August 27, 2025 • 37 mins
Chuck Zodda and Marc Fandetti discuss Fed bank presidents face risk of removal on Trump's maneuvers. Will the Fed lose its independence? India braces for the pain of Trump's stiff tariffs. Todd Lutsky joins the show for his weekly segment, Ask Todd.
Mark as Played
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Episode Transcript
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Speaker 1 (00:00):
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(01:03):
This is the Financial Exchange with Chuck Zada and Mark Vandetti's.
Speaker 2 (01:11):
Chuck, Mark and Tucker with you here today, and not
a ton in the way of major economic data. We
got some mortgage applications data that came through, not really
a major shift. Mortgage purchase applications up about one point
five percent, so a little bit of a move in
the positive direction given the quarter percent move down that
(01:34):
we've seen in interest rates over the last couple of weeks,
but not a huge shift in terms of what we're
seeing for mortgage demand at the moment. All eyes today
are really going to be focused on in video earnings
after the bell, and so we're obviously going to talk
about that quite a bit tomorrow. We'll preview some of
that today too, But our top story to kick things
(01:55):
off today continues to be the Federal Reserve and questions
surrounding its independence in the future. With President Trump seeking
to remove Cook from her position as one of the
governors of the FED Board, So Mark, this sets the
(02:16):
stage for Lyle Brainerd, who's a former vice chair of
the FED. She occupied a position on the Board of
Governors from twenty fourteen through twenty twenty three and was
the vice chair was just the last three years of
her term. I can't remember how long she served in
that particular role, but I think it was the last
two or three years of her term, somewhere in that range.
(02:39):
And basically she lays out a number of concerns that
she has regarding the potential independence of the FED going forward,
and concerned that a FED with greater control by the
executive branch would not be able to conduct policy as effectively,
something we've talked about quite a bit.
Speaker 3 (02:58):
Yeah, the most important thing for the Federal Reserve is credibility.
Credibility believability that they will squash inflation when the time comes,
or that they will not try to exploit the short
term trade off between unexpected inflation, which the FED can generate.
The FED can tell the public we're going to be focused,
laser focused on inflation, and we're going to grow the
(03:20):
money supply modestly, and then when the public sets expectations
and prices and wages based on that commitment, the FED
can reneg it can cheat. So, but if the public
knows the Federal reneg it will in turn not believe it.
Speaker 2 (03:34):
A lot of the model on that decision, Yeah.
Speaker 3 (03:36):
Exactly, a lot of the modeling, A lot of the
changes in the thinking about monetary policy that came out
of the experience of the nineteen seventies focus on that
issue of commitment and the timing of the commitment and
the role that expectations play. And it all boils down
to a word. You're going to be hearing a lot
from commentators over the next I think probably a few years,
given the direction that things are going in here is credibility.
(03:57):
Credibility makes it easier for the FED to control inflation
prevent it from getting going. It also makes it easier
for the FED to bring inflation down when it inevitably
has to without economic pain and its credibility. Chuck, that's
at risk right now.
Speaker 2 (04:11):
And the big thing is look for the better part
of the last forty years, up until twenty twenty one
and twenty two, the United States did not see any
meaningful rise in inflation.
Speaker 4 (04:22):
It moved along.
Speaker 2 (04:23):
Pretty consistently at somewhere around a two and a half
percent clip. Some years it was a little bit higher,
some years it was a little bit lower, but it
was pretty well anchored there, and so the FED really
didn't need to use that credibility very often or very strongly,
at least because there were really rare instances where inflation
actually crept up to the point where there were potential
(04:43):
problems there, and in most of them it was due
to transitory items, largely because of energy. The early nineteen
nineties with the first Gulf War, the mid to late
two thousands, call it that two thousand and seven period
where actually it was two thousand and eight, where during
that summer right before the financial crisis, I still remember,
(05:04):
oil prices jumped up to one hundred and forty nine
dollars a barrel, which is still the highest that we
have ever seen on record. But the FED you know,
rightly at that time, looked through and was like, no,
there's some real problems brewing, you know elsewhere. I don't
think we need to be hiking because of you know,
oil prices moving up this summer. I think we're good
on that. So the FED hasn't really had to act
(05:27):
strongly in order to enforce that credibility. Yeah, and this
is something that if you talk to if anyone has
any friends that live in I think the best example
of this is is probably Brazil, just like everyone likes
to point to like Argentina as a country that has
you know, failed banking systems on a number of occasions.
(05:48):
Brazil is an example of one where today I think
you you can point to it and pretty much say, look,
it's very much still an emerging market. It still is
the wild West when it comes to a number of
different things. But the central bank there and largely the
presidency understands, hey, we need to let the central banker
do their thing, and they need to act quickly in
(06:09):
response to any inflationary threat because if you don't stamp
it out quickly, you run into real problems. And this
is not to say that the US is going to
turn into you know, Brazil. It's more just, hey, banks
that have to deal with inflationary threats on a regular basis,
they act strongly in order to maintain that credibility because
otherwise they do become Argentina's. That's kind of how things go.
(06:33):
And so I think the place that we continue to
look at this from is one where hey, the FED
is by no means a perfect institution. You can want
to reform the FED in any number of different ways,
and we could talk about some of those in terms of, hey,
how do we make the FED more accountable to Congress
(06:53):
or the court system or any you know, potential third
party review that allows them to operate more effectively. But
consolidating the power of money supply within the executive branch
is a real problem, not because of any one particular president,
but because of you don't know who could be president
(07:15):
in the future and the actions that they may take
as an individual that larger, more balanced institutions might not undertake.
Speaker 3 (07:23):
Yeah, we got to this point because of the cumulative
experience of past generations here and elsewhere, with every possible
monetary arrangement. Hey, let's let the king clip coins. What
could go wrong? And right on down the line. From
ancient times to the present, every goofy scheme to goose
the economy in the short run has been tried. It
(07:45):
has invariably resulted in rapidly increasing prices, in some cases
in an extreme version so called hyperinflation, which is technically difficult.
People use that casually to mean like high inflation. It
actually means something like a thousand percent a month, and
they've only been.
Speaker 2 (08:01):
A yeah, no, no, no exactly.
Speaker 3 (08:03):
So every goofball scheme that you can think of to
goose the economy in the short run for political benefit
has ended in tears, high inflation, turmoil, societal convulsions, which
is why we got to the point we're at today.
Speaker 2 (08:18):
And there's a very good reason why you don't want
the person or more appropriately, people who determine monetary policy
to be running for office. It's very simple, Hey, who
are you going to vote for? Oh, I'm going to
vote for the guy who's going to lower interest rates.
Is that the right thing to do? I don't know,
but it's gonna help my mortgage to be more affordable. It, yeah, right,
(08:42):
dumb comparison. But when I was in seventh grade, I
ran for a class treasurer, and you know, I got
into finance early obviously, you know, I was like, oh yeah,
this is gonna be it. And my campaign slogan was
really simple. It was dollars for donuts. Dollars two donuts,
but dollars for donuts, because my whole campaign was, Hey,
(09:04):
I'm gonna take you know, the class treasury, and I'm
gonna use it to buy donuts for you know, we
for ourselves. You know, we're gonna have donuts, you know,
once a week. You know what happened Mark, we ran
out of money?
Speaker 1 (09:14):
Diabetes.
Speaker 2 (09:15):
Well, these are seventh graders. You know, oh yes, we
ran out of money very early in the year, because
it turns out that you don't have just unlimited money
in these things. Now, when you're the Federal Reserve, you
do have unlimited money, which gives you the idea that hey,
like I can do things that no one else can.
And it's true that you can. But as Spider Man says,
(09:36):
with great power comes great responsibility, and if you don't
act responsibly with that money that you have there, you
end up with all kinds of problems in terms of
either inflation or people out of work. So there's a
good reason why you don't want to have someone running
for FED chair, as you know, a publicly elected position.
(09:58):
And if the executive branch able to assert that control
over the FED, it pretty much turns the president then
into the elected head of monetary policy, which is really
dangerous because what president would ever vote for higher interest rates? Comparison,
do you ever see any presidents successfully campaign on I'm
(10:22):
gonna raise your taxes successfully?
Speaker 3 (10:27):
Clinton may have, you know, he was he ran as
a fiscal and governed as a fiscal conservative. But your
tax is speaking to the middle.
Speaker 2 (10:34):
No, No, I mean, look, it's it doesn't work.
Speaker 3 (10:37):
People do Mondale said it, then we know what happened
to Walter Mondale?
Speaker 2 (10:40):
How long was he president?
Speaker 1 (10:41):
For right?
Speaker 3 (10:44):
And there are other factors there, of course.
Speaker 2 (10:46):
Correct, But the big thing is no one is ever
going to running campaign. Hey I'm going to raise borrowing rates.
But ultimately that's something that still sometimes needs to be done.
And if you have a captive FED to the presidency,
it presents real risks that inflation gets out of hand
in the long run because it's not a competent and
(11:09):
not a not a credible institution. Then because everyone looks
at it and says, Okay, whatever the president wants, they're
going to get, and who knows what future presidents may want,
but it's usually going to be lower interest rates, and
that's not always the thing that you need, kind of
like donuts.
Speaker 3 (11:25):
Last few years has been years of relearning old lessons
and monetary theory and good policy, and I think we
have to relearn the lesson of why FED independence is
important for economic stability.
Speaker 2 (11:37):
And the problem is it doesn't matter until it does.
You know, it's you could look at the last forty
years and say, Okay, the FED didn't really need to
do much during that time, and it's true, but when
it does matter, boy, it's important. And also you can't
look at the last forty years and definitively say, hey,
if the Fed had looser policy, things would have been
the same. Maybe you would have had a resurgence in inflation.
(11:59):
Maybe that credibility would have been shotowed.
Speaker 4 (12:00):
I don't know.
Speaker 3 (12:01):
It almost certainly would have been. The credibility itself is
what prevented inflation. Most researchers think, not everybody, but most
think it's the credibility itself that kept expectations under control
and inflation as a consequence under control.
Speaker 2 (12:12):
Let's take a bit of a break here. When we
come back, we're talking India. Right after this.
Speaker 1 (12:17):
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Speaker 2 (13:16):
Pe'ce in the Wall Street Journal today talking about the
fact that the additional twenty five percent tariff on Indian
imports goes into effect today, if making the effective teriff
freight on Indian imports fifty percent. This additional twenty five
percent ostensibly due to India purchasing oil from Russia in
(13:39):
large quantities, which does raise the question, Okay, if it's
really about that, why are you not instituting something similar
on China, who also purchases quite a bit of Russian oil,
Which means that it's probably not actually about the Russian oil.
It's probably about something else that the US wants in
this relationship and in this deal. But what exactly that is.
(14:04):
I have, you know, things I can speculate on, but ultimately,
if this stays in place, you know, you've got almost
ninety billion dollars in goods that India exports to the
United States, about sixty billion of which will be subject
to these new taxes.
Speaker 3 (14:19):
Yeah, like you said, we don't know what the motive
or the endgame is here. What's he playing at in
the short term geopolitically not my area of expertise. If
I have such a thing, it seems to be foolhardy.
It's pushing India closer to our our strategic foes, Russia
and perhaps China.
Speaker 2 (14:37):
I don't really buy that, okay, So, like India and
China do not like each other very much, Well.
Speaker 3 (14:42):
They can't they have they share a border. I mean,
the basic geostrategic consideration suggests they should be adversaries, correct,
Whereas you know, like we should not naturally be adversaries
with India or even China. Our interests are too far
excuse me, Russia unmost Russia in day's Europe, and then
we do have skin in the game. Anyway, I think
(15:02):
way way out of my league here. But my point
is that we could probably use their help against China.
It seems foolish in the short term. But you say
there may be ulterior, hidden, more sophisticated motive when we
just have to let this kind of play out.
Speaker 2 (15:18):
I think there are And here's the thing, So Indian
President Narendra Modi and President Trump generally have shared like
a pretty good relationship historically. Beyond that, Vice President Vance
went out to India I think it was in maybe
February or March of this year and reportedly had a
good visit there as well. And so I think a
(15:38):
you have, you know, two presidents who have generally gotten
along pretty well during their tenures in office. The other
thing that I look at is look India, is India
is a potential natural bulwark against China when you look
at combination of two things. Number one, the region that
(16:01):
they occupy geographically, and number two just the sheer number
of people that you have there that could potentially be
you know, an economic engine that helps to power you know,
the non China aligned world. The problem that you do have,
I think you have a few different problems, and the
question is like which one of these are are we
(16:22):
trying to solve here? Trying to you know, figure out
how do we you know, be part of the solution.
On the first is when you look at if you
talk to anyone who's actually worked in India with you know, manufacturing,
which is really what this is about.
Speaker 1 (16:38):
It.
Speaker 2 (16:39):
It's about trying to replace some of China's manufacturing capacity.
One thing that China does really well is they will
quite literally like clear the road for you with whatever
you want. And I mean that literally and figurative. You
go to China and you say, hey, I need X
number of workers in this location with these specs and
blah blah blah, and they say, great, where bulldoze all
(17:00):
the houses that were there before. Here are the workers
that you. I'm not saying this is good like for
like human rights are like that population. It's just no,
this is this is what they do. And if you're
a US investor that doesn't care about any of the
other stuff, you're like, Okay, great, this is just what
I need, even though like there's some pretty horrendous implications
from it. Obviously, India does not do that. First and
(17:22):
foremost beyond that, the sheer level of just organization and
coordination inside of India, it's it's really messy. It's just
like things are not particularly well organized. You have all
kinds of different divisions in terms of you know, just
how things operate from you know, one part of India
to the other. It's it's just not something where you
(17:42):
have tremendous uniformity in what you get from manufacturers in
different parts of the country and regulations and laws and
things like that. It's it's very much a patchwork. I
don't get the sense that we're really trying to solve
that because I don't think we really care. Quite honestly, it's.
Speaker 3 (17:58):
Deeply embedded for historical reasons. Like China was an empire,
it had an imperial structure of bureaucracy. For millennia, India
was a bunch of principality.
Speaker 1 (18:06):
Correct is that?
Speaker 3 (18:07):
Yeah, so you're not going to change.
Speaker 2 (18:09):
That right dimply, And I don't think we would want to.
I don't think that's what's a footthare. What I do
think is at play here is, even though India and
China don't really get along particularly well, the economic ties
have deepened in recent years, and in particular, there is
(18:29):
a big threat that India could be used for transshipments
from China to try to skirt different tariffs and other
regulations and things like that about US imports. And I
think there's some meat on that bone there, just based
on you know, what I see from other countries around it.
The Russian oil thing, maybe at the margins is actually
(18:53):
a thing. But again, if that were actually the main
driving force here, there are plenty of other countries that
import Russian oil as well, the biggest one being China,
and there is no additional twenty five percent tariff being
levied on you're trying to right.
Speaker 3 (19:05):
I think you're a slorry. Trump doesn't care about Russia.
He's not sanctioning the Shadow Fleet, he's not trying to
attach their assets. He keeps threatening serious severe consequences if
Russia doesn't do this or that in two weeks or
some arbitrary timeframe. None of it's been followed through on.
I think you're probably right here.
Speaker 2 (19:19):
So there's something else afoot here. Exactly what it is,
I don't know, but we'll continue to watch this, and
I'm not sure that these stick around too too long.
Necessarily quick break here. When we return, it's Wall Street
Watch and ask Todd.
Speaker 1 (19:40):
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Speaker 5 (20:00):
Markets edging higher and mostly quiet ahead of the massive
earnings report from chip maker and AI giant Nvidia do
out after today's closing bell. Right now, the Dow is
up by about a quarter of percent, or one hundred
and sixteen points higher. SMP five hundred is up two
tenths of one percent, Nasdaq is up just over a
(20:21):
tenth of a percent or thirty three points higher. Russell
two thousand is up nearly four tenths of one percent.
Ten year Treasure reeled up two basis points a four
point two eight one percent, and crude oil up about
two thirds of a percent higher, or sixty three dollars
in sixty eight cents a barrel. Cole's jumping nearly twenty
(20:42):
percent after the retailer surpassed street earnings and revenue expectations
for the second quarter, despite its sales declining and its
ongoing search for new CEO. Coles also reported a better
than anticipated full year sales guidance. Another retailer, in Abercromine Fitch,
also reported earnings where it's sales growth slowed during the quarter.
(21:02):
Abercrombie sales slumped five percent, while comparable sales dropped eleven percent. However,
sales from its Hollister brand grew nineteen percent in the quarter.
Abercrombie that stock is up by almost two percent. Meanwhile,
CNBC reporting that the controlling shareholder of Canada goose By
Capital received bids to take the company private, valuing the
(21:24):
retailer at about one point three five billion dollars. Canada
goose shares are jumping fifteen percent on that news. Elsewhere,
Octa shares climbing four percent after the identity security company
posted higher quarterly results and raised its annual guidance. Database
platform developer Mango dB, surging thirty two percent after it
(21:46):
beat analysts estimates. In After controversy surrounding its new logo,
Cracker Barrel reverted back to its original old Timer logo,
resulting in that stock rebounding by seven percent.
Speaker 1 (21:59):
Today.
Speaker 5 (22:00):
I'm Tucker Silva and that is Wallstree.
Speaker 3 (22:02):
Watch.
Speaker 1 (22:04):
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 the state and tax planning, medicaid planning, and probate law.
(22:25):
Visit Cushingdolan dot com. Now here's Todd Lutsky as proms.
Speaker 2 (22:31):
We're now joined by Todd Lutsky from Cushing and Dolan.
We've got the phone lines open and room for your
calls about your estate plans. Why we call the segment
Ask Todd is you get to ask Todd your questions live.
Speaker 4 (22:43):
On air right now.
Speaker 2 (22:45):
Phone number is eight eight eight two zero five two
two six three. Again, that is eight eight eight two
zero five two two six three. So make sure you
call early and often, because we usually only get through
two or three calls with Todd in any particular day.
That number again is eight eight eight two zero five
(23:05):
two two six three. Again, it's eight eight eight two
zero five two two six three. Mister Lutsky. How are
you doing today?
Speaker 4 (23:13):
I am never better? How about you?
Speaker 2 (23:16):
I'm good. I saw over the weekend, actually that the
Navy Navy the training dolphins to carry first aid kits
really medicinal porpoises only.
Speaker 4 (23:29):
That's good.
Speaker 2 (23:30):
Yeah, So it's it's exciting News Todd want to talk
to you a little bit about trusts and beneficiaries. Can
you talk a little bit about are there any benefits
to using a trust to name beneficiaries for assets as
opposed to simply naming them directly on an account.
Speaker 4 (23:50):
So there's obviously different kinds of trust that we have
to deal with, uh when we talk about this, but
and certain things that we'll go into trust in certain
things that want So first of all, on IRA would
would generally not go into trust period, So I wouldn't
wouldn't even wouldn't even do it because you have a
big tax problem.
Speaker 2 (24:07):
What about naming a trust as a beneficiary of an ira?
Speaker 4 (24:10):
And that's that's where I was headed. So you can't
change the owner, and I think this is important owner
versus beneficiaries, which what you're asking me for an IRA,
I would say, you know, based on the kind of
planning you're doing. So if you're trying to put you know,
do it you know married couple or trying to ultimately
get your IRA to your to your kids the next
(24:30):
generation and maybe protect it from nursing home, not from
nursing homes, but protecting it from your kids future creditors,
future divorces, UH, passing it down to a generation even
below the children tax free. So if you're looking to
do all of those things, then the designated beneficiary always
primary is spouse, So always start with that. The primary
(24:52):
should be the spouse from an income tax perspective, and
the contingent could be the trust. So while you you
cannot put an IRA in the trust while you're alive,
you can get it there when you die, So the
beneficiary could be named that. Now for non IRA, and
ask question, sure.
Speaker 2 (25:13):
Pros and cons of that approach? What are the good
things you get from doing that? What are the bad
things that happen from doing that?
Speaker 4 (25:19):
If if the goal is to protect the IRA, let's
say got two three million dollar IRA? Sure big money, right,
so we want to make sure that it's protected from
the kids' future divorces, creditors, and generation skipping. Then there
I see there is no negative Why because one, I
want it not going outright to the kids, because then
(25:39):
all bets are off as to what happens to it.
I want it getting into the trust. Is there? And
I think what you're driving at, Chuck, is is there
a tax problem doing that?
Speaker 1 (25:49):
Uh?
Speaker 4 (25:50):
And as long as the trust is designed to hold
the IRA asset, which it should be. The required minimum distributions,
as we talk about and what we care about from
an income tax perspective, these required minimum distributions. If I
name the children outright, it is ten years. Generally speaking,
(26:10):
there's some exceptions. If I name the trust the beneficiary
and the kids are beneficiaries. Inside the trust, it still
comes out over ten years, but it doesn't come out
to the kid. That's the difference. Sure, the required minimum
distribution is still reaching into the IRA, pulling it out,
(26:31):
subjecting that withdrawal to income taxes, but it goes to
the trust. Now, I guess there could be a tax
difference if the amount that goes to the trust remains
in the trust and doesn't come out to the kids.
It could be taxed at the trust level, which would
be a higher rate than kids or human levels. Let's
(26:52):
put it that way. So but again, if I'm trying
to protect it, I still want to make that distribution,
because every year I can decide whether I make a
distribution or not. If someone's going through a divorce, we're
gonna let it build up inside the trust. But if
if I don't have a problem, allow the distribution to
come out and let the kid pay the tax.
Speaker 2 (27:11):
Talking with Todd Lutsky. If you've got estate planning questions,
this is your chance to ask them to Todd live
on air right now. Phone number is eight eight eight
to zero five two two sixty three. That number again
is eight eight eight to zero five two two six three.
We're gonna take a quick break here, but when we
return we're gonna get right to your questions with Todd.
(27:33):
That phone number eight eight eight to zero five two
two sixty three. One last time eight eight eight to
zero five two two six y three.
Speaker 1 (27:44):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
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Speaker 2 (28:12):
Talking with Todd Aletski from Kushigan Dolan. If you've got
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lines eight eight eight two zero five two two six three.
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Speaker 4 (28:27):
Todd.
Speaker 2 (28:27):
When we talk about beneficiaries, and how you know families
might might think about them when it comes to revocable
versus irrevocable trusts, any difference there in terms of how
beneficiaries may or may not be treated, or is it
pretty much the exact same?
Speaker 4 (28:43):
So I think it's probably the same. Let's let's run
through it, though, it's always better to sort of understand
how that works. So if I've got a revocable trust
and I want to put stuff in it, my first
comment is I'm going to probably put everything in except
I raise, of course always we already talked about iras.
They don't go in. So I would change on a
(29:04):
investment account, a brokerage account, a bank account, a CD.
I don't care what it is. I don't see why
I wouldn't just put it all in there. When I
say put it in there, I mean change the owner.
I don't need to change the beneficiary anymore. And the
reason I don't is because once it's in the trust,
the trust will dictate where everything goes when you die,
(29:27):
and that's great, that's what I want to have happen,
and I don't have to worry. And this is why
sometimes people say, well, I'll just put one kid on
one account, one kid on another account, and you know,
but you don't know which account's going to grow faster
than another, and you don't know if that's going to
end up an unequal treatment. I don't want that. Plus
I want to control it. I can't really control it
by naming beneficiaries, So I would retitle it, changing the
(29:48):
owner on those accounts to the name of the revocable trust. Now, similarly,
with an irrevocable trust, if I wanted to fund it,
I would do the same thing. I would change the
owner on these items to the irrevocable trust. The difference
is what I put in before. With they're revocable, I'm
(30:12):
likely to put everything in. With an irrevocable I'm probably
not going to do that. I always want to leave
some stuff out, some access, you know, direct access to
assets outside of these irrevocable Medicaid trusts, or leave some
stuff out. And the other reason I leave some stuff
out is especially especially my bank account that receives my
(30:35):
direct deposits social security or pension. Because remember, when I'm
talking about medicaid trusts, I'm talking about people that are
probably retired.
Speaker 2 (30:44):
Sure you're not talking about thirty year olds generally going
that route, right, there's no need to be thinking about it, right.
Speaker 4 (30:50):
So these are generally folks that are either retiring, close
to retirement, et cetera, and more on a fixed income.
So you never want to put in that that main
operating bank account into a Medicaid irrevocable trust like you
would with a revocable because you get these checks every month,
whether it's pension, soci security, if it was owned by
(31:12):
the irrevocable Medicaid trust, every single time it goes in there,
it's a new five year waiting period for Medicaid because
you added new money. People don't think about that, but
I actually had someone who came to me. We didn't
do the planning, but they were going on trying to
apply for Medicaid and they came in and I saw
this when we were going through the application process. I'm like,
(31:34):
what are all these deposits? And they said, oh, it's
our it's our social security and pension. I'm like, oh,
you're gonna have a big problem here. So for years
we had to go back and count everything that went
in there to figure out what the amount of the
deposits were, to get them out to basically cure the problem.
I said, you're never going to be eligible for medicaid
(31:55):
because this ongoing five year waiting period is every single month,
it just keeps going, Yeah, keeps extending it out right, sure,
And so we had to go back and undo all
that and fix it to cure all that money back
into their personal name to eliminate the waiting period, and
then deal with the money that's outside the trust to
get them eligible for medicaid. So so I think that's
(32:17):
the biggest difference between the two.
Speaker 2 (32:19):
Just digging in on that, it seems like that seems
like obviously kind of a big problem in an estate plan.
What other kinds of things do you see as being
really common If someone comes to you and says, oh, hey,
like I've done my estate plan, like I think I'm
all ready to go, Do you see an issue with this?
What other common ones do you typically see that cause
problems for people?
Speaker 4 (32:38):
Oh, common questions like so an example would be not.
Speaker 2 (32:41):
Even not even common questions like things where someone thinks
they're doing things right right, okay, and then you looking
at it, you like, no, do you realize what you've
done here?
Speaker 4 (32:50):
Yeah? I see So an example like that would be.
And again partly this is where the guide comes in, right,
we want to figure out what trust is right for you.
I've had people come in and say say to me, Okay,
you know so and so is going into the nursing home,
and you know, we know all about the five year
waiting period. So we're all set because my mom, you know,
(33:11):
she did the planning years ago. And again to your point, Chuck,
we think we did it right. And then I sit
down and I say, great, give me a copy of
the trust. That's going to be a real helpful to us,
and let's start figuring out how we can apply for medicaid.
And then I look at the top of the trust
and I see it's the you know, the you know,
Tom Smith revocable trust. Okay, you didn't do it right.
(33:35):
You did revocable trust planning right, sure, but you didn't
do nursing home planning right because the five year waiting
period never begins to run on assets in a revocable trust.
So that would be an example of somebody who thinks
they did it right and they didn't. But folks, that's
what this guide is about this month. Right, as as
(33:57):
we approach the end of the month. This is the
top seven estate planning trusts, the ones I think are
used most frequently and some of them most frequently misunderstood.
Like it starts with the nominee realty trust. What is that?
It's not even really a trust. You'll learn when you
get the guide. Revocable trusts and irrevocable trust We just
(34:17):
talked about two with you, Chuck, about the Medicaid and
revocable trust Well, there's other kinds of irrevocable trusts, life
insurance trusts, first to die, second to die variety. People
who have special needs children have you know, needs to
figure out a special needs trust. They're in here. What
about a pool trust? There's so many different trusts. These
(34:39):
are the top seven. They explain how they work, the
tax savings, the operation. If you've never done your planning,
this is going to help you get started. Pick which
one's right for you eight six six eight four eight
five six nine to nine or Legal Exchange show dot com.
You can download it right there again eight six six
(34:59):
eight or eight five six nine nine or Legal Exchange
Show dot com.
Speaker 2 (35:05):
Tod Do you see instances where I guess people will
use a combination of different vehicles for their estate planning
because of different needs. You know, maybe hey, they've got
a revocable trust that eventually spits out a special needs
trust for a child of theirs. Or sometimes do people
ever use revocable trusts and irrevocable trusts in the same
(35:25):
estate plan? Are those things possible or useful in situations?
Speaker 4 (35:29):
Yeah? I think it's it's very important that when you're
doing your planning, we you know, we use we first
gather like all of your assets, and it's the amount
of assets you have and the type of assets that
you have that will dictate what kind of trust we do.
So let's say we start with your foundation and it's
a revocable trust, and you're worth about four million dollars,
(35:52):
but you have a two million dollar life insurance policy. Well, now,
all of a sudden, I'm worth six million dollars, and
that changes the estate tax game here in at least
even though it might not affect you federally. So it
changes the game here. So now what Well, maybe it
makes sense to take that two million dollar life insurance
policy and put it in an irrevocable medical an irrevocable
(36:14):
life insurance trust. Right, So I would put all the
other assets in my revocable trust. And by the way,
many kinds of revocable trusts with an estate worth well
under fifteen million dollars, I'm probably putting together a joint
revocable trust for this married couple hypothetical example. But that's great.
(36:35):
It does avoid probate and reduce my taxes, but it's
not going to quite eliminate them. Why. Because I got
this two million dollar policy, I move that into an
irrevocable life insurance trust and as long as I live
three years, the death benefit will now be estate and
income tax free when I die, thereby reducing and helping
to eliminate my state taxes. So a combination of the
(36:57):
two trusts work good in that arrange. And yes, sometimes
special needs trusts are built in to these revocable trusts
as well.
Speaker 2 (37:05):
Mister Lutsky, thank you so much for joining us today.
Speaker 4 (37:07):
We appreciate it always pleasure. Thank you.
Speaker 1 (37:10):
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 ninety
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The views expressed in this segment are solely those of
(37:31):
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The Financial Exchange is produced by Money Matters Radio and
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(00:20):
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(01:03):
This is the Financial Exchange with Chuck Zada and Mark Vandetti's.
Speaker 2 (01:11):
Chuck, Mark and Tucker with you here today, and not
a ton in the way of major economic data. We
got some mortgage applications data that came through, not really
a major shift. Mortgage purchase applications up about one point
five percent, so a little bit of a move in
the positive direction given the quarter percent move down that
(01:34):
we've seen in interest rates over the last couple of weeks,
but not a huge shift in terms of what we're
seeing for mortgage demand at the moment. All eyes today
are really going to be focused on in video earnings
after the bell, and so we're obviously going to talk
about that quite a bit tomorrow. We'll preview some of
that today too, But our top story to kick things
(01:55):
off today continues to be the Federal Reserve and questions
surrounding its independence in the future. With President Trump seeking
to remove Cook from her position as one of the
governors of the FED Board, So Mark, this sets the
(02:16):
stage for Lyle Brainerd, who's a former vice chair of
the FED. She occupied a position on the Board of
Governors from twenty fourteen through twenty twenty three and was
the vice chair was just the last three years of
her term. I can't remember how long she served in
that particular role, but I think it was the last
two or three years of her term, somewhere in that range.
(02:39):
And basically she lays out a number of concerns that
she has regarding the potential independence of the FED going forward,
and concerned that a FED with greater control by the
executive branch would not be able to conduct policy as effectively,
something we've talked about quite a bit.
Speaker 3 (02:58):
Yeah, the most important thing for the Federal Reserve is credibility.
Credibility believability that they will squash inflation when the time comes,
or that they will not try to exploit the short
term trade off between unexpected inflation, which the FED can generate.
The FED can tell the public we're going to be focused,
laser focused on inflation, and we're going to grow the
(03:20):
money supply modestly, and then when the public sets expectations
and prices and wages based on that commitment, the FED
can reneg it can cheat. So, but if the public
knows the Federal reneg it will in turn not believe it.
Speaker 2 (03:34):
A lot of the model on that decision, Yeah.
Speaker 3 (03:36):
Exactly, a lot of the modeling, A lot of the
changes in the thinking about monetary policy that came out
of the experience of the nineteen seventies focus on that
issue of commitment and the timing of the commitment and
the role that expectations play. And it all boils down
to a word. You're going to be hearing a lot
from commentators over the next I think probably a few years,
given the direction that things are going in here is credibility.
(03:57):
Credibility makes it easier for the FED to control inflation
prevent it from getting going. It also makes it easier
for the FED to bring inflation down when it inevitably
has to without economic pain and its credibility. Chuck, that's
at risk right now.
Speaker 2 (04:11):
And the big thing is look for the better part
of the last forty years, up until twenty twenty one
and twenty two, the United States did not see any
meaningful rise in inflation.
Speaker 4 (04:22):
It moved along.
Speaker 2 (04:23):
Pretty consistently at somewhere around a two and a half
percent clip. Some years it was a little bit higher,
some years it was a little bit lower, but it
was pretty well anchored there, and so the FED really
didn't need to use that credibility very often or very strongly,
at least because there were really rare instances where inflation
actually crept up to the point where there were potential
(04:43):
problems there, and in most of them it was due
to transitory items, largely because of energy. The early nineteen
nineties with the first Gulf War, the mid to late
two thousands, call it that two thousand and seven period
where actually it was two thousand and eight, where during
that summer right before the financial crisis, I still remember,
(05:04):
oil prices jumped up to one hundred and forty nine
dollars a barrel, which is still the highest that we
have ever seen on record. But the FED you know,
rightly at that time, looked through and was like, no,
there's some real problems brewing, you know elsewhere. I don't
think we need to be hiking because of you know,
oil prices moving up this summer. I think we're good
on that. So the FED hasn't really had to act
(05:27):
strongly in order to enforce that credibility. Yeah, and this
is something that if you talk to if anyone has
any friends that live in I think the best example
of this is is probably Brazil, just like everyone likes
to point to like Argentina as a country that has
you know, failed banking systems on a number of occasions.
(05:48):
Brazil is an example of one where today I think
you you can point to it and pretty much say, look,
it's very much still an emerging market. It still is
the wild West when it comes to a number of
different things. But the central bank there and largely the
presidency understands, hey, we need to let the central banker
do their thing, and they need to act quickly in
(06:09):
response to any inflationary threat because if you don't stamp
it out quickly, you run into real problems. And this
is not to say that the US is going to
turn into you know, Brazil. It's more just, hey, banks
that have to deal with inflationary threats on a regular basis,
they act strongly in order to maintain that credibility because
otherwise they do become Argentina's. That's kind of how things go.
(06:33):
And so I think the place that we continue to
look at this from is one where hey, the FED
is by no means a perfect institution. You can want
to reform the FED in any number of different ways,
and we could talk about some of those in terms of, hey,
how do we make the FED more accountable to Congress
(06:53):
or the court system or any you know, potential third
party review that allows them to operate more effectively. But
consolidating the power of money supply within the executive branch
is a real problem, not because of any one particular president,
but because of you don't know who could be president
(07:15):
in the future and the actions that they may take
as an individual that larger, more balanced institutions might not undertake.
Speaker 3 (07:23):
Yeah, we got to this point because of the cumulative
experience of past generations here and elsewhere, with every possible
monetary arrangement. Hey, let's let the king clip coins. What
could go wrong? And right on down the line. From
ancient times to the present, every goofy scheme to goose
the economy in the short run has been tried. It
(07:45):
has invariably resulted in rapidly increasing prices, in some cases
in an extreme version so called hyperinflation, which is technically difficult.
People use that casually to mean like high inflation. It
actually means something like a thousand percent a month, and
they've only been.
Speaker 2 (08:01):
A yeah, no, no, no exactly.
Speaker 3 (08:03):
So every goofball scheme that you can think of to
goose the economy in the short run for political benefit
has ended in tears, high inflation, turmoil, societal convulsions, which
is why we got to the point we're at today.
Speaker 2 (08:18):
And there's a very good reason why you don't want
the person or more appropriately, people who determine monetary policy
to be running for office. It's very simple, Hey, who
are you going to vote for? Oh, I'm going to
vote for the guy who's going to lower interest rates.
Is that the right thing to do? I don't know,
but it's gonna help my mortgage to be more affordable. It, yeah, right,
(08:42):
dumb comparison. But when I was in seventh grade, I
ran for a class treasurer, and you know, I got
into finance early obviously, you know, I was like, oh yeah,
this is gonna be it. And my campaign slogan was
really simple. It was dollars for donuts. Dollars two donuts,
but dollars for donuts, because my whole campaign was, Hey,
(09:04):
I'm gonna take you know, the class treasury, and I'm
gonna use it to buy donuts for you know, we
for ourselves. You know, we're gonna have donuts, you know,
once a week. You know what happened Mark, we ran
out of money?
Speaker 1 (09:14):
Diabetes.
Speaker 2 (09:15):
Well, these are seventh graders. You know, oh yes, we
ran out of money very early in the year, because
it turns out that you don't have just unlimited money
in these things. Now, when you're the Federal Reserve, you
do have unlimited money, which gives you the idea that hey,
like I can do things that no one else can.
And it's true that you can. But as Spider Man says,
(09:36):
with great power comes great responsibility, and if you don't
act responsibly with that money that you have there, you
end up with all kinds of problems in terms of
either inflation or people out of work. So there's a
good reason why you don't want to have someone running
for FED chair, as you know, a publicly elected position.
(09:58):
And if the executive branch able to assert that control
over the FED, it pretty much turns the president then
into the elected head of monetary policy, which is really
dangerous because what president would ever vote for higher interest rates? Comparison,
do you ever see any presidents successfully campaign on I'm
(10:22):
gonna raise your taxes successfully?
Speaker 3 (10:27):
Clinton may have, you know, he was he ran as
a fiscal and governed as a fiscal conservative. But your
tax is speaking to the middle.
Speaker 2 (10:34):
No, No, I mean, look, it's it doesn't work.
Speaker 3 (10:37):
People do Mondale said it, then we know what happened
to Walter Mondale?
Speaker 2 (10:40):
How long was he president?
Speaker 1 (10:41):
For right?
Speaker 3 (10:44):
And there are other factors there, of course.
Speaker 2 (10:46):
Correct, But the big thing is no one is ever
going to running campaign. Hey I'm going to raise borrowing rates.
But ultimately that's something that still sometimes needs to be done.
And if you have a captive FED to the presidency,
it presents real risks that inflation gets out of hand
in the long run because it's not a competent and
(11:09):
not a not a credible institution. Then because everyone looks
at it and says, Okay, whatever the president wants, they're
going to get, and who knows what future presidents may want,
but it's usually going to be lower interest rates, and
that's not always the thing that you need, kind of
like donuts.
Speaker 3 (11:25):
Last few years has been years of relearning old lessons
and monetary theory and good policy, and I think we
have to relearn the lesson of why FED independence is
important for economic stability.
Speaker 2 (11:37):
And the problem is it doesn't matter until it does.
You know, it's you could look at the last forty
years and say, Okay, the FED didn't really need to
do much during that time, and it's true, but when
it does matter, boy, it's important. And also you can't
look at the last forty years and definitively say, hey,
if the Fed had looser policy, things would have been
the same. Maybe you would have had a resurgence in inflation.
(11:59):
Maybe that credibility would have been shotowed.
Speaker 4 (12:00):
I don't know.
Speaker 3 (12:01):
It almost certainly would have been. The credibility itself is
what prevented inflation. Most researchers think, not everybody, but most
think it's the credibility itself that kept expectations under control
and inflation as a consequence under control.
Speaker 2 (12:12):
Let's take a bit of a break here. When we
come back, we're talking India. Right after this.
Speaker 1 (12:17):
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Speaker 5 (12:43):
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Speaker 2 (13:16):
Pe'ce in the Wall Street Journal today talking about the
fact that the additional twenty five percent tariff on Indian
imports goes into effect today, if making the effective teriff
freight on Indian imports fifty percent. This additional twenty five
percent ostensibly due to India purchasing oil from Russia in
(13:39):
large quantities, which does raise the question, Okay, if it's
really about that, why are you not instituting something similar
on China, who also purchases quite a bit of Russian oil,
Which means that it's probably not actually about the Russian oil.
It's probably about something else that the US wants in
this relationship and in this deal. But what exactly that is.
(14:04):
I have, you know, things I can speculate on, but ultimately,
if this stays in place, you know, you've got almost
ninety billion dollars in goods that India exports to the
United States, about sixty billion of which will be subject
to these new taxes.
Speaker 3 (14:19):
Yeah, like you said, we don't know what the motive
or the endgame is here. What's he playing at in
the short term geopolitically not my area of expertise. If
I have such a thing, it seems to be foolhardy.
It's pushing India closer to our our strategic foes, Russia
and perhaps China.
Speaker 2 (14:37):
I don't really buy that, okay, So, like India and
China do not like each other very much, Well.
Speaker 3 (14:42):
They can't they have they share a border. I mean,
the basic geostrategic consideration suggests they should be adversaries, correct,
Whereas you know, like we should not naturally be adversaries
with India or even China. Our interests are too far
excuse me, Russia unmost Russia in day's Europe, and then
we do have skin in the game. Anyway, I think
(15:02):
way way out of my league here. But my point
is that we could probably use their help against China.
It seems foolish in the short term. But you say
there may be ulterior, hidden, more sophisticated motive when we
just have to let this kind of play out.
Speaker 2 (15:18):
I think there are And here's the thing, So Indian
President Narendra Modi and President Trump generally have shared like
a pretty good relationship historically. Beyond that, Vice President Vance
went out to India I think it was in maybe
February or March of this year and reportedly had a
good visit there as well. And so I think a
(15:38):
you have, you know, two presidents who have generally gotten
along pretty well during their tenures in office. The other
thing that I look at is look India, is India
is a potential natural bulwark against China when you look
at combination of two things. Number one, the region that
(16:01):
they occupy geographically, and number two just the sheer number
of people that you have there that could potentially be
you know, an economic engine that helps to power you know,
the non China aligned world. The problem that you do have,
I think you have a few different problems, and the
question is like which one of these are are we
(16:22):
trying to solve here? Trying to you know, figure out
how do we you know, be part of the solution.
On the first is when you look at if you
talk to anyone who's actually worked in India with you know, manufacturing,
which is really what this is about.
Speaker 1 (16:38):
It.
Speaker 2 (16:39):
It's about trying to replace some of China's manufacturing capacity.
One thing that China does really well is they will
quite literally like clear the road for you with whatever
you want. And I mean that literally and figurative. You
go to China and you say, hey, I need X
number of workers in this location with these specs and
blah blah blah, and they say, great, where bulldoze all
(17:00):
the houses that were there before. Here are the workers
that you. I'm not saying this is good like for
like human rights are like that population. It's just no,
this is this is what they do. And if you're
a US investor that doesn't care about any of the
other stuff, you're like, Okay, great, this is just what
I need, even though like there's some pretty horrendous implications
from it. Obviously, India does not do that. First and
(17:22):
foremost beyond that, the sheer level of just organization and
coordination inside of India, it's it's really messy. It's just
like things are not particularly well organized. You have all
kinds of different divisions in terms of you know, just
how things operate from you know, one part of India
to the other. It's it's just not something where you
(17:42):
have tremendous uniformity in what you get from manufacturers in
different parts of the country and regulations and laws and
things like that. It's it's very much a patchwork. I
don't get the sense that we're really trying to solve
that because I don't think we really care. Quite honestly, it's.
Speaker 3 (17:58):
Deeply embedded for historical reasons. Like China was an empire,
it had an imperial structure of bureaucracy. For millennia, India
was a bunch of principality.
Speaker 1 (18:06):
Correct is that?
Speaker 3 (18:07):
Yeah, so you're not going to change.
Speaker 2 (18:09):
That right dimply, And I don't think we would want to.
I don't think that's what's a footthare. What I do
think is at play here is, even though India and
China don't really get along particularly well, the economic ties
have deepened in recent years, and in particular, there is
(18:29):
a big threat that India could be used for transshipments
from China to try to skirt different tariffs and other
regulations and things like that about US imports. And I
think there's some meat on that bone there, just based
on you know, what I see from other countries around it.
The Russian oil thing, maybe at the margins is actually
(18:53):
a thing. But again, if that were actually the main
driving force here, there are plenty of other countries that
import Russian oil as well, the biggest one being China,
and there is no additional twenty five percent tariff being
levied on you're trying to right.
Speaker 3 (19:05):
I think you're a slorry. Trump doesn't care about Russia.
He's not sanctioning the Shadow Fleet, he's not trying to
attach their assets. He keeps threatening serious severe consequences if
Russia doesn't do this or that in two weeks or
some arbitrary timeframe. None of it's been followed through on.
I think you're probably right here.
Speaker 2 (19:19):
So there's something else afoot here. Exactly what it is,
I don't know, but we'll continue to watch this, and
I'm not sure that these stick around too too long.
Necessarily quick break here. When we return, it's Wall Street
Watch and ask Todd.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter. Act
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look and what's moving market so
far today right here on the Financial Exchange Radio network.
Speaker 5 (20:00):
Markets edging higher and mostly quiet ahead of the massive
earnings report from chip maker and AI giant Nvidia do
out after today's closing bell. Right now, the Dow is
up by about a quarter of percent, or one hundred
and sixteen points higher. SMP five hundred is up two
tenths of one percent, Nasdaq is up just over a
(20:21):
tenth of a percent or thirty three points higher. Russell
two thousand is up nearly four tenths of one percent.
Ten year Treasure reeled up two basis points a four
point two eight one percent, and crude oil up about
two thirds of a percent higher, or sixty three dollars
in sixty eight cents a barrel. Cole's jumping nearly twenty
(20:42):
percent after the retailer surpassed street earnings and revenue expectations
for the second quarter, despite its sales declining and its
ongoing search for new CEO. Coles also reported a better
than anticipated full year sales guidance. Another retailer, in Abercromine Fitch,
also reported earnings where it's sales growth slowed during the quarter.
(21:02):
Abercrombie sales slumped five percent, while comparable sales dropped eleven percent. However,
sales from its Hollister brand grew nineteen percent in the quarter.
Abercrombie that stock is up by almost two percent. Meanwhile,
CNBC reporting that the controlling shareholder of Canada goose By
Capital received bids to take the company private, valuing the
(21:24):
retailer at about one point three five billion dollars. Canada
goose shares are jumping fifteen percent on that news. Elsewhere,
Octa shares climbing four percent after the identity security company
posted higher quarterly results and raised its annual guidance. Database
platform developer Mango dB, surging thirty two percent after it
(21:46):
beat analysts estimates. In After controversy surrounding its new logo,
Cracker Barrel reverted back to its original old Timer logo,
resulting in that stock rebounding by seven percent.
Speaker 1 (21:59):
Today.
Speaker 5 (22:00):
I'm Tucker Silva and that is Wallstree.
Speaker 3 (22:02):
Watch.
Speaker 1 (22:04):
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 the state and tax planning, medicaid planning, and probate law.
(22:25):
Visit Cushingdolan dot com. Now here's Todd Lutsky as proms.
Speaker 2 (22:31):
We're now joined by Todd Lutsky from Cushing and Dolan.
We've got the phone lines open and room for your
calls about your estate plans. Why we call the segment
Ask Todd is you get to ask Todd your questions live.
Speaker 4 (22:43):
On air right now.
Speaker 2 (22:45):
Phone number is eight eight eight two zero five two
two six three. Again, that is eight eight eight two
zero five two two six three. So make sure you
call early and often, because we usually only get through
two or three calls with Todd in any particular day.
That number again is eight eight eight two zero five
(23:05):
two two six three. Again, it's eight eight eight two
zero five two two six three. Mister Lutsky. How are
you doing today?
Speaker 4 (23:13):
I am never better? How about you?
Speaker 2 (23:16):
I'm good. I saw over the weekend, actually that the
Navy Navy the training dolphins to carry first aid kits
really medicinal porpoises only.
Speaker 4 (23:29):
That's good.
Speaker 2 (23:30):
Yeah, So it's it's exciting News Todd want to talk
to you a little bit about trusts and beneficiaries. Can
you talk a little bit about are there any benefits
to using a trust to name beneficiaries for assets as
opposed to simply naming them directly on an account.
Speaker 4 (23:50):
So there's obviously different kinds of trust that we have
to deal with, uh when we talk about this, but
and certain things that we'll go into trust in certain
things that want So first of all, on IRA would
would generally not go into trust period, So I wouldn't
wouldn't even wouldn't even do it because you have a
big tax problem.
Speaker 2 (24:07):
What about naming a trust as a beneficiary of an ira?
Speaker 4 (24:10):
And that's that's where I was headed. So you can't
change the owner, and I think this is important owner
versus beneficiaries, which what you're asking me for an IRA,
I would say, you know, based on the kind of
planning you're doing. So if you're trying to put you know,
do it you know married couple or trying to ultimately
get your IRA to your to your kids the next
(24:30):
generation and maybe protect it from nursing home, not from
nursing homes, but protecting it from your kids future creditors,
future divorces, UH, passing it down to a generation even
below the children tax free. So if you're looking to
do all of those things, then the designated beneficiary always
primary is spouse, So always start with that. The primary
(24:52):
should be the spouse from an income tax perspective, and
the contingent could be the trust. So while you you
cannot put an IRA in the trust while you're alive,
you can get it there when you die, So the
beneficiary could be named that. Now for non IRA, and
ask question, sure.
Speaker 2 (25:13):
Pros and cons of that approach? What are the good
things you get from doing that? What are the bad
things that happen from doing that?
Speaker 4 (25:19):
If if the goal is to protect the IRA, let's
say got two three million dollar IRA? Sure big money, right,
so we want to make sure that it's protected from
the kids' future divorces, creditors, and generation skipping. Then there
I see there is no negative Why because one, I
want it not going outright to the kids, because then
(25:39):
all bets are off as to what happens to it.
I want it getting into the trust. Is there? And
I think what you're driving at, Chuck, is is there
a tax problem doing that?
Speaker 1 (25:49):
Uh?
Speaker 4 (25:50):
And as long as the trust is designed to hold
the IRA asset, which it should be. The required minimum distributions,
as we talk about and what we care about from
an income tax perspective, these required minimum distributions. If I
name the children outright, it is ten years. Generally speaking,
(26:10):
there's some exceptions. If I name the trust the beneficiary
and the kids are beneficiaries. Inside the trust, it still
comes out over ten years, but it doesn't come out
to the kid. That's the difference. Sure, the required minimum
distribution is still reaching into the IRA, pulling it out,
(26:31):
subjecting that withdrawal to income taxes, but it goes to
the trust. Now, I guess there could be a tax
difference if the amount that goes to the trust remains
in the trust and doesn't come out to the kids.
It could be taxed at the trust level, which would
be a higher rate than kids or human levels. Let's
(26:52):
put it that way. So but again, if I'm trying
to protect it, I still want to make that distribution,
because every year I can decide whether I make a
distribution or not. If someone's going through a divorce, we're
gonna let it build up inside the trust. But if
if I don't have a problem, allow the distribution to
come out and let the kid pay the tax.
Speaker 2 (27:11):
Talking with Todd Lutsky. If you've got estate planning questions,
this is your chance to ask them to Todd live
on air right now. Phone number is eight eight eight
to zero five two two sixty three. That number again
is eight eight eight to zero five two two six three.
We're gonna take a quick break here, but when we
return we're gonna get right to your questions with Todd.
(27:33):
That phone number eight eight eight to zero five two
two sixty three. One last time eight eight eight to
zero five two two six y three.
Speaker 1 (27:44):
Ask Todd with Todd Lutsky 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
Lix James Radio Network.
Speaker 2 (28:12):
Talking with Todd Aletski from Kushigan Dolan. If you've got
a question to ask Todd, still room on the phone
lines eight eight eight two zero five two two six three.
That number again is eight eight eight two zero five
two two six three.
Speaker 4 (28:27):
Todd.
Speaker 2 (28:27):
When we talk about beneficiaries, and how you know families
might might think about them when it comes to revocable
versus irrevocable trusts, any difference there in terms of how
beneficiaries may or may not be treated, or is it
pretty much the exact same?
Speaker 4 (28:43):
So I think it's probably the same. Let's let's run
through it, though, it's always better to sort of understand
how that works. So if I've got a revocable trust
and I want to put stuff in it, my first
comment is I'm going to probably put everything in except
I raise, of course always we already talked about iras.
They don't go in. So I would change on a
(29:04):
investment account, a brokerage account, a bank account, a CD.
I don't care what it is. I don't see why
I wouldn't just put it all in there. When I
say put it in there, I mean change the owner.
I don't need to change the beneficiary anymore. And the
reason I don't is because once it's in the trust,
the trust will dictate where everything goes when you die,
(29:27):
and that's great, that's what I want to have happen,
and I don't have to worry. And this is why
sometimes people say, well, I'll just put one kid on
one account, one kid on another account, and you know,
but you don't know which account's going to grow faster
than another, and you don't know if that's going to
end up an unequal treatment. I don't want that. Plus
I want to control it. I can't really control it
by naming beneficiaries, So I would retitle it, changing the
(29:48):
owner on those accounts to the name of the revocable trust. Now, similarly,
with an irrevocable trust, if I wanted to fund it,
I would do the same thing. I would change the
owner on these items to the irrevocable trust. The difference
is what I put in before. With they're revocable, I'm
(30:12):
likely to put everything in. With an irrevocable I'm probably
not going to do that. I always want to leave
some stuff out, some access, you know, direct access to
assets outside of these irrevocable Medicaid trusts, or leave some
stuff out. And the other reason I leave some stuff
out is especially especially my bank account that receives my
(30:35):
direct deposits social security or pension. Because remember, when I'm
talking about medicaid trusts, I'm talking about people that are
probably retired.
Speaker 2 (30:44):
Sure you're not talking about thirty year olds generally going
that route, right, there's no need to be thinking about it, right.
Speaker 4 (30:50):
So these are generally folks that are either retiring, close
to retirement, et cetera, and more on a fixed income.
So you never want to put in that that main
operating bank account into a Medicaid irrevocable trust like you
would with a revocable because you get these checks every month,
whether it's pension, soci security, if it was owned by
(31:12):
the irrevocable Medicaid trust, every single time it goes in there,
it's a new five year waiting period for Medicaid because
you added new money. People don't think about that, but
I actually had someone who came to me. We didn't
do the planning, but they were going on trying to
apply for Medicaid and they came in and I saw
this when we were going through the application process. I'm like,
(31:34):
what are all these deposits? And they said, oh, it's
our it's our social security and pension. I'm like, oh,
you're gonna have a big problem here. So for years
we had to go back and count everything that went
in there to figure out what the amount of the
deposits were, to get them out to basically cure the problem.
I said, you're never going to be eligible for medicaid
(31:55):
because this ongoing five year waiting period is every single month,
it just keeps going, Yeah, keeps extending it out right, sure,
And so we had to go back and undo all
that and fix it to cure all that money back
into their personal name to eliminate the waiting period, and
then deal with the money that's outside the trust to
get them eligible for medicaid. So so I think that's
(32:17):
the biggest difference between the two.
Speaker 2 (32:19):
Just digging in on that, it seems like that seems
like obviously kind of a big problem in an estate plan.
What other kinds of things do you see as being
really common If someone comes to you and says, oh, hey,
like I've done my estate plan, like I think I'm
all ready to go, Do you see an issue with this?
What other common ones do you typically see that cause
problems for people?
Speaker 4 (32:38):
Oh, common questions like so an example would be not.
Speaker 2 (32:41):
Even not even common questions like things where someone thinks
they're doing things right right, okay, and then you looking
at it, you like, no, do you realize what you've
done here?
Speaker 4 (32:50):
Yeah? I see So an example like that would be.
And again partly this is where the guide comes in, right,
we want to figure out what trust is right for you.
I've had people come in and say say to me, Okay,
you know so and so is going into the nursing home,
and you know, we know all about the five year
waiting period. So we're all set because my mom, you know,
(33:11):
she did the planning years ago. And again to your point, Chuck,
we think we did it right. And then I sit
down and I say, great, give me a copy of
the trust. That's going to be a real helpful to us,
and let's start figuring out how we can apply for medicaid.
And then I look at the top of the trust
and I see it's the you know, the you know,
Tom Smith revocable trust. Okay, you didn't do it right.
(33:35):
You did revocable trust planning right, sure, but you didn't
do nursing home planning right because the five year waiting
period never begins to run on assets in a revocable trust.
So that would be an example of somebody who thinks
they did it right and they didn't. But folks, that's
what this guide is about this month. Right, as as
(33:57):
we approach the end of the month. This is the
top seven estate planning trusts, the ones I think are
used most frequently and some of them most frequently misunderstood.
Like it starts with the nominee realty trust. What is that?
It's not even really a trust. You'll learn when you
get the guide. Revocable trusts and irrevocable trust We just
(34:17):
talked about two with you, Chuck, about the Medicaid and
revocable trust Well, there's other kinds of irrevocable trusts, life
insurance trusts, first to die, second to die variety. People
who have special needs children have you know, needs to
figure out a special needs trust. They're in here. What
about a pool trust? There's so many different trusts. These
(34:39):
are the top seven. They explain how they work, the
tax savings, the operation. If you've never done your planning,
this is going to help you get started. Pick which
one's right for you eight six six eight four eight
five six nine to nine or Legal Exchange show dot com.
You can download it right there again eight six six
(34:59):
eight or eight five six nine nine or Legal Exchange
Show dot com.
Speaker 2 (35:05):
Tod Do you see instances where I guess people will
use a combination of different vehicles for their estate planning
because of different needs. You know, maybe hey, they've got
a revocable trust that eventually spits out a special needs
trust for a child of theirs. Or sometimes do people
ever use revocable trusts and irrevocable trusts in the same
(35:25):
estate plan? Are those things possible or useful in situations?
Speaker 4 (35:29):
Yeah? I think it's it's very important that when you're
doing your planning, we you know, we use we first
gather like all of your assets, and it's the amount
of assets you have and the type of assets that
you have that will dictate what kind of trust we do.
So let's say we start with your foundation and it's
a revocable trust, and you're worth about four million dollars,
(35:52):
but you have a two million dollar life insurance policy. Well, now,
all of a sudden, I'm worth six million dollars, and
that changes the estate tax game here in at least
even though it might not affect you federally. So it
changes the game here. So now what Well, maybe it
makes sense to take that two million dollar life insurance
policy and put it in an irrevocable medical an irrevocable
(36:14):
life insurance trust. Right, So I would put all the
other assets in my revocable trust. And by the way,
many kinds of revocable trusts with an estate worth well
under fifteen million dollars, I'm probably putting together a joint
revocable trust for this married couple hypothetical example. But that's great.
(36:35):
It does avoid probate and reduce my taxes, but it's
not going to quite eliminate them. Why. Because I got
this two million dollar policy, I move that into an
irrevocable life insurance trust and as long as I live
three years, the death benefit will now be estate and
income tax free when I die, thereby reducing and helping
to eliminate my state taxes. So a combination of the
(36:57):
two trusts work good in that arrange. And yes, sometimes
special needs trusts are built in to these revocable trusts
as well.
Speaker 2 (37:05):
Mister Lutsky, thank you so much for joining us today.
Speaker 4 (37:07):
We appreciate it always pleasure. Thank you.
Speaker 1 (37:10):
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 ninety
three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(37:31):
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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