May 13, 2026 • 38 mins
Markets are beginning to price in a world where inflation stays higher for much longer than investors expected.
Chuck Zodda and Marc Fandetti break down the latest inflation data as producer prices surge to their highest levels in years and global bond markets signal growing concern about structurally higher inflation and interest rates.
Also covered:
Chuck Zodda and Marc Fandetti break down the latest inflation data as producer prices surge to their highest levels in years and global bond markets signal growing concern about structurally higher inflation and interest rates.
Also covered:
- Why investors are becoming more worried about long-term inflation
- How rising gas prices are erasing wage gains for consumers
- The growing fear of a return to 1970s-style stagflation
- Why the Fed may not have the political ability to fight inflation aggressively
- How the Strait of Hormuz crisis could push inflation even higher this summer
- Why markets have become political “utilities” over the last two decades
- The debate over whether higher wages could trigger another inflation spiral
- Walmart cuts corporate jobs amid broader economic uncertainty
- Why sovereign bond markets around the world are flashing warning signs
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Episode Transcript
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Speaker 1 (00:00):
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(00:42):
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(01:05):
Zada and Mark Fandetti.
Speaker 2 (01:10):
It's Chuck, Mark and Soccer with you today. And this
morning at eight thirty am Eastern time, we got the
Producer Price Index data for the month of April. Expectations
were that headline was going to come in at point
five percent, Core was going to come in at point three. Instead,
we got one point four and one point zero percent, respectively,
(01:33):
which pushed headline up to six percent for the last
twelve months now and core PPI up to five point two. Now.
I do like to point out that the PPI is
the most misunderstood price index in finance, in that most
(01:54):
people think that PPI is tracking the cost of making stuff.
People think it's like, oh, that means that producers are
paying more for their stuff, and so that's going to
mean that CPI rises later. No, that's not how it works.
What it actually is is the PPI is you got
(02:16):
to look at it backwards, Okay. CPI is what are
you paying for things? PPI is what are domestic producers
receiving for their production. So it's reversed first and foremost.
The other thing that you have to remember the PPI
(02:36):
excludes imports, So this is a big thing. In the
last year because there's nothing terrif for related that gets
into PPI. It's only measuring domestic producers. So you can
have some blind spots that show up as a result
of that. But so again, don't think that this means, oh,
(02:57):
that means that like CPI is going to be one
percent next month or something. No, it doesn't work like that.
It's just giving you another look at, you know, how
costs are being passed through the system, and it's from
a different point of view, and you have to accept
that for what it is. But he got this hot
inflation report, and you know, I went over to Mark
(03:19):
about a half hour after that as I was kind
of digesting it, and I said, Mark, I want to,
you know, just kind of look at some things when
we talk about you know, longer term inflation and break
evens and things along those lines, and you know, what's
going on with tips and what are they telling us
about inflation? And without even talking to Tucker, Tucker ended
(03:40):
up putting a piece from the Wall Street Journal titled
Wall Street is getting more Anxious about long term inflation
as the top piece in our stack. Despite us having
no communication about marketized conversation, this just ended up there,
which means that Tucker and I are very much just
vibing right now. It's the vibes are good.
Speaker 3 (04:00):
Also, it's the biggest story in the world.
Speaker 2 (04:02):
Well, here's the thing. Is no offense talking, Yeah, none taken.
Excuse me, no, No, it's fine. I appreciate that, backhanded, complimentary,
backhanded just face slapped to Tucker. I had to actually,
it's it's nice. It's kind of like moron wouldn't have
put this first in the stack today. There's kind of
(04:24):
the implication. But uh, I digress. Here's the thing. Uh, globally,
sovereign bonds have been melting down for a little while now,
Like if if if you were to go and take
a look at the Japanese tenuere treasury just as an example, Uh,
it's it's a two point five to five percent right now.
(04:47):
Five years ago it was a negative point one percent,
and really even in the last year, it's gone from
like one and a quarter last February to two five five. Now. Uh,
if you look at the UK and their ten year
yield lot going on right now with you know, some
issues that they're seeing. UK ten year yield's gone from
(05:08):
again about zero percent five years ago up to five
oh four. Now in the last you know, year and
a half, it's gone from three to eight to four
up to this five oh four reading. So this is
not a US only issue, but globally, sovereign bonds are
kind of sniffing out. Hey, you guys are trying to
make the math math. But the only way that the
(05:29):
math actually maths is if yields go up. Because inflation
is running structurally hotter than it was before. Population growth
is slower, which means deficits have to be bigger in
order to pay for all this. No, we're not gonna
be able to just figure this out and paper it over.
Interest rates are gonna have to move up, and you're
seeing it to a more muted effect in the US
(05:51):
right now, I think probably because with oil still being
priced globally in dollars, there's a lot of money flowing
into dollars in order to buy higher priced oil at
the moment. But as soon as you know that reverses,
I think that you could end up seeing some some
real problems with long bonds in the United States because
(06:13):
long term inflation, I gotta tell you, I'm very skeptical
gets back into that two percent range anytime soon. You
might have pockets where you get down into like two
and a half like we did last year. But I
think fundamentally, structurally, you are, you know, heading towards a
period where long term inflation probably is close to three
to three and a half than two. That's not, you know, crazy,
(06:36):
that's not something that is you know, horrible, horrible, horrible,
but it's a fundamental difference from the mid nineties through
late twenty tens. And I think you need to understand
what that means as far as the economy, asset classes
and what can come from that.
Speaker 3 (06:52):
Yeah, not without a huge opening in economic slack. And
even then that's not a guarantee if expectations swamp the
slow component in the inflation process. And I'll just say
it in plain English, Normally a recession gets inflation down,
but if people expect inflation to continue, you get stagflation.
The stag being stagnation, inflation being the inflation part. That
(07:12):
term was invented in the nineteen seventies because we had
that paradoxical outcome. Everybody expected inflation to come down in
seventy three seventy four. It did not. We realize later
that you need to be aware of the expectations. Part
are expectations people in firms, of the inflation humans, Yeah, yeah,
of the inflation process. FED credibility plays into that as well,
(07:35):
something I imagine we'll be talking about today.
Speaker 2 (07:37):
So what you're seeing is when you take a look
at how to measure this, they're all different, you know,
financial instruments out there. There are inflation swaps, there are
break evens on treasuries indexed for inflation versus treasuries that
are not. You've got all these different you know, items
(07:58):
that you can look at in order to say, hey,
how is the market pricing in uh inflation right now?
And when you look at them, the thing that you're
starting to see priced in is higher for longer inflation Now,
higher for longer doesn't mean that we're going to go
back to you know, nine percent inflation like we saw
in twenty twenty two. But I gotta tell you this, Look,
(08:22):
this is still going to depend at least you know,
next couple of years. It's going to depend on what
happens with the straight hornor moves and when it reopens
into what capacity it's you know, there is a path
where if you want to, like look at some of
the really gnarly stuff. There's a path where inflation, does
you know, move well beyond five percent annually if the
(08:44):
straight of horror moves remains close to any extended period,
you know, through this summer.
Speaker 3 (08:48):
I mean, there is another path the FED could kill.
You know, It's interesting Germany didn't have the seventies inflation
that we had. Japan I think escaped it too, So
it raises Researchers explored these uh, cross country situations a
lot after that great inflation experience. So I guess just
cutt into the chase here. The FED could kill this
(09:10):
in the cradle. Awful expression, but you know, captures.
Speaker 2 (09:12):
It basically by killing the economy. Correct.
Speaker 3 (09:14):
It would have to. It would probably have to inflict
a lot of pain on the economy.
Speaker 2 (09:19):
Now do we get any sense that? Again, even let's
you know, Powell's moving on at this point, Warsh is
going to be officially confirmed as chair probably in the
next week or so. Do we believe that? Look, even
under Powell, Okay, the FED was very much in the
business of not wanting to create a recession. In order
(09:41):
to staunch inflation totally, I have to believe given what
we know about you know, worsh coming in and what
he stated he wants to do policy wise. And again
I've maintained that Hey, once you're in the chair, you know,
maybe feel the gravity, and you often see someone change
what they're going to do. But I can't see Warsh
or quite on anyone else who's sitting on the Board
(10:02):
of Governors or you know, as a regional fed president
coming out in large enough numbers, being like, yeah, you
know what we're gonna We're gonna be Paul Vulker because
there's just not the appetite for me right now.
Speaker 3 (10:17):
There was no appetite for Paul Volker to be Paul Vulker.
But before Paul Vulker, you have to make we have
the benefit of history. They did not. Yes, so before Vulkar,
you had Miller and Burns. They didn't have the authority
to do what Vulgar did. Carter, to his credit, gave
Vulgar room. Reagan, to his credit, even though they chafed
(10:38):
behind the scenes, they gave Vulgar the room to inflict
economic pain. Sure, I don't know that we have the
politic well, we don't have the political A lot of
the Trump administration. You can love him or not like him,
but he is not a hard money guy. He's for
easy money under all circumstances. So I don't know that
the political will exists to allow the FED to inflict
(10:59):
economic pain.
Speaker 2 (10:59):
Check it doesn't exist anywhere because ultimately, our financial markets
at this point, and this is something that's evolved over
the last twenty to twenty five years. In my opinion,
they have evolved. And this is not my own quote,
so I'm stealing this, but I use it because I
think it's a good one. Our financial markets have become
(11:21):
political utilities. And what I mean by that is like,
there's a reason why President Trump points out, hey, stocks
are at all time highs, because it signals something to
the broader group of people that participate politically and as
a whole as a society, we look at financial markets
(11:42):
now and think that it says something about the political system,
when in fact, it's really just telling you, okay, like
here's you know, what we're willing to pay for corporate earnings.
And this has been a transformation over the last twenty
to twenty five years. So again it's gone through you know,
multiple administrations and multiple parties like that. This is not
any one person who's responsible for this, it's just how
(12:03):
society has transformed them as a whole. But I believe
we're kind of at a point now where it's like,
you know, the nineteen seventies from a stock market perspective.
I don't think any politician would allow to happen now
because of what it would mean for them and their
party politically. And the problem there is the distortion that
(12:24):
you end up within the economy because of that.
Speaker 3 (12:26):
They remember the great depression that generation lived through it,
They fall in the war. They saw what stocks were
only on by two percent of Americans, then now the
numbers over fifty. Sure, the twenty nine crash killed confidence
to the point where it depressed spending on durable goods
by people who didn't own stocks. They remembered that they
(12:47):
would never have thought of using the stock market as
a policy tool as the fed US and Bernank's partly
responsible for that, and green Span is too. As much
as I respect an admire right.
Speaker 2 (12:57):
Again, this goes back like twenty five thirty years. Yes,
you know, you're right.
Speaker 3 (13:01):
A lot of people are to blame.
Speaker 2 (13:03):
Yeah, it's it's where it is in our broader zeitgeist.
Now just take a quick break. When we come back,
we'll talk about what we're seeing from gas prices and
how it relates to wage games that we've seen they're
being eaten away by rising gas prices. We'll discuss after.
Speaker 1 (13:20):
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(13:40):
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Speaker 2 (13:56):
So yesterday we got Consumer Price in Next data that
for the last twelve months CPI is running at three
point eight percent. We also have wage growth data from
the Department of Labor over the last twelve months which
is showing that wages grew somewhere around three point six percent.
Now here's the thing, this is all estimation. Again, prices
(14:21):
may have actually risen it like three point nine. Wages
could have risen at three point four. Wages could have
risen at three point nine. Inflation could have been you know,
so again, like the specific numbers, don't pay too much
attention to them directionally though. Here's the deal is that
wage growth and inflation for the last twelve months are
(14:43):
probably pretty close to equal, which means that any gains
that you've seen from your salary have very likely been
eaten up by additional costs in the aggregate. And the
other thing that we know is based on what we're
seeing from you know, further gas price moves that have
happened over the last months since this, you know, since
(15:03):
the April data was collected, inflation is likely. I'm guessing
that headline is probably gonna be running somewhere between like
four one and four three when we get the May
data that comes out, and I know that wages have
not accelerated similarly for the month. So what I think
you can say is, hey, by the time we get
the MAD data, pretty good chance that wages will be
(15:25):
trailing the inflation rate by a quarter to a half
percent over the last twelve months. And this is ultimately
not great because it means that in real terms, you
can't buy as much stuff, which means that a you
feel kind of bad about your financial situation, and b
(15:46):
it potentially puts some pressure on sales numbers for non
energy businesses because they have consumers have less money to
spend at those other businesses and potentially pull back from
those areas instead. Right, Yes, which is probably why if
you take a look at like retail stocks, they've been
(16:06):
in the toilet for the last month, like they haven't
gone anywhere.
Speaker 3 (16:10):
Yeah. And one of the the at the crux of
the dilemma for the FED, which we're talking a little
bit about how monetary policy should respond earlier, They could
allow aggregate allowed demand just to continue to expand the
problem with that is that it will push up inflation further.
Speaker 2 (16:25):
Yeah.
Speaker 3 (16:25):
This is why the choice typically involves do we impose
pain on the economy to get inflation down or not.
If the answer is not, you're accommodating it, and that
can create and that can cause inflation to become entrenched.
That's one thought. Another is, well, this is why inflation
is a form of taxation. It does ultimately come down
(16:46):
to too much money slashing around. I'm not blaming the
FED for the oil price spike.
Speaker 2 (16:50):
No, they can't do any They can't print oil anymore
than you and I can no.
Speaker 3 (16:53):
I mean, there is this argument. It's interesting some researchers say, well,
the seventies, the oil price spike was not actually outside
the economy. The FED allowed it and others where banks
allowed it to happen by overstimulating demand. It's kind of
an interesting academic debate. So I guess what I'm saying is,
if somebody's listening to this and they've heard about that,
they remember that technicality. I'm acknowledging it, even though I
don't think you've got to do a lot of sophisticated
statistical analysis on the most recent series of events to
(17:15):
get at the cause of it.
Speaker 2 (17:18):
When we look at you again kind of where things
go over the rest of the year, the piece that
is interesting to me that could provide a little bit
of counterbalance to this, not necessarily in a good way.
We've seen some signs that we may be, you know,
entering kind of a nascent acceleration in hiring. There's been
some green shoots over the last month or two, and
(17:41):
this is happening against the backdrop of a labor force
that is probably not growing due to the combination of
baby boomer retirements and changes in immigration and the one
piece that you may see, which again, this would be
the piece that would scare the FED. Quite honestly, in
my opinion, is Hey, if you don't have much labor
(18:03):
force growth, but companies are trying to ramp up hiring,
what do they need to do in order to hire?
They need to raise wages more quickly. I think if
you saw that, that would be the thing that spooks
the FED, because then you get into the position of great,
Now do we have, you know, this wage price spiral
that starts happening, and do we start seeing you know,
(18:23):
that cementing higher for longer inflation because of it. So
just something to watch when you don't have much labor
force growth and companies start trying to hire, there's only
one lever they can pull, and it's higher wages. And
that's not what the FED wants to see.
Speaker 3 (18:39):
So maybe, you know, the demand component is not going
to drive the inflation process in this this inflation cycle,
like it was part of it in the last cycle.
You know, there was that debate, was it the COVID shoks,
was it the Trump and the Biden stimulus? Was it
the Fed? The latter three the stimulus and the FED
would be part of the demand component of the inflation process.
(18:59):
But again, expectations play a role in shocks play a role.
This is why forecasting inflation is such a fraught exercise.
Speaker 2 (19:08):
To take a quick break here, but when we come back,
we got quite a bit that we're going to get to.
We've got Wall Street Watch, and then we are going
to be joined by Todd Lutsky from Cushing and Dolan
for Ask Todd. Todd's here to answer your estate planning
questions live on air. Get them ready because Todd Lutsky
(19:28):
is coming up next.
Speaker 1 (19:41):
Liked 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 till now full Wall
Street Watch tracking the stocks, the data, and the headlines
driving markets so far today right here on the final
inchel Exchange Radio Network.
Speaker 4 (20:01):
Markets are mixed after Cinnamon took a hit on the
heels of a hotter than expected producer Price index, where
wholesale prices in April rows the most in three years,
adding fuel to inflation anxiety. President Trump also landed in
Beijing this morning with several CEOs, including Elon Musk and
Jensen Huang for his summit with Chinese President Yijingping. Right now,
(20:23):
the Dow is down about two tenths of a percent,
SMP five hundred up modestly, only five points higher, NASDAC
up about a third of a percent, RUSSED two thousand
selling off over two thirds of a percent. A ten
year Treasure reeled up one basis point at four point
four eight one percent, and Oil up one on a
quarter percent, trading at one hundred and three dollars.
Speaker 5 (20:46):
A barrel.
Speaker 4 (20:47):
Shares in Chinese e commerce DRI and ally Boba rising
over six percent after it posted an eighty four percent
drop in first quarter of profit and also reported heavy
investments in a I. Meanwhile, according to the Wall Wall
Street Journal, Walmart plans to cut or relocate about one
thousand corporate employees. Walmart stock is up modestly. Elsewhere, Echo
(21:09):
Star shares a climbing two percent after the FCC approved
the company's forty billion dollars sale of wireless Spectrum.
Speaker 2 (21:15):
To AT and T and SpaceX.
Speaker 4 (21:18):
And Next Power shares are surging twelve percent after the
energy technology company raised its full year revenue guidance. I'm
Tucker Silva, and that is Wallstreet Watch.
Speaker 1 (21:32):
This is ask Todd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Todd Lutsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate law.
(21:54):
Visit Cushingdolan dot com. Now here's Todd Lutsky promise.
Speaker 2 (22:03):
We're now joined by the one and only Todd. Let's
kee from the law firm of Cushing and Dolan. We
got the phone lines wide open for you because we
get uh. This is your chance to ask Todd your
estate planning questions live on air right now. Eight eight
eight to zero five two two sixty three is the
number again, That is eight eight eight two zero five
(22:25):
two two six three. And remember, this is your chance
to ask Todd your estate planning questions live on air
right now, and we usually get through two to three
of these, so get calling early to make sure we
can get to your question. That phone number again is
eight eight eight to zero five two two six three.
(22:47):
Mister Lutsky, How are you doing today?
Speaker 6 (22:49):
I am never better and you I'm great, awesome. Where
does a king put his armies?
Speaker 2 (22:58):
Uh? That I don't know. I'm not the king in
his sleeves, his sleevees. Yeah, in his sleevies, Todd, I
want to talk to you a little bit about h
trusts and trusts as part of an estate plan. Is
one would expect at what point does it become beneficial
to a household to have multiple trusts as opposed to
(23:22):
just a single one for their assets.
Speaker 6 (23:26):
So that is really driven by, I think by the
federal exemption. So the federal exemption tends to go up
and down. But let's say you have today a fifteen
million dollar federal exemption. So for everybody listening, that's the
amount of assets that you can pass to somebody other
(23:46):
than a spouse and not pay tax. Go over that,
and of course we got a forty percent tax hit
per person. So at a bare minimum, I would say,
if you're at fifteen million or under, I'm thinking that
that should probably be a joint revocable trust because it's
a you know, it's a large estate, but joint revocable trusts.
(24:09):
And I think if you're four million or below. I
don't know if you you weren't really asking this question,
but if you're four millionaire below, you probably might be considering.
And over sixty five, let's say, sure sixty you probably
also might be thinking about whether you want a revocable
or an irrevocable trust. But for a joint trust, for single,
(24:33):
for a married couple, I'd say fifteen million is a good.
Speaker 2 (24:35):
Number at any point in that discussion. Are there certain
types of estate plans where it may make sense to
have different kinds of trust fulfilling different roles within that estate.
Speaker 6 (24:49):
Yeah, So when you get like larger estates like that,
you know, sometimes you might have somebody that's got a
twelve million dollar estate, let's say, but you know, a
four million dollar life insurance poble. Well, that's just an
asset that shouldn't be in there. I mean, so, I mean,
to me, I would say, let's just make that asset.
Why why do I want to increase my taxable estate
(25:10):
by four million dollars? Maybe not so much for federal
but for Massachusetts? Right? Why do I want my estate
to be four million dollars higher? If I don't have
to be four million dollars higher. How and why, Well,
then I would be thinking of a separate kind of trust,
probably called an irrevocable life insurance trust, where you might
want to take that asset and put it in there.
(25:32):
That asset being the the life insurance policy, put that
into the irrevocable trust, and thereby making it not only
income tax free, which is what it is in and
of itself, but also estate tax free, both federal and state.
Speaker 2 (25:49):
Talking with Todd Lutsky from the law firm of Cushing
and Dolan. Phone lines are open at eight eight eight
two zero five two two sixty three. That is the
number to call to ask Todd your estate planning questions
live on air right now. We do still have room
on those phone lines. Again. That number is eight eight
eight to zero five two two sixty three. We're gonna
(26:13):
take a quick break here, but when we come back,
we're gonna get right to your questions with Todd. That
phone number again is eight eight eight two zero five
two two six to three.
Speaker 1 (26:26):
Ask Todd with Todd Letsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. Todd Letsky
answers your questions about a state and elder Life Planning
every Wednesday at ten thirty right here on the Financial
Exchange Radio Network.
Speaker 2 (26:55):
Got Todd Letsky here from the law firm of Pushing
and Dolan. We just to have room on the phone
lines eight eight eight to zero five two two six
three is the number again, that is eight eight eight
to zero five two two six three, Todd. At what
point does trust work that someone has previously done turn
(27:17):
into a problem if it has not been updated appropriately? Like,
what are some of the things that would cause someone
to need to update an estate plan?
Speaker 6 (27:25):
And I think that's a great question because so many
people who might have already done their estate plan think
I'm all said, I don't have to do anything. Well, no, again, one,
I think if you're ten years fifteen years in on
an estate plan, I probably would say, you know what,
maybe I should pick it up and review it.
Speaker 2 (27:44):
Why.
Speaker 6 (27:45):
Perhaps my assets have grown significantly. That would be a reason.
I'm older, of course, so maybe, uh, if I did
revocable trusts, I might want to think about changing my
estate plan to an era of locable trust depending on
how large my estate has grown. So obviously, you know
(28:05):
when when nursing home concerns weren't an issue. Maybe they
more are on your mind now. I would say things like,
you know what if I've lost a spouse. You know when,
even though you've done your estate plan, when you lose
a spouse. The problems I've seen are people would say, oh,
(28:25):
I got these two trusts and my spouse died, I'll
just take everything out of my spouse's trust who's deceased,
and put it in my trust.
Speaker 2 (28:32):
That's not good.
Speaker 6 (28:34):
Not only is it not good, it's not permitted by
the terms of the trust, but you know, so someone's
breaching their fiduciary duty number one. But number two, you've
now completely blown the estate plan. You've now put all
the assets back into the hands of the surviving spouse,
bumping up the surviving spouse's estate to a point where
(28:56):
it's larger, perhaps than the EGS exemption that was in
effect or that is in effect on the date of death,
thereby creating an estate tax liability, whereas one didn't exist
if you left them in the old trust. So I
think that's a really big problem learned. But that's why
you call the lawyer. You call and say, I lost
my spouse. What do I do? Please don't call the
(29:19):
spouse and call the attorney and say here's what I did.
Is it okay? I always hate it when they start
the conversation, here's what I did. Okay, that's that's bad.
Speaker 2 (29:30):
So this is not a situation where it's better to
ask forgiveness than permission.
Speaker 6 (29:34):
Right, That's exactly. I think that's a good a good analysis. So, folks,
these are just some of the potholes that we encounter
when you have an estate plan or are thinking about
doing an estate plan. So this guide is good for
both folks, whether you've done the planning or you haven't
done the planning. I think it's going to help you,
(29:54):
you know, for people who haven't done the planning. Don't
not plan because you think you have a will and
that's all you need. Don't you know, rely on a
nominee realty trust as the only item you have. Don't
sit around and think, oh, I don't have enough assets,
I don't need to do a plan. Well, there's a
lot of other reasons to do planning than just taxes.
So folks call and get the guide. A state planning
(30:17):
potholes to avoid eight six six eight four eight five
six nine to nine or Legal Exchange Show dot com
again eight six six eight four eight five six nine
nine or Legal Exchange Show dot com. And you can
always go to Cushing Dolan PC our Instagram page for
much more information.
Speaker 2 (30:39):
Todd got a caller for you here. Let's go to
Paul in Hanover. Paul, what is your question for Todd Lutsky?
Speaker 5 (30:46):
Yeah, good morning. I had a question we got. I
have a revocable trust that was put together about fifteen
years ago and updated maybe five okay, and sixty five,
and I'm looking at, you know, like an irrevocable for
the home only for that five year look back. Yeah,
when when do you what's the downside I guess of
(31:07):
doing something like that, other than maybe losing the value
of the equity of the home.
Speaker 6 (31:12):
So so you're sixty five, are you married?
Speaker 1 (31:15):
Yeah?
Speaker 6 (31:16):
Kids?
Speaker 5 (31:18):
Yes? Three?
Speaker 6 (31:20):
And last question, excuse me when we talk about switching
to an irrevocable trust or adding one, usually I would
you probably won't need both, is my point. But how
much are you worth in total including the house? Meaning
are you more than two million? And if so, are
you more than four Those are the Massachusetts thresholds that
(31:41):
I that I worry.
Speaker 5 (31:43):
About more than four. Yeah, So if.
Speaker 6 (31:46):
You're more than four, the question is do you really
need the irrevocable trust right if you've got enough assets?
And again I don't know how much you're worth, but
if you have enough assets, you could be self insured,
meaning you know, if you start adding up your assets
and investing it at say six percent plus social security
(32:08):
and pension. You know, do I have enough income coming
in that I'm really able to provide and pay for
the nursing home anyway, and so I don't need to
worry about protecting my assets. Do you think you're in
that in that category?
Speaker 5 (32:24):
Close? I guess you know, I really haven't done the map,
but it depends, you know, obviously on longevity there too.
Speaker 6 (32:30):
Sure. I mean, you're gonna need to cover about you know,
one hundred and twenty five and thirty thousand dollars a
year maybe more from the nursing home. So it's not
a small number. And so I think that's the first thing.
That's the only reason I'm hesitating on this. But but
I will address your question. Let's assume you do need
to protect assets from the nursing home. Probably if you're
(32:51):
if you do need to protect them, you probably might
be wanting to protect even more than just a house.
You might want to even put some money in. Wait,
and you learn how they work because you're asking me
about the downside. There really isn't other than you can't
refinance the mortgage on the house. You can keep the mortgage,
but you can't get a new one unless you, you know,
(33:13):
take it out of the house and start the five
year clock over again. So other than that, there's no downside.
You live in your house, you pay your bills. You
could sell your house anytime you want. From the irrevocable trust,
you can have the trust buy another house. The trust
is still set up as a grand tour trust, so
you get your five hundred thousand dollars capital gains exclusion.
(33:33):
There's no adverse tax consequences when you sell the house.
You can manage your money, collect the income. I mean,
it's really I'm going through it quickly, but there's really
not a lot of downsides at all. So I think
it might be worth exploring. But get a handle on
your assets and then maybe you can decide whether shifting
putting more than just a house in is important.
Speaker 2 (33:56):
Todd, I get another one for you. Let's go to
Steve in Weymouth. Steve, if you are on with Tom Lutsky.
Speaker 7 (34:02):
Hi, guys, thanks for talking taking my call. I was
wondering about the fifteen million dollar exemption. We you don't
have to pay taxes. Yeah, if your state is twenty million,
do you just pay on the over five million or
do you get tax on the whole thing?
Speaker 6 (34:22):
So one follow up question, are you married? Yes, so
if you do basic planning, meaning a revocable trust, right,
So in your case, if it's twenty million, we might
do two separate revocable trusts and then fund those revocable trusts.
Remember they're revocable, so it's just like it's still you,
(34:44):
but they're owned by the trust. The reason I'm telling
you that is because with basic estate planning, we now
can double your exemption. So if you do basic estate
planning between you and your spouse, we can shelter up
to thirty million from a state taxes. So if you're
(35:06):
worth twenty you're not gonna have to worry about paying
a state taxes, at least not in the short term
or even perhaps the long term. But that would answer
that question. But let's let's address your question. Assuming that
you had let's say you're married and you're worth forty million,
to just make it the point, and you still did
your basic estate planning, which I certainly would recommend. Now
(35:27):
we would only have to pay tax on the ten
million that we are over the forty I'm sorry, over
the thirty. So but remember ten million. If you live
in Massachusetts, it's it's not just the forty percent on
ten million, which is four million. You've got mass and
mass is over ten percent. Mass is close to sixteen percent.
(35:50):
So I mean you're looking at every bit of fifty
to fifty five percent total estate tax between federal and
state on the amount over. So you would probably even
do do more planning than basic estate planning if you
were in that realm. But if you're in the twenty
million dollar realm, at least basic estate planning, and then
we can focus on what we might do for Massachusetts.
(36:13):
I stress this only because I had a client that
came in that was worth about forty million, not married,
but with a significant other for thirty years, and I
explained to them that, wow, if you get married, we
can save you like twenty million dollars in state taxes. Well, WHOA,
you should see how fast they ran to the courthouse, right.
(36:34):
I mean, it's one of those things where they just
don't think about it. I get it. You're not married.
You know why ruin a good relationship by getting married?
You've been together thirty years, kids from different sides of
the relationships. But you know what, sometimes getting married can
make sense. And in this case it certainly did for them,
and it could well you're already married, Steve, but but
(36:55):
not that it could for you. But planning now that
you are married can take advantage each of this doubling
of the exemption.
Speaker 2 (37:02):
Mister Wutski, thank you so much for joining us today.
Speaker 6 (37:05):
Always pleasure. Thank you.
Speaker 1 (37:06):
This has been Asked Odd on the Financial Exchange Radio
network Ask Todd with Todd. Lutsky has been presented by
Cushing and Dolan, serving Massachusetts and New England for more
than thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
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The views expressed in this segment are solely those of
(37:27):
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or tax advice. Please consult with your illegal or tax
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Speaker 2 (37:36):
Quite a bit to get to in the second hour,
we'll talk a little bit about the US China Summit
that is kicking off today with President Trump landing in
Beijing earlier this morning. Also, we're going to be covering
a little bit more on the Spring housing market and
what we are seeing there. And then we got to
talk about the tomatoes because there's a problem them with
(38:00):
tomato prices, and I gotta tell you it's gonna gonna
be something we're gonna have to discuss in depth in
our two All that and more is coming up in
just a little bits
The Financial Exchange is produced by Money Matters Radio and
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(00:20):
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(01:05):
Zada and Mark Fandetti.
Speaker 2 (01:10):
It's Chuck, Mark and Soccer with you today. And this
morning at eight thirty am Eastern time, we got the
Producer Price Index data for the month of April. Expectations
were that headline was going to come in at point
five percent, Core was going to come in at point three. Instead,
we got one point four and one point zero percent, respectively,
(01:33):
which pushed headline up to six percent for the last
twelve months now and core PPI up to five point two. Now.
I do like to point out that the PPI is
the most misunderstood price index in finance, in that most
(01:54):
people think that PPI is tracking the cost of making stuff.
People think it's like, oh, that means that producers are
paying more for their stuff, and so that's going to
mean that CPI rises later. No, that's not how it works.
What it actually is is the PPI is you got
(02:16):
to look at it backwards, Okay. CPI is what are
you paying for things? PPI is what are domestic producers
receiving for their production. So it's reversed first and foremost.
The other thing that you have to remember the PPI
(02:36):
excludes imports, So this is a big thing. In the
last year because there's nothing terrif for related that gets
into PPI. It's only measuring domestic producers. So you can
have some blind spots that show up as a result
of that. But so again, don't think that this means, oh,
(02:57):
that means that like CPI is going to be one
percent next month or something. No, it doesn't work like that.
It's just giving you another look at, you know, how
costs are being passed through the system, and it's from
a different point of view, and you have to accept
that for what it is. But he got this hot
inflation report, and you know, I went over to Mark
(03:19):
about a half hour after that as I was kind
of digesting it, and I said, Mark, I want to,
you know, just kind of look at some things when
we talk about you know, longer term inflation and break
evens and things along those lines, and you know, what's
going on with tips and what are they telling us
about inflation? And without even talking to Tucker, Tucker ended
(03:40):
up putting a piece from the Wall Street Journal titled
Wall Street is getting more Anxious about long term inflation
as the top piece in our stack. Despite us having
no communication about marketized conversation, this just ended up there,
which means that Tucker and I are very much just
vibing right now. It's the vibes are good.
Speaker 3 (04:00):
Also, it's the biggest story in the world.
Speaker 2 (04:02):
Well, here's the thing. Is no offense talking, Yeah, none taken.
Excuse me, no, No, it's fine. I appreciate that, backhanded, complimentary,
backhanded just face slapped to Tucker. I had to actually,
it's it's nice. It's kind of like moron wouldn't have
put this first in the stack today. There's kind of
(04:24):
the implication. But uh, I digress. Here's the thing. Uh, globally,
sovereign bonds have been melting down for a little while now,
Like if if if you were to go and take
a look at the Japanese tenuere treasury just as an example, Uh,
it's it's a two point five to five percent right now.
(04:47):
Five years ago it was a negative point one percent,
and really even in the last year, it's gone from
like one and a quarter last February to two five five. Now. Uh,
if you look at the UK and their ten year
yield lot going on right now with you know, some
issues that they're seeing. UK ten year yield's gone from
(05:08):
again about zero percent five years ago up to five
oh four. Now in the last you know, year and
a half, it's gone from three to eight to four
up to this five oh four reading. So this is
not a US only issue, but globally, sovereign bonds are
kind of sniffing out. Hey, you guys are trying to
make the math math. But the only way that the
(05:29):
math actually maths is if yields go up. Because inflation
is running structurally hotter than it was before. Population growth
is slower, which means deficits have to be bigger in
order to pay for all this. No, we're not gonna
be able to just figure this out and paper it over.
Interest rates are gonna have to move up, and you're
seeing it to a more muted effect in the US
(05:51):
right now, I think probably because with oil still being
priced globally in dollars, there's a lot of money flowing
into dollars in order to buy higher priced oil at
the moment. But as soon as you know that reverses,
I think that you could end up seeing some some
real problems with long bonds in the United States because
(06:13):
long term inflation, I gotta tell you, I'm very skeptical
gets back into that two percent range anytime soon. You
might have pockets where you get down into like two
and a half like we did last year. But I
think fundamentally, structurally, you are, you know, heading towards a
period where long term inflation probably is close to three
to three and a half than two. That's not, you know, crazy,
(06:36):
that's not something that is you know, horrible, horrible, horrible,
but it's a fundamental difference from the mid nineties through
late twenty tens. And I think you need to understand
what that means as far as the economy, asset classes
and what can come from that.
Speaker 3 (06:52):
Yeah, not without a huge opening in economic slack. And
even then that's not a guarantee if expectations swamp the
slow component in the inflation process. And I'll just say
it in plain English, Normally a recession gets inflation down,
but if people expect inflation to continue, you get stagflation.
The stag being stagnation, inflation being the inflation part. That
(07:12):
term was invented in the nineteen seventies because we had
that paradoxical outcome. Everybody expected inflation to come down in
seventy three seventy four. It did not. We realize later
that you need to be aware of the expectations. Part
are expectations people in firms, of the inflation humans, Yeah, yeah,
of the inflation process. FED credibility plays into that as well,
(07:35):
something I imagine we'll be talking about today.
Speaker 2 (07:37):
So what you're seeing is when you take a look
at how to measure this, they're all different, you know,
financial instruments out there. There are inflation swaps, there are
break evens on treasuries indexed for inflation versus treasuries that
are not. You've got all these different you know, items
(07:58):
that you can look at in order to say, hey,
how is the market pricing in uh inflation right now?
And when you look at them, the thing that you're
starting to see priced in is higher for longer inflation Now,
higher for longer doesn't mean that we're going to go
back to you know, nine percent inflation like we saw
in twenty twenty two. But I gotta tell you this, Look,
(08:22):
this is still going to depend at least you know,
next couple of years. It's going to depend on what
happens with the straight hornor moves and when it reopens
into what capacity it's you know, there is a path
where if you want to, like look at some of
the really gnarly stuff. There's a path where inflation, does
you know, move well beyond five percent annually if the
(08:44):
straight of horror moves remains close to any extended period,
you know, through this summer.
Speaker 3 (08:48):
I mean, there is another path the FED could kill.
You know, It's interesting Germany didn't have the seventies inflation
that we had. Japan I think escaped it too, So
it raises Researchers explored these uh, cross country situations a
lot after that great inflation experience. So I guess just
cutt into the chase here. The FED could kill this
(09:10):
in the cradle. Awful expression, but you know, captures.
Speaker 2 (09:12):
It basically by killing the economy. Correct.
Speaker 3 (09:14):
It would have to. It would probably have to inflict
a lot of pain on the economy.
Speaker 2 (09:19):
Now do we get any sense that? Again, even let's
you know, Powell's moving on at this point, Warsh is
going to be officially confirmed as chair probably in the
next week or so. Do we believe that? Look, even
under Powell, Okay, the FED was very much in the
business of not wanting to create a recession. In order
(09:41):
to staunch inflation totally, I have to believe given what
we know about you know, worsh coming in and what
he stated he wants to do policy wise. And again
I've maintained that Hey, once you're in the chair, you know,
maybe feel the gravity, and you often see someone change
what they're going to do. But I can't see Warsh
or quite on anyone else who's sitting on the Board
(10:02):
of Governors or you know, as a regional fed president
coming out in large enough numbers, being like, yeah, you
know what we're gonna We're gonna be Paul Vulker because
there's just not the appetite for me right now.
Speaker 3 (10:17):
There was no appetite for Paul Volker to be Paul Vulker.
But before Paul Vulker, you have to make we have
the benefit of history. They did not. Yes, so before Vulkar,
you had Miller and Burns. They didn't have the authority
to do what Vulgar did. Carter, to his credit, gave
Vulgar room. Reagan, to his credit, even though they chafed
(10:38):
behind the scenes, they gave Vulgar the room to inflict
economic pain. Sure, I don't know that we have the
politic well, we don't have the political A lot of
the Trump administration. You can love him or not like him,
but he is not a hard money guy. He's for
easy money under all circumstances. So I don't know that
the political will exists to allow the FED to inflict
(10:59):
economic pain.
Speaker 2 (10:59):
Check it doesn't exist anywhere because ultimately, our financial markets
at this point, and this is something that's evolved over
the last twenty to twenty five years. In my opinion,
they have evolved. And this is not my own quote,
so I'm stealing this, but I use it because I
think it's a good one. Our financial markets have become
(11:21):
political utilities. And what I mean by that is like,
there's a reason why President Trump points out, hey, stocks
are at all time highs, because it signals something to
the broader group of people that participate politically and as
a whole as a society, we look at financial markets
(11:42):
now and think that it says something about the political system,
when in fact, it's really just telling you, okay, like
here's you know, what we're willing to pay for corporate earnings.
And this has been a transformation over the last twenty
to twenty five years. So again it's gone through you know,
multiple administrations and multiple parties like that. This is not
any one person who's responsible for this, it's just how
(12:03):
society has transformed them as a whole. But I believe
we're kind of at a point now where it's like,
you know, the nineteen seventies from a stock market perspective.
I don't think any politician would allow to happen now
because of what it would mean for them and their
party politically. And the problem there is the distortion that
(12:24):
you end up within the economy because of that.
Speaker 3 (12:26):
They remember the great depression that generation lived through it,
They fall in the war. They saw what stocks were
only on by two percent of Americans, then now the
numbers over fifty. Sure, the twenty nine crash killed confidence
to the point where it depressed spending on durable goods
by people who didn't own stocks. They remembered that they
(12:47):
would never have thought of using the stock market as
a policy tool as the fed US and Bernank's partly
responsible for that, and green Span is too. As much
as I respect an admire right.
Speaker 2 (12:57):
Again, this goes back like twenty five thirty years. Yes,
you know, you're right.
Speaker 3 (13:01):
A lot of people are to blame.
Speaker 2 (13:03):
Yeah, it's it's where it is in our broader zeitgeist.
Now just take a quick break. When we come back,
we'll talk about what we're seeing from gas prices and
how it relates to wage games that we've seen they're
being eaten away by rising gas prices. We'll discuss after.
Speaker 1 (13:20):
This smart financial talk. Whenever you want, find the Financial
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Text us at six one seven three six two one
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(13:40):
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Speaker 2 (13:56):
So yesterday we got Consumer Price in Next data that
for the last twelve months CPI is running at three
point eight percent. We also have wage growth data from
the Department of Labor over the last twelve months which
is showing that wages grew somewhere around three point six percent.
Now here's the thing, this is all estimation. Again, prices
(14:21):
may have actually risen it like three point nine. Wages
could have risen at three point four. Wages could have
risen at three point nine. Inflation could have been you know,
so again, like the specific numbers, don't pay too much
attention to them directionally though. Here's the deal is that
wage growth and inflation for the last twelve months are
(14:43):
probably pretty close to equal, which means that any gains
that you've seen from your salary have very likely been
eaten up by additional costs in the aggregate. And the
other thing that we know is based on what we're
seeing from you know, further gas price moves that have
happened over the last months since this, you know, since
(15:03):
the April data was collected, inflation is likely. I'm guessing
that headline is probably gonna be running somewhere between like
four one and four three when we get the May
data that comes out, and I know that wages have
not accelerated similarly for the month. So what I think
you can say is, hey, by the time we get
the MAD data, pretty good chance that wages will be
(15:25):
trailing the inflation rate by a quarter to a half
percent over the last twelve months. And this is ultimately
not great because it means that in real terms, you
can't buy as much stuff, which means that a you
feel kind of bad about your financial situation, and b
(15:46):
it potentially puts some pressure on sales numbers for non
energy businesses because they have consumers have less money to
spend at those other businesses and potentially pull back from
those areas instead. Right, Yes, which is probably why if
you take a look at like retail stocks, they've been
(16:06):
in the toilet for the last month, like they haven't
gone anywhere.
Speaker 3 (16:10):
Yeah. And one of the the at the crux of
the dilemma for the FED, which we're talking a little
bit about how monetary policy should respond earlier, They could
allow aggregate allowed demand just to continue to expand the
problem with that is that it will push up inflation further.
Speaker 2 (16:25):
Yeah.
Speaker 3 (16:25):
This is why the choice typically involves do we impose
pain on the economy to get inflation down or not.
If the answer is not, you're accommodating it, and that
can create and that can cause inflation to become entrenched.
That's one thought. Another is, well, this is why inflation
is a form of taxation. It does ultimately come down
(16:46):
to too much money slashing around. I'm not blaming the
FED for the oil price spike.
Speaker 2 (16:50):
No, they can't do any They can't print oil anymore
than you and I can no.
Speaker 3 (16:53):
I mean, there is this argument. It's interesting some researchers say, well,
the seventies, the oil price spike was not actually outside
the economy. The FED allowed it and others where banks
allowed it to happen by overstimulating demand. It's kind of
an interesting academic debate. So I guess what I'm saying is,
if somebody's listening to this and they've heard about that,
they remember that technicality. I'm acknowledging it, even though I
don't think you've got to do a lot of sophisticated
statistical analysis on the most recent series of events to
(17:15):
get at the cause of it.
Speaker 2 (17:18):
When we look at you again kind of where things
go over the rest of the year, the piece that
is interesting to me that could provide a little bit
of counterbalance to this, not necessarily in a good way.
We've seen some signs that we may be, you know,
entering kind of a nascent acceleration in hiring. There's been
some green shoots over the last month or two, and
(17:41):
this is happening against the backdrop of a labor force
that is probably not growing due to the combination of
baby boomer retirements and changes in immigration and the one
piece that you may see, which again, this would be
the piece that would scare the FED. Quite honestly, in
my opinion, is Hey, if you don't have much labor
(18:03):
force growth, but companies are trying to ramp up hiring,
what do they need to do in order to hire?
They need to raise wages more quickly. I think if
you saw that, that would be the thing that spooks
the FED, because then you get into the position of great,
Now do we have, you know, this wage price spiral
that starts happening, and do we start seeing you know,
(18:23):
that cementing higher for longer inflation because of it. So
just something to watch when you don't have much labor
force growth and companies start trying to hire, there's only
one lever they can pull, and it's higher wages. And
that's not what the FED wants to see.
Speaker 3 (18:39):
So maybe, you know, the demand component is not going
to drive the inflation process in this this inflation cycle,
like it was part of it in the last cycle.
You know, there was that debate, was it the COVID shoks,
was it the Trump and the Biden stimulus? Was it
the Fed? The latter three the stimulus and the FED
would be part of the demand component of the inflation process.
(18:59):
But again, expectations play a role in shocks play a role.
This is why forecasting inflation is such a fraught exercise.
Speaker 2 (19:08):
To take a quick break here, but when we come back,
we got quite a bit that we're going to get to.
We've got Wall Street Watch, and then we are going
to be joined by Todd Lutsky from Cushing and Dolan
for Ask Todd. Todd's here to answer your estate planning
questions live on air. Get them ready because Todd Lutsky
(19:28):
is coming up next.
Speaker 1 (19:41):
Liked 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 till now full Wall
Street Watch tracking the stocks, the data, and the headlines
driving markets so far today right here on the final
inchel Exchange Radio Network.
Speaker 4 (20:01):
Markets are mixed after Cinnamon took a hit on the
heels of a hotter than expected producer Price index, where
wholesale prices in April rows the most in three years,
adding fuel to inflation anxiety. President Trump also landed in
Beijing this morning with several CEOs, including Elon Musk and
Jensen Huang for his summit with Chinese President Yijingping. Right now,
(20:23):
the Dow is down about two tenths of a percent,
SMP five hundred up modestly, only five points higher, NASDAC
up about a third of a percent, RUSSED two thousand
selling off over two thirds of a percent. A ten
year Treasure reeled up one basis point at four point
four eight one percent, and Oil up one on a
quarter percent, trading at one hundred and three dollars.
Speaker 5 (20:46):
A barrel.
Speaker 4 (20:47):
Shares in Chinese e commerce DRI and ally Boba rising
over six percent after it posted an eighty four percent
drop in first quarter of profit and also reported heavy
investments in a I. Meanwhile, according to the Wall Wall
Street Journal, Walmart plans to cut or relocate about one
thousand corporate employees. Walmart stock is up modestly. Elsewhere, Echo
(21:09):
Star shares a climbing two percent after the FCC approved
the company's forty billion dollars sale of wireless Spectrum.
Speaker 2 (21:15):
To AT and T and SpaceX.
Speaker 4 (21:18):
And Next Power shares are surging twelve percent after the
energy technology company raised its full year revenue guidance. I'm
Tucker Silva, and that is Wallstreet Watch.
Speaker 1 (21:32):
This is ask Todd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Todd Lutsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate law.
(21:54):
Visit Cushingdolan dot com. Now here's Todd Lutsky promise.
Speaker 2 (22:03):
We're now joined by the one and only Todd. Let's
kee from the law firm of Cushing and Dolan. We
got the phone lines wide open for you because we
get uh. This is your chance to ask Todd your
estate planning questions live on air right now. Eight eight
eight to zero five two two sixty three is the
number again, That is eight eight eight two zero five
(22:25):
two two six three. And remember, this is your chance
to ask Todd your estate planning questions live on air
right now, and we usually get through two to three
of these, so get calling early to make sure we
can get to your question. That phone number again is
eight eight eight to zero five two two six three.
(22:47):
Mister Lutsky, How are you doing today?
Speaker 6 (22:49):
I am never better and you I'm great, awesome. Where
does a king put his armies?
Speaker 2 (22:58):
Uh? That I don't know. I'm not the king in
his sleeves, his sleevees. Yeah, in his sleevies, Todd, I
want to talk to you a little bit about h
trusts and trusts as part of an estate plan. Is
one would expect at what point does it become beneficial
to a household to have multiple trusts as opposed to
(23:22):
just a single one for their assets.
Speaker 6 (23:26):
So that is really driven by, I think by the
federal exemption. So the federal exemption tends to go up
and down. But let's say you have today a fifteen
million dollar federal exemption. So for everybody listening, that's the
amount of assets that you can pass to somebody other
(23:46):
than a spouse and not pay tax. Go over that,
and of course we got a forty percent tax hit
per person. So at a bare minimum, I would say,
if you're at fifteen million or under, I'm thinking that
that should probably be a joint revocable trust because it's
a you know, it's a large estate, but joint revocable trusts.
(24:09):
And I think if you're four million or below. I
don't know if you you weren't really asking this question,
but if you're four millionaire below, you probably might be considering.
And over sixty five, let's say, sure sixty you probably
also might be thinking about whether you want a revocable
or an irrevocable trust. But for a joint trust, for single,
(24:33):
for a married couple, I'd say fifteen million is a good.
Speaker 2 (24:35):
Number at any point in that discussion. Are there certain
types of estate plans where it may make sense to
have different kinds of trust fulfilling different roles within that estate.
Speaker 6 (24:49):
Yeah, So when you get like larger estates like that,
you know, sometimes you might have somebody that's got a
twelve million dollar estate, let's say, but you know, a
four million dollar life insurance poble. Well, that's just an
asset that shouldn't be in there. I mean, so, I mean,
to me, I would say, let's just make that asset.
Why why do I want to increase my taxable estate
(25:10):
by four million dollars? Maybe not so much for federal
but for Massachusetts? Right? Why do I want my estate
to be four million dollars higher? If I don't have
to be four million dollars higher. How and why, Well,
then I would be thinking of a separate kind of trust,
probably called an irrevocable life insurance trust, where you might
want to take that asset and put it in there.
(25:32):
That asset being the the life insurance policy, put that
into the irrevocable trust, and thereby making it not only
income tax free, which is what it is in and
of itself, but also estate tax free, both federal and state.
Speaker 2 (25:49):
Talking with Todd Lutsky from the law firm of Cushing
and Dolan. Phone lines are open at eight eight eight
two zero five two two sixty three. That is the
number to call to ask Todd your estate planning questions
live on air right now. We do still have room
on those phone lines. Again. That number is eight eight
eight to zero five two two sixty three. We're gonna
(26:13):
take a quick break here, but when we come back,
we're gonna get right to your questions with Todd. That
phone number again is eight eight eight two zero five
two two six to three.
Speaker 1 (26:26):
Ask Todd with Todd Letsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. Todd Letsky
answers your questions about a state and elder Life Planning
every Wednesday at ten thirty right here on the Financial
Exchange Radio Network.
Speaker 2 (26:55):
Got Todd Letsky here from the law firm of Pushing
and Dolan. We just to have room on the phone
lines eight eight eight to zero five two two six
three is the number again, that is eight eight eight
to zero five two two six three, Todd. At what
point does trust work that someone has previously done turn
(27:17):
into a problem if it has not been updated appropriately? Like,
what are some of the things that would cause someone
to need to update an estate plan?
Speaker 6 (27:25):
And I think that's a great question because so many
people who might have already done their estate plan think
I'm all said, I don't have to do anything. Well, no, again, one,
I think if you're ten years fifteen years in on
an estate plan, I probably would say, you know what,
maybe I should pick it up and review it.
Speaker 2 (27:44):
Why.
Speaker 6 (27:45):
Perhaps my assets have grown significantly. That would be a reason.
I'm older, of course, so maybe, uh, if I did
revocable trusts, I might want to think about changing my
estate plan to an era of locable trust depending on
how large my estate has grown. So obviously, you know
(28:05):
when when nursing home concerns weren't an issue. Maybe they
more are on your mind now. I would say things like,
you know what if I've lost a spouse. You know when,
even though you've done your estate plan, when you lose
a spouse. The problems I've seen are people would say, oh,
(28:25):
I got these two trusts and my spouse died, I'll
just take everything out of my spouse's trust who's deceased,
and put it in my trust.
Speaker 2 (28:32):
That's not good.
Speaker 6 (28:34):
Not only is it not good, it's not permitted by
the terms of the trust, but you know, so someone's
breaching their fiduciary duty number one. But number two, you've
now completely blown the estate plan. You've now put all
the assets back into the hands of the surviving spouse,
bumping up the surviving spouse's estate to a point where
(28:56):
it's larger, perhaps than the EGS exemption that was in
effect or that is in effect on the date of death,
thereby creating an estate tax liability, whereas one didn't exist
if you left them in the old trust. So I
think that's a really big problem learned. But that's why
you call the lawyer. You call and say, I lost
my spouse. What do I do? Please don't call the
(29:19):
spouse and call the attorney and say here's what I did.
Is it okay? I always hate it when they start
the conversation, here's what I did. Okay, that's that's bad.
Speaker 2 (29:30):
So this is not a situation where it's better to
ask forgiveness than permission.
Speaker 6 (29:34):
Right, That's exactly. I think that's a good a good analysis. So, folks,
these are just some of the potholes that we encounter
when you have an estate plan or are thinking about
doing an estate plan. So this guide is good for
both folks, whether you've done the planning or you haven't
done the planning. I think it's going to help you,
(29:54):
you know, for people who haven't done the planning. Don't
not plan because you think you have a will and
that's all you need. Don't you know, rely on a
nominee realty trust as the only item you have. Don't
sit around and think, oh, I don't have enough assets,
I don't need to do a plan. Well, there's a
lot of other reasons to do planning than just taxes.
So folks call and get the guide. A state planning
(30:17):
potholes to avoid eight six six eight four eight five
six nine to nine or Legal Exchange Show dot com
again eight six six eight four eight five six nine
nine or Legal Exchange Show dot com. And you can
always go to Cushing Dolan PC our Instagram page for
much more information.
Speaker 2 (30:39):
Todd got a caller for you here. Let's go to
Paul in Hanover. Paul, what is your question for Todd Lutsky?
Speaker 5 (30:46):
Yeah, good morning. I had a question we got. I
have a revocable trust that was put together about fifteen
years ago and updated maybe five okay, and sixty five,
and I'm looking at, you know, like an irrevocable for
the home only for that five year look back. Yeah,
when when do you what's the downside I guess of
(31:07):
doing something like that, other than maybe losing the value
of the equity of the home.
Speaker 6 (31:12):
So so you're sixty five, are you married?
Speaker 1 (31:15):
Yeah?
Speaker 6 (31:16):
Kids?
Speaker 5 (31:18):
Yes? Three?
Speaker 6 (31:20):
And last question, excuse me when we talk about switching
to an irrevocable trust or adding one, usually I would
you probably won't need both, is my point. But how
much are you worth in total including the house? Meaning
are you more than two million? And if so, are
you more than four Those are the Massachusetts thresholds that
(31:41):
I that I worry.
Speaker 5 (31:43):
About more than four. Yeah, So if.
Speaker 6 (31:46):
You're more than four, the question is do you really
need the irrevocable trust right if you've got enough assets?
And again I don't know how much you're worth, but
if you have enough assets, you could be self insured,
meaning you know, if you start adding up your assets
and investing it at say six percent plus social security
(32:08):
and pension. You know, do I have enough income coming
in that I'm really able to provide and pay for
the nursing home anyway, and so I don't need to
worry about protecting my assets. Do you think you're in
that in that category?
Speaker 5 (32:24):
Close? I guess you know, I really haven't done the map,
but it depends, you know, obviously on longevity there too.
Speaker 6 (32:30):
Sure. I mean, you're gonna need to cover about you know,
one hundred and twenty five and thirty thousand dollars a
year maybe more from the nursing home. So it's not
a small number. And so I think that's the first thing.
That's the only reason I'm hesitating on this. But but
I will address your question. Let's assume you do need
to protect assets from the nursing home. Probably if you're
(32:51):
if you do need to protect them, you probably might
be wanting to protect even more than just a house.
You might want to even put some money in. Wait,
and you learn how they work because you're asking me
about the downside. There really isn't other than you can't
refinance the mortgage on the house. You can keep the mortgage,
but you can't get a new one unless you, you know,
(33:13):
take it out of the house and start the five
year clock over again. So other than that, there's no downside.
You live in your house, you pay your bills. You
could sell your house anytime you want. From the irrevocable trust,
you can have the trust buy another house. The trust
is still set up as a grand tour trust, so
you get your five hundred thousand dollars capital gains exclusion.
(33:33):
There's no adverse tax consequences when you sell the house.
You can manage your money, collect the income. I mean,
it's really I'm going through it quickly, but there's really
not a lot of downsides at all. So I think
it might be worth exploring. But get a handle on
your assets and then maybe you can decide whether shifting
putting more than just a house in is important.
Speaker 2 (33:56):
Todd, I get another one for you. Let's go to
Steve in Weymouth. Steve, if you are on with Tom Lutsky.
Speaker 7 (34:02):
Hi, guys, thanks for talking taking my call. I was
wondering about the fifteen million dollar exemption. We you don't
have to pay taxes. Yeah, if your state is twenty million,
do you just pay on the over five million or
do you get tax on the whole thing?
Speaker 6 (34:22):
So one follow up question, are you married? Yes, so
if you do basic planning, meaning a revocable trust, right,
So in your case, if it's twenty million, we might
do two separate revocable trusts and then fund those revocable trusts.
Remember they're revocable, so it's just like it's still you,
(34:44):
but they're owned by the trust. The reason I'm telling
you that is because with basic estate planning, we now
can double your exemption. So if you do basic estate
planning between you and your spouse, we can shelter up
to thirty million from a state taxes. So if you're
(35:06):
worth twenty you're not gonna have to worry about paying
a state taxes, at least not in the short term
or even perhaps the long term. But that would answer
that question. But let's let's address your question. Assuming that
you had let's say you're married and you're worth forty million,
to just make it the point, and you still did
your basic estate planning, which I certainly would recommend. Now
(35:27):
we would only have to pay tax on the ten
million that we are over the forty I'm sorry, over
the thirty. So but remember ten million. If you live
in Massachusetts, it's it's not just the forty percent on
ten million, which is four million. You've got mass and
mass is over ten percent. Mass is close to sixteen percent.
(35:50):
So I mean you're looking at every bit of fifty
to fifty five percent total estate tax between federal and
state on the amount over. So you would probably even
do do more planning than basic estate planning if you
were in that realm. But if you're in the twenty
million dollar realm, at least basic estate planning, and then
we can focus on what we might do for Massachusetts.
(36:13):
I stress this only because I had a client that
came in that was worth about forty million, not married,
but with a significant other for thirty years, and I
explained to them that, wow, if you get married, we
can save you like twenty million dollars in state taxes. Well, WHOA,
you should see how fast they ran to the courthouse, right.
(36:34):
I mean, it's one of those things where they just
don't think about it. I get it. You're not married.
You know why ruin a good relationship by getting married?
You've been together thirty years, kids from different sides of
the relationships. But you know what, sometimes getting married can
make sense. And in this case it certainly did for them,
and it could well you're already married, Steve, but but
(36:55):
not that it could for you. But planning now that
you are married can take advantage each of this doubling
of the exemption.
Speaker 2 (37:02):
Mister Wutski, thank you so much for joining us today.
Speaker 6 (37:05):
Always pleasure. Thank you.
Speaker 1 (37:06):
This has been Asked Odd on the Financial Exchange Radio
network Ask Todd with Todd. Lutsky has been presented by
Cushing and Dolan, serving Massachusetts and New England for more
than thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(37:27):
Cushing and Dolan. Armstrong Advisory does not provide any legal
or tax advice. Please consult with your illegal or tax
advisor on such matters. Cushing and Armstrong do not endorse
each other and are not affiliated.
Speaker 2 (37:36):
Quite a bit to get to in the second hour,
we'll talk a little bit about the US China Summit
that is kicking off today with President Trump landing in
Beijing earlier this morning. Also, we're going to be covering
a little bit more on the Spring housing market and
what we are seeing there. And then we got to
talk about the tomatoes because there's a problem them with
(38:00):
tomato prices, and I gotta tell you it's gonna gonna
be something we're gonna have to discuss in depth in
our two All that and more is coming up in
just a little bits
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