September 24, 2025 • 37 mins
Chuck Zodda and Marc Fandetti discuss Powell describing rates as 'modestly restrictive,' keeping the door open to cuts. Do Stephen Miran's rate-cut arguments add up? US stocks resist S&P500 drops of 2% or more in best run in over a year. Todd Lutsky joins the show for his weekly segment, Ask Todd. This week, Todd explains to best way to leave property to your heirs.
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Episode Transcript
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Speaker 1 (00:00):
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(01:06):
and Mark Fandetti.
Speaker 2 (01:09):
Chuck, Mark and Tucker with you, and we kick things
off today with a little bit of a j. Powell discussion.
Last week, the Federal Reserve got together and Jay talked
to the gang and said, Hey, what do we want
to do about interest rates? And they all said, yeah,
we're going to cut them, and so the Fed cut
the Fed funds rate by a quarter percent last week. Yesterday,
(01:32):
Powell was in Providence in Rhode Island. Actually always great
to see him up in the New England area. I
didn't get a chance to personally stop by and say, hey,
purple tie, looks good, but I got to, you know,
see his remarks you know on the streaming thing Internet.
That's the one on the on the internet, on the streamer.
(01:55):
And here's what I find kind of interesting right now.
Powell to me yesterday came off very much as hey,
you guys kind of missed the point that I was
trying to make last week, didn't you? In that I
think really what he was trying to say was, hey,
(02:15):
we're going to be cutting interest rates. We think that
there are going to be more cuts coming, but there's
no free lunch there. That probably means we're going to
lose a little bit on the price stability side of things.
And you guys got to understand that just because we're
prioritizing unemployment doesn't mean we're out of the woods elsewhere.
Is that a fair read to you of what he
(02:36):
said yesterday?
Speaker 3 (02:37):
I think he was putting into plain English, what is
embedded in all economic models, no matter what you conclude
based on them, certainly the models that the FED uses
and that the private sector uses to forecast what the
FED is going to do, which is that in the
short term, money is not neutral. When the FED prints money,
it has an effect on the economy. That effect can
(02:59):
result in upper pressure on wages and therefore prices, and
thank god money's not so called. Thank god money has
an effect on the economy. Otherwise the FED wouldn't be
able to do anything to help us during recessionary periods.
But Powell was pointing out that there is in the
short term a trade off between the pressures that push
wages and inflation up and the forces that can act
(03:20):
After a period of time, nobody knows exactly how long
to put the brakes on economic expansion. You cannot stimulate
the economy without risking pushing inflation up.
Speaker 2 (03:31):
You just can't.
Speaker 3 (03:32):
Sometimes it's so low or there's so much slack that
you have room to run. But unless there's a lot
more slack than traditional measures of labor market tightness suggest vacancies,
the unemployment rate, and some variations on those, then as
Powell said, we're probably going to result Their actions will
(03:53):
probably result in upward pressure on inflation, and inflation is
already uncomfortably high. RELAI tip to the FEDS goal.
Speaker 2 (04:02):
The piece that I think is really challenging right now
is that the more data that I see out there,
particularly on the housing side of things, we're really in
not a great spot with the housing sector, which tends
to be the marginal driver of economic activity in the
United States. I mean, when you think about, you know,
(04:24):
the difference between recession or not, I think people have
it in their heads sometimes that wow, you know, when
the economy goes into recession, it's, you know, this huge
drop in GDP and you know, everything just falls apart.
And normally it's a very modest dip in GDP. In
(04:44):
a lot of times, nominal GDP might not even go negative.
Speaker 3 (04:48):
Yeah, it's very rare, you know, it's happened in the
modern era when you add inflation.
Speaker 2 (04:52):
Yeah, I think it happened in two thousand and eight.
Speaker 3 (04:54):
Oh, like I said, it happened.
Speaker 2 (04:55):
In I think it did, but I don't remember. I
could be wrong. I think just because things got so
bad there. But it's usually just that, hey, you know,
because you know, inflation is typically running two to three percent.
You know, hey, if nominal GDP dips to one, then
real GDP goes negative, and that's kind of the recession
(05:15):
that you tend to get in a lot of cases.
And so really what we're talking about is, you know,
a difference of you know, a couple percentage points between hey,
the economy's fine and things are bad, and that couple
percentage points does result in usually, you know, a difference
in unemployment of like three to five percent. So like,
(05:36):
there's something that happens there. But when I look at
what's going on in housing right now, whether you look
at the publicly traded home builders, whether you're just looking
at the anecdotes that are coming out about housing, most
of the country now, aside from the Midwest and the Northeast,
(05:57):
is turning into a buyer's market pretty quickly. Now the
problem is because those buyers often need to sell their
property in order to buy the new one, because first
time home buyers are still largely priced out of these markets.
Is that because that the housing market is so locked up,
you still aren't seeing the volume of transactions rising. It's
(06:20):
just kind of pitter patters your a three point nine million,
nine annywized basis four point one million back to four million.
It's we're just floating around there, and we're still running
about twenty to twenty five percent below the normal pace
of housing activity that you'd like to see. So I
think ultimately where I got to this morning, and this
(06:43):
was kind of a scary thought for me quite honestly,
was look, the FED over the last year now has
cut the FED funds rate by one to quarter percent.
It hasn't done anything to help housing. You know, it's
it's done effectively.
Speaker 4 (07:00):
I see a thing.
Speaker 3 (07:01):
I see your point.
Speaker 2 (07:02):
And this is for a combination of reasons, some of
which I've mentioned, but also, hey, you still have property
taxes that are rising in much of the country. You
still have insurance premiums that are rising in much of
the country. You still have utility prices that are rising.
In much of the country. And so you know, the
piece that I think I look at here is Okay,
(07:24):
mortgage rates may have come down half a percent in
the last year, which means that a mortgage that had
you know, principal and interest payments coming in at two
thousand a month is now nineteen hundred a month. Okay, great,
you got a little bit more wiggle room. You know,
that's that's good. But if property taxes went up by
(07:45):
you know, three four hundred bucks for the year, and
your homeowner's insurance premiums went up by six seven hundred
bucks for the year, and your utility rates went up
by a few hundred bucks for the year, that savings
on the mortgage has I've been completely eaten up by
all the other stuff that just went up.
Speaker 5 (08:04):
And so.
Speaker 2 (08:07):
It's something where I look at and I go, look
what would it take to get housing actually moving again?
And you kind of start talking about, hey, if you're
really concerned about housing, you start to get kind of
aligned then with Stephen Moran's view of yeah, you might
need to get the Fed funds rate down to somewhere
in that two percent range before you finally, you know,
(08:30):
get things really budging The problem is, hey, what does
Fed funds at two percent? Due to the inflation side
of the equation, Because housing is not the only thing
that matters in the economy. It's the marginal driver of
economic activity, but all the other stuff you start trying
to juice demand with, you know, the FED funds rate
at two, do you end up with inflation at four?
Speaker 3 (08:53):
In short order, if you think we have a demand
problem that the FED can do something about, it's easiest
to think about the Feds sort of a thermostat. It
cools demand when it's too hot. It can stoke demand
when demand is flagging and the economy is thus slowing.
So the genesis of the slowdown in demand, if you
think there is one, might be housing. And if you
(09:15):
put a lot of weight on that proposition, housing slowing.
This is going to be bad for consumption and bad
for investment. There's an investment and a consumption exponent, a
component to it. They are both. They're two big components
of GDP. That's not to say they drive growth in
the long run. Those are two different things. But let's
keep this simple. Then, Yeah, I guess you could get
to we need to do something about demand. We need
(09:37):
to stimulate it, so you should lower the Fed funds
rate more. That's a reasonable point of view. His assumptions
are aggressive, and they conveniently align with the orders he
almost certainly got from the administration for which he still
works that put him where he is. That's what clouds
this and makes it especially complicated and borney. You cannot
overlook the political pressures right now. That's not to say
(09:58):
there might not be a good argument for cutting rates,
though I simply don't know. I do know inflation is
elevated on employment is still low, and GDP appears to
be growing at or above trend. Those facts which we
have in front of us, they're concrete, don't exactly scream
for an aggressive rate cut.
Speaker 2 (10:13):
Let's take a quick break, and when we return, let's
talk a little bit about what we've been seeing in
the market over the last four or five months.
Speaker 1 (10:22):
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Speaker 2 (11:29):
The S and P five hundred has now gone one
hundred and seven sessions without a two percent daily drop.
That is the longest stretch since last July. There have
been two longer stretches in the past decade, the other
one ending in early twenty eighteen. Both of those, the
last July one and the twenty eighteen one, lasted about
(11:49):
three hundred and fifty sessions each, which is over a year.
Remember there's about two hundred and fifty trading sessions in
a given year, and so you're talking close to a
year and a half. In both of those cases, Generally
you usually see a two percent drop happen in markets. Again,
there's no like hard and fast rule, but a two
(12:09):
percent down day if you look just at the distribution,
you know, you're talking about having a handful of them
in a given year, anywhere from you know, three to
ten is kind of the range in a normal year
that you would see. So it's there are a couple
of things here that this means. Obviously, the first is
that with markets, you might recall back in you know,
(12:32):
kind of that February through April time period this year.
One of the things that we tended to say a
lot was, look, when you have market volatility, it tends
to be get more market volatility. Volatility tends to cluster
in markets. Likewise, a lack of volatility tends to as well.
And some of this is a more recent phenomenon simply
because of different trading strategies and different investment strategies that
(12:58):
really focus on volatility target and things along those lines,
uh and and and that focus on you know, kind
of trying to have a mechanical construct for how volatility
appears in a portfolio, such that, hey, if you're seeing
more volatility in markets, it you know, directs the investment strategy. Okay,
you need to degross and pull back because you have
(13:20):
too much volume in your portfolio for you know, how
much you know you want to take on, and so
you can kind of spiral in both directions. So the
question on this obviously is hey, how long can this go?
Because no market has ever gone, you know, an infinite
number of days without a two percent dip. And the
(13:42):
question that is popping up in people's mind now is, hey,
it's been a while and stocks are at all time
his is this market getting, you know, really nervous? Is
this market getting really dangerous? You then get to this
piece from Barons, the S and P. Five hundred has
been on a tear history says this rally is due
for a pause, and to which I say, not necessarily.
And I'm not sitting here telling you that stocks never
(14:04):
go down. I'm not sitting here telling you this rally
is going to go on. But as I've said a lot,
with this whole AI phenomenon that's been the main driver
of these moves the last few years. Look, the tech
bubble had plenty of opportunities where you could have said, Okay,
maybe it's time for this to take a break, but
it ultimately didn't start breaking down for good until two
(14:26):
thousand and You had a whole lot more opportunities to
make money riding the bubble up than you did trying
to predict exactly when it was going to pop. And
I have no idea what you're going to get in
this case as well, in terms of when this market
actually gets along in the tooth, instead of people just
writing about, well, maybe it's a long in the tooth now.
Speaker 3 (14:48):
Yeah, As you can imagine, very sophisticated attempts have been
made to model the frequency of pickups in volatility. Knew
when markets were going to become more volatile, or if
you knew when markets were quote unquote do there would
be a way to parlay that into making money, to
(15:08):
turn that into an investment strategy. Similarly, people try to
predict recessions for similar reasons. There is no relationship though,
between the duration of an expansion and the occurrence of
a recession. It doesn't become more likely. For example, people
have looked at this over and over it's a natural
question to ask and over and over the idea that
(15:29):
the longer, for example, the economy expands, or the longer
a market goes without having a one or two percent dip,
the more likely one becomes, or the more severe the dip.
Eventually is no real reliable relationships there, And oh, who
would be interested in volatility? I wanted to make a
point about that too. If you're a business and you
have a pension fund, it's rare, but they're still out there.
(15:51):
You have to make contributions if your pension fund doesn't
grow at the rate you and your actuaries assumed. So
you're very concerned about market dips and volatility because volatility
swings both ways up and down because in the event
that you don't hit your assumed rate of return. As
a business, for your pension fund, you have to put
money into it that comes out of earnings. That affects you,
(16:14):
it affects shareholders. So for you and I and anybody
with a four oh one K, volatility is annoying. You'd
rather have a nice, steady eight to ten percent a year.
But that's not the way the world works. But for
some investors and all use pension funds as an example here,
it has real world consequences.
Speaker 2 (16:31):
Yeah, it's the you know, volatility. It is the price
of admission to get the rates of return that you
get in equity markets. You you cannot avoid it. You
can transform it, but it never goes away. It just
transforms and becomes you know, it shows up somewhere else
if you try to get rid of it. So I
(16:53):
think that when we look at what we're seeing in
this market, yes, stock prices are elevated, Yes they have
been on an absolute tear over the last five months. Yes,
volatility is very low, and those are all things that
can make you nervous. But the question that I think
you ask is, Okay, this was all true two or
(17:15):
three months ago and the S and P was six
to seven percent. Well yeah, yeah, so if it didn't
go down, then what's going to make it go down now?
And I'm not saying that it will or won't, because
I have no idea what the market's going to do tomorrow,
the week after, the month after, the year after, Like,
I have no idea, But it always bothers me to see,
(17:41):
you know, the writing that's out there either saying well
this is you know what we're seeing in these stats,
and that means that this is what comes next. Nothing ever,
always comes next in markets. A year ago we were
talking about the Psalm rule and how well there's you know,
never been a Sam rule trigger without a recession, and
lo and behold we had a saw rule trigger without
(18:02):
a recession at the end of last year. So I
think that if none of this is physics, I say
that a lot. But there are no you know, laws
of physics to markets. There are some you know, general
guidelines and things that you can pay attention to, but
there's nothing that's hard and fast. There's no this is
(18:23):
the speed of light for markets. There's no you know,
this is you know, how fast gravity on Earth causes
an object to fall for markets. There are some things
that you can pay attention to and things worth noting,
but ultimately understand that, hey, things can move in unexpected
ways and for longer than you expect in a lot
of cases.
Speaker 3 (18:44):
Yeah, the only rules you can almost take to the
bank are is that nothing can grow faster than the
economy forever, like our debt, for example, because eventually we
wouldn't be able to repay it. It would become the whole economy,
and that's true of stocks too. They can't grow faster
than the get growth rate forever. But you're you're right. Relationships.
The difficulty in predicting things is that past relationships change,
(19:09):
so you can't use the same factors that would have
been effective in the past to make predictions to make
them in the future because people figure it out and
it makes them useless.
Speaker 2 (19:16):
Let's take a quick break here. When we return, we're
gonna do a little bit of Wall Street Watch, and
then we're gonna be joined by Todd Lutsky from Cushing
and Dolan here to talk a little bit of a
state planning Next.
Speaker 1 (19:40):
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 6 (20:00):
We left to the SMP five hundred snapped a three
day winning streak, and we saw a slight pullback from
Nvidia yesterday.
Speaker 2 (20:07):
Markets are really quiet right now.
Speaker 6 (20:10):
The Dow is up only a tenth of a percenter
forty one points higher, SMP five hundred dipping by two points,
Nasdaq also dipping by merely eleven points. Russell two thousand
is edging higher and not much movement there. Ten year
Treasure reeled up one basis point at four point one
three three percent, and crude oil is up one point
(20:33):
six percent, trading it's sixty four dollars in forty three
cents barrel and Video shares, by the way, are currently flat.
Ali Baba, on the other hand, jumping over nine percent
after the Chinese tech company said it will boost spending
on artificial intelligence models and development to more than fifty
three billion dollars. Sticking with tech in AI, where Micron
(20:54):
reported it's revenue sword forty six percent last quarter, driven
by demand for AI developers. Mic Run's outlook for the
current quarter also beat expectations. However, Microun shares are down
nearly two percent. Meanwhile, shares in Lithium America is surging
eighty eight percent after Reuter's reported that the US is
negotiating a stake as large as ten percent in the
(21:17):
Canadian mining company. Lithium Americas is also developing a mine
with General Motors, sending shares in GM up by two percent,
and according to Bloomberg, Oracle is seeking to borrow fifteen
billion dollars from the US investment grade bond market. Today,
as the software maker ramps up it's spending to meet
the needs of the AI boom, Oracle shares are down
(21:41):
about two and a half percent. I'm Tucker Silva and
that is Wall Street Watch.
Speaker 1 (21:47):
This is Asked Todd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Tod Letsky is here to answer your
questions and help you plan for later life. Ask Todd
is presented by Cushing and Dolan, serving Massachusetts and New
England for more than thirty five years, helping families with
estate and tax planning, Medicaid planning, and probate law. Visit
(22:09):
Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:14):
As promised, We're joined now by Todd Lutsky for Asked Todd.
We got phone lines open so that you can ask
Todd your estate planning questions. The number is eight eight
eight to zero five two two six three. Get calling
to make sure that you get space in line, because
gollyg Wilkers, we can usually only get through two to
three questions.
Speaker 4 (22:35):
Uh.
Speaker 2 (22:36):
During the segment. Again, that number is eight eight eight
to zero five two two six three. One more time
that number is eight eight eight to zero five two
two sixty three. To ask Todd your estate planning questions,
mister Lutsky, how are you doing today?
Speaker 4 (22:54):
I am doing great. How about yourself?
Speaker 5 (22:57):
Uh?
Speaker 2 (22:57):
Doing pretty well? I? Uh, yesterday, actually I've robbed the
oversized board game store. Believe it or not. Yeah, it
was a huge risk I was willing to take. Right, toy,
I want to talk to you today about real estate
and passing real estate on to the next generation. Is
it possible to put a beneficiary on a piece of
(23:20):
real estate generally?
Speaker 4 (23:24):
Well, you know the answer is yes, you you absolutely
can do it. But I would never do it, and
it's not really adding a beneficiary. So let me sort
of say yes. But it's not really called adding a beneficiary.
Right You you add a beneficiary to like an IRA,
or to a you know, a four to oh one K,
(23:44):
or or even to an investment portfolio. Right, you can
add a beneficiary, but you can't really add a beneficiary
to a trust, I mean, to a piece of property.
But what people do, which is actually worse, is they
tend to put someone's name on it, right. I've actually
had people who would say, oh, in fact, I'm dealing
(24:06):
with one right now. It was strange. The siblings came
in and they said, we believe that one sibling is
now moved in with us. They have unfortunately some cognitive
issues and they need some help, and we just want
to make sure we can start doing some planning before
it gets too bad and protect this house. But we're
(24:27):
fairly certain that this house was meant to be given
to all four of us. Sure enough, I checked the deed.
It went all to the one sibling who's starting to
have the cognitive disability, into a trust by that person,
so that person owns it one hundred percent because it
was it did have more than one name on it,
and then they gave it to her. She then put
(24:49):
it into this trust, and this trust said for her
life she has one hundred percent ownership, and then when
she dies, it goes to these siblings. And I'm like,
right now, that's how it's owned. It's really her property. Oh,
we didn't mean that, But unfortunately, if she gets sick,
the government doesn't care that. You didn't mean that. That's
(25:11):
how it's owned. And if you try to transfer it
now because of an oopsie a couple of years ago,
we made a mistake. It's still going to look like
a five year waiting period for medicaid eligibility today. So
I said, here's how we have to sort of plan it.
But to my point, I didn't mean to get off
track on that, and I'm not sure I did. But
that's that's what you run into when you start talking
(25:32):
about real estate and naming a beneficiary, right, they don't.
They actually changed the name on the deed, and so
when you do that, they become an owner. So if
you say I decide to put my son on as
a fifty percent owner, you didn't have a beneficiary. You
gave them a fifty percent ownership. And why the ownership
(25:54):
is so different than beneficiary's designations is one, well, obviously
they own it. That kid gets divorced has a financial problem,
there's going to be a ramification because that asset is theirs.
They get sick, go to a nursing home, it's their asset,
So you can't hide that it's theirs. Perhaps you've made
(26:16):
a completed gift when you did this as well, so
you have that problem that goes with it. You've carried
over the basis for tax purposes, You've got those problems
because now if I bought it, but I bought it
for you know, two hundred thousand, and it's worth a million,
and I give it to my son half, well, his
(26:36):
basis is one hundred thousand, half of my basis. So
now I've trapped capital gains tax problems in doing this.
So you know, if I want to sell it, I can't.
I need two people, two different signatures, on and on
with the problems. Right, So great question, I think, chuck,
because people really confuse this. Let me quickly tell you
(26:58):
what a beneficiary does. An You don't have any of
those problems. Why, because they don't own it, they don't
get it until you die. They're not on the account.
They can't open the account, they can't take money out
of the account, they can't manage the account. They're just
a beneficiary when you die. So you don't have any
of those tax problems or any of those control problems.
(27:21):
So great question. I think it sometimes really needs to
be explained.
Speaker 2 (27:25):
Talking with Todd Lotski from the law firm of Cushing
and Dolan, still room on the phone lines for you
to ask your estate planning questions. Eight eight eight to
zero five two two sixty three. Is the number again?
That is eight eight eight two zero five two two
six three. Let's take a quick break right now, and
when we come back, we're gonna get right to your
(27:48):
questions with Todd. Then that phone number is eight eight
eight to zero five two two six three. One more time,
it's eight eight eight to zero five two two six three.
Speaker 1 (28:01):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (28:21):
Still a bit of room on the phone lines if
you want to ask Todd Lutsky any estate planning questions
eight eight eight to zero five two two six three.
That number again is eight eight eight to zero five
two two six three. Let's go to Mary in Buzzard's Bay. Mary,
you're on with Todd Lutsky.
Speaker 7 (28:42):
Hi there, can you hear me? Okay?
Speaker 2 (28:45):
We certainly can. What's your question for Todd?
Speaker 1 (28:47):
Mary?
Speaker 4 (28:48):
Okay?
Speaker 7 (28:49):
So what I explained I was, you know before you
go on, is uh soon we're gonna be my my
mom passed away about a year ago, and we're very
close to closing their property. And before her death, I've
got two remaining siblings. Originally there were five of us siblings.
Two passed away in twenty twenty. So the the three
(29:12):
of us we before our mom died, we each owned
twenty percent of our real estate, and the remaining forty
percent from the two siblings that passed away each went
back to ownership.
Speaker 5 (29:27):
Of my mother. So we know that we're going to
have to.
Speaker 7 (29:30):
Pay capital gains on the twenty percent that we each
you know, already owned. My question is on the forty
percent that soon will be divided amongst us three remaining
siblings in the family, do we have to pay capital.
Speaker 5 (29:46):
Gains on that?
Speaker 7 (29:48):
Unfortunately, you know, the house is worth a lot of money,
which is good. But the bad side is my father
when he gave us the twenty percent, you know, he
did not do it the right way. So we know
we're going to have we're going to get splammed on
capital gains on the twenty percent each. But again on
that the remainder of that will be divided amongst three
(30:11):
of us. How does that work? Well, we have to
pay a lot on capital gains on that or.
Speaker 4 (30:18):
Is it so? So stay on the phone and let
me ask you a couple of follow up questions, because
there was a lot of information that you just gave
and it's not easy to follow. I'm not adding up
the numbers correctly. So Dad gave you twenty percent, gave
twenty percent to two people before he died, so forty
percent was given to you and your sibling.
Speaker 7 (30:39):
Twenty percent each was given to my siblings and I
before our mother passed away.
Speaker 4 (30:47):
Before your mother died, You guys got there. There was
forty percent gifted.
Speaker 7 (30:51):
Correct, twenty percent each we owned prior to our mother's death.
Speaker 4 (30:58):
Well, the answer yet the answers forty. So the answer
is forty percent was gifted before your mother died. Twenty
to you, twenty to your sibling. That's forty percent correct.
Speaker 7 (31:10):
No, there's two we each got twenty percent. There's two
o them.
Speaker 4 (31:14):
That's percent. So twenty and twenty is forty percent, right.
I just can't understand the numbers. If you got twenty
percent and your sister got twenty percent, that's forty percent correct.
Speaker 5 (31:29):
No, what it is is, you're not hearing me. I
don't think well, twenty percent per person. There's two siblings
in myself, there's three of us that each got twenty
percent prior to our mothers percent.
Speaker 4 (31:43):
Okay, so that's sixty percent correct.
Speaker 5 (31:46):
And then what happened is my when my mom died,
well before, you know, before she died, two siblings you
know other two other two siblings passed away. There's still
three of us. I'm the family left. So my mother inherited.
Speaker 4 (32:02):
I got it. I got it now, Thank you very
much for that. That was very helpful. So now I
understand sixty percent was given away before mom died and
forty percent was not. But that forty percent is going
to these other people who have already died, so it's
(32:22):
going to probably pass down to their kids, and so
that forty percent is going to get a step up
in basis for capital gain tax purposes. So you're absolutely right,
but I think to help limit the capital gain. Let
me just ask you this, how was the property? Is
your dad alive?
Speaker 5 (32:43):
No, he died before my mother.
Speaker 4 (32:45):
So when when you when your dad died, the property
was owned jointly between your mom and.
Speaker 5 (32:49):
Your dad, right, it was joined, yes, but they had
they had put it in their kids' names. So it
wasn't joint all.
Speaker 4 (32:59):
Right, So then it wasn't joint. I was just trying
to get a step up in basis when Dad died.
But it sounds like it wasn't jointly owned by mom
and dad one hundred percent when Dad died, correct.
Speaker 5 (33:11):
I'm not sure that I do know that all of
us siblings. There were originally five siblings in the family,
and we all owned twenty percent each, so our parents
were actually off of it. So the five year looked
back and then what happened is unexpectedly two siblings passed away.
So then my mother got back ownership of two twenty
(33:35):
percent ownerships from two siblings who passed away.
Speaker 4 (33:39):
Oh, so it actually went back up a generation rather
than down. So it sounds like you guys gave it
all away. Mom and Dad gave it away, reserved a
life estate, and then one of the kids died. Two
of the kids died, and so a portion went back
up to mom, and that's why Mom ended up with
forty percent on her death, which actually turned out to
(34:01):
be tax beneficial. I'm not happy about two siblings dying,
but from a tax perspective, that forty percent will be
a step up. In basis, so it's going to help
you a little there, But you are right. This is
why we don't give things away, folks. This is exact
she you answer, almost answered your own question. But ultimately
(34:22):
we don't want to give things away during life because
you have this basis problem, right, and life estates give
you so little control while you're alive in terms of
selling it and moving and creditor issues. I don't love it,
but for here, it actually created a tax problem. So
you're right. When you go to sell this, sixty percent
(34:43):
will be capital gains at a higher rate whatever the
carryover basis was when you guys got the property from
your parents, and forty percent will get the fair market
value date of death as a basis. So interestingly enough,
the people who are inheriting that forty percent will have
(35:04):
probably zero capital gains tax and you guys will have
to pay capital gains tax. So it's unfortunate, but that's
how the pro rating will work out. So yeah, folks,
this is why great question, for sure, A great question
from Chuck. Real Estate's complicated, folks. In fact, estate planning
(35:25):
can be complicated, and that's why this guy this is
just for real estate. The thing we're looking at here
is iras and life insurance also extremely hard to deal
with with a state planning who do we name as
the beneficiary? They're complicated because they have an income tax
hit and an estate tax hit, so you've got to
(35:46):
plan for both. So in this case, you can name
the if you're in. If you're you know, over seventy three,
that's a requirement. But it's possible to name the estate
the beneficiary of an ir and shelter it for estate
taxes while at the same time protecting it from the
cost of long term care in the event you die
(36:08):
and just never go to a nursing home, so it
can be saved for the surviving spouse and can be
done without any adverse income tax consequences. Call and get
the guide, folks. That's what it's all about.
Speaker 8 (36:21):
Naming your estate and IRA beneficiary eight six six eight
four eight five six nine nine or Legal Exchange Show
dot com. Learn how to do it and how to
do it with IRA or with life insurance eight six
six eight four eight five six ninety nine or Legal
Exchange Show dot com.
Speaker 2 (36:43):
Mister Letsky, I appreciate you joining us today. Thank you
so much for the time.
Speaker 4 (36:48):
Always a pleasure. Thank you for having me.
Speaker 1 (36:51):
This has been asked on on the Financial Exchange Radio network,
asked on with Todd Letskey. Has been presented by Cushing
and Dolan, serving Massachusetts and New England for more than
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The views expressed in this segment are solely those of
(37:11):
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(00:20):
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donation today. This is the Financial Exchange with Chuck Sauta
(01:06):
and Mark Fandetti.
Speaker 2 (01:09):
Chuck, Mark and Tucker with you, and we kick things
off today with a little bit of a j. Powell discussion.
Last week, the Federal Reserve got together and Jay talked
to the gang and said, Hey, what do we want
to do about interest rates? And they all said, yeah,
we're going to cut them, and so the Fed cut
the Fed funds rate by a quarter percent last week. Yesterday,
(01:32):
Powell was in Providence in Rhode Island. Actually always great
to see him up in the New England area. I
didn't get a chance to personally stop by and say, hey,
purple tie, looks good, but I got to, you know,
see his remarks you know on the streaming thing Internet.
That's the one on the on the internet, on the streamer.
(01:55):
And here's what I find kind of interesting right now.
Powell to me yesterday came off very much as hey,
you guys kind of missed the point that I was
trying to make last week, didn't you? In that I
think really what he was trying to say was, hey,
(02:15):
we're going to be cutting interest rates. We think that
there are going to be more cuts coming, but there's
no free lunch there. That probably means we're going to
lose a little bit on the price stability side of things.
And you guys got to understand that just because we're
prioritizing unemployment doesn't mean we're out of the woods elsewhere.
Is that a fair read to you of what he
(02:36):
said yesterday?
Speaker 3 (02:37):
I think he was putting into plain English, what is
embedded in all economic models, no matter what you conclude
based on them, certainly the models that the FED uses
and that the private sector uses to forecast what the
FED is going to do, which is that in the
short term, money is not neutral. When the FED prints money,
it has an effect on the economy. That effect can
(02:59):
result in upper pressure on wages and therefore prices, and
thank god money's not so called. Thank god money has
an effect on the economy. Otherwise the FED wouldn't be
able to do anything to help us during recessionary periods.
But Powell was pointing out that there is in the
short term a trade off between the pressures that push
wages and inflation up and the forces that can act
(03:20):
After a period of time, nobody knows exactly how long
to put the brakes on economic expansion. You cannot stimulate
the economy without risking pushing inflation up.
Speaker 2 (03:31):
You just can't.
Speaker 3 (03:32):
Sometimes it's so low or there's so much slack that
you have room to run. But unless there's a lot
more slack than traditional measures of labor market tightness suggest vacancies,
the unemployment rate, and some variations on those, then as
Powell said, we're probably going to result Their actions will
(03:53):
probably result in upward pressure on inflation, and inflation is
already uncomfortably high. RELAI tip to the FEDS goal.
Speaker 2 (04:02):
The piece that I think is really challenging right now
is that the more data that I see out there,
particularly on the housing side of things, we're really in
not a great spot with the housing sector, which tends
to be the marginal driver of economic activity in the
United States. I mean, when you think about, you know,
(04:24):
the difference between recession or not, I think people have
it in their heads sometimes that wow, you know, when
the economy goes into recession, it's, you know, this huge
drop in GDP and you know, everything just falls apart.
And normally it's a very modest dip in GDP. In
(04:44):
a lot of times, nominal GDP might not even go negative.
Speaker 3 (04:48):
Yeah, it's very rare, you know, it's happened in the
modern era when you add inflation.
Speaker 2 (04:52):
Yeah, I think it happened in two thousand and eight.
Speaker 3 (04:54):
Oh, like I said, it happened.
Speaker 2 (04:55):
In I think it did, but I don't remember. I
could be wrong. I think just because things got so
bad there. But it's usually just that, hey, you know,
because you know, inflation is typically running two to three percent.
You know, hey, if nominal GDP dips to one, then
real GDP goes negative, and that's kind of the recession
(05:15):
that you tend to get in a lot of cases.
And so really what we're talking about is, you know,
a difference of you know, a couple percentage points between hey,
the economy's fine and things are bad, and that couple
percentage points does result in usually, you know, a difference
in unemployment of like three to five percent. So like,
(05:36):
there's something that happens there. But when I look at
what's going on in housing right now, whether you look
at the publicly traded home builders, whether you're just looking
at the anecdotes that are coming out about housing, most
of the country now, aside from the Midwest and the Northeast,
(05:57):
is turning into a buyer's market pretty quickly. Now the
problem is because those buyers often need to sell their
property in order to buy the new one, because first
time home buyers are still largely priced out of these markets.
Is that because that the housing market is so locked up,
you still aren't seeing the volume of transactions rising. It's
(06:20):
just kind of pitter patters your a three point nine million,
nine annywized basis four point one million back to four million.
It's we're just floating around there, and we're still running
about twenty to twenty five percent below the normal pace
of housing activity that you'd like to see. So I
think ultimately where I got to this morning, and this
(06:43):
was kind of a scary thought for me quite honestly,
was look, the FED over the last year now has
cut the FED funds rate by one to quarter percent.
It hasn't done anything to help housing. You know, it's
it's done effectively.
Speaker 4 (07:00):
I see a thing.
Speaker 3 (07:01):
I see your point.
Speaker 2 (07:02):
And this is for a combination of reasons, some of
which I've mentioned, but also, hey, you still have property
taxes that are rising in much of the country. You
still have insurance premiums that are rising in much of
the country. You still have utility prices that are rising.
In much of the country. And so you know, the
piece that I think I look at here is Okay,
(07:24):
mortgage rates may have come down half a percent in
the last year, which means that a mortgage that had
you know, principal and interest payments coming in at two
thousand a month is now nineteen hundred a month. Okay, great,
you got a little bit more wiggle room. You know,
that's that's good. But if property taxes went up by
(07:45):
you know, three four hundred bucks for the year, and
your homeowner's insurance premiums went up by six seven hundred
bucks for the year, and your utility rates went up
by a few hundred bucks for the year, that savings
on the mortgage has I've been completely eaten up by
all the other stuff that just went up.
Speaker 5 (08:04):
And so.
Speaker 2 (08:07):
It's something where I look at and I go, look
what would it take to get housing actually moving again?
And you kind of start talking about, hey, if you're
really concerned about housing, you start to get kind of
aligned then with Stephen Moran's view of yeah, you might
need to get the Fed funds rate down to somewhere
in that two percent range before you finally, you know,
(08:30):
get things really budging The problem is, hey, what does
Fed funds at two percent? Due to the inflation side
of the equation, Because housing is not the only thing
that matters in the economy. It's the marginal driver of
economic activity, but all the other stuff you start trying
to juice demand with, you know, the FED funds rate
at two, do you end up with inflation at four?
Speaker 3 (08:53):
In short order, if you think we have a demand
problem that the FED can do something about, it's easiest
to think about the Feds sort of a thermostat. It
cools demand when it's too hot. It can stoke demand
when demand is flagging and the economy is thus slowing.
So the genesis of the slowdown in demand, if you
think there is one, might be housing. And if you
(09:15):
put a lot of weight on that proposition, housing slowing.
This is going to be bad for consumption and bad
for investment. There's an investment and a consumption exponent, a
component to it. They are both. They're two big components
of GDP. That's not to say they drive growth in
the long run. Those are two different things. But let's
keep this simple. Then, Yeah, I guess you could get
to we need to do something about demand. We need
(09:37):
to stimulate it, so you should lower the Fed funds
rate more. That's a reasonable point of view. His assumptions
are aggressive, and they conveniently align with the orders he
almost certainly got from the administration for which he still
works that put him where he is. That's what clouds
this and makes it especially complicated and borney. You cannot
overlook the political pressures right now. That's not to say
(09:58):
there might not be a good argument for cutting rates,
though I simply don't know. I do know inflation is
elevated on employment is still low, and GDP appears to
be growing at or above trend. Those facts which we
have in front of us, they're concrete, don't exactly scream
for an aggressive rate cut.
Speaker 2 (10:13):
Let's take a quick break, and when we return, let's
talk a little bit about what we've been seeing in
the market over the last four or five months.
Speaker 1 (10:22):
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Speaker 6 (10:52):
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Speaker 2 (11:29):
The S and P five hundred has now gone one
hundred and seven sessions without a two percent daily drop.
That is the longest stretch since last July. There have
been two longer stretches in the past decade, the other
one ending in early twenty eighteen. Both of those, the
last July one and the twenty eighteen one, lasted about
(11:49):
three hundred and fifty sessions each, which is over a year.
Remember there's about two hundred and fifty trading sessions in
a given year, and so you're talking close to a
year and a half. In both of those cases, Generally
you usually see a two percent drop happen in markets. Again,
there's no like hard and fast rule, but a two
(12:09):
percent down day if you look just at the distribution,
you know, you're talking about having a handful of them
in a given year, anywhere from you know, three to
ten is kind of the range in a normal year
that you would see. So it's there are a couple
of things here that this means. Obviously, the first is
that with markets, you might recall back in you know,
(12:32):
kind of that February through April time period this year.
One of the things that we tended to say a
lot was, look, when you have market volatility, it tends
to be get more market volatility. Volatility tends to cluster
in markets. Likewise, a lack of volatility tends to as well.
And some of this is a more recent phenomenon simply
because of different trading strategies and different investment strategies that
(12:58):
really focus on volatility target and things along those lines,
uh and and and that focus on you know, kind
of trying to have a mechanical construct for how volatility
appears in a portfolio, such that, hey, if you're seeing
more volatility in markets, it you know, directs the investment strategy. Okay,
you need to degross and pull back because you have
(13:20):
too much volume in your portfolio for you know, how
much you know you want to take on, and so
you can kind of spiral in both directions. So the
question on this obviously is hey, how long can this go?
Because no market has ever gone, you know, an infinite
number of days without a two percent dip. And the
(13:42):
question that is popping up in people's mind now is, hey,
it's been a while and stocks are at all time
his is this market getting, you know, really nervous? Is
this market getting really dangerous? You then get to this
piece from Barons, the S and P. Five hundred has
been on a tear history says this rally is due
for a pause, and to which I say, not necessarily.
And I'm not sitting here telling you that stocks never
(14:04):
go down. I'm not sitting here telling you this rally
is going to go on. But as I've said a lot,
with this whole AI phenomenon that's been the main driver
of these moves the last few years. Look, the tech
bubble had plenty of opportunities where you could have said, Okay,
maybe it's time for this to take a break, but
it ultimately didn't start breaking down for good until two
(14:26):
thousand and You had a whole lot more opportunities to
make money riding the bubble up than you did trying
to predict exactly when it was going to pop. And
I have no idea what you're going to get in
this case as well, in terms of when this market
actually gets along in the tooth, instead of people just
writing about, well, maybe it's a long in the tooth now.
Speaker 3 (14:48):
Yeah, As you can imagine, very sophisticated attempts have been
made to model the frequency of pickups in volatility. Knew
when markets were going to become more volatile, or if
you knew when markets were quote unquote do there would
be a way to parlay that into making money, to
(15:08):
turn that into an investment strategy. Similarly, people try to
predict recessions for similar reasons. There is no relationship though,
between the duration of an expansion and the occurrence of
a recession. It doesn't become more likely. For example, people
have looked at this over and over it's a natural
question to ask and over and over the idea that
(15:29):
the longer, for example, the economy expands, or the longer
a market goes without having a one or two percent dip,
the more likely one becomes, or the more severe the dip.
Eventually is no real reliable relationships there, And oh, who
would be interested in volatility? I wanted to make a
point about that too. If you're a business and you
have a pension fund, it's rare, but they're still out there.
(15:51):
You have to make contributions if your pension fund doesn't
grow at the rate you and your actuaries assumed. So
you're very concerned about market dips and volatility because volatility
swings both ways up and down because in the event
that you don't hit your assumed rate of return. As
a business, for your pension fund, you have to put
money into it that comes out of earnings. That affects you,
(16:14):
it affects shareholders. So for you and I and anybody
with a four oh one K, volatility is annoying. You'd
rather have a nice, steady eight to ten percent a year.
But that's not the way the world works. But for
some investors and all use pension funds as an example here,
it has real world consequences.
Speaker 2 (16:31):
Yeah, it's the you know, volatility. It is the price
of admission to get the rates of return that you
get in equity markets. You you cannot avoid it. You
can transform it, but it never goes away. It just
transforms and becomes you know, it shows up somewhere else
if you try to get rid of it. So I
(16:53):
think that when we look at what we're seeing in
this market, yes, stock prices are elevated, Yes they have
been on an absolute tear over the last five months. Yes,
volatility is very low, and those are all things that
can make you nervous. But the question that I think
you ask is, Okay, this was all true two or
(17:15):
three months ago and the S and P was six
to seven percent. Well yeah, yeah, so if it didn't
go down, then what's going to make it go down now?
And I'm not saying that it will or won't, because
I have no idea what the market's going to do tomorrow,
the week after, the month after, the year after, Like,
I have no idea, But it always bothers me to see,
(17:41):
you know, the writing that's out there either saying well
this is you know what we're seeing in these stats,
and that means that this is what comes next. Nothing ever,
always comes next in markets. A year ago we were
talking about the Psalm rule and how well there's you know,
never been a Sam rule trigger without a recession, and
lo and behold we had a saw rule trigger without
(18:02):
a recession at the end of last year. So I
think that if none of this is physics, I say
that a lot. But there are no you know, laws
of physics to markets. There are some you know, general
guidelines and things that you can pay attention to, but
there's nothing that's hard and fast. There's no this is
(18:23):
the speed of light for markets. There's no you know,
this is you know, how fast gravity on Earth causes
an object to fall for markets. There are some things
that you can pay attention to and things worth noting,
but ultimately understand that, hey, things can move in unexpected
ways and for longer than you expect in a lot
of cases.
Speaker 3 (18:44):
Yeah, the only rules you can almost take to the
bank are is that nothing can grow faster than the
economy forever, like our debt, for example, because eventually we
wouldn't be able to repay it. It would become the whole economy,
and that's true of stocks too. They can't grow faster
than the get growth rate forever. But you're you're right. Relationships.
The difficulty in predicting things is that past relationships change,
(19:09):
so you can't use the same factors that would have
been effective in the past to make predictions to make
them in the future because people figure it out and
it makes them useless.
Speaker 2 (19:16):
Let's take a quick break here. When we return, we're
gonna do a little bit of Wall Street Watch, and
then we're gonna be joined by Todd Lutsky from Cushing
and Dolan here to talk a little bit of a
state planning Next.
Speaker 1 (19:40):
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 6 (20:00):
We left to the SMP five hundred snapped a three
day winning streak, and we saw a slight pullback from
Nvidia yesterday.
Speaker 2 (20:07):
Markets are really quiet right now.
Speaker 6 (20:10):
The Dow is up only a tenth of a percenter
forty one points higher, SMP five hundred dipping by two points,
Nasdaq also dipping by merely eleven points. Russell two thousand
is edging higher and not much movement there. Ten year
Treasure reeled up one basis point at four point one
three three percent, and crude oil is up one point
(20:33):
six percent, trading it's sixty four dollars in forty three
cents barrel and Video shares, by the way, are currently flat.
Ali Baba, on the other hand, jumping over nine percent
after the Chinese tech company said it will boost spending
on artificial intelligence models and development to more than fifty
three billion dollars. Sticking with tech in AI, where Micron
(20:54):
reported it's revenue sword forty six percent last quarter, driven
by demand for AI developers. Mic Run's outlook for the
current quarter also beat expectations. However, Microun shares are down
nearly two percent. Meanwhile, shares in Lithium America is surging
eighty eight percent after Reuter's reported that the US is
negotiating a stake as large as ten percent in the
(21:17):
Canadian mining company. Lithium Americas is also developing a mine
with General Motors, sending shares in GM up by two percent,
and according to Bloomberg, Oracle is seeking to borrow fifteen
billion dollars from the US investment grade bond market. Today,
as the software maker ramps up it's spending to meet
the needs of the AI boom, Oracle shares are down
(21:41):
about two and a half percent. I'm Tucker Silva and
that is Wall Street Watch.
Speaker 1 (21:47):
This is Asked Todd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Tod Letsky is here to answer your
questions and help you plan for later life. Ask Todd
is presented by Cushing and Dolan, serving Massachusetts and New
England for more than thirty five years, helping families with
estate and tax planning, Medicaid planning, and probate law. Visit
(22:09):
Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:14):
As promised, We're joined now by Todd Lutsky for Asked Todd.
We got phone lines open so that you can ask
Todd your estate planning questions. The number is eight eight
eight to zero five two two six three. Get calling
to make sure that you get space in line, because
gollyg Wilkers, we can usually only get through two to
three questions.
Speaker 4 (22:35):
Uh.
Speaker 2 (22:36):
During the segment. Again, that number is eight eight eight
to zero five two two six three. One more time
that number is eight eight eight to zero five two
two sixty three. To ask Todd your estate planning questions,
mister Lutsky, how are you doing today?
Speaker 4 (22:54):
I am doing great. How about yourself?
Speaker 5 (22:57):
Uh?
Speaker 2 (22:57):
Doing pretty well? I? Uh, yesterday, actually I've robbed the
oversized board game store. Believe it or not. Yeah, it
was a huge risk I was willing to take. Right, toy,
I want to talk to you today about real estate
and passing real estate on to the next generation. Is
it possible to put a beneficiary on a piece of
(23:20):
real estate generally?
Speaker 4 (23:24):
Well, you know the answer is yes, you you absolutely
can do it. But I would never do it, and
it's not really adding a beneficiary. So let me sort
of say yes. But it's not really called adding a beneficiary.
Right You you add a beneficiary to like an IRA,
or to a you know, a four to oh one K,
(23:44):
or or even to an investment portfolio. Right, you can
add a beneficiary, but you can't really add a beneficiary
to a trust, I mean, to a piece of property.
But what people do, which is actually worse, is they
tend to put someone's name on it, right. I've actually
had people who would say, oh, in fact, I'm dealing
(24:06):
with one right now. It was strange. The siblings came
in and they said, we believe that one sibling is
now moved in with us. They have unfortunately some cognitive
issues and they need some help, and we just want
to make sure we can start doing some planning before
it gets too bad and protect this house. But we're
(24:27):
fairly certain that this house was meant to be given
to all four of us. Sure enough, I checked the deed.
It went all to the one sibling who's starting to
have the cognitive disability, into a trust by that person,
so that person owns it one hundred percent because it
was it did have more than one name on it,
and then they gave it to her. She then put
(24:49):
it into this trust, and this trust said for her
life she has one hundred percent ownership, and then when
she dies, it goes to these siblings. And I'm like,
right now, that's how it's owned. It's really her property. Oh,
we didn't mean that, But unfortunately, if she gets sick,
the government doesn't care that. You didn't mean that. That's
(25:11):
how it's owned. And if you try to transfer it
now because of an oopsie a couple of years ago,
we made a mistake. It's still going to look like
a five year waiting period for medicaid eligibility today. So
I said, here's how we have to sort of plan it.
But to my point, I didn't mean to get off
track on that, and I'm not sure I did. But
that's that's what you run into when you start talking
(25:32):
about real estate and naming a beneficiary, right, they don't.
They actually changed the name on the deed, and so
when you do that, they become an owner. So if
you say I decide to put my son on as
a fifty percent owner, you didn't have a beneficiary. You
gave them a fifty percent ownership. And why the ownership
(25:54):
is so different than beneficiary's designations is one, well, obviously
they own it. That kid gets divorced has a financial problem,
there's going to be a ramification because that asset is theirs.
They get sick, go to a nursing home, it's their asset,
So you can't hide that it's theirs. Perhaps you've made
(26:16):
a completed gift when you did this as well, so
you have that problem that goes with it. You've carried
over the basis for tax purposes, You've got those problems
because now if I bought it, but I bought it
for you know, two hundred thousand, and it's worth a million,
and I give it to my son half, well, his
(26:36):
basis is one hundred thousand, half of my basis. So
now I've trapped capital gains tax problems in doing this.
So you know, if I want to sell it, I can't.
I need two people, two different signatures, on and on
with the problems. Right, So great question, I think, chuck,
because people really confuse this. Let me quickly tell you
(26:58):
what a beneficiary does. An You don't have any of
those problems. Why, because they don't own it, they don't
get it until you die. They're not on the account.
They can't open the account, they can't take money out
of the account, they can't manage the account. They're just
a beneficiary when you die. So you don't have any
of those tax problems or any of those control problems.
(27:21):
So great question. I think it sometimes really needs to
be explained.
Speaker 2 (27:25):
Talking with Todd Lotski from the law firm of Cushing
and Dolan, still room on the phone lines for you
to ask your estate planning questions. Eight eight eight to
zero five two two sixty three. Is the number again?
That is eight eight eight two zero five two two
six three. Let's take a quick break right now, and
when we come back, we're gonna get right to your
(27:48):
questions with Todd. Then that phone number is eight eight
eight to zero five two two six three. One more time,
it's eight eight eight to zero five two two six three.
Speaker 1 (28:01):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (28:21):
Still a bit of room on the phone lines if
you want to ask Todd Lutsky any estate planning questions
eight eight eight to zero five two two six three.
That number again is eight eight eight to zero five
two two six three. Let's go to Mary in Buzzard's Bay. Mary,
you're on with Todd Lutsky.
Speaker 7 (28:42):
Hi there, can you hear me? Okay?
Speaker 2 (28:45):
We certainly can. What's your question for Todd?
Speaker 1 (28:47):
Mary?
Speaker 4 (28:48):
Okay?
Speaker 7 (28:49):
So what I explained I was, you know before you
go on, is uh soon we're gonna be my my
mom passed away about a year ago, and we're very
close to closing their property. And before her death, I've
got two remaining siblings. Originally there were five of us siblings.
Two passed away in twenty twenty. So the the three
(29:12):
of us we before our mom died, we each owned
twenty percent of our real estate, and the remaining forty
percent from the two siblings that passed away each went
back to ownership.
Speaker 5 (29:27):
Of my mother. So we know that we're going to
have to.
Speaker 7 (29:30):
Pay capital gains on the twenty percent that we each
you know, already owned. My question is on the forty
percent that soon will be divided amongst us three remaining
siblings in the family, do we have to pay capital.
Speaker 5 (29:46):
Gains on that?
Speaker 7 (29:48):
Unfortunately, you know, the house is worth a lot of money,
which is good. But the bad side is my father
when he gave us the twenty percent, you know, he
did not do it the right way. So we know
we're going to have we're going to get splammed on
capital gains on the twenty percent each. But again on
that the remainder of that will be divided amongst three
(30:11):
of us. How does that work? Well, we have to
pay a lot on capital gains on that or.
Speaker 4 (30:18):
Is it so? So stay on the phone and let
me ask you a couple of follow up questions, because
there was a lot of information that you just gave
and it's not easy to follow. I'm not adding up
the numbers correctly. So Dad gave you twenty percent, gave
twenty percent to two people before he died, so forty
percent was given to you and your sibling.
Speaker 7 (30:39):
Twenty percent each was given to my siblings and I
before our mother passed away.
Speaker 4 (30:47):
Before your mother died, You guys got there. There was
forty percent gifted.
Speaker 7 (30:51):
Correct, twenty percent each we owned prior to our mother's death.
Speaker 4 (30:58):
Well, the answer yet the answers forty. So the answer
is forty percent was gifted before your mother died. Twenty
to you, twenty to your sibling. That's forty percent correct.
Speaker 7 (31:10):
No, there's two we each got twenty percent. There's two
o them.
Speaker 4 (31:14):
That's percent. So twenty and twenty is forty percent, right.
I just can't understand the numbers. If you got twenty
percent and your sister got twenty percent, that's forty percent correct.
Speaker 5 (31:29):
No, what it is is, you're not hearing me. I
don't think well, twenty percent per person. There's two siblings
in myself, there's three of us that each got twenty
percent prior to our mothers percent.
Speaker 4 (31:43):
Okay, so that's sixty percent correct.
Speaker 5 (31:46):
And then what happened is my when my mom died,
well before, you know, before she died, two siblings you
know other two other two siblings passed away. There's still
three of us. I'm the family left. So my mother inherited.
Speaker 4 (32:02):
I got it. I got it now, Thank you very
much for that. That was very helpful. So now I
understand sixty percent was given away before mom died and
forty percent was not. But that forty percent is going
to these other people who have already died, so it's
(32:22):
going to probably pass down to their kids, and so
that forty percent is going to get a step up
in basis for capital gain tax purposes. So you're absolutely right,
but I think to help limit the capital gain. Let
me just ask you this, how was the property? Is
your dad alive?
Speaker 5 (32:43):
No, he died before my mother.
Speaker 4 (32:45):
So when when you when your dad died, the property
was owned jointly between your mom and.
Speaker 5 (32:49):
Your dad, right, it was joined, yes, but they had
they had put it in their kids' names. So it
wasn't joint all.
Speaker 4 (32:59):
Right, So then it wasn't joint. I was just trying
to get a step up in basis when Dad died.
But it sounds like it wasn't jointly owned by mom
and dad one hundred percent when Dad died, correct.
Speaker 5 (33:11):
I'm not sure that I do know that all of
us siblings. There were originally five siblings in the family,
and we all owned twenty percent each, so our parents
were actually off of it. So the five year looked
back and then what happened is unexpectedly two siblings passed away.
So then my mother got back ownership of two twenty
(33:35):
percent ownerships from two siblings who passed away.
Speaker 4 (33:39):
Oh, so it actually went back up a generation rather
than down. So it sounds like you guys gave it
all away. Mom and Dad gave it away, reserved a
life estate, and then one of the kids died. Two
of the kids died, and so a portion went back
up to mom, and that's why Mom ended up with
forty percent on her death, which actually turned out to
(34:01):
be tax beneficial. I'm not happy about two siblings dying,
but from a tax perspective, that forty percent will be
a step up. In basis, so it's going to help
you a little there, But you are right. This is
why we don't give things away, folks. This is exact
she you answer, almost answered your own question. But ultimately
(34:22):
we don't want to give things away during life because
you have this basis problem, right, and life estates give
you so little control while you're alive in terms of
selling it and moving and creditor issues. I don't love it,
but for here, it actually created a tax problem. So
you're right. When you go to sell this, sixty percent
(34:43):
will be capital gains at a higher rate whatever the
carryover basis was when you guys got the property from
your parents, and forty percent will get the fair market
value date of death as a basis. So interestingly enough,
the people who are inheriting that forty percent will have
(35:04):
probably zero capital gains tax and you guys will have
to pay capital gains tax. So it's unfortunate, but that's
how the pro rating will work out. So yeah, folks,
this is why great question, for sure, A great question
from Chuck. Real Estate's complicated, folks. In fact, estate planning
(35:25):
can be complicated, and that's why this guy this is
just for real estate. The thing we're looking at here
is iras and life insurance also extremely hard to deal
with with a state planning who do we name as
the beneficiary? They're complicated because they have an income tax
hit and an estate tax hit, so you've got to
(35:46):
plan for both. So in this case, you can name
the if you're in. If you're you know, over seventy three,
that's a requirement. But it's possible to name the estate
the beneficiary of an ir and shelter it for estate
taxes while at the same time protecting it from the
cost of long term care in the event you die
(36:08):
and just never go to a nursing home, so it
can be saved for the surviving spouse and can be
done without any adverse income tax consequences. Call and get
the guide, folks. That's what it's all about.
Speaker 8 (36:21):
Naming your estate and IRA beneficiary eight six six eight
four eight five six nine nine or Legal Exchange Show
dot com. Learn how to do it and how to
do it with IRA or with life insurance eight six
six eight four eight five six ninety nine or Legal
Exchange Show dot com.
Speaker 2 (36:43):
Mister Letsky, I appreciate you joining us today. Thank you
so much for the time.
Speaker 4 (36:48):
Always a pleasure. Thank you for having me.
Speaker 1 (36:51):
This has been asked on on the Financial Exchange Radio network,
asked on with Todd Letskey. Has been presented by Cushing
and Dolan, serving Massachusetts and New England for more than
in thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(37:11):
Cushing and Dolan Armstrong Advisory. He 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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