August 14, 2024 • 37 mins
Chuck Zodda and Paul Lane react to the release of the CPI report that stayed in-line with expectations. How will this weeks economic data releases influence the Fed? UBS CEO says its too early to talk about a US recession. Todd Lutsky joins the show to share his expertise on estate planning and takes calls from listeners about their personal planning needs.
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Episode Transcript
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Speaker 1 (00:00):
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(01:07):
Financial Exchange with Chuck Zutta and Paul Lane.
Speaker 2 (01:12):
Chuck, Paul, and Ben with you here on a consumer
Price Index day. That's right, it is the CPI right now.
And in terms of what we saw this morning, Paul
at eight thirty am, we did get CPI data and
it was pretty good. It came in at point two
percent for the month of July on the headline number.
(01:36):
The core number excluding food and fuel came in at
point two percent as well. And so what this means
is that if you look at the annualized numbers, which
is what everyone you know pays attention to, because it's
just kind of hard to feel the difference between point
two and point three percent for the month, man, what
(01:57):
we ended up seeing is that annually, the headline CPI
decreased down to two point nine percent from three percent,
and the core CPI number decreased from three point three
percent down to three point two percent, all of this
being consistent with what you'd like to see on the
(02:18):
inflation side if you are getting a soft landing.
Speaker 3 (02:22):
Yeah, it's interesting, Chuck.
Speaker 4 (02:23):
Heading into this inflation report, Mike and I were talking
about this on yesterday's show. It was probably the least
concerned I've been about an inflation report. It seems as
if it's significant, very mellow man, very chill, very chill.
It's just a nice summer August report that it's significance.
Compared to others that we covered and sort of were
waiting on baby breath to be released, this one didn't
(02:44):
have that feeling at least to me heading into this.
It seems like, and if you read all of the
different Wall Street journals and Bluebergs out there, et cetera,
the focus is much more shifted now to the labor market. Certainly,
it is reassuring to get these numbers coming in, because
if we were to see a significant uptick to inflation
that would surprise on the upside, then that would be
(03:04):
difficult from a Federal Reserve perspective. Ahead of their September
meeting to balance the idea that hey, perhaps we have
a weaking labor market, but also inflation appears to be
roaring its head. We did not get that data today,
so that is good in itself, and it seems as
if in general, looking at all the components of CPI,
many of them coming down to reasonable levels.
Speaker 3 (03:25):
So overall, a good report.
Speaker 4 (03:27):
I don't think there was as much concern heading into this,
but certainly you're glad it didn't surprise the upside.
Speaker 2 (03:32):
So that's what we're seeing in terms of the big
headline numbers, other things that we pay attention to when
we look under the surface, Hey, what's driving this drop
in inflation? Is it just that you know, shelter costs
came down and that's you know, such a big weight
and that's what's happening here.
Speaker 3 (03:50):
No, it's not.
Speaker 2 (03:51):
In fact, the shelter inflation number for the month went
back up to point four percent for the month compared
to the point two percent that we saw print in June.
So the shelter inflation number actually got worse again according
to how they calculate it, which is, you know, this
hugely smoothed and lagged thing that does not actually represent
how much you're spending on shelter this month. But what
(04:12):
we saw, and this is data from Michael McDonough from Bloomberg.
He's the chief economist UH in the Financial Products division
at Bloomberg and UH he pulled a data set this
morning that showed, look, only thirty eight percent of CPI
components are rising this month. At a pace of four
(04:34):
percent or more, and that is a you know, that's
a meaningful improvement from where we were. Just to give
some context on this, back at the end of Q one,
when we were concerned about that potential for a rebound
in inflation, over sixty five percent of CPI components were
registering more than point more than four percent annualized increases.
(04:57):
And really for the last two years two and a half,
you know, dating back to late twenty twenty one, you
were between fifty five and seventy five percent of components
on a monthly basis registering greater than four percent annualized bumps.
You compare that to the pre pandemic period and generally
anywhere from about twenty to thirty percent of items had
(05:19):
more than four percent bumps. So even during times when
inflation was tame, there's always gonna be some you still
had something that was you know, going up in price
because there's a bird flu and so eggs or through
the roof, or there's a swine flu and so bacons
through the roof, or there's you know, OPEC production cuts
and oil went up. These things are always you know,
kind of moving here and there. But there was nothing
(05:39):
no conclusive trend in the overall inflation so or no
conclusive uptick at least, So I think it's encouraging that
it's not just one or two items that are, you know,
printing lower, that are dragging the whole thing down, but
rather you're seeing numbers as a whole improving and lower
in relation numbers printing on a monthly basis. Remember, lower
(06:03):
inflation numbers do not mean deflation, which is prices coming down.
It just means that the rate of price increases is
stabilizing at close to what it was pre pandemic.
Speaker 4 (06:13):
I like the way of looking at that as the
collection of all the different items, because you can always
pick out one item or another that could be concerning
or favorable, depending on which one you want to focus on.
If you want it to be negative, you could highlight
the concern about shelter increasing. But then if you want
to tell the full picture to the point ofment earlier
and why you brought up all the components, there are
(06:35):
many other areas where we're not seeing pressure, and that's
what inflation is all about. It's the basket, the price
of all goods in the basket. It's not just looking
at one particular component and pointing it out as a
concern or something that is going to help in the
future exactly.
Speaker 2 (06:50):
I mean look, because you could do that either way. Yeah,
you could look at motor vehicle insurance which is still
rising quickly at zero point nine percent for the month,
and be like, oh like very very very bad. Or
you could take a look at outpatient hospital services, which
prices were down one point nine percent for the month. Again,
how do they calculate any of this? I have no
(07:11):
idea public transportation airline fares down seven point one percent.
Oh gee, the prices are really improving. Well yeah, that's
for airline fares. But if you want to take intracity
mass transit, well those prices are up half a percent
for the month. So this is why you don't cherry
pick one or two items. You will get the whole
data set. And I do find that when you look
(07:33):
at you know kind of how things are distributed amongst it.
That's what ultimately is in the driver's seat here as well.
Other things that I want to talk about as it
relates to this report. I want to talk a little
bit about how this and how some of the other
data is influencing what the FED may or may not do,
because Paul, we're only nine days out from nine days
(08:00):
you know away now from what had been, you know,
just this catastrophic crash in markets. Just this the worst
three percent down day in the history of the S
and P five hundred. Where again, you've got really smart
people that were just running around every financial media station
out there saying, the Fed's got to do emergency seventy
(08:21):
five basis point rate cuts. And and here's where we
are right now, because let's let's look at the data
that we have.
Speaker 3 (08:28):
To be clear, Chuck was being sarcastic about that market drop.
Speaker 2 (08:31):
Just if anyone our listeners know, our listeners know, they're
in on the gig, they're in on the joke today
right now, inflation it's better than it was before. Still
running high twos, low threes. Okay, that's that's good, but
it's not you know, it's still not quite where you
want it to be. Core inflation same ballpark high two's,
(08:55):
low threes. Like you, you're right around there the S
and P five hundred right now, it's under five percent off.
It's all time high. It's like four and a half
percent from its all time high you've got. And again
we don't know exactly what GDP is going to be
for this quarter. The next estimate of GDP now comes
out tomorrow, but through August eighth, the estimate very early
(09:17):
in the quarter it was two point nine percent. Ladies
and gentlemen of the jury, you do not get seventy
five basis point emergency rate cuts with inflation running it
two and a half to three percent and GDP running
it two and a half percent and the S and
P five hundred less than five percent off its all
(09:38):
time highs it's not gonna do it. That doesn't happen.
And this this gets at, you know, the crux of
what a soft landing may be. And I'm not saying
that we're getting the soft landing. I'm saying that when
you are going through the soft landing, it's not something
where you just ease down and say, ah, that was
(09:58):
a great landing. In economic terms, you kind of alternate between, hey,
are we heading into recession or not? And it's that
uncertainty because you have to actually land the economy if
and by landing, really what we're talking about is inflation
if you don't land it, which happened last year, then okay,
(10:20):
we do a go around, and now we've got to
go through it again. You have to have these questions
in order to get the soft landing. You have to
have the questions of are we going into recession or not,
and then inflation has to stay down while unemployment doesn't spike.
We're now finally getting to the point where it's possible,
but the next few months are going to determine whether
it actually happens or not.
Speaker 4 (10:41):
And it really comes down to the labor market at
this point unless something, you know, there's some sort of
shock in the system that sends back up inflation in
the other direction. It seems as if there's been good
progress there and there's no real indications, you know, right
in our face that inflation is going to pick back
up again. So that's why i'd mentioned the point of,
you know, scrutinizing the labor market.
Speaker 2 (11:01):
It's all gonna be on the growth side. Because there's
an economist from the University of Oregon, Tim Dwee, and
he made this point on Twitter yesterday, which was, look,
the calculus for the last year has been effectively, we're
gonna let unemployment rise by point nine percent because it's
worth it to have that happen in order to get
(11:22):
inflation down into the twos? Are we going to let
unemployment rise another point nine percent because we want to
get inflation an additional like half percent down from where
it is. His point is probably not, Like you don't
the difference between an economy that is, you know, two
(11:42):
and a half percent inflation and five and a half
percent unemployment is really different from Yeah, inflation's at three
and unemployments at four and a half. You'd rather have
the ladder all else being equal, because when unemployment goes
up to five and a half, it rarely just stops there.
And it also just doesn't like you don't need to
(12:03):
lose that many more jobs for that small marginal benefit.
The last year was, hey, we took inflation from five
percent down to three, and it cost us zero point
nine percent in unemployment to do. So that's the trade
off the Fed was willing to make. He's kind of
saying they won't make that trade off for the next
half percent in unemployment because it's not worth losing another
(12:24):
one to two percent I'm sorry, half percent in inflation.
It's not losing another one to two percent and unemployment.
Speaker 3 (12:31):
To take a quick break here.
Speaker 2 (12:32):
When we come back, let's see should we talk recession
and whether or not it's coming? Does that sound fun?
Speaker 3 (12:41):
Let's do it.
Speaker 2 (12:41):
Let's talk recession when we return.
Speaker 1 (12:44):
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Speaker 5 (13:08):
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Speaker 2 (13:46):
Let's talk a little bit about the possibility of a
US recession, which is all that anyone wants to talk
about right now. Is like I literally I wake up
and my mom text me and goes, are we heading
into a recession? I go, well, she didn't actually text
me that, so I shocking she's got She's like no.
(14:08):
The text for my mom are like, hey, can I
have another picture of like my granddaughters? And I'm like, okay, fine,
Like it's you know, I'm not gonna call my mom
out for something she didn't do. But the point is
everyone wants to talk about are we in recession right now?
It's just it's the only thing that people are are
focused on. And the CEO of UBS, who quite honestly
(14:28):
didn't even know who it was until I read this piece.
It's how little I think about UBS at this point,
just because again they're they're not really consequential in terms
of much of anything in US banking these days. But
their CEO said yesterday that, hey, it's it's too early
to talk about a potential US recession. It certainly is possible,
(14:50):
but you know, we're not necessarily there yet, And I
give him credit for not going the Jamie Diamond route
and saying, yes, we think we're heading into recession every
fall for the last three years.
Speaker 3 (15:01):
That's true. He has been very vocal about that.
Speaker 2 (15:04):
Is there anything else to take from this? Does the
CEO of UBS know anything that CEOs of other banks
don't know?
Speaker 4 (15:09):
Nostely, absolutely not. But really the bigger question that we
should cover, because everyone does want to talk about, is
you know, what are the things that economists look at
in terms of trying to get a gauge of whether
or not we are heading into recession. Some of the
components that the National Bureau of Economic Research looks at
when they're trying to determine, hey, where do we stand
(15:30):
from an economic standpoint include the labor market, which we
talk about quite frequently, manufacturing and dustal production consumption GDP.
Those are some of the factors that we look at
when you're gauging a recession. I can highlight some that
may indicate we are in a difficult position and maybe
slowing down, like, for example, the ISM Manufacturing Index, which
(15:52):
is at a point at forty six point eight, which
is gauged by fifty is sort of the round number.
If you're over that, you're an expansion phase. As you're
under that, you're in a contraction, just specific to manufacturing.
So I could point to that and make the argument here, Chuck,
that we're in this bad place. I can certainly talk
about unemployment increasing. We talked about that in the first
second of the show. However, there are many other indicators
(16:15):
out there. Looking at GDP now we're tracking it close
to three percent economic growth for Q three, there are
other factors that would dispute that notion. So I think
that's the context that we need to provide when we're
looking at gauging out the likelihood of recession going forward.
Speaker 2 (16:31):
Yeah, and I think that ultimately, I think sometimes we
forget what recession really means because it's been it's been
almost twenty years since we've had a real one here
in the United States. I say real, not that you
know twenty twenty wasn't real, but it wasn't caused by
the business cycle, and it was relatively not relatively, it
(16:54):
was incredibly short, it was over. I think the NBER
declared recession for a month. I think it ended up
being March of that year. And then the economy started
expanding again. And so the last real recession that we
had was two thousand and eight through I think it
finally ended in early twenty ten, and it was the
single largest recession in the last one hundred years. It
(17:17):
was a generational event, and I think sometimes we forget
how much recessions suck because the way that people talk
about them is just, oh, it's, you know, a slow down,
and no, there are growth slowdowns that don't lead to recession,
and those are kind of, yeah, you're fine, we muddle
through when we come out the other side, recessions do
(17:40):
leave lasting scars on the economy in terms of lost output,
lost wages, lost jobs, things that you know, affect people
for years afterwards. It's not something that you just go
through and say, well, we got through that and now
everything's fine. Even a mild recession still has really meaningful
job loss. I mean, in recessions, unemployment typically rises anywhere
(18:01):
from two to four percent. At this level of you know,
at this size of the workforce, you're talking between like
three and seven million people losing jobs on a net basis.
Speaker 6 (18:12):
There.
Speaker 4 (18:12):
I agree with that, though I do feel as if
the two thousand and eight comparisons, or so many people
have ingrained in their mind two thousand and eight as
a typical recession just because that's the last one they're
familiar with. Sure, And I would compare it to hurricanes
in a sense where there can be different categories, where
a hurricane five like Katrina can leave long lasting impacts
that linger on for years and don't get resolved, or
(18:34):
you can have one that's a one or two and
it's sort of, hey, we got through it. And I'm
not saying that recessions aren't something to be concerned about.
The problem When you bring up for sessions, everyone thinks
category five two thousand and eight.
Speaker 2 (18:45):
Basically, it's kind of it's interesting that you bring up
the weather comparison because you see a similar phenomenon amongst
people who follow weather, where if a storm comes and
it's not as big as people were expecting that, it's
like they're disappointed. It's like, oh, that hurricane wasn't as big,
and it's like, guys, there's actual people that live there
that are having their homes destroyed. Like, don't root for
(19:06):
the big one just because you want to see a
big number on a screen.
Speaker 3 (19:09):
Not to mention the economic impact of cleaning that stuff up. Yeah.
Speaker 6 (19:12):
Right.
Speaker 2 (19:13):
Likewise, with the economy, it seems like there are people
who just, you know, they root for a disaster. And
maybe it's just because they've been reading about disaster for
so long. I don't know, but guys, you don't want
economic disasters. It's not good for anyone when that happens.
Let's take a quick break here. When we come back,
we're going to be joined by Todd Lutsky for Ask Todd.
(19:35):
We've also got Wall Street Watch coming up as well.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter. Act
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 (20:02):
Markets are currently in slightly mixed territory, mostly down, except
for the Dow Jones, which is up twenty two points.
The SMP five hundred is down thirteen points or out now.
The Dow Jones just went negative. Nasdaq is down one
hundred and forty four points as markets continue to digest
this morning's CPI report. Right now, Kelenova shares are up
(20:25):
eight percent after the food maker agreed to be acquired
by snackmaker Mars for eighty three dollars and fifty cents
per share in cash. The deal values Kelenova at about
thirty six billion dollars and is expected to close in
the first half of twenty twenty five. Alphabet shares are
down just over three percent after Bloomberg News reported US
regulators are weighing a breakup of the tech giant. Per
(20:48):
the report, which cites people with knowledge of the discussions,
the units most likely to buy to be divested are
Google's Chrome browser and Android operating system if the Justice
Department push for a breakup. US shares of the British
chip designer ARM Holdings are up four point three percent
after Intel sold its one point one eight million share stake.
(21:10):
Shares of Intel, whose move came amid restructuring and cost
cutting efforts, are down two point seventy five percent, And finally,
the healthcare company Cardinal Health is up five point five
percent after reporting fiscal fourth quarter results that beat expectations.
Cardinal earned a dollar eighty four per share excluding items,
on fifty nine dollars fifty nine point eight seven billion
(21:33):
in revenue, while analysts pulled anticipated one dollar in seventy
three cents per share and fifty eight point sixty four billion.
The Ohio based company also raised its full year guidance
for earnings per share.
Speaker 1 (21:49):
This is Asked Odd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Tod Letskey is here to answer your
questions and help you plan for a later 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.
(22:10):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:16):
And we are now joined by Todd Lutsky from the
law firm of Cushing and Dolan. The segment it's called
Ask Todd because you get to ask Todd your estate
planning questions. We've got the phone lines open at eight
eight eight to zero five two two sixty three. That
is the number to call to ask Todd your estate
planning questions. Last week we couldn't get to everyone. So
(22:38):
if you were one of the people last week who
was trying to call and you couldn't get your question answered.
Eight eight eight two zero five two two sixty three
is the number if you want to get in line
early to make sure that you're able to ask Todd
your question today. That number again is eight eight eight
to zero five two two six three. We do have
(22:58):
space on the phone lines, and so again make sure
you call eight eight eight two zero five two two
six three to ask Todd Lutsky your questions. Mister Lutsky,
how are you doing today? I'm doing great? And should
I ask how you're doing?
Speaker 3 (23:14):
I'm okay?
Speaker 7 (23:14):
Yeah, what happened?
Speaker 2 (23:15):
I got into a fight with a baby frog yesterday?
Speaker 7 (23:19):
Yeah? How'd that work out?
Speaker 5 (23:20):
Well?
Speaker 2 (23:20):
It was a tad polarizing, Yeah, it sure would be,
you know, so it didn't go great.
Speaker 3 (23:25):
But Todd, I want to talk a little bit about medicaid.
Speaker 2 (23:28):
Irrevocable trust today. And let's say that someone has an
irrevocable trust that is built for the purpose of qualifying
assets for Medicaid. Okay, what can and can't they do
with the assets that are placed in said irrevocable trust?
Speaker 8 (23:45):
Should we just try to pick on both or like
in you want to do like real estate or money?
Speaker 7 (23:51):
Should we start with.
Speaker 6 (23:55):
Money.
Speaker 7 (23:55):
Money's good, that's what you work on. So we'll do money.
Speaker 2 (23:58):
Let's start with money.
Speaker 8 (23:59):
So let's say you put money in the trust. Right
and again, folks, and it's very important. The way Chuck
described this is that it's the kind of irrevocable trust
that we do to protect from the nursing homes. Because
there are many kinds of irrevocable trusts. I want to
put that out there first, that so many people hear
the word irrevocable and think rigid and flexible. I can't
(24:20):
change it, I can't do anything. There are those kinds.
This isn't one of them. And that's why Chuck was
trying to make it clear that this is for medicaid
protection purposes. Now that said, what can you put in Well,
you can put in real estate. You can't put in
money rental properties, not iras. So let's say we put
(24:42):
your investment portfolio and let's call it half a million dollars. Okay,
we got half a million dollars in the trust. If
it wasn't in the trust, you would be managing and
investing that money. I would imagine that's what people do.
If it's in the trust, you would be managing and
investing that money just like you do today.
Speaker 7 (25:01):
Okay.
Speaker 8 (25:02):
Well, once that money is managed and invested, and again
when I say that, I mean you can call your broker,
you can talk to your financial advisor.
Speaker 7 (25:09):
Even if you're not the trustee, You're allowed to do that. Okay,
that's called limited trading authority, So no problem. Okay.
Speaker 8 (25:15):
Well, then this money, after you do all of this,
is generating interest and dividends. So well, that's income. I
want my income. Well, the trust gives you the income,
just like it would give you the income today. So
if you didn't do your planning and you had the
money sitting in your brokerage account, you'd get the income. Okay,
Well that that makes sense. So far, so good. Well,
(25:38):
at the end of the year you get a nasty
ten ninety nine that says this is how much income
you earned, and you get to put that on your
tax return today. Well, if you have it in one
of these medicaid trusts, which we design specifically as grant
or trusts, which means for income tax purposes, you're considered
the owner, well then you get to put that money
(26:02):
on your income tax return. And yes, you get to
put it on your income tax return, your own personal
income tax return at your own personal rates, just like
you would if you didn't have the trust, even if
you don't take the money out. I mean, think about
it so many times.
Speaker 7 (26:17):
Today.
Speaker 8 (26:18):
You've got your portfolio, but you don't take any money out,
it's just growing. You still got to pay taxes on it.
Same deal here. The only difference is this trust will
have an ID number when you open up that account.
It's like a Social Security number for a trust. And
then this trust will file its income tax return based
(26:39):
on that ID number. But because it's a grand Tour trust,
the form is ten forty one. But because it's a
Grand tor trust, it will not report any income. It
will kick out a letter to you, the owner, and
you'll put the numbers on your tax return, just like before.
So sounds to me like very little change even with
(27:02):
an irrevocable trust.
Speaker 2 (27:04):
Talking with Todd Lutski from the law firm of Cushing
and Dolan. If you have a question that you'd like
to ask Todd about your estate plan, the studio line
here is eight eight eight two zero five two two
six three. That is the number to call to ask
Todd your questions about your estate plan again. It is
eight eight eight two zero five two two six three.
(27:26):
We're gonna take a quick break right now, but when
we come back, we're gonna get right to your questions
with Todd. That number is eight eight eight two zero
five two two sixty three. One more time, it's eight
eight eight two zero five two two sixty three. Your
questions when we come back.
Speaker 1 (27:44):
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Speaker 2 (28:08):
As promised, it's time to get right to your calls
with Todd Lutsky. First in the queue, we've got Michael
from West Roxbury. Michael, what's your question for Tom Letsky?
Speaker 9 (28:19):
Yes, I have a last minute problem that I hopefully
we can give me some good revolutions. Basically, my mother
is already in and there with no free planning, okay.
Speaker 6 (28:31):
And we have been there for.
Speaker 9 (28:36):
Over a year's gone to the wall of her cash,
and now we have the house that's been sold.
Speaker 7 (28:44):
The house has already been sold. Correct, Oh boy, this
is one mistake after another.
Speaker 6 (28:52):
Yes, it is.
Speaker 7 (28:54):
So how much money did you get for the house?
Speaker 9 (28:57):
Uh? Five sixty? I think we cleared and done.
Speaker 7 (29:02):
And how old is your mom? She's eighty three eighty three, So.
Speaker 8 (29:11):
So basically at this point you're saying, please, can I
stop paying fifteen thousand dollars a month to the nursing home?
And how can I get eligible for medicaid? Is really
the only thing that I see and and last minute
planning can be done. Of course, we all wish you
would have done the last you know, a year ago, folks.
Speaker 7 (29:30):
And this is important for everybody.
Speaker 8 (29:31):
This isn't this isn't necessarily you know, to just pick
on this situation. This is important for everybody to learn
from this that that if you're in the nursing home
and you're writing that check, don't just write the check
right call somebody right away, because a year ago we
probably could have stopped this. So we would have taken
(29:52):
whatever money they had a year ago, and if they
probably spent a good one hundred and fifty thousand dollars
I'm guessing on the nursing home, so we would have
taken that one hundred and fifty a year ago, bought
a Medicaid annuity for it, converting it to an income stream.
Assuming there's no community spouse and it's just your mom,
then we would have gotten rid of that, getting her
(30:14):
down to two thousand dollars and having a primary residence.
It's non countable in the form of a primary residence,
and so she would have been eligible.
Speaker 7 (30:23):
For Medicaid a year ago.
Speaker 8 (30:26):
She'd have been eligible for Medicaid a whole year ago,
and we would have stopped or slowed the bleeding. Now,
the fact that that didn't happen and we're faced with
the money already being spent, and now we're selling a house.
If the house wasn't sold and you had called prior
to selling the house, even though you spent one hundred
and fifty for a year in the nursing home, I
(30:46):
would have said, don't sell the house. Let's either rent
it or just maintain it if the children know they're
going to get it, and you'd be eligible for Medicaid
because a house primary residence non countable for Medicaid eligibility. Yes,
it's leanable, but it's non countable. So it's a huge savings.
But since it's been sold and we're now left with
(31:08):
just money, and there's plenty of people who have just
money when they're entering a nursing home, we're back to
this idea of buying an annuity for an eighty three
year old person. They are a special designed Medicaid annuity.
You need to seek out help from an elder law
attorney to do this. Don't just try to buy it
on your own, and apply for Medicaid. I can tell
(31:29):
you that we can get your mum eligible for Medicaid
pretty much right away and slow the bleeding. When I
say slow the bleeding, I mean it will go from
a approximately fifteen thousand dollars a month nursing home bill
to a full pay sixty five hundred dollars a month
approximately nursing home bill, of which is offset by Social
(31:52):
Security and the annuity payment, so the state will be
paying a little.
Speaker 7 (31:56):
So that's a really big help.
Speaker 8 (31:58):
I hope that gets you at least thinking about what
the next steps are for you and folks, one of
the things I think that we should talk about is,
you know, here there's no planning done and it does happen.
Speaker 7 (32:10):
I get it.
Speaker 8 (32:11):
There's not something you can do all the time. But
the guide we're giving away this month is Unlocking the
power of Medicaid irrevocable trusts, and it really describes for
you how they work. And if Mike's mom had done
the planning in advance, or anybody not picking on Mike's mom,
but if instead they put that house in the trust
(32:33):
five years ago, that house would be all protected. We
wouldn't be worried about any of this at this point.
And while putting it in there, learn how the trust works,
and you'll see how much control you keep, because I
think you'll find that there's way more control over these
trusts than not. And if you've never done a trust
and you want to learn how they work, this guide
is for you eight six six eight four eight five
(32:56):
six nine nine or Legal Exchange Show dot com again
eight four eight five six or Legal Exchange Show dot
com and you can get the guide.
Speaker 2 (33:07):
Tod I've got another caller for you here. Let's go
to Dave in Worcester. Dave, you're on with Todd Lutsky.
Speaker 7 (33:15):
Come on, Tod, Hi, David.
Speaker 6 (33:18):
My question is concerning a property owned a revocable trust
with a mortgage attached to it.
Speaker 8 (33:25):
You said, you said revocable trust. Correct, yes, revocable trust okay,
and it's got a mortgage.
Speaker 7 (33:30):
I'm with you.
Speaker 6 (33:32):
Uh, mortgage isn't paid for about ten fifteen years. My
question was concerning the duon clause. Is there say the
the owner of the trust expires the beneficiaries to receive
that property. What has to happen as far as the
duon clause is concerned. Is there some sort of language
(33:53):
that can be put into the trust to pay the
mortgage on their on their demise? So or I mean,
how does that work?
Speaker 7 (34:00):
Is the person currently still living?
Speaker 1 (34:03):
Yes?
Speaker 7 (34:04):
Okay, so I can address this.
Speaker 8 (34:06):
So now, because the property, I think it's important for
people to understand the difference between revocable and irrevocable.
Speaker 7 (34:13):
So in this case it's in a revocable trust.
Speaker 8 (34:15):
The initial setting up of the document putting the property,
even though it's encumbered in a revocable trust, has no
bearing on the duan sale clause. And that's what Dave
was referring to. It's a duon sale duon transfer clause.
All mortgages have these because they didn't lend to the
person you're giving it to. They lent to you, So
(34:37):
you then would would have to be the one that
would be on the note. Now, putting it into a
revocable trust no impact. However, as Dave indicated, what happens
when the creator the donor of the revocable trust dies, Well,
the revocable trust becomes irrevocable right away. And that technical
(35:00):
you're now if you read the document, it probably says
the property located in the trust or the assets in
the trust need to be divided and paid out.
Speaker 7 (35:09):
Let's just say equally to the kids.
Speaker 8 (35:11):
Well, if it says divide and paid out equally to
the kids, what do we have. We have a transfer,
We have the property coming out of the trust to
the kids. That will trigger the do on sale clause,
the du on transfer clause, having the bank call the note. Now,
they might not know right away, and there might be
language in the trust that allows you to pay this bill.
(35:33):
I don't know if it's in there or it's not
in there. But technically, if you're getting the money in
the trust, just take the money and pay the mortgage.
But the bank's going to learn about the death and
they're gonna call it. So your best bet is simply
to go to the bank and ask them can we
strike up a deal to assume the mortgage and they
will tell you obviously we're in a high rate environment now,
(35:55):
so or a higher rate environment. They'll let you know
what the story is. But yeah, hard to deal with. Uh,
no way around the do on sale class. Mister Lutski,
thank you so much for joining us today. We appreciate
it always the pleasure.
Speaker 1 (36:09):
This has been Aske Todd on the Financial Exchange Radio network.
Ask Todd with Todd Lutsky has been presented by Cushing
and Dolan, serving Massachusetts and New England for more than
thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
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The views expressed in this segment are solely those of
(36:30):
Cushing and Dolan. Armstrong Advisory does not provide any legal
or tax advice. Please consult with your legal or tax
advisor on such matters. Cushing and Armstrong do not endorse
each other and are not affiliated. Helme life planning can
be overwhelming, so make sure you're prepared or you can
make costly mistakes that affect your overall plan. Irrevocable trusts
are the most common type of trust that folks use
for financial protection, and while they can be complicated to create,
(36:53):
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eliminating your estate taxes. Cushing and Dolan are experts in
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(37:15):
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(37:37):
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(00:21):
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(01:07):
Financial Exchange with Chuck Zutta and Paul Lane.
Speaker 2 (01:12):
Chuck, Paul, and Ben with you here on a consumer
Price Index day. That's right, it is the CPI right now.
And in terms of what we saw this morning, Paul
at eight thirty am, we did get CPI data and
it was pretty good. It came in at point two
percent for the month of July on the headline number.
(01:36):
The core number excluding food and fuel came in at
point two percent as well. And so what this means
is that if you look at the annualized numbers, which
is what everyone you know pays attention to, because it's
just kind of hard to feel the difference between point
two and point three percent for the month, man, what
(01:57):
we ended up seeing is that annually, the headline CPI
decreased down to two point nine percent from three percent,
and the core CPI number decreased from three point three
percent down to three point two percent, all of this
being consistent with what you'd like to see on the
(02:18):
inflation side if you are getting a soft landing.
Speaker 3 (02:22):
Yeah, it's interesting, Chuck.
Speaker 4 (02:23):
Heading into this inflation report, Mike and I were talking
about this on yesterday's show. It was probably the least
concerned I've been about an inflation report. It seems as
if it's significant, very mellow man, very chill, very chill.
It's just a nice summer August report that it's significance.
Compared to others that we covered and sort of were
waiting on baby breath to be released, this one didn't
(02:44):
have that feeling at least to me heading into this.
It seems like, and if you read all of the
different Wall Street journals and Bluebergs out there, et cetera,
the focus is much more shifted now to the labor market. Certainly,
it is reassuring to get these numbers coming in, because
if we were to see a significant uptick to inflation
that would surprise on the upside, then that would be
(03:04):
difficult from a Federal Reserve perspective. Ahead of their September
meeting to balance the idea that hey, perhaps we have
a weaking labor market, but also inflation appears to be
roaring its head. We did not get that data today,
so that is good in itself, and it seems as
if in general, looking at all the components of CPI,
many of them coming down to reasonable levels.
Speaker 3 (03:25):
So overall, a good report.
Speaker 4 (03:27):
I don't think there was as much concern heading into this,
but certainly you're glad it didn't surprise the upside.
Speaker 2 (03:32):
So that's what we're seeing in terms of the big
headline numbers, other things that we pay attention to when
we look under the surface, Hey, what's driving this drop
in inflation? Is it just that you know, shelter costs
came down and that's you know, such a big weight
and that's what's happening here.
Speaker 3 (03:50):
No, it's not.
Speaker 2 (03:51):
In fact, the shelter inflation number for the month went
back up to point four percent for the month compared
to the point two percent that we saw print in June.
So the shelter inflation number actually got worse again according
to how they calculate it, which is, you know, this
hugely smoothed and lagged thing that does not actually represent
how much you're spending on shelter this month. But what
(04:12):
we saw, and this is data from Michael McDonough from Bloomberg.
He's the chief economist UH in the Financial Products division
at Bloomberg and UH he pulled a data set this
morning that showed, look, only thirty eight percent of CPI
components are rising this month. At a pace of four
(04:34):
percent or more, and that is a you know, that's
a meaningful improvement from where we were. Just to give
some context on this, back at the end of Q one,
when we were concerned about that potential for a rebound
in inflation, over sixty five percent of CPI components were
registering more than point more than four percent annualized increases.
(04:57):
And really for the last two years two and a half,
you know, dating back to late twenty twenty one, you
were between fifty five and seventy five percent of components
on a monthly basis registering greater than four percent annualized bumps.
You compare that to the pre pandemic period and generally
anywhere from about twenty to thirty percent of items had
(05:19):
more than four percent bumps. So even during times when
inflation was tame, there's always gonna be some you still
had something that was you know, going up in price
because there's a bird flu and so eggs or through
the roof, or there's a swine flu and so bacons
through the roof, or there's you know, OPEC production cuts
and oil went up. These things are always you know,
kind of moving here and there. But there was nothing
(05:39):
no conclusive trend in the overall inflation so or no
conclusive uptick at least, So I think it's encouraging that
it's not just one or two items that are, you know,
printing lower, that are dragging the whole thing down, but
rather you're seeing numbers as a whole improving and lower
in relation numbers printing on a monthly basis. Remember, lower
(06:03):
inflation numbers do not mean deflation, which is prices coming down.
It just means that the rate of price increases is
stabilizing at close to what it was pre pandemic.
Speaker 4 (06:13):
I like the way of looking at that as the
collection of all the different items, because you can always
pick out one item or another that could be concerning
or favorable, depending on which one you want to focus on.
If you want it to be negative, you could highlight
the concern about shelter increasing. But then if you want
to tell the full picture to the point ofment earlier
and why you brought up all the components, there are
(06:35):
many other areas where we're not seeing pressure, and that's
what inflation is all about. It's the basket, the price
of all goods in the basket. It's not just looking
at one particular component and pointing it out as a
concern or something that is going to help in the
future exactly.
Speaker 2 (06:50):
I mean look, because you could do that either way. Yeah,
you could look at motor vehicle insurance which is still
rising quickly at zero point nine percent for the month,
and be like, oh like very very very bad. Or
you could take a look at outpatient hospital services, which
prices were down one point nine percent for the month. Again,
how do they calculate any of this? I have no
(07:11):
idea public transportation airline fares down seven point one percent.
Oh gee, the prices are really improving. Well yeah, that's
for airline fares. But if you want to take intracity
mass transit, well those prices are up half a percent
for the month. So this is why you don't cherry
pick one or two items. You will get the whole
data set. And I do find that when you look
(07:33):
at you know kind of how things are distributed amongst it.
That's what ultimately is in the driver's seat here as well.
Other things that I want to talk about as it
relates to this report. I want to talk a little
bit about how this and how some of the other
data is influencing what the FED may or may not do,
because Paul, we're only nine days out from nine days
(08:00):
you know away now from what had been, you know,
just this catastrophic crash in markets. Just this the worst
three percent down day in the history of the S
and P five hundred. Where again, you've got really smart
people that were just running around every financial media station
out there saying, the Fed's got to do emergency seventy
(08:21):
five basis point rate cuts. And and here's where we
are right now, because let's let's look at the data
that we have.
Speaker 3 (08:28):
To be clear, Chuck was being sarcastic about that market drop.
Speaker 2 (08:31):
Just if anyone our listeners know, our listeners know, they're
in on the gig, they're in on the joke today
right now, inflation it's better than it was before. Still
running high twos, low threes. Okay, that's that's good, but
it's not you know, it's still not quite where you
want it to be. Core inflation same ballpark high two's,
(08:55):
low threes. Like you, you're right around there the S
and P five hundred right now, it's under five percent off.
It's all time high. It's like four and a half
percent from its all time high you've got. And again
we don't know exactly what GDP is going to be
for this quarter. The next estimate of GDP now comes
out tomorrow, but through August eighth, the estimate very early
(09:17):
in the quarter it was two point nine percent. Ladies
and gentlemen of the jury, you do not get seventy
five basis point emergency rate cuts with inflation running it
two and a half to three percent and GDP running
it two and a half percent and the S and
P five hundred less than five percent off its all
(09:38):
time highs it's not gonna do it. That doesn't happen.
And this this gets at, you know, the crux of
what a soft landing may be. And I'm not saying
that we're getting the soft landing. I'm saying that when
you are going through the soft landing, it's not something
where you just ease down and say, ah, that was
(09:58):
a great landing. In economic terms, you kind of alternate between, hey,
are we heading into recession or not? And it's that
uncertainty because you have to actually land the economy if
and by landing, really what we're talking about is inflation
if you don't land it, which happened last year, then okay,
(10:20):
we do a go around, and now we've got to
go through it again. You have to have these questions
in order to get the soft landing. You have to
have the questions of are we going into recession or not,
and then inflation has to stay down while unemployment doesn't spike.
We're now finally getting to the point where it's possible,
but the next few months are going to determine whether
it actually happens or not.
Speaker 4 (10:41):
And it really comes down to the labor market at
this point unless something, you know, there's some sort of
shock in the system that sends back up inflation in
the other direction. It seems as if there's been good
progress there and there's no real indications, you know, right
in our face that inflation is going to pick back
up again. So that's why i'd mentioned the point of,
you know, scrutinizing the labor market.
Speaker 2 (11:01):
It's all gonna be on the growth side. Because there's
an economist from the University of Oregon, Tim Dwee, and
he made this point on Twitter yesterday, which was, look,
the calculus for the last year has been effectively, we're
gonna let unemployment rise by point nine percent because it's
worth it to have that happen in order to get
(11:22):
inflation down into the twos? Are we going to let
unemployment rise another point nine percent because we want to
get inflation an additional like half percent down from where
it is. His point is probably not, Like you don't
the difference between an economy that is, you know, two
(11:42):
and a half percent inflation and five and a half
percent unemployment is really different from Yeah, inflation's at three
and unemployments at four and a half. You'd rather have
the ladder all else being equal, because when unemployment goes
up to five and a half, it rarely just stops there.
And it also just doesn't like you don't need to
(12:03):
lose that many more jobs for that small marginal benefit.
The last year was, hey, we took inflation from five
percent down to three, and it cost us zero point
nine percent in unemployment to do. So that's the trade
off the Fed was willing to make. He's kind of
saying they won't make that trade off for the next
half percent in unemployment because it's not worth losing another
(12:24):
one to two percent I'm sorry, half percent in inflation.
It's not losing another one to two percent and unemployment.
Speaker 3 (12:31):
To take a quick break here.
Speaker 2 (12:32):
When we come back, let's see should we talk recession
and whether or not it's coming? Does that sound fun?
Speaker 3 (12:41):
Let's do it.
Speaker 2 (12:41):
Let's talk recession when we return.
Speaker 1 (12:44):
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Speaker 5 (13:08):
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Speaker 2 (13:46):
Let's talk a little bit about the possibility of a
US recession, which is all that anyone wants to talk
about right now. Is like I literally I wake up
and my mom text me and goes, are we heading
into a recession? I go, well, she didn't actually text
me that, so I shocking she's got She's like no.
(14:08):
The text for my mom are like, hey, can I
have another picture of like my granddaughters? And I'm like, okay, fine,
Like it's you know, I'm not gonna call my mom
out for something she didn't do. But the point is
everyone wants to talk about are we in recession right now?
It's just it's the only thing that people are are
focused on. And the CEO of UBS, who quite honestly
(14:28):
didn't even know who it was until I read this piece.
It's how little I think about UBS at this point,
just because again they're they're not really consequential in terms
of much of anything in US banking these days. But
their CEO said yesterday that, hey, it's it's too early
to talk about a potential US recession. It certainly is possible,
(14:50):
but you know, we're not necessarily there yet, And I
give him credit for not going the Jamie Diamond route
and saying, yes, we think we're heading into recession every
fall for the last three years.
Speaker 3 (15:01):
That's true. He has been very vocal about that.
Speaker 2 (15:04):
Is there anything else to take from this? Does the
CEO of UBS know anything that CEOs of other banks
don't know?
Speaker 4 (15:09):
Nostely, absolutely not. But really the bigger question that we
should cover, because everyone does want to talk about, is
you know, what are the things that economists look at
in terms of trying to get a gauge of whether
or not we are heading into recession. Some of the
components that the National Bureau of Economic Research looks at
when they're trying to determine, hey, where do we stand
(15:30):
from an economic standpoint include the labor market, which we
talk about quite frequently, manufacturing and dustal production consumption GDP.
Those are some of the factors that we look at
when you're gauging a recession. I can highlight some that
may indicate we are in a difficult position and maybe
slowing down, like, for example, the ISM Manufacturing Index, which
(15:52):
is at a point at forty six point eight, which
is gauged by fifty is sort of the round number.
If you're over that, you're an expansion phase. As you're
under that, you're in a contraction, just specific to manufacturing.
So I could point to that and make the argument here, Chuck,
that we're in this bad place. I can certainly talk
about unemployment increasing. We talked about that in the first
second of the show. However, there are many other indicators
(16:15):
out there. Looking at GDP now we're tracking it close
to three percent economic growth for Q three, there are
other factors that would dispute that notion. So I think
that's the context that we need to provide when we're
looking at gauging out the likelihood of recession going forward.
Speaker 2 (16:31):
Yeah, and I think that ultimately, I think sometimes we
forget what recession really means because it's been it's been
almost twenty years since we've had a real one here
in the United States. I say real, not that you
know twenty twenty wasn't real, but it wasn't caused by
the business cycle, and it was relatively not relatively, it
(16:54):
was incredibly short, it was over. I think the NBER
declared recession for a month. I think it ended up
being March of that year. And then the economy started
expanding again. And so the last real recession that we
had was two thousand and eight through I think it
finally ended in early twenty ten, and it was the
single largest recession in the last one hundred years. It
(17:17):
was a generational event, and I think sometimes we forget
how much recessions suck because the way that people talk
about them is just, oh, it's, you know, a slow down,
and no, there are growth slowdowns that don't lead to recession,
and those are kind of, yeah, you're fine, we muddle
through when we come out the other side, recessions do
(17:40):
leave lasting scars on the economy in terms of lost output,
lost wages, lost jobs, things that you know, affect people
for years afterwards. It's not something that you just go
through and say, well, we got through that and now
everything's fine. Even a mild recession still has really meaningful
job loss. I mean, in recessions, unemployment typically rises anywhere
(18:01):
from two to four percent. At this level of you know,
at this size of the workforce, you're talking between like
three and seven million people losing jobs on a net basis.
Speaker 6 (18:12):
There.
Speaker 4 (18:12):
I agree with that, though I do feel as if
the two thousand and eight comparisons, or so many people
have ingrained in their mind two thousand and eight as
a typical recession just because that's the last one they're
familiar with. Sure, And I would compare it to hurricanes
in a sense where there can be different categories, where
a hurricane five like Katrina can leave long lasting impacts
that linger on for years and don't get resolved, or
(18:34):
you can have one that's a one or two and
it's sort of, hey, we got through it. And I'm
not saying that recessions aren't something to be concerned about.
The problem When you bring up for sessions, everyone thinks
category five two thousand and eight.
Speaker 2 (18:45):
Basically, it's kind of it's interesting that you bring up
the weather comparison because you see a similar phenomenon amongst
people who follow weather, where if a storm comes and
it's not as big as people were expecting that, it's
like they're disappointed. It's like, oh, that hurricane wasn't as big,
and it's like, guys, there's actual people that live there
that are having their homes destroyed. Like, don't root for
(19:06):
the big one just because you want to see a
big number on a screen.
Speaker 3 (19:09):
Not to mention the economic impact of cleaning that stuff up. Yeah.
Speaker 6 (19:12):
Right.
Speaker 2 (19:13):
Likewise, with the economy, it seems like there are people
who just, you know, they root for a disaster. And
maybe it's just because they've been reading about disaster for
so long. I don't know, but guys, you don't want
economic disasters. It's not good for anyone when that happens.
Let's take a quick break here. When we come back,
we're going to be joined by Todd Lutsky for Ask Todd.
(19:35):
We've also got Wall Street Watch coming up as well.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter. Act
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 (20:02):
Markets are currently in slightly mixed territory, mostly down, except
for the Dow Jones, which is up twenty two points.
The SMP five hundred is down thirteen points or out now.
The Dow Jones just went negative. Nasdaq is down one
hundred and forty four points as markets continue to digest
this morning's CPI report. Right now, Kelenova shares are up
(20:25):
eight percent after the food maker agreed to be acquired
by snackmaker Mars for eighty three dollars and fifty cents
per share in cash. The deal values Kelenova at about
thirty six billion dollars and is expected to close in
the first half of twenty twenty five. Alphabet shares are
down just over three percent after Bloomberg News reported US
regulators are weighing a breakup of the tech giant. Per
(20:48):
the report, which cites people with knowledge of the discussions,
the units most likely to buy to be divested are
Google's Chrome browser and Android operating system if the Justice
Department push for a breakup. US shares of the British
chip designer ARM Holdings are up four point three percent
after Intel sold its one point one eight million share stake.
(21:10):
Shares of Intel, whose move came amid restructuring and cost
cutting efforts, are down two point seventy five percent, And finally,
the healthcare company Cardinal Health is up five point five
percent after reporting fiscal fourth quarter results that beat expectations.
Cardinal earned a dollar eighty four per share excluding items,
on fifty nine dollars fifty nine point eight seven billion
(21:33):
in revenue, while analysts pulled anticipated one dollar in seventy
three cents per share and fifty eight point sixty four billion.
The Ohio based company also raised its full year guidance
for earnings per share.
Speaker 1 (21:49):
This is Asked Odd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Tod Letskey is here to answer your
questions and help you plan for a later 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.
(22:10):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:16):
And we are now joined by Todd Lutsky from the
law firm of Cushing and Dolan. The segment it's called
Ask Todd because you get to ask Todd your estate
planning questions. We've got the phone lines open at eight
eight eight to zero five two two sixty three. That
is the number to call to ask Todd your estate
planning questions. Last week we couldn't get to everyone. So
(22:38):
if you were one of the people last week who
was trying to call and you couldn't get your question answered.
Eight eight eight two zero five two two sixty three
is the number if you want to get in line
early to make sure that you're able to ask Todd
your question today. That number again is eight eight eight
to zero five two two six three. We do have
(22:58):
space on the phone lines, and so again make sure
you call eight eight eight two zero five two two
six three to ask Todd Lutsky your questions. Mister Lutsky,
how are you doing today? I'm doing great? And should
I ask how you're doing?
Speaker 3 (23:14):
I'm okay?
Speaker 7 (23:14):
Yeah, what happened?
Speaker 2 (23:15):
I got into a fight with a baby frog yesterday?
Speaker 7 (23:19):
Yeah? How'd that work out?
Speaker 5 (23:20):
Well?
Speaker 2 (23:20):
It was a tad polarizing, Yeah, it sure would be,
you know, so it didn't go great.
Speaker 3 (23:25):
But Todd, I want to talk a little bit about medicaid.
Speaker 2 (23:28):
Irrevocable trust today. And let's say that someone has an
irrevocable trust that is built for the purpose of qualifying
assets for Medicaid. Okay, what can and can't they do
with the assets that are placed in said irrevocable trust?
Speaker 8 (23:45):
Should we just try to pick on both or like
in you want to do like real estate or money?
Speaker 7 (23:51):
Should we start with.
Speaker 6 (23:55):
Money.
Speaker 7 (23:55):
Money's good, that's what you work on. So we'll do money.
Speaker 2 (23:58):
Let's start with money.
Speaker 8 (23:59):
So let's say you put money in the trust. Right
and again, folks, and it's very important. The way Chuck
described this is that it's the kind of irrevocable trust
that we do to protect from the nursing homes. Because
there are many kinds of irrevocable trusts. I want to
put that out there first, that so many people hear
the word irrevocable and think rigid and flexible. I can't
(24:20):
change it, I can't do anything. There are those kinds.
This isn't one of them. And that's why Chuck was
trying to make it clear that this is for medicaid
protection purposes. Now that said, what can you put in Well,
you can put in real estate. You can't put in
money rental properties, not iras. So let's say we put
(24:42):
your investment portfolio and let's call it half a million dollars. Okay,
we got half a million dollars in the trust. If
it wasn't in the trust, you would be managing and
investing that money. I would imagine that's what people do.
If it's in the trust, you would be managing and
investing that money just like you do today.
Speaker 7 (25:01):
Okay.
Speaker 8 (25:02):
Well, once that money is managed and invested, and again
when I say that, I mean you can call your broker,
you can talk to your financial advisor.
Speaker 7 (25:09):
Even if you're not the trustee, You're allowed to do that. Okay,
that's called limited trading authority, So no problem. Okay.
Speaker 8 (25:15):
Well, then this money, after you do all of this,
is generating interest and dividends. So well, that's income. I
want my income. Well, the trust gives you the income,
just like it would give you the income today. So
if you didn't do your planning and you had the
money sitting in your brokerage account, you'd get the income. Okay,
Well that that makes sense. So far, so good. Well,
(25:38):
at the end of the year you get a nasty
ten ninety nine that says this is how much income
you earned, and you get to put that on your
tax return today. Well, if you have it in one
of these medicaid trusts, which we design specifically as grant
or trusts, which means for income tax purposes, you're considered
the owner, well then you get to put that money
(26:02):
on your income tax return. And yes, you get to
put it on your income tax return, your own personal
income tax return at your own personal rates, just like
you would if you didn't have the trust, even if
you don't take the money out. I mean, think about
it so many times.
Speaker 7 (26:17):
Today.
Speaker 8 (26:18):
You've got your portfolio, but you don't take any money out,
it's just growing. You still got to pay taxes on it.
Same deal here. The only difference is this trust will
have an ID number when you open up that account.
It's like a Social Security number for a trust. And
then this trust will file its income tax return based
(26:39):
on that ID number. But because it's a grand Tour trust,
the form is ten forty one. But because it's a
Grand tor trust, it will not report any income. It
will kick out a letter to you, the owner, and
you'll put the numbers on your tax return, just like before.
So sounds to me like very little change even with
(27:02):
an irrevocable trust.
Speaker 2 (27:04):
Talking with Todd Lutski from the law firm of Cushing
and Dolan. If you have a question that you'd like
to ask Todd about your estate plan, the studio line
here is eight eight eight two zero five two two
six three. That is the number to call to ask
Todd your questions about your estate plan again. It is
eight eight eight two zero five two two six three.
(27:26):
We're gonna take a quick break right now, but when
we come back, we're gonna get right to your questions
with Todd. That number is eight eight eight two zero
five two two sixty three. One more time, it's eight
eight eight two zero five two two sixty three. Your
questions when we come back.
Speaker 1 (27:44):
This is your home for the most comprehensive coverage of
the economy and the trends on Wall Street. This He's
the Financial Exchange Radio Network. The Financial Exchange streams live
on YouTube. Like our page and stay up to date
on breaking business news. All morning. Loan Base is the
Financial Exchange Radio Network.
Speaker 2 (28:08):
As promised, it's time to get right to your calls
with Todd Lutsky. First in the queue, we've got Michael
from West Roxbury. Michael, what's your question for Tom Letsky?
Speaker 9 (28:19):
Yes, I have a last minute problem that I hopefully
we can give me some good revolutions. Basically, my mother
is already in and there with no free planning, okay.
Speaker 6 (28:31):
And we have been there for.
Speaker 9 (28:36):
Over a year's gone to the wall of her cash,
and now we have the house that's been sold.
Speaker 7 (28:44):
The house has already been sold. Correct, Oh boy, this
is one mistake after another.
Speaker 6 (28:52):
Yes, it is.
Speaker 7 (28:54):
So how much money did you get for the house?
Speaker 9 (28:57):
Uh? Five sixty? I think we cleared and done.
Speaker 7 (29:02):
And how old is your mom? She's eighty three eighty three, So.
Speaker 8 (29:11):
So basically at this point you're saying, please, can I
stop paying fifteen thousand dollars a month to the nursing home?
And how can I get eligible for medicaid? Is really
the only thing that I see and and last minute
planning can be done. Of course, we all wish you
would have done the last you know, a year ago, folks.
Speaker 7 (29:30):
And this is important for everybody.
Speaker 8 (29:31):
This isn't this isn't necessarily you know, to just pick
on this situation. This is important for everybody to learn
from this that that if you're in the nursing home
and you're writing that check, don't just write the check
right call somebody right away, because a year ago we
probably could have stopped this. So we would have taken
(29:52):
whatever money they had a year ago, and if they
probably spent a good one hundred and fifty thousand dollars
I'm guessing on the nursing home, so we would have
taken that one hundred and fifty a year ago, bought
a Medicaid annuity for it, converting it to an income stream.
Assuming there's no community spouse and it's just your mom,
then we would have gotten rid of that, getting her
(30:14):
down to two thousand dollars and having a primary residence.
It's non countable in the form of a primary residence,
and so she would have been eligible.
Speaker 7 (30:23):
For Medicaid a year ago.
Speaker 8 (30:26):
She'd have been eligible for Medicaid a whole year ago,
and we would have stopped or slowed the bleeding. Now,
the fact that that didn't happen and we're faced with
the money already being spent, and now we're selling a house.
If the house wasn't sold and you had called prior
to selling the house, even though you spent one hundred
and fifty for a year in the nursing home, I
(30:46):
would have said, don't sell the house. Let's either rent
it or just maintain it if the children know they're
going to get it, and you'd be eligible for Medicaid
because a house primary residence non countable for Medicaid eligibility. Yes,
it's leanable, but it's non countable. So it's a huge savings.
But since it's been sold and we're now left with
(31:08):
just money, and there's plenty of people who have just
money when they're entering a nursing home, we're back to
this idea of buying an annuity for an eighty three
year old person. They are a special designed Medicaid annuity.
You need to seek out help from an elder law
attorney to do this. Don't just try to buy it
on your own, and apply for Medicaid. I can tell
(31:29):
you that we can get your mum eligible for Medicaid
pretty much right away and slow the bleeding. When I
say slow the bleeding, I mean it will go from
a approximately fifteen thousand dollars a month nursing home bill
to a full pay sixty five hundred dollars a month
approximately nursing home bill, of which is offset by Social
(31:52):
Security and the annuity payment, so the state will be
paying a little.
Speaker 7 (31:56):
So that's a really big help.
Speaker 8 (31:58):
I hope that gets you at least thinking about what
the next steps are for you and folks, one of
the things I think that we should talk about is,
you know, here there's no planning done and it does happen.
Speaker 7 (32:10):
I get it.
Speaker 8 (32:11):
There's not something you can do all the time. But
the guide we're giving away this month is Unlocking the
power of Medicaid irrevocable trusts, and it really describes for
you how they work. And if Mike's mom had done
the planning in advance, or anybody not picking on Mike's mom,
but if instead they put that house in the trust
(32:33):
five years ago, that house would be all protected. We
wouldn't be worried about any of this at this point.
And while putting it in there, learn how the trust works,
and you'll see how much control you keep, because I
think you'll find that there's way more control over these
trusts than not. And if you've never done a trust
and you want to learn how they work, this guide
is for you eight six six eight four eight five
(32:56):
six nine nine or Legal Exchange Show dot com again
eight four eight five six or Legal Exchange Show dot
com and you can get the guide.
Speaker 2 (33:07):
Tod I've got another caller for you here. Let's go
to Dave in Worcester. Dave, you're on with Todd Lutsky.
Speaker 7 (33:15):
Come on, Tod, Hi, David.
Speaker 6 (33:18):
My question is concerning a property owned a revocable trust
with a mortgage attached to it.
Speaker 8 (33:25):
You said, you said revocable trust. Correct, yes, revocable trust okay,
and it's got a mortgage.
Speaker 7 (33:30):
I'm with you.
Speaker 6 (33:32):
Uh, mortgage isn't paid for about ten fifteen years. My
question was concerning the duon clause. Is there say the
the owner of the trust expires the beneficiaries to receive
that property. What has to happen as far as the
duon clause is concerned. Is there some sort of language
(33:53):
that can be put into the trust to pay the
mortgage on their on their demise? So or I mean,
how does that work?
Speaker 7 (34:00):
Is the person currently still living?
Speaker 1 (34:03):
Yes?
Speaker 7 (34:04):
Okay, so I can address this.
Speaker 8 (34:06):
So now, because the property, I think it's important for
people to understand the difference between revocable and irrevocable.
Speaker 7 (34:13):
So in this case it's in a revocable trust.
Speaker 8 (34:15):
The initial setting up of the document putting the property,
even though it's encumbered in a revocable trust, has no
bearing on the duan sale clause. And that's what Dave
was referring to. It's a duon sale duon transfer clause.
All mortgages have these because they didn't lend to the
person you're giving it to. They lent to you, So
(34:37):
you then would would have to be the one that
would be on the note. Now, putting it into a
revocable trust no impact. However, as Dave indicated, what happens
when the creator the donor of the revocable trust dies, Well,
the revocable trust becomes irrevocable right away. And that technical
(35:00):
you're now if you read the document, it probably says
the property located in the trust or the assets in
the trust need to be divided and paid out.
Speaker 7 (35:09):
Let's just say equally to the kids.
Speaker 8 (35:11):
Well, if it says divide and paid out equally to
the kids, what do we have. We have a transfer,
We have the property coming out of the trust to
the kids. That will trigger the do on sale clause,
the du on transfer clause, having the bank call the note. Now,
they might not know right away, and there might be
language in the trust that allows you to pay this bill.
(35:33):
I don't know if it's in there or it's not
in there. But technically, if you're getting the money in
the trust, just take the money and pay the mortgage.
But the bank's going to learn about the death and
they're gonna call it. So your best bet is simply
to go to the bank and ask them can we
strike up a deal to assume the mortgage and they
will tell you obviously we're in a high rate environment now,
(35:55):
so or a higher rate environment. They'll let you know
what the story is. But yeah, hard to deal with. Uh,
no way around the do on sale class. Mister Lutski,
thank you so much for joining us today. We appreciate
it always the pleasure.
Speaker 1 (36:09):
This has been Aske Todd on the Financial Exchange Radio network.
Ask Todd with Todd Lutsky has been presented by Cushing
and Dolan, serving Massachusetts and New England for more than
thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(36:30):
Cushing and Dolan. Armstrong Advisory does not provide any legal
or tax advice. Please consult with your legal or tax
advisor on such matters. Cushing and Armstrong do not endorse
each other and are not affiliated. Helme life planning can
be overwhelming, so make sure you're prepared or you can
make costly mistakes that affect your overall plan. Irrevocable trusts
are the most common type of trust that folks use
for financial protection, and while they can be complicated to create,
(36:53):
they help keep your assets safe because they contain specific
protections that many of us need, like the possibility of
eliminating your estate taxes. Cushing and Dolan are experts in
milder lawn taxation and they can devise a plane that
covers you in every area where issues can rise. Their
new guide is called Unlocking the Power of Irrevocable Medicaid Trusts.
Learn more about how these trusts can benefit your family
(37:15):
by calling eight sixty six eight four eight five six
ninety nine right now. That's eight sixty six eight four
eight five six ninety nine, or you can request the
guide right now by visiting Legal exchange show dot com.
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Dolan and Armstrong Advisory do not endorse each
(37:37):
other and are not affiliated
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