December 11, 2024 • 37 mins
Chuck Zodda and Marc Fandetti discuss the November CPI report that came in as expected but is still too high. How will the Fed view the slight rise in inflation? Todd Lutsky joins the show for his weekly segment, Ask Todd. This week, Todd explains why creating a trust will alleviate some of those pesky estate taxes.
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Speaker 1 (00:00):
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(01:07):
He's the Financial Exchange with Chuck Zana and Mark Vandetti.
Speaker 2 (01:20):
It's Chuck, Mark and Tucker with you today, and our
lead story is this morning's Consumer Price Index data CPI
came out at eight thirty this morning from the Bureau
of Labor Statistics, and what we saw was in line
with expectations. The headline number came in point three percent
(01:40):
for the month, which is how do they need to
like to see? But again in line with expectations is
still what matters. And the core number came into point
three percent four of the month of November as well,
once again in line with expectations for the last twelve months. Now,
this brings the headline number to two point seven percent
(02:00):
on an annual basis. The core number is right now
at three point three. That headline number at two seven
largely being dragged down by energy prices, with gasoline down
eight point one percent over the last year, so that's
been kind of the main difference there, and as such,
were we're in a spot where we seem to be
(02:24):
kind of stuck right now in this position where core
inflation is running probably about one percent higher than you'd
really be comfortable with it running and there's no clear
path for it to move, you know, down to the
low two percent range absence you know kind of this,
(02:45):
Uh yeah, because some kind of economic miracle, the likes
of which I don't think we've really seen. It's it's
just unclear what takes it down further at this point.
Speaker 3 (02:58):
Your thoughts mark, Yeah, inflation came in right where very
simple models that a generalist like me would use to
predict inflation would suggest. The models have been right on
the past few months. I'm not bragging about them. I
didn't develop them, I just utilize them. And that tells me,
for what it is worth that the process chuck whatever
(03:19):
it is, forget about the components will probably get into that,
and it's interesting. But for again, a generalist like me,
and like any everybody listening. Nobody listening, I presume is
a you know, is an academic monetary economist.
Speaker 2 (03:32):
We have a few of those who listen. Really, I
have no idea.
Speaker 3 (03:35):
They're not teaching right now, not on Wednesdays. So what
that tells me is that the process hasn't changed. You
could say, well, that's good news. Inflation is stable, and
when I say the process, I mean, whatever's under the
hood generating the result. Sure, that's not a very deep statement.
It's an acknowledgment that, however, that there are lots of
(03:56):
things that could affect inflation. It's almost futile to try
to guess from month to month which mole is going
to pop up in the whack a mole game. Just
look at what's happening overall. The process is stable, which
is both good news and bad news. Doesn't appear to
be breaking out. That's good news. Sure, doesn't appear to
be moderating. Further though, that might be bad news. That
might suggest, and I don't have a strong opinion on this,
(04:18):
but that might suggest that the FED is prematurely lowering
rates too quickly, by too much and too quickly.
Speaker 4 (04:24):
We won't we won't know for months.
Speaker 2 (04:27):
We're in a position where, if you look at the
core inflation numbers, we've basically been stuck for the last
six months now, and so there's kind of this steady
state there. The pieces that are interesting is when you
do dive under the hood and you say, okay, where
is this coming from? Even within core inflation. A couple
(04:48):
interesting things just in this report that we saw, and
this is data from Jason Furman, who sliced and diced
the BLS data to his heart's content, And what we
did see in this month is an unexpected jump in
the annual rate of inflation for core goods, which typically
(05:09):
are pretty deflationary, the reason being, hey, usually we're pretty
good like once something, once you're making something, in today's world,
someone's pretty good at commoditizing it, and so you typically
don't see much goods inflation outside of supply shortages like
we did in twenty twenty one and twenty twenty two
and even into the first part of twenty three. Generally
(05:32):
there's kind of a deflationary aspect to them, not the
case this month, where they were actually running at a
hotter pace than what we saw from core services. And
so I think if you're looking for the silver lining
on this, you could say, Okay, that's probably unlikely to repeat.
It is likely due to a combination of factors, which
(05:53):
you know might be companies trying to front run potential
tariffs from next year and saying, hey, we're willing to
pay more this month in order to buy these things
up because the prices could be even higher next year.
It could be still some hurricane related artifacts that are
in here in terms of higher prices because of excess
(06:14):
demand after the hurricane for things like lumber and you know,
things you need to rebuild homes and businesses and things
like that. But it would be unusual to see that
repeat itself. So you say, okay, like that, that's good news.
Maybe that means that you know the core number is
going to come in better next month. Well, or it
could just mean hey, once that short term thing is
(06:35):
taken care of there, maybe the money that would have
been spent there goes back into core services, and so
you end up with core services printing higher in future months.
Speaker 3 (06:43):
I think that is the key issue for again, someone
like most of us participating in this show today, most
of us listening, we're generalists. We care about this stuff
at a high level. We care about inflation because it
has implications for interest rates and economic stability. This the
level of inflation. If I had to sort of nuts
(07:03):
shell it, putting it into a nutshell, sing it no.
Speaker 2 (07:07):
I like the use of nutshell.
Speaker 4 (07:09):
I feel about it. Shakespeare, I don't know, don't think
about it.
Speaker 3 (07:15):
Uh, it's doesn't feel like it's moderating further, and that's
consistent with the economy running a little bit hot. Growth
as measured by GDP is above what most researchers think
is the economy's capacity, it's potential, it's speed limit if
you like. That's so that suggests a tachometer needle in
the red zone. Unemployment is low, it's gone up, so
(07:38):
the the direction is important. It has been rising, but
it's still low. That points and other measures of labor
market activity point to a solid labor market, probably not
an overheating one anymore. Maybe the tachometer on that market
is not in the red zone. But overall, Chuck, economy
has been strong. Using the averages which are the best
(07:58):
we have at our dispose things like GDP and unemployment,
and they're not consistent with further immaculate disinflation. By that
I mean painless disinflation.
Speaker 2 (08:11):
Mark How do how does one reconcile what we're seeing
right now with an economy that still is pretty hot
by most measures other than you know, kind of the
declines that we've seen in the labor market, which are
strains because normally the labor market's the last thing to
slow down in an economy. And here it's kind of
showing signs that it's the first thing to slow, which
(08:32):
is kind of backwards. But how do we reconcile the
fact that we've got inflation still running a little bit
hotter than anticipated and hotter than we'd like to see it.
We've got GDP growth again, I'm just looking at the
Atlanta Fed's GDP now now cast in terms of, hey,
what is it showing. I'm not projecting this myself because
(08:53):
I don't have that kind of capability. They're saying, hey,
right now, through you know this point in q Q four,
he grows is running three point three percent, which, again,
how accurate it is, who knows, but it's there. It's
saying that.
Speaker 3 (09:06):
Until turning points is actually pretty don accurate.
Speaker 2 (09:08):
And so we've got hotter than howter? Then we want
inflation an economy that's growing faster than is you know,
probably possible in the long run based on the demographic
trends that we have, and we've got an incoming president
who the button that he likes to push most is hey,
let's grow faster. How do we try to figure out
(09:33):
how this is all going to work next year? Is
there a path for this to work in terms of
trying to get inflation down further while also growing the
economy at the clip the incoming president would like to
see it if products.
Speaker 3 (09:51):
You put aside whatever Trump's saying today.
Speaker 2 (09:56):
Pay attention to what he's done though, and the button
he likes to push is growth faster.
Speaker 4 (10:02):
That button didn't.
Speaker 3 (10:03):
That button worked for a little bit in twenty eighteen
and twenty nineteen, but in late twenty eighteen we were
in a growth p fair.
Speaker 2 (10:09):
That's half it's that's half his term.
Speaker 3 (10:10):
So like you, no, I'm just saying there is no
we know, there's no button. If there was a growth button,
every president would just jam his thumb on it.
Speaker 2 (10:16):
There For all I'm saying is that, like, that's the
one that.
Speaker 3 (10:19):
Well just wouldn't like to push that. What's what's the
other button you want to push?
Speaker 1 (10:23):
Well?
Speaker 2 (10:23):
There are I mean, look, you will get the Reagan
through Clinton era there was a meaningful push of the
other button, which is, hey, deficits are getting out of control.
Let's slow this thing. From Reagan, from Bush, and from Clinton,
all three of them had deficit control measures at some
point of their term, even if it impacted short term economics.
Speaker 4 (10:45):
You're talking about fiscal policy.
Speaker 3 (10:47):
What else would you just want to Well, there's there's deregulation.
There are other leverties O the push.
Speaker 2 (10:53):
Like the one that actually matters is fiscal. The deregulatory
stuff doesn't matter. It doesn't matter from a A it's
just gonna the deregulatory side is just gonna determine the right.
Speaker 3 (11:03):
But Trump also wanted to impose big spending cuts on
the government, which which would be contractionary.
Speaker 4 (11:09):
So is he gonna be.
Speaker 2 (11:11):
I'm looking at the track record.
Speaker 3 (11:12):
That's why I'm saying, we don't know is he gonna be?
Is Elon gonna be driving the bus? Or is are
the tax cutters? And to hell with deficits and debt,
don't worry about it, they don't matter. Are those people
going to be driving the bus?
Speaker 2 (11:23):
This is what I'm trying to reconcile is what.
Speaker 3 (11:26):
You can't reconcile those two things. They're in perfect tension.
Is Elon and then the the the big spenders, whether
it's tax cuts or additional outlays. I don't know how
you reconcile those two things.
Speaker 2 (11:35):
I think the point that I'm getting to, though, is
where I've been kind of for the last month now,
which is Look, there's a chance that next year is
kind of challenging as far as how to navigate all
these different cross winds here.
Speaker 3 (11:49):
Yeah, forget fiscal policy. I think the safe approaches, all
bets are off. Don't try to guess what Trump's gonna
tweet about tomorrow. We don't know She's shifting.
Speaker 2 (11:59):
I think it's much more you know what he wants.
His goal is to be judged on, Hey, is unemployment low?
Is the stock market high and our interest rates low? Like, yeah,
that's what you wants?
Speaker 3 (12:16):
And and and those are in Those are intention Unemployment
low and low interest rates are probably intention Outside of
a few exceptional periods like the early two thousands, which
was a global phenomenon, you can't necessarily balance all those
forces indefinitely, which I guess is your point. Which is
going to prevail? The question is what you.
Speaker 2 (12:36):
Give is like where which one of those breaks? Is
the question? Because you can't have all of it, at
least not in year one based on where we are today.
Speaker 3 (12:46):
Yeah, you can't have both high growth and low interest
rates and low inflation.
Speaker 4 (12:51):
Probably yeah, get the next year.
Speaker 3 (12:56):
That's that's why they use the expression no free launchs
are unavoidable.
Speaker 2 (13:00):
You try to say, what's the path to mortgage rates
in the fives next year, unemployment hanging around four and
the S and P five hundred going to seventy five hundred.
Speaker 4 (13:11):
It's hard to do. It's like taste great, less filling.
Speaker 2 (13:14):
Really Miller figured that out, did they?
Speaker 4 (13:17):
Though I don't know that's rhetorical.
Speaker 2 (13:21):
Taste better than a lot of other light beers. And
I have these things still.
Speaker 3 (13:26):
I guess my point is these things are always intention
that things you want to eat, or were other worse
things for you.
Speaker 4 (13:31):
For the most part.
Speaker 2 (13:31):
That's why we have December Eat everything you can, like
any good Italian boy. Let's take a quick break here.
When we come back, let's talk a little bit about
how this inflation report impacts the Fed Wall Street.
Speaker 1 (13:46):
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Speaker 2 (14:41):
Mark. What do you think the recent inflation day that
we've gotten, including today's report, does to the FED and
how they are likely to behave over the next six
to twelve months.
Speaker 3 (14:53):
I think when they put these figures into their when
they have their staff put these figures into their economic
models that crank out outcomes for the whole economy, it
probably doesn't change the trajectory of anything. So I don't think,
and this is take this with a huge grain of salt,
because I don't work with these big, complicated models. But
if it doesn't change anything, why would it change their
(15:15):
expected course of action?
Speaker 2 (15:18):
So here is the question that I look at is
in September we got their most recent summary of economic projections,
and let's look at how those projections may have evolved
and whether there is, you know, something that we think
has changed there so for the end of this year,
which is not as relevant to the discussion at this point,
but still matters. They thought that GDP would come in
(15:41):
at two percent. Based on the recent data we've gotten,
it's likely going to be stronger than that. This year.
Unemployment rate they thought was going to go up to
four point four. We're at four to two now. But
that four to two is a rounding, you know, error
away from being four to three. So there still is
a potential that this ends up coming in at four
to four for the unemployment rate, But with the downside
skew to the range of potential outcomes. I think PCE
(16:04):
inflation they thought would be a two to three, with
CORE coming in at two six. Both of those are
likely going to be a little bit light. So they're
probably a little bit underestimating what they have there next
year where all the meat is in terms of their
projections FED things GDP is going to grow two percent
because they basically always think it's going to grow two percent,
because that's that's where they think that the speed limit is.
(16:29):
Unemployment rate they think is going to end twenty twenty
five at four point four. Do we think there's the
potential for meaningful shift? There is that kind of right
in the middle range of outcomes that.
Speaker 4 (16:39):
We would see for the end of next year, Yes.
Speaker 2 (16:42):
Is twenty twenty five. Yeah, I'm looking at the FED
step like, do we think four to four is one
that they're likely to revise up, down or no change
when we get the next Summary of Economic projections.
Speaker 3 (16:54):
Next GDP is going to be fifty percent lower than
it is, a third lower excuse me, than it is today. Uh,
And they think unemployment is going to be the same
with GDP a third lower. But these are just the medians.
These aren't the numbers they actually put into this.
Speaker 2 (17:08):
No, exactly, brani acts. I'm just saying, do we expect
the step to the same or different?
Speaker 3 (17:15):
I'm just trying to answer your question in a way
that's consistent with the other data in the projections that
you're reading. If you told me GDP is going to
be a lot slower than it appears to be growing today.
I would say, applying something called Oaken's law, named after
the guy that observed it, unemployment would have to go
up by more than they appear to project to be
consistent with the GDP slow down of that magnitude if.
Speaker 2 (17:36):
That were to happen, so again, potentially ending up with
you know, unemployment a little bit higher. They've got pc
inflation ending next year at two one and core pce
E at two two. Are those reasonable or based on
the higher inflation that we've seen in Q four relative
to their projections? Do those need to be revised up
for next sear.
Speaker 3 (17:55):
So just let's let's use the same framework. If you
think growth is going to slow from that that unemployment
probably won't go down, It'll probably go up, especially if
it slows down by as much as three today to
two in a year or so from now. Sure inflation
that that story to this point is also consistent with
inflation slowing. So those three things that you just articulated
(18:17):
are I think consistent as to this, you know, as
to the number of decimal points we get this right by,
that's less so elevant.
Speaker 2 (18:26):
If you were a FED member, and again I'm not
I'm not saying that you are. You'd say, okay, okay,
So GDP get us slow to two percent next year,
unemployment might need to move up from the four to
four projection, maybe it needs to move a little bit
higher based on that kind of slowing. But if that
were to happen, there is a reasonable path then where
(18:47):
PCE and core PCE can come in in the low
twos instead of the mid to high twos.
Speaker 3 (18:53):
Those things are not inconsistent. It's possibly uncomfortable with that, sure, But.
Speaker 2 (18:57):
A slowing GDP, and this is the part that I
think there's questions on next year, is not necessarily then
consistent with a stock market that is priced as steeply
as it's pres to them.
Speaker 3 (19:09):
So unless there's something unique to these publicly traded companies
that allows them to continue to expand margins notwithstanding a
slow down in the overall and right, companies can make
more money. It's not as it becomes zero sum at
that point. But I guess that's not inconsistent.
Speaker 2 (19:26):
Let's take a quick break here. When we come back,
we're joined by Todd Lebsky for ask Todd, we're also
going to do Wall Street Watch right after this, Like us.
Speaker 1 (19:43):
On Facebook and follow us on Twitter. Act TFFE show
breaking business news is always first right here on the
Financial Exchange Radio Network. Time now for Wall Street Watch
a complete look at what's moving markets so far today
right here on the Financial Exchange Radio Network.
Speaker 5 (20:03):
Well markets are mixed territory as Wall Street reacts to
the Consumer Price Index for the latest reading on inflation,
where consumer prices climb two point seven percent year over year,
in line with estimates. Right now, the Dow is only
down by eight points in negative territory s and P
five hundred is up by two thirds of a percent,
and the tech heavy NASDAK is rallying one in a
(20:26):
third percent or two hundred and sixty three points. RUSSED
two thousand is up by about a half a percent
or eleven points. Ten year treasury yield is up by
two basis points at four point two five percent, and
Crew Oil is up over one and a third percent,
trading at sixty nine dollars in fifty three cents a barrel.
(20:47):
Macy's down by seven percent after the struggling department store
chain posted a decline in quarterly net income in sales
and lowered its fiscal year forecasts. Macy's earnings report was
delayed from November after the company discovered an employee had
hidden expenses over several years that amounted to one hundred
and fifty one million dollars in false bookkeeping entries. Meanwhile,
(21:10):
General Motors announced it has scrapped its Cruise Robotaxi program
after nearly a decade and ten billion dollars of development.
GM shares are down by two percent. Elsewhere, shares an
arcade and restaurant operator David Busters down by fifteen percent
after it posted a significantly wider quarterly loss and also
(21:31):
announced its chief executive has resigned. Video game retailer and
meme stock favorite game stock swum swung a quarterly profit
as a result of lower expenses. That stock is up
by six percent, and shares in stitch Fix jumping by
thirty four percent after the online personal styling company raised
(21:51):
its second quarter revenue. Outlook, I'm Tucker Silvan, that's Wallstreet Watch.
Speaker 1 (21:57):
This is Aske Todd on the Financial Extramee Radio Network.
If you have an existing estate plan or in the
market for one, Todd Letsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate law.
(22:18):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:23):
So this is your chance to ask Todd Lutsky your
estate planning questions live on air. Todd's with us here
and we got the phone lines open at eight eight
eight to zero five two two six three. Remember we
don't always get through everyone, So if you want to
make sure we get to your question, call early, call often, well,
really call once. Well you know Tucker will pick up.
(22:46):
But that number is eight eight eight to zero five
two two six three in order to speak with Todd
Lotsky about any estate planning questions that you have right
now again eight eight eight to zero five two six three,
get calling so we can make sure that we get
to your questions. Mister Lutsky, how are you doing today?
Speaker 6 (23:08):
I am doing great? How about yourself?
Speaker 2 (23:10):
Pretty good? Yeah?
Speaker 6 (23:11):
What's going on?
Speaker 2 (23:13):
Have you ever thought about buying a telescope? Not?
Speaker 6 (23:15):
Not generally?
Speaker 2 (23:16):
No, you should look into it.
Speaker 6 (23:18):
That's right.
Speaker 2 (23:19):
So Todd, I want to talk to you a little
bit about estate taxes and trust work. Okay, how does
creating an estate plan using trusts potentially work to minimize
the state taxes?
Speaker 7 (23:33):
And you know it's fair, especially when we talk about
you know, federal and state. So remember state. I will
be mentioning more about Massachusetts. Please check your own state
for those laws. But they're the federal and it's it's
strange because when you talk about a federal estate tax,
a lot of people don't think they need it, right
and then, and it's true. I mean, the exemption is
(23:55):
thirteen point nine million come January one, let's just call
it fourteen million for easy numbers.
Speaker 8 (24:00):
Right.
Speaker 7 (24:01):
Well, if you think you have a large estate, like
oh my gosh, I'm worth twenty million dollars, and again
that's a large estate, you might be thinking, Wow, I've
got all kinds of estate tax planning I have to do.
I bet you it's real sophisticated and I got to
get into all these special techniques. And guess what, No,
right now, I would say that that's that's certainly not
(24:21):
the case. We've got a new election or an election
that took place. We've got a new president coming in,
and I think the exemptions could stay high for a while.
So when I say that, if you are a married
couple and you are worth twenty million dollars, and you're thinking, wow,
I got to do all kind of sophisticated planning, basic
revocable trusts, or what I like to call estate planning
(24:45):
one oh one, which is really the foundation of estate planning,
pretty much can eliminate your estate tax. And it's amazing
because if you don't do anything and you're a married
couple and you just I leave everything to my spouse
and I'm worth twenty million, well the surviving spouse will
be worth twenty million, and you could have potentially wasted
your fourteen million dollar exemption. Say you didn't do planning,
(25:05):
and you didn't elect portability, and it's very possible when
you don't plan, none of that happens. And so the
surviving spouse is worth twenty million when they die with
a fourteen million dollar exemption. Yeah, you have six million
dollars subject to tax. You figure federal and state forty
and ten, you're looking at fifty percent or three million
(25:26):
dollars that you're given away However, to your point, Chuck,
simple revocable trust one for each put ten million dollars
in each trust, and when one dies, you really have
the ability through the marital share and the remainder share
built into this trust, to shelter that ten million dollars.
So it'll be subject to or included in the estate
(25:47):
of the first spouse to die, but not the second
spouse to die. So ten million minus fourteen million no tax.
Survivor dies and the survivor spouse's estates now only ten
million because we're not going to include what was in
the deceased spouse's a state or the seas spouses trust,
(26:09):
I should say, leaving her with ten million, we have
an exemption of fourteen million no tax.
Speaker 2 (26:16):
Talking with Todd Lutsky from the law firm of Cushing
and Dolan. If you've got a question for Todd, the
number is eight eight eight to zero five two two
sixty three. That is the number to call to ask
Todd your question live on air. We still have little
bit of room on the phone lines, so eight eight
eight two zero five two two sixty three that is
(26:37):
the number to call. We are going to take a
quick break right now, but when we come back, it's
going to be right to your questions with Todd again.
Still a little bit of room on the phone lines
eight eight, eight to zero five two two sixty three,
quick break, then your questions.
Speaker 1 (26:52):
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 Lunsky on the Financial Exchange
Radio Network.
Speaker 2 (27:13):
All right, Todd, we've got some calls for you, So
here we go. Let's kick things off with Daniel from Wooster. Daniel,
you are on with Todd Lutsky.
Speaker 8 (27:23):
Hey, how are we going today?
Speaker 2 (27:25):
Good? Good?
Speaker 8 (27:27):
So my question is, if I wanted to leave everything
to one of my children or or my son, how
are things not able to get held up in court
under like probate, say, any debts, pass taxes, and any
bills things like that. If I just wanted to leave
him all of my.
Speaker 6 (27:46):
Ass that's how many How many children do you have?
Speaker 8 (27:49):
Just the one?
Speaker 6 (27:50):
Okay?
Speaker 7 (27:50):
Because you made it sound like I wanted to leave
it all to just one child, and that made it
sound like you were going to be disinheriting other children.
Maybe that's just how I heard it, but uh, and
that of course makes it a little more complicated. You
certainly could do that, but then you always got to
worry about making sure there's no fighting after you're you're
you're gone. So yeah, this is a more more simple
I would say, are you married?
Speaker 1 (28:13):
No?
Speaker 6 (28:13):
No, So you know how old are you at this point?
Speaker 8 (28:18):
I am forty five? Okay, I'll be forty five.
Speaker 7 (28:22):
So no more tough questions. So the the uh answer
is pretty simple. I think for you, I don't well,
I don't know the size of your estate. Are you
under like the Massachusetts two million dollar level?
Speaker 6 (28:34):
Or are you over that?
Speaker 1 (28:35):
Yeah?
Speaker 7 (28:36):
No, I'm under okay, So good news on that front
is you know, we're not really worried about taxes. I
want to keep you in control, so you would be
the trustee. I would want you to be the donor.
Or it would be simply a revocable trust and put
your assets into it so during life, your life will
not change at all. You get to do everything you
do today. You will not need to file an income
(28:59):
tax return special for this trust. You will just continue
to file your personal ten forty like you always do,
and life will go on relatively unaffected. The old, set
it and forget it idea, And then though what you're
looking to accomplish will happen when you die. Everything in
the trust avoids probate and it passes. So if doesn't
(29:19):
go to probate, creditors can only attach assets in your
probatea state. This is outside of your probatea state, so
it'll pass directly to your child, or you could control it,
depending on how you want to leave it to that child.
Do you want to put it in you know, have
them get it at certain ages like twenty five, thirty
thirty five? Do you want to have it controlled and
(29:42):
protected from future creditors. All of those things you will
discuss with your state planning attorney to design how your
child gets it.
Speaker 6 (29:50):
But that will accomplish your objectives.
Speaker 7 (29:54):
Folks, speaking of accomplishing objectives, sometimes avoiding taxes is one
of those objectives. As a new article this month a
tale of two objectives reduce taxes and protect assets from
the nursing home.
Speaker 6 (30:06):
So it's really for everybody.
Speaker 7 (30:08):
It explains probate, It explains the portability rules, and it
explains with an example, how with a revocable trust, a
marital share and a remainder share can shelter assets for
a state taxes like I was explaining earlier when Chuck
asked the question, However, it also deals with the Massachusetts
of state tax, the new Massachusetts of state tax one
(30:30):
year later, of course. And then for folks who are
more concerned about nursing, home planning and taxes, well, then
we have a section in there regarding irrevocable trusts and
how those are designed to provide both of those benefits
at the same time. So, folks, is a little bit
of everything in here, something for everyone eight six six
(30:53):
eight four eight five six nine nine or Legal Exchange
Show dot com again eight sixty six eight four eight
five six ninety nine or Legal Exchange Show dot com.
Speaker 2 (31:05):
Todd, let's keep another one for you here. We've got
Chris in Milton. Chris, what's your question for Todd?
Speaker 9 (31:11):
Hi, Todd, thank you for answering these questions. That's nicer
you to do that. My question is on the Massachusetts
a state tax, you know, but quote unquote newer state tax. Yes, say,
if somebody has a grosser estate of two million, fifty thousand, okay, okay,
but they have allowable deductions of say seventy five thousand. Okay,
(31:37):
so that lowers the net of state to one million,
nine hundred and seventy five thousand.
Speaker 6 (31:42):
Got it.
Speaker 9 (31:44):
Does somebody even need to file the Massachusetts a state
tax return? I mean, is it based on the grosser
state or the state after these allowable expenses?
Speaker 6 (31:54):
Great? Great question.
Speaker 7 (31:56):
It is based on the grosser state, So you would
need to file even though you're not gonna pay any tax.
It's going to pull you under the estate tax exemption.
But because the gross estate is over the filing threshold,
which is in essence what this two million dollar exemption
is in Massachusetts, it's more of a threshold, you would
(32:18):
still need to file the estate tax, but because you're
at a million nine to seventy five, it would result
in zero estate tax too. Versus if your gross estate
was a million nine ninety nine, then technically you don't
need to file.
Speaker 6 (32:34):
So hopefully that was helpful, Todd.
Speaker 2 (32:36):
We got another one for you here. Let's go to
fill in Worcester. Phil. What's your question for Todd?
Speaker 10 (32:43):
Hey, Todd, I thank you for what you're doing. He
just turned fifty five. I have really no family, no kids,
no wife. I have roughly a small meager for one
kid that I've rolled over to a rash and I
just don't know if, if, if I should be looking
(33:03):
at her trust at this point.
Speaker 6 (33:06):
How much are you worth in total? Under under a million?
Under two million?
Speaker 10 (33:12):
Well well under.
Speaker 7 (33:14):
Okay, so probably not. I mean again, I want you
to do only what you need to do. Not to
sound like a liberty mutual commercial, but I got to
tell you that that for someone in your situation, simply
name a designated beneficiary on your wrath, put a designated
beneficiary on whatever bank accounts you might have, or or
(33:36):
or maybe other investment accounts that you might have, and
then they will go directly to those people listed as
beneficiaries and they can they can take it, and it
will avoid probate. No need to get bogged down in
trusts and wills for you. So but hopefully that's helpful.
Speaker 2 (33:51):
Todd. Let's go do one more here, we'll see if
we can go four for four on this. Let's go
to Bill in Austerville. Bill, you're on with Todd Lutsky Hike, Todd.
Speaker 9 (34:03):
The question is.
Speaker 10 (34:05):
If there's an irrevocable trust, YEP, can you.
Speaker 9 (34:10):
Sell the house. In other words, she has two houses
and she wants to sell one so that she can
be taken care of.
Speaker 6 (34:20):
Is this a single person widdow?
Speaker 7 (34:24):
Yeah, so single at the time, right, So I don't know.
I didn't draft the trust, but I'm going to tell
you how our irrevocable trusts work. And I'm assuming this
was a Medicaid irrevocable type trust because remember there's many
kinds of irrevocable trusts. So let's assume that it's a
Medicaid irrevocable trust and she wants to sell it. Our
trust absolutely allow for the sale, super simple. She would
(34:49):
direct the trustee to put it on the market, it
would sell, money would go or the house would go
out the money would come in. Our trusts are also
designed as grand or trusts, so she would still be
entitled to her capital gains tax exclusion as a single person.
If this is her primary residence of two hundred and
(35:11):
fifty thousand dollars, the first two hundred and fifty thousand
dollars of gain would not be taxed for her, and
then the trust can actually use that money either for
investments for her to live off of, or you could
maybe downsize. Maybe she wants to now buy a condo
and just not have to worry about maintenance and upkeep.
(35:33):
And so money would go out and a new house
would come in or new condo would come in, and
arguably that transaction would not impact the five year waiting
period if she did that for medicaid eligibility. So you
just need to read the terms of the trust that
will tell you whether she can do it or not.
I hope it's drafted properly. I know in our trusts
(35:56):
that can absolutely be done.
Speaker 2 (35:58):
Todd One other questions just that I have for you,
just kind of getting back to what we discussed in
the prior segment. Let's say that someone had done estate
planning previously, and maybe now they're concerned about estate taxes.
Their estate may have grown since they did it. Yes,
how would someone know whether or not they need to
update previous estate plans?
Speaker 10 (36:20):
You know?
Speaker 7 (36:21):
I guess the only way to really know that is
to keep an eye on what your assets are. Right,
We try to educate you as to what those exemption
amounts are, and those exemption amounts. You know, if you
know your estate has grown, call your accountant, call your
estate planning attorney, check in, right, I always tell people
check in with your estate planning attorney and try to
(36:43):
figure out where you are and so if the estate
tax has gone up high enough that now it's causing
you to be an estate tax problem, he'll tell you
or she'll tell you, and you will be able to
adjust your plan to maybe do more sophisticated planning as
the case may be.
Speaker 2 (36:58):
Mister Letsky, thank you how much for joining us today.
Speaker 6 (37:01):
Always a pleasure.
Speaker 1 (37:03):
This has been Aske Todd on the Financial Exchange Radio network.
Aske 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
(37:24):
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(01:07):
He's the Financial Exchange with Chuck Zana and Mark Vandetti.
Speaker 2 (01:20):
It's Chuck, Mark and Tucker with you today, and our
lead story is this morning's Consumer Price Index data CPI
came out at eight thirty this morning from the Bureau
of Labor Statistics, and what we saw was in line
with expectations. The headline number came in point three percent
(01:40):
for the month, which is how do they need to
like to see? But again in line with expectations is
still what matters. And the core number came into point
three percent four of the month of November as well,
once again in line with expectations for the last twelve months. Now,
this brings the headline number to two point seven percent
(02:00):
on an annual basis. The core number is right now
at three point three. That headline number at two seven
largely being dragged down by energy prices, with gasoline down
eight point one percent over the last year, so that's
been kind of the main difference there, and as such,
were we're in a spot where we seem to be
(02:24):
kind of stuck right now in this position where core
inflation is running probably about one percent higher than you'd
really be comfortable with it running and there's no clear
path for it to move, you know, down to the
low two percent range absence you know kind of this,
(02:45):
Uh yeah, because some kind of economic miracle, the likes
of which I don't think we've really seen. It's it's
just unclear what takes it down further at this point.
Speaker 3 (02:58):
Your thoughts mark, Yeah, inflation came in right where very
simple models that a generalist like me would use to
predict inflation would suggest. The models have been right on
the past few months. I'm not bragging about them. I
didn't develop them, I just utilize them. And that tells me,
for what it is worth that the process chuck whatever
(03:19):
it is, forget about the components will probably get into that,
and it's interesting. But for again, a generalist like me,
and like any everybody listening. Nobody listening, I presume is
a you know, is an academic monetary economist.
Speaker 2 (03:32):
We have a few of those who listen. Really, I
have no idea.
Speaker 3 (03:35):
They're not teaching right now, not on Wednesdays. So what
that tells me is that the process hasn't changed. You
could say, well, that's good news. Inflation is stable, and
when I say the process, I mean, whatever's under the
hood generating the result. Sure, that's not a very deep statement.
It's an acknowledgment that, however, that there are lots of
(03:56):
things that could affect inflation. It's almost futile to try
to guess from month to month which mole is going
to pop up in the whack a mole game. Just
look at what's happening overall. The process is stable, which
is both good news and bad news. Doesn't appear to
be breaking out. That's good news. Sure, doesn't appear to
be moderating. Further though, that might be bad news. That
might suggest, and I don't have a strong opinion on this,
(04:18):
but that might suggest that the FED is prematurely lowering
rates too quickly, by too much and too quickly.
Speaker 4 (04:24):
We won't we won't know for months.
Speaker 2 (04:27):
We're in a position where, if you look at the
core inflation numbers, we've basically been stuck for the last
six months now, and so there's kind of this steady
state there. The pieces that are interesting is when you
do dive under the hood and you say, okay, where
is this coming from? Even within core inflation. A couple
(04:48):
interesting things just in this report that we saw, and
this is data from Jason Furman, who sliced and diced
the BLS data to his heart's content, And what we
did see in this month is an unexpected jump in
the annual rate of inflation for core goods, which typically
(05:09):
are pretty deflationary, the reason being, hey, usually we're pretty
good like once something, once you're making something, in today's world,
someone's pretty good at commoditizing it, and so you typically
don't see much goods inflation outside of supply shortages like
we did in twenty twenty one and twenty twenty two
and even into the first part of twenty three. Generally
(05:32):
there's kind of a deflationary aspect to them, not the
case this month, where they were actually running at a
hotter pace than what we saw from core services. And
so I think if you're looking for the silver lining
on this, you could say, Okay, that's probably unlikely to repeat.
It is likely due to a combination of factors, which
(05:53):
you know might be companies trying to front run potential
tariffs from next year and saying, hey, we're willing to
pay more this month in order to buy these things
up because the prices could be even higher next year.
It could be still some hurricane related artifacts that are
in here in terms of higher prices because of excess
(06:14):
demand after the hurricane for things like lumber and you know,
things you need to rebuild homes and businesses and things
like that. But it would be unusual to see that
repeat itself. So you say, okay, like that, that's good news.
Maybe that means that you know the core number is
going to come in better next month. Well, or it
could just mean hey, once that short term thing is
(06:35):
taken care of there, maybe the money that would have
been spent there goes back into core services, and so
you end up with core services printing higher in future months.
Speaker 3 (06:43):
I think that is the key issue for again, someone
like most of us participating in this show today, most
of us listening, we're generalists. We care about this stuff
at a high level. We care about inflation because it
has implications for interest rates and economic stability. This the
level of inflation. If I had to sort of nuts
(07:03):
shell it, putting it into a nutshell, sing it no.
Speaker 2 (07:07):
I like the use of nutshell.
Speaker 4 (07:09):
I feel about it. Shakespeare, I don't know, don't think
about it.
Speaker 3 (07:15):
Uh, it's doesn't feel like it's moderating further, and that's
consistent with the economy running a little bit hot. Growth
as measured by GDP is above what most researchers think
is the economy's capacity, it's potential, it's speed limit if
you like. That's so that suggests a tachometer needle in
the red zone. Unemployment is low, it's gone up, so
(07:38):
the the direction is important. It has been rising, but
it's still low. That points and other measures of labor
market activity point to a solid labor market, probably not
an overheating one anymore. Maybe the tachometer on that market
is not in the red zone. But overall, Chuck, economy
has been strong. Using the averages which are the best
(07:58):
we have at our dispose things like GDP and unemployment,
and they're not consistent with further immaculate disinflation. By that
I mean painless disinflation.
Speaker 2 (08:11):
Mark How do how does one reconcile what we're seeing
right now with an economy that still is pretty hot
by most measures other than you know, kind of the
declines that we've seen in the labor market, which are
strains because normally the labor market's the last thing to
slow down in an economy. And here it's kind of
showing signs that it's the first thing to slow, which
(08:32):
is kind of backwards. But how do we reconcile the
fact that we've got inflation still running a little bit
hotter than anticipated and hotter than we'd like to see it.
We've got GDP growth again, I'm just looking at the
Atlanta Fed's GDP now now cast in terms of, hey,
what is it showing. I'm not projecting this myself because
(08:53):
I don't have that kind of capability. They're saying, hey,
right now, through you know this point in q Q four,
he grows is running three point three percent, which, again,
how accurate it is, who knows, but it's there. It's
saying that.
Speaker 3 (09:06):
Until turning points is actually pretty don accurate.
Speaker 2 (09:08):
And so we've got hotter than howter? Then we want
inflation an economy that's growing faster than is you know,
probably possible in the long run based on the demographic
trends that we have, and we've got an incoming president
who the button that he likes to push most is hey,
let's grow faster. How do we try to figure out
(09:33):
how this is all going to work next year? Is
there a path for this to work in terms of
trying to get inflation down further while also growing the
economy at the clip the incoming president would like to
see it if products.
Speaker 3 (09:51):
You put aside whatever Trump's saying today.
Speaker 2 (09:56):
Pay attention to what he's done though, and the button
he likes to push is growth faster.
Speaker 4 (10:02):
That button didn't.
Speaker 3 (10:03):
That button worked for a little bit in twenty eighteen
and twenty nineteen, but in late twenty eighteen we were
in a growth p fair.
Speaker 2 (10:09):
That's half it's that's half his term.
Speaker 3 (10:10):
So like you, no, I'm just saying there is no
we know, there's no button. If there was a growth button,
every president would just jam his thumb on it.
Speaker 2 (10:16):
There For all I'm saying is that, like, that's the
one that.
Speaker 3 (10:19):
Well just wouldn't like to push that. What's what's the
other button you want to push?
Speaker 1 (10:23):
Well?
Speaker 2 (10:23):
There are I mean, look, you will get the Reagan
through Clinton era there was a meaningful push of the
other button, which is, hey, deficits are getting out of control.
Let's slow this thing. From Reagan, from Bush, and from Clinton,
all three of them had deficit control measures at some
point of their term, even if it impacted short term economics.
Speaker 4 (10:45):
You're talking about fiscal policy.
Speaker 3 (10:47):
What else would you just want to Well, there's there's deregulation.
There are other leverties O the push.
Speaker 2 (10:53):
Like the one that actually matters is fiscal. The deregulatory
stuff doesn't matter. It doesn't matter from a A it's
just gonna the deregulatory side is just gonna determine the right.
Speaker 3 (11:03):
But Trump also wanted to impose big spending cuts on
the government, which which would be contractionary.
Speaker 4 (11:09):
So is he gonna be.
Speaker 2 (11:11):
I'm looking at the track record.
Speaker 3 (11:12):
That's why I'm saying, we don't know is he gonna be?
Is Elon gonna be driving the bus? Or is are
the tax cutters? And to hell with deficits and debt,
don't worry about it, they don't matter. Are those people
going to be driving the bus?
Speaker 2 (11:23):
This is what I'm trying to reconcile is what.
Speaker 3 (11:26):
You can't reconcile those two things. They're in perfect tension.
Is Elon and then the the the big spenders, whether
it's tax cuts or additional outlays. I don't know how
you reconcile those two things.
Speaker 2 (11:35):
I think the point that I'm getting to, though, is
where I've been kind of for the last month now,
which is Look, there's a chance that next year is
kind of challenging as far as how to navigate all
these different cross winds here.
Speaker 3 (11:49):
Yeah, forget fiscal policy. I think the safe approaches, all
bets are off. Don't try to guess what Trump's gonna
tweet about tomorrow. We don't know She's shifting.
Speaker 2 (11:59):
I think it's much more you know what he wants.
His goal is to be judged on, Hey, is unemployment low?
Is the stock market high and our interest rates low? Like, yeah,
that's what you wants?
Speaker 3 (12:16):
And and and those are in Those are intention Unemployment
low and low interest rates are probably intention Outside of
a few exceptional periods like the early two thousands, which
was a global phenomenon, you can't necessarily balance all those
forces indefinitely, which I guess is your point. Which is
going to prevail? The question is what you.
Speaker 2 (12:36):
Give is like where which one of those breaks? Is
the question? Because you can't have all of it, at
least not in year one based on where we are today.
Speaker 3 (12:46):
Yeah, you can't have both high growth and low interest
rates and low inflation.
Speaker 4 (12:51):
Probably yeah, get the next year.
Speaker 3 (12:56):
That's that's why they use the expression no free launchs
are unavoidable.
Speaker 2 (13:00):
You try to say, what's the path to mortgage rates
in the fives next year, unemployment hanging around four and
the S and P five hundred going to seventy five hundred.
Speaker 4 (13:11):
It's hard to do. It's like taste great, less filling.
Speaker 2 (13:14):
Really Miller figured that out, did they?
Speaker 4 (13:17):
Though I don't know that's rhetorical.
Speaker 2 (13:21):
Taste better than a lot of other light beers. And
I have these things still.
Speaker 3 (13:26):
I guess my point is these things are always intention
that things you want to eat, or were other worse
things for you.
Speaker 4 (13:31):
For the most part.
Speaker 2 (13:31):
That's why we have December Eat everything you can, like
any good Italian boy. Let's take a quick break here.
When we come back, let's talk a little bit about
how this inflation report impacts the Fed Wall Street.
Speaker 1 (13:46):
Watch a full update on the markets performance todate week
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Speaker 5 (14:07):
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Speaker 2 (14:41):
Mark. What do you think the recent inflation day that
we've gotten, including today's report, does to the FED and
how they are likely to behave over the next six
to twelve months.
Speaker 3 (14:53):
I think when they put these figures into their when
they have their staff put these figures into their economic
models that crank out outcomes for the whole economy, it
probably doesn't change the trajectory of anything. So I don't think,
and this is take this with a huge grain of salt,
because I don't work with these big, complicated models. But
if it doesn't change anything, why would it change their
(15:15):
expected course of action?
Speaker 2 (15:18):
So here is the question that I look at is
in September we got their most recent summary of economic projections,
and let's look at how those projections may have evolved
and whether there is, you know, something that we think
has changed there so for the end of this year,
which is not as relevant to the discussion at this point,
but still matters. They thought that GDP would come in
(15:41):
at two percent. Based on the recent data we've gotten,
it's likely going to be stronger than that. This year.
Unemployment rate they thought was going to go up to
four point four. We're at four to two now. But
that four to two is a rounding, you know, error
away from being four to three. So there still is
a potential that this ends up coming in at four
to four for the unemployment rate, But with the downside
skew to the range of potential outcomes. I think PCE
(16:04):
inflation they thought would be a two to three, with
CORE coming in at two six. Both of those are
likely going to be a little bit light. So they're
probably a little bit underestimating what they have there next
year where all the meat is in terms of their
projections FED things GDP is going to grow two percent
because they basically always think it's going to grow two percent,
because that's that's where they think that the speed limit is.
(16:29):
Unemployment rate they think is going to end twenty twenty
five at four point four. Do we think there's the
potential for meaningful shift? There is that kind of right
in the middle range of outcomes that.
Speaker 4 (16:39):
We would see for the end of next year, Yes.
Speaker 2 (16:42):
Is twenty twenty five. Yeah, I'm looking at the FED
step like, do we think four to four is one
that they're likely to revise up, down or no change
when we get the next Summary of Economic projections.
Speaker 3 (16:54):
Next GDP is going to be fifty percent lower than
it is, a third lower excuse me, than it is today. Uh,
And they think unemployment is going to be the same
with GDP a third lower. But these are just the medians.
These aren't the numbers they actually put into this.
Speaker 2 (17:08):
No, exactly, brani acts. I'm just saying, do we expect
the step to the same or different?
Speaker 3 (17:15):
I'm just trying to answer your question in a way
that's consistent with the other data in the projections that
you're reading. If you told me GDP is going to
be a lot slower than it appears to be growing today.
I would say, applying something called Oaken's law, named after
the guy that observed it, unemployment would have to go
up by more than they appear to project to be
consistent with the GDP slow down of that magnitude if.
Speaker 2 (17:36):
That were to happen, so again, potentially ending up with
you know, unemployment a little bit higher. They've got pc
inflation ending next year at two one and core pce
E at two two. Are those reasonable or based on
the higher inflation that we've seen in Q four relative
to their projections? Do those need to be revised up
for next sear.
Speaker 3 (17:55):
So just let's let's use the same framework. If you
think growth is going to slow from that that unemployment
probably won't go down, It'll probably go up, especially if
it slows down by as much as three today to
two in a year or so from now. Sure inflation
that that story to this point is also consistent with
inflation slowing. So those three things that you just articulated
(18:17):
are I think consistent as to this, you know, as
to the number of decimal points we get this right by,
that's less so elevant.
Speaker 2 (18:26):
If you were a FED member, and again I'm not
I'm not saying that you are. You'd say, okay, okay,
So GDP get us slow to two percent next year,
unemployment might need to move up from the four to
four projection, maybe it needs to move a little bit
higher based on that kind of slowing. But if that
were to happen, there is a reasonable path then where
(18:47):
PCE and core PCE can come in in the low
twos instead of the mid to high twos.
Speaker 3 (18:53):
Those things are not inconsistent. It's possibly uncomfortable with that, sure, But.
Speaker 2 (18:57):
A slowing GDP, and this is the part that I
think there's questions on next year, is not necessarily then
consistent with a stock market that is priced as steeply
as it's pres to them.
Speaker 3 (19:09):
So unless there's something unique to these publicly traded companies
that allows them to continue to expand margins notwithstanding a
slow down in the overall and right, companies can make
more money. It's not as it becomes zero sum at
that point. But I guess that's not inconsistent.
Speaker 2 (19:26):
Let's take a quick break here. When we come back,
we're joined by Todd Lebsky for ask Todd, we're also
going to do Wall Street Watch right after this, Like us.
Speaker 1 (19:43):
On Facebook and follow us on Twitter. Act TFFE show
breaking business news is always first right here on the
Financial Exchange Radio Network. Time now for Wall Street Watch
a complete look at what's moving markets so far today
right here on the Financial Exchange Radio Network.
Speaker 5 (20:03):
Well markets are mixed territory as Wall Street reacts to
the Consumer Price Index for the latest reading on inflation,
where consumer prices climb two point seven percent year over year,
in line with estimates. Right now, the Dow is only
down by eight points in negative territory s and P
five hundred is up by two thirds of a percent,
and the tech heavy NASDAK is rallying one in a
(20:26):
third percent or two hundred and sixty three points. RUSSED
two thousand is up by about a half a percent
or eleven points. Ten year treasury yield is up by
two basis points at four point two five percent, and
Crew Oil is up over one and a third percent,
trading at sixty nine dollars in fifty three cents a barrel.
(20:47):
Macy's down by seven percent after the struggling department store
chain posted a decline in quarterly net income in sales
and lowered its fiscal year forecasts. Macy's earnings report was
delayed from November after the company discovered an employee had
hidden expenses over several years that amounted to one hundred
and fifty one million dollars in false bookkeeping entries. Meanwhile,
(21:10):
General Motors announced it has scrapped its Cruise Robotaxi program
after nearly a decade and ten billion dollars of development.
GM shares are down by two percent. Elsewhere, shares an
arcade and restaurant operator David Busters down by fifteen percent
after it posted a significantly wider quarterly loss and also
(21:31):
announced its chief executive has resigned. Video game retailer and
meme stock favorite game stock swum swung a quarterly profit
as a result of lower expenses. That stock is up
by six percent, and shares in stitch Fix jumping by
thirty four percent after the online personal styling company raised
(21:51):
its second quarter revenue. Outlook, I'm Tucker Silvan, that's Wallstreet Watch.
Speaker 1 (21:57):
This is Aske Todd on the Financial Extramee Radio Network.
If you have an existing estate plan or in the
market for one, Todd Letsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate law.
(22:18):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:23):
So this is your chance to ask Todd Lutsky your
estate planning questions live on air. Todd's with us here
and we got the phone lines open at eight eight
eight to zero five two two six three. Remember we
don't always get through everyone, So if you want to
make sure we get to your question, call early, call often, well,
really call once. Well you know Tucker will pick up.
(22:46):
But that number is eight eight eight to zero five
two two six three in order to speak with Todd
Lotsky about any estate planning questions that you have right
now again eight eight eight to zero five two six three,
get calling so we can make sure that we get
to your questions. Mister Lutsky, how are you doing today?
Speaker 6 (23:08):
I am doing great? How about yourself?
Speaker 2 (23:10):
Pretty good? Yeah?
Speaker 6 (23:11):
What's going on?
Speaker 2 (23:13):
Have you ever thought about buying a telescope? Not?
Speaker 6 (23:15):
Not generally?
Speaker 2 (23:16):
No, you should look into it.
Speaker 6 (23:18):
That's right.
Speaker 2 (23:19):
So Todd, I want to talk to you a little
bit about estate taxes and trust work. Okay, how does
creating an estate plan using trusts potentially work to minimize
the state taxes?
Speaker 7 (23:33):
And you know it's fair, especially when we talk about
you know, federal and state. So remember state. I will
be mentioning more about Massachusetts. Please check your own state
for those laws. But they're the federal and it's it's
strange because when you talk about a federal estate tax,
a lot of people don't think they need it, right
and then, and it's true. I mean, the exemption is
(23:55):
thirteen point nine million come January one, let's just call
it fourteen million for easy numbers.
Speaker 8 (24:00):
Right.
Speaker 7 (24:01):
Well, if you think you have a large estate, like
oh my gosh, I'm worth twenty million dollars, and again
that's a large estate, you might be thinking, Wow, I've
got all kinds of estate tax planning I have to do.
I bet you it's real sophisticated and I got to
get into all these special techniques. And guess what, No,
right now, I would say that that's that's certainly not
(24:21):
the case. We've got a new election or an election
that took place. We've got a new president coming in,
and I think the exemptions could stay high for a while.
So when I say that, if you are a married
couple and you are worth twenty million dollars, and you're thinking, wow,
I got to do all kind of sophisticated planning, basic
revocable trusts, or what I like to call estate planning
(24:45):
one oh one, which is really the foundation of estate planning,
pretty much can eliminate your estate tax. And it's amazing
because if you don't do anything and you're a married
couple and you just I leave everything to my spouse
and I'm worth twenty million, well the surviving spouse will
be worth twenty million, and you could have potentially wasted
your fourteen million dollar exemption. Say you didn't do planning,
(25:05):
and you didn't elect portability, and it's very possible when
you don't plan, none of that happens. And so the
surviving spouse is worth twenty million when they die with
a fourteen million dollar exemption. Yeah, you have six million
dollars subject to tax. You figure federal and state forty
and ten, you're looking at fifty percent or three million
(25:26):
dollars that you're given away However, to your point, Chuck,
simple revocable trust one for each put ten million dollars
in each trust, and when one dies, you really have
the ability through the marital share and the remainder share
built into this trust, to shelter that ten million dollars.
So it'll be subject to or included in the estate
(25:47):
of the first spouse to die, but not the second
spouse to die. So ten million minus fourteen million no tax.
Survivor dies and the survivor spouse's estates now only ten
million because we're not going to include what was in
the deceased spouse's a state or the seas spouses trust,
(26:09):
I should say, leaving her with ten million, we have
an exemption of fourteen million no tax.
Speaker 2 (26:16):
Talking with Todd Lutsky from the law firm of Cushing
and Dolan. If you've got a question for Todd, the
number is eight eight eight to zero five two two
sixty three. That is the number to call to ask
Todd your question live on air. We still have little
bit of room on the phone lines, so eight eight
eight two zero five two two sixty three that is
(26:37):
the number to call. We are going to take a
quick break right now, but when we come back, it's
going to be right to your questions with Todd again.
Still a little bit of room on the phone lines
eight eight, eight to zero five two two sixty three,
quick break, then your questions.
Speaker 1 (26:52):
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 Lunsky on the Financial Exchange
Radio Network.
Speaker 2 (27:13):
All right, Todd, we've got some calls for you, So
here we go. Let's kick things off with Daniel from Wooster. Daniel,
you are on with Todd Lutsky.
Speaker 8 (27:23):
Hey, how are we going today?
Speaker 2 (27:25):
Good? Good?
Speaker 8 (27:27):
So my question is, if I wanted to leave everything
to one of my children or or my son, how
are things not able to get held up in court
under like probate, say, any debts, pass taxes, and any
bills things like that. If I just wanted to leave
him all of my.
Speaker 6 (27:46):
Ass that's how many How many children do you have?
Speaker 8 (27:49):
Just the one?
Speaker 6 (27:50):
Okay?
Speaker 7 (27:50):
Because you made it sound like I wanted to leave
it all to just one child, and that made it
sound like you were going to be disinheriting other children.
Maybe that's just how I heard it, but uh, and
that of course makes it a little more complicated. You
certainly could do that, but then you always got to
worry about making sure there's no fighting after you're you're
you're gone. So yeah, this is a more more simple
I would say, are you married?
Speaker 1 (28:13):
No?
Speaker 6 (28:13):
No, So you know how old are you at this point?
Speaker 8 (28:18):
I am forty five? Okay, I'll be forty five.
Speaker 7 (28:22):
So no more tough questions. So the the uh answer
is pretty simple. I think for you, I don't well,
I don't know the size of your estate. Are you
under like the Massachusetts two million dollar level?
Speaker 6 (28:34):
Or are you over that?
Speaker 1 (28:35):
Yeah?
Speaker 7 (28:36):
No, I'm under okay, So good news on that front
is you know, we're not really worried about taxes. I
want to keep you in control, so you would be
the trustee. I would want you to be the donor.
Or it would be simply a revocable trust and put
your assets into it so during life, your life will
not change at all. You get to do everything you
do today. You will not need to file an income
(28:59):
tax return special for this trust. You will just continue
to file your personal ten forty like you always do,
and life will go on relatively unaffected. The old, set
it and forget it idea, And then though what you're
looking to accomplish will happen when you die. Everything in
the trust avoids probate and it passes. So if doesn't
(29:19):
go to probate, creditors can only attach assets in your
probatea state. This is outside of your probatea state, so
it'll pass directly to your child, or you could control it,
depending on how you want to leave it to that child.
Do you want to put it in you know, have
them get it at certain ages like twenty five, thirty
thirty five? Do you want to have it controlled and
(29:42):
protected from future creditors. All of those things you will
discuss with your state planning attorney to design how your
child gets it.
Speaker 6 (29:50):
But that will accomplish your objectives.
Speaker 7 (29:54):
Folks, speaking of accomplishing objectives, sometimes avoiding taxes is one
of those objectives. As a new article this month a
tale of two objectives reduce taxes and protect assets from
the nursing home.
Speaker 6 (30:06):
So it's really for everybody.
Speaker 7 (30:08):
It explains probate, It explains the portability rules, and it
explains with an example, how with a revocable trust, a
marital share and a remainder share can shelter assets for
a state taxes like I was explaining earlier when Chuck
asked the question, However, it also deals with the Massachusetts
of state tax, the new Massachusetts of state tax one
(30:30):
year later, of course. And then for folks who are
more concerned about nursing, home planning and taxes, well, then
we have a section in there regarding irrevocable trusts and
how those are designed to provide both of those benefits
at the same time. So, folks, is a little bit
of everything in here, something for everyone eight six six
(30:53):
eight four eight five six nine nine or Legal Exchange
Show dot com again eight sixty six eight four eight
five six ninety nine or Legal Exchange Show dot com.
Speaker 2 (31:05):
Todd, let's keep another one for you here. We've got
Chris in Milton. Chris, what's your question for Todd?
Speaker 9 (31:11):
Hi, Todd, thank you for answering these questions. That's nicer
you to do that. My question is on the Massachusetts
a state tax, you know, but quote unquote newer state tax. Yes, say,
if somebody has a grosser estate of two million, fifty thousand, okay, okay,
but they have allowable deductions of say seventy five thousand. Okay,
(31:37):
so that lowers the net of state to one million,
nine hundred and seventy five thousand.
Speaker 6 (31:42):
Got it.
Speaker 9 (31:44):
Does somebody even need to file the Massachusetts a state
tax return? I mean, is it based on the grosser
state or the state after these allowable expenses?
Speaker 6 (31:54):
Great? Great question.
Speaker 7 (31:56):
It is based on the grosser state, So you would
need to file even though you're not gonna pay any tax.
It's going to pull you under the estate tax exemption.
But because the gross estate is over the filing threshold,
which is in essence what this two million dollar exemption
is in Massachusetts, it's more of a threshold, you would
(32:18):
still need to file the estate tax, but because you're
at a million nine to seventy five, it would result
in zero estate tax too. Versus if your gross estate
was a million nine ninety nine, then technically you don't
need to file.
Speaker 6 (32:34):
So hopefully that was helpful, Todd.
Speaker 2 (32:36):
We got another one for you here. Let's go to
fill in Worcester. Phil. What's your question for Todd?
Speaker 10 (32:43):
Hey, Todd, I thank you for what you're doing. He
just turned fifty five. I have really no family, no kids,
no wife. I have roughly a small meager for one
kid that I've rolled over to a rash and I
just don't know if, if, if I should be looking
(33:03):
at her trust at this point.
Speaker 6 (33:06):
How much are you worth in total? Under under a million?
Under two million?
Speaker 10 (33:12):
Well well under.
Speaker 7 (33:14):
Okay, so probably not. I mean again, I want you
to do only what you need to do. Not to
sound like a liberty mutual commercial, but I got to
tell you that that for someone in your situation, simply
name a designated beneficiary on your wrath, put a designated
beneficiary on whatever bank accounts you might have, or or
(33:36):
or maybe other investment accounts that you might have, and
then they will go directly to those people listed as
beneficiaries and they can they can take it, and it
will avoid probate. No need to get bogged down in
trusts and wills for you. So but hopefully that's helpful.
Speaker 2 (33:51):
Todd. Let's go do one more here, we'll see if
we can go four for four on this. Let's go
to Bill in Austerville. Bill, you're on with Todd Lutsky Hike, Todd.
Speaker 9 (34:03):
The question is.
Speaker 10 (34:05):
If there's an irrevocable trust, YEP, can you.
Speaker 9 (34:10):
Sell the house. In other words, she has two houses
and she wants to sell one so that she can
be taken care of.
Speaker 6 (34:20):
Is this a single person widdow?
Speaker 7 (34:24):
Yeah, so single at the time, right, So I don't know.
I didn't draft the trust, but I'm going to tell
you how our irrevocable trusts work. And I'm assuming this
was a Medicaid irrevocable type trust because remember there's many
kinds of irrevocable trusts. So let's assume that it's a
Medicaid irrevocable trust and she wants to sell it. Our
trust absolutely allow for the sale, super simple. She would
(34:49):
direct the trustee to put it on the market, it
would sell, money would go or the house would go
out the money would come in. Our trusts are also
designed as grand or trusts, so she would still be
entitled to her capital gains tax exclusion as a single person.
If this is her primary residence of two hundred and
(35:11):
fifty thousand dollars, the first two hundred and fifty thousand
dollars of gain would not be taxed for her, and
then the trust can actually use that money either for
investments for her to live off of, or you could
maybe downsize. Maybe she wants to now buy a condo
and just not have to worry about maintenance and upkeep.
(35:33):
And so money would go out and a new house
would come in or new condo would come in, and
arguably that transaction would not impact the five year waiting
period if she did that for medicaid eligibility. So you
just need to read the terms of the trust that
will tell you whether she can do it or not.
I hope it's drafted properly. I know in our trusts
(35:56):
that can absolutely be done.
Speaker 2 (35:58):
Todd One other questions just that I have for you,
just kind of getting back to what we discussed in
the prior segment. Let's say that someone had done estate
planning previously, and maybe now they're concerned about estate taxes.
Their estate may have grown since they did it. Yes,
how would someone know whether or not they need to
update previous estate plans?
Speaker 10 (36:20):
You know?
Speaker 7 (36:21):
I guess the only way to really know that is
to keep an eye on what your assets are. Right,
We try to educate you as to what those exemption
amounts are, and those exemption amounts. You know, if you
know your estate has grown, call your accountant, call your
estate planning attorney, check in, right, I always tell people
check in with your estate planning attorney and try to
(36:43):
figure out where you are and so if the estate
tax has gone up high enough that now it's causing
you to be an estate tax problem, he'll tell you
or she'll tell you, and you will be able to
adjust your plan to maybe do more sophisticated planning as
the case may be.
Speaker 2 (36:58):
Mister Letsky, thank you how much for joining us today.
Speaker 6 (37:01):
Always a pleasure.
Speaker 1 (37:03):
This has been Aske Todd on the Financial Exchange Radio network.
Aske 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
(37:24):
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
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