planning attorney, assuming you've already
done your plan and seeing how you might want to
adjust it, or if you've never done your plan. I
think looking at value is always one of the first
things to think about, right because depending on how much
(24:51):
your worth will drive the type of a state plan
that you might need. Like, for example, if you're over
let's say fifteen million, which is the new federal estate
tax exemption come January one, twenty twenty six. Well, obviously,
(25:11):
if I'm married and I'm over fifteen million, then I
need to think about estate planning because by being married
and doing an estate plan, doing a trust, you are
going to be able to shelter up to thirty million
through the use of these trusts. In fact, I have
a real life story if I could share it. Absolutely,
(25:34):
had a client come in sits down. I worked about
thirty nine million, not married, been together, I don't know,
thirty years kids from separate relationships. Explain to them that
if you get married, we can save about twenty million
(25:56):
dollars in a state tax. Wow, I think we're going
to head to the courthouse right away. Sure, I mean
it's that important. Right By being married and using trusts,
you're able to you know, shelter up to you know,
thirty million dollars from a state taxes. But again, basic
a state planning would accomplish that. Now the flip side
(26:20):
is what if you're worth four million. Well, here in
Massachusetts the exemption is two million per person. Again, if
you're married and you do basic state planning through the
use of trusts, we talk about them all the time,
the marital share and the remainder share, and those are
the buckets that provide the shelter on the first death
(26:43):
to use up the exemption so that it's not taxed
on the second death. Well, again, if you're married, we
can eliminate four million dollars from Massachusetts of state tax
and eliminate your state tax. If you are married and
you don't do anything, the whole four million likely will
pass to the surviving spouse. And if the surviving spouse
(27:06):
died with say five million, because they lived a while,
they would be worth the tax would be about three
hundred thousand to mass So you kind of are wasting
giving money to the state by not doing some basic
estate planning.
Speaker 2 (27:21):
Talking with Todd Lutsky from Cushingen Dolan, this is your
chance to ask Todd your estate planning questions live on
air right now, still room at the phone line at
eight eight eight to zero five two two six three.
Again that number is eight eight eight to zero five
two two sixty three, and it's your chance to ask
Todd your estate planning questions. We're going to take a
(27:44):
quick break now, but when we come back, we are
going to get to your questions. 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 six three.
Speaker 1 (28:00):
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 (28:25):
Talking with Todd Lotsky from Kushing and Dolan. We do
still have some room on the phone lines for your
questions for Todd at eight eight eight to zero five
two two six three. Again, it's your opportunity to ask
Todd your estate planning questions, and that phone number is
eight eight eight to zero five two two six three.
(28:45):
Let's go to Michael in Boston. Michael, what is your
question for Todd A.
Speaker 1 (28:49):
Lotsky?
Speaker 6 (28:51):
Oh, good morning, thank you. I have an irrevocable trust.
I'm the grantor. The trust is about eleven years old,
and I wondered for the beneficiary taxes. So as the
grantor of the trust, now I'm taking for myself any
(29:13):
dividends and interest or income that of any kind that
accumulate on the trust, which I understand I'm entitled to do.
If I'm not around anymore in the future, my beneficiary
will get a certain amount of money every month. What
(29:35):
is taxable to him he'll have to do I imagine
at ten forty one in addition to his ten forty
for the trust income. But if he takes out let's
say twenty five hundred dollars a month, if that's designated
by my trust, that he is able to take out
(29:56):
up to that amount, what is actually taxing on his ten.
Speaker 7 (30:01):
Forty So let me ask you a couple of follow
up questions. So, first, you're the granteur of the trust.
Who's the trustee?
Speaker 6 (30:13):
I have two, one of which is a beneficiary, So
for right.
Speaker 7 (30:19):
Now, it's not you, and that's important.
Speaker 6 (30:22):
Good.
Speaker 7 (30:23):
So, so, well you're living. You're saying, the trust allows
you to pay income to yourself, right, interest and dividends, right,
so the trustee can give you the income. That's what
the trust says. Well, you're alive, correct.
Speaker 6 (30:38):
I understand that. I've understood that as grantor of the trust,
I do take out interest and dividends when I need them.
Speaker 7 (30:44):
Okay, so you don't. The trustee gives it to you
or it comes out from the trust. But yeah, we're
saying the same thing. So if you're getting the income,
and let's say the trust says just for other people's education.
If the trust says that the income shall be paid
to you, which is not uncommon, we draft our medicaid
(31:04):
irrevocable trust like this all the time, then it likely
is a grant to or trust and you will be
able to pick up the income on your personal return.
No problem. But the trust should still be filing a
ten forty one grant or trust tax return. It will
end up showing zero on it, and it will kick
(31:26):
out a letter to you saying whether you took the
income or not. Physically, it still gets picked up on
your tax return, so no problem, you're paying the tax.
Speaker 6 (31:36):
At your rate.
Speaker 7 (31:38):
Now fast forward to you dying. When you die, the
trust is no longer a grant tor trust because you died,
so therefore it's going to be a non grant tor
trust and a new tax ID number will be obtained,
likely by the trustee. At that point, the trust will
pay the income taxes on the income, depending on how
(32:02):
it's drafted, but likely if it says hold stuff in trust,
for my beneficiaries, and they can get you know, income
and the trustees discretion, or they can get you know,
twenty five hundred a month or whatever the rule is.
Then to the extent the income comes out of the
trust physically to the kids, then the trust would take
(32:26):
an income distribution deduction and not pay tax on it,
and the kids would pick it up on their personal return.
So it's just a function of how much comes out
at that time. So that's a little bit about how
taxes work with these irrevocable trusts. Folks, speaking of taxes,
our guide this month balancing asset protection and avoiding a
(32:50):
state taxes at the same time, explains to you what
we were talking about earlier, portability, the pros and cons.
It explains to you this marital share remainder share and
actually walks you through how they are designed to shelter
the assets from estate taxes. And it does the same
(33:10):
thing for an irrevocable trust in case you don't need
the revocable trust and you're more concerned about protecting assets
from the nursing home as well. And so it also
gives you all the tables as to how to calculate
the estate tax so you can put your own numbers in.
It's really a great idea to help you figure out
which path is right for you in estate planning. Call
(33:31):
and get the guide eight six six eight four eight
five six nine nine or Legal Exchange Show dot com
again eight sixty six eight four eight five six nine
nine or Legal Exchange Show dot com.
Speaker 2 (33:47):
Todd, I got another one here four you. Let's go
to Tom in Charlestown. Tom, what is your question for Todd?
Speaker 8 (33:54):
Good morning. My question has to do is I've heard
you mentioned that Merritson's deduction that capped. For example, if
you know, for federal tax purposes, you talked about fifteen
million for each person a wife. So if the state
is thirty nine for example, like let's say when the
husband dies, that nine million become taxable because only the
(34:18):
thirty million is entitled to the marital deduction.
Speaker 7 (34:21):
No, no, no, no, So it's a great, great question.
So the fifteen million is the cap right per person
that you can leave to someone other than a spouse,
but doesn't matter this person and I'll make up an example.
The person can be worth one hundred million. When you die,
(34:42):
you can leave one hundred million to your spouse and
there is zero tax to And remember while that sounds great,
it's not really great. Why because the survivor has one
hundred million, and the government's just waiting until the survivor
dies to get way more taxes than they would get
(35:03):
if you did planning. So under the forty million dollar example, right,
you know, I don't want to leave forty million have
them pay forty percent on the amount over fifteen million,
which is what would happen when the survivor dies. So
does that Does that help out?
Speaker 8 (35:20):
It does very much, Thank you very much.
Speaker 7 (35:21):
No, you're welcome. So I think a lot of people
are confused by these exemptions sometimes, Chuck and I think
it's important for them to understand that this exemption, although
we speak about it today, not only works the way
I said that's the cap. It also goes up and down,
so we have laws that change, Like since twenty eleven,
(35:44):
this exemption has been all over the map, and that's
why it's so important for people to do their planning
to grab whatever exemption is in place when you die.
Speaker 2 (35:55):
Has there been any indication of kind of where that
exemption is going in future years? Like what is the
tax bill from this year? What does that specify things
look like over the next decade or so.
Speaker 7 (36:08):
You know, it basically gives us the idea that the
fifteen million is still indexed for inflation, so it's tied
to some tables every year. So I think for the
next three years, anyway, we can kind of envision this,
you know, going up. I don't know exactly how high
it will go up, but I envision it going up
(36:28):
over the next three years. Now, the bill itself says, oh, well,
you know, it's permanent. But folks, you know, we don't
want to be lulled into a sense of security. It's
not permanent. It's not permanent any more than any other
bill that came out in the past that says it's permanent.
It's permanent until you have a new administration. And when
(36:50):
you have a new administration, they're allowed to change things.
As you see from this one, right, you can change
other rules, past new tax laws, past new initiatives, et cetera.
So I expect I just can't see it staying so high.
I think the government needs money, and I think ultimately,
(37:10):
you know, after we get to the next administration, that
we'll probably see some downward pressure on these exemptions go way.
Speaker 2 (37:21):
A couple seconds left. Any movement at the state level
for either new state level of state taxes or change
is happening to them.
Speaker 7 (37:29):
Interestingly enough, we know it went recently from one million
to two million and twenty twenty three, and that was
in Massachusetts, and Massachusetts took a long time, and I've
actually seen some new legislation on that that maybe they'll
change again.
Speaker 2 (37:41):
Mister Wotski, Thanks for joining us.
Speaker 7 (37:42):
Always a pleasure.
Speaker 1 (37:44):
This has been asked on on the Financial Exchange Radio network.
Asked with Todd Luedskey 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 one or visit Cushingdolan dot com. The views expressed
in this segment are solely those of Cushing and Dolan.
(38:05):
Armstrong Advisory does not provide any legal or tax advice.
Please consult with your illegal or tax advisor on such matters.
Cushing and Armstrong do not endorse each other and are
not affiliated
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