December 3, 2025 • 38 mins
Chuck Zodda and Marc Fandetti discuss today's ADP jobs report and if the results mean the Fed is more likely to cut this month. Will the Fed act fast enough as potential trouble is brewing in a key corner of the financial market. Todd Lutsky joins the show for his weekly segment, Ask Todd. This week, Todd explains how trusts can help with estate taxes.
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Episode Transcript
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Speaker 1 (00:00):
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(01:06):
and Mark Fandetti.
Speaker 2 (01:11):
Chuck Mark Tucker with you here on a Wednesday, and
we're gonna kick things off with this piece from Barons.
Speaker 3 (01:24):
November.
Speaker 2 (01:24):
ADP jobs data could complicate the Fed's rate decision. First
of all, I really don't think the Fed is paying
a ton of attention to the ADP report. I just
don't think it's something that is really on their radar.
And the reason why is historically what has mattered to
the Fed is what is going on with the unemployment rate.
And given the fact that historically the ADP report has
(01:48):
not had a strong correlation with the unemployment report, the
FED has generally said, no, we're not gonna pay you know,
a ton of attention, like it's it's not something anyone
really pays attention to because it's just historically not been
something that's a great month to month's correlation with the
unemployment rate.
Speaker 4 (02:07):
You're looking like, yeah, I found that it does. Maybe
a sample I was looking at was wrong. It helps
you predict it a little bit.
Speaker 3 (02:14):
The what kind of correlation you know the AP If
you know ADP recently it's been good, Like history, it
has not.
Speaker 4 (02:21):
Whatever fred DA, Federal Reserve Economic ID I don't know why
I'm waving at the camera, but anyway, whatever, the Federal
Reserve Economic Database goes back to maybe it's only the
early twenty twenties, I forget. But if you know it,
it helps you do a better forecast of the.
Speaker 3 (02:35):
The last two years, it's been very lot.
Speaker 4 (02:37):
Yeah, and that can distort averages, which is what I'm
reporting to you.
Speaker 2 (02:40):
Never mind, So I think here's here's where I get
to when when looking at this the.
Speaker 3 (02:49):
FED.
Speaker 2 (02:50):
The reason why the Fed's not going to care about
the ADP report is because it's one report and they
generally haven't paid attention to it.
Speaker 3 (02:56):
Ever, I see your point. Okay, what does matter right now?
Speaker 2 (03:01):
Fed's Beage book, which came out last week, says that
employment is shrinking. ADP says employment is shrinking. The BLS
says the unemployment rate is going up, continuous jobless claims
rising five to seven percent year over year. You've got
warn notices that are rising. Challenger Grand Christmas is saying
(03:23):
that layoffs are going up. It's really hard right now
to find something out there that you look at and say, yep,
labor markets cranking. And so given that, yeah, absolutely, I
don't think the November ADP jobs data could complicate the
Fed's rate decision, especially since it came in this morning
(03:44):
bad thirty two thousand jobs lost compared to a range
of five to fifteen thousand gained expected. And I think
that when you look at this, ultimately the outlier that
we have right now is that the September jobs, the
headline jobs created number came and stronger than anticipated, even
as the unemployment rate rose. But basically aside from that,
(04:09):
the message that you're getting right now is, yes, companies
haven't been laying people off, you know, too quickly this year.
There are signs that may be starting to shift, and
the overall hiring picture has remained very, very slow. And
so as such, net job growth is probably somewhere around zero.
(04:29):
It might be plus or minus fifty thousand for a month,
but it's probably somewhere flat ish. And assuming that those
errors don't trend in any direction, flat is not really
a great place for a job market to be.
Speaker 3 (04:46):
If you will get.
Speaker 2 (04:47):
Other data that we track, another one that's out there
with holding four solid security taxes and FIKA. If you
look at the data, we've gone through a deceleration since
the middle of the year, where fighter Withholding was growing
at a rate of about seven percent in July, it's
now declined each of the last four months to be
(05:09):
at around a three point two percent annual growth rate.
You might say, hey, why is fighta withholding you know
growing at three percent despite a flat job market?
Speaker 3 (05:19):
Is in there a disconnect there? And the answer that
I'll say.
Speaker 2 (05:20):
Is no, because if you are working generally, even if
you stay at the same company, you might get a
raise of one to three percent, and if you're hopping
to a new firm, you might get a paid you know,
bump of four to six percent, and so three percent
year over year growth, and FIGHTA Withholding, which is actually
capturing like what's going into the US treasury from payrolls,
(05:43):
is pretty consistent with flat job growth. The place where
things get dangerous is if FIGHTA Withholding continues to decline here,
because now that's indicative of a labor market that is
in decline. But all these factors are pointing towards the
same thing, which is the labor market's been weakening for
the last three to four years now, since mid twenty two.
(06:04):
It's probably starting to reach a critical point where if
it doesn't improve in Q one of twenty six.
Speaker 3 (06:13):
You've got some real.
Speaker 2 (06:13):
Issues that show up in the economy, and as such,
I continue to be in the same place, which is
the FED, based on what they've already done, should be
cutting in December. But that cut is not likely to matter,
because if the economy worsens, you're gonna need another one
hundred and fifty two hundred basis points of cuts. Anyways,
(06:34):
a policy error is not made at one meeting. It's
made by making the wrong choice repeatedly, and so whether
the FED does or doesn't cut in December is immaterial.
Speaker 3 (06:44):
In my opinion, the.
Speaker 4 (06:46):
FED may not be able to do anything about a
softening labor market. It depends on why the labor market
is softening.
Speaker 1 (06:51):
Sure, the FED.
Speaker 4 (06:52):
You could think of the FED as controlling demand. That's
a real oversimplification, but we all know that they control
in a literal sense, the money supply. They can print money,
they tell the Treasury to print money, they credit it
to banks, and banks lend it. That is a very
short fairy tale of the mechanism. So they try to
stimulate the economy when they think it's getting solved, and
(07:15):
vice versa when they think it's running too hot. That
suggests there is some happy medium. We don't know what
that is. You could call it the nature. You ever
took an economics class, you recognize the neutral or natural
rate of unemployment. Milton Friedman, among others, came up with
the concept, really popularized. It exists. We just don't know
what it is. Maybe the right natural rate has gone
up where cutting immigration. Sure, labor market changed a lot
(07:37):
after COVID. Maybe the natural rate or the non inflationary
rate not technically the same things, but I'll use those
terms interchangeably. Maybe the non inflationary rate of unemployment and
that sound that means just what it says. You go
below it pushes inflation up, you stay added or above it.
Inflation is the static or falling. That non inflationary rate
may have gone up. We don't know. That's the FEDS challenge.
(08:01):
Inflation as we know is. I'll give the counter to
the argument you made. Inflation is still elevated. Maybe the
natural rate is. And growth by all accounts in the
data has been foggy lately or just missing. Growth is
still on track to hit a trend or potential which
is roughly two percent. Maybe FED funds is just right,
(08:23):
That's what worries me a bit.
Speaker 3 (08:25):
I think so couple pieces just on this.
Speaker 2 (08:28):
If you want to take the view that, hey, the
Fed doesn't need to do something, and you're looking for
data points in your favor, one that is showing up
the last couple of weeks, indeed's Jobs Posting Index is
showing a meaningful rise in job openings.
Speaker 1 (08:42):
Yeah.
Speaker 2 (08:43):
The counter to this is that it showed a similar
bump in late August that turned out to be like
a one month bump and then resumed a decline that
it's been on since the start of twenty twenty two.
So again, I don't think you can say there's a
clear change in trend yet because it's been three weeks
of inclin reached openings, and three weeks does not a
new trend make there. But if you're looking for positive
(09:04):
data in the labor market, this is, you know, one
of those few data points that you can point to
and say, yeah, things are things are better here on
the inflation side of things.
Speaker 4 (09:14):
Can I say one thing about labor though? Yah, I'm
not disputing that it's softening. I'm wondering whether the yeah,
I know you and I are we're not arguing we
just pretend to What I'm wondering is can the FED
doing We're pretending?
Speaker 3 (09:25):
You think we're pretending. I hate you.
Speaker 2 (09:27):
You think we're pretending. You're Tucker to turn your mic
off for the show, and now you're fired after that show.
First of all, Jack, now I'm I mean labor market
could be uh indisputably softening. I wonder if the FED
can do anything. It sounds foolish because we think of
the FED as a miracle worker. But never mind the
(09:48):
lags with which policy works. You hinted at this interest
rate cuts today may not affect the economy for a few,
even several quarters. What if we don't have a demand problem.
This was the problem throughout the nineteen seventies, So I'm
having the nightmares that we're reliving it.
Speaker 4 (10:01):
The FED kept thinking, right, The FED kept thinking, the
natural rate is lower than the actual rate. We can
do something about that. We could stimulate demand. What they
weren't taking into account was that they misread. They didn't
think of the They didn't think of things in the terms.
This is a little bit of an anachronism. They didn't
think of it in these terms. But the parallels are
(10:22):
pretty clear. They just misread the productive potential of the
economy over and over again throughout the nineteen seventies, and
they misread underlying inflationary pressure over and over again. So
we ended up with a decade of choppy growth, still
good on average, but choppy and uncomfortably high inflation that
it took a massive recession to ring out of the economy. Sorry,
go ahead, quick break.
Speaker 2 (10:42):
When we come back, I want to talk more about
that inflation piece after this.
Speaker 1 (10:46):
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Speaker 2 (11:56):
In the last segment, we were talking about the upcoming
FED meeting and this uh push pull between you know,
inflation and the unemployment rate, and you know the challenge
that the FED is facing. And I gotta tell you,
the more that I look at what is developing right now,
(12:17):
the less concerned I am about a continued inflationary impulse
in twenty six. It's not to say that it might
not rear its head at some point later, but I'm
just unconcerned about it for next year for a couple
of reasons.
Speaker 3 (12:33):
The first is mark we talk of.
Speaker 2 (12:37):
An awful lot about, you know, the conditions that are
necessary for inflation to take hold. And it's something again
like no one knows the exact formula because there is
no exact formula. It evolves and changes over time, but
it's some combination of Hey, high inflation is caused by
excess demand, reduced supply, and high inflation expectations. Is that
(12:58):
a fair place to start I can go with that.
So let's look at those three pieces the one that
I am.
Speaker 4 (13:04):
You said, did you say supply shocks in there? Because
in the short term, of course they I would put
the supply shock term on there.
Speaker 3 (13:09):
Yeah, I said, you know, high whatever, Yeah, so whatever.
Speaker 2 (13:16):
Here's the place that I'm looking here is ultimately when
we look at tariff induced inflation.
Speaker 4 (13:24):
Yeah, that'd be a supply shock.
Speaker 2 (13:25):
Yet it's very much something where the rate of change matters.
If you impose a fifteen percent tariff and all else
being equal, nothing else changes once you lap that year
of that tariff imposition, that tariff has been absorbed by
the inflation during that year, and anything from there is
(13:47):
neutral in theory because you're not changing the tariff.
Speaker 4 (13:52):
Yeah, the problem is that would affect expectations, probably correct,
But yeah, so one time change is different. Than a graduation.
Speaker 2 (13:59):
It doesn't necessary passed through. Like tariffs are something that
I really thought again, if you had imposed like the
full weight of them initially in April, they could have
had a huge impact on the economy. House say, yeah, probably,
And as we get to you know, next year, I
just don't think that that's going to be a major
factor because they're in place and it's going to be
what it's going to be, or if the Supreme Court
(14:20):
says no, you can't do this, it's going to be
even lower.
Speaker 3 (14:22):
Either way, I don't.
Speaker 2 (14:23):
See tariffs as being a major issue for inflation in
twenty six the way they have been a problem in
twenty five. If you will get you know, goods related
in place, which is clearly risen. So this brings us
over to the services side of things. And I got
to tell you, based on what we're seeing in the
housing market, shelter disinflation is picking up speed.
Speaker 3 (14:46):
Rapidly. Uh.
Speaker 2 (14:47):
You know, prices are falling in the housing market in
large portions of the country. Now they are not in
the Northeast because of you know, different conditions that exist
to begin with, but housing is like to have significant
disinflationary trends through twenty twenty six, and as part of
a result of home price is falling, I think you
(15:09):
are likely to see some struggles in the construction industry,
which in turn impacts the demand side as employment weakens further.
Speaker 3 (15:16):
And so I.
Speaker 2 (15:18):
Get to a place where goods inflation I don't think
is going to be impacted by tariffs in twenty six
the same way it was this year. Services inflation. The
dominant piece there is housing. I don't think you are
going to see any problems on that side based on
what we're seeing in the housing market, and I think
demand is likely to continue to weaken in the first
(15:39):
part of next year, and so I don't see twenty
six being a problem on the inflation side, which gets
me more towards Hey, if there is a real problem
on the labor side, which the data is starting to indicate.
To be honest, I'm getting to a point where I
might be okay with the FED starting to cut faster than.
Speaker 4 (15:59):
Yeah, you're kind of begging the question. You've assumed away
all the problems, But yeah, if it all works out.
Speaker 2 (16:04):
Like that, isn't that what the FED does with you know,
their modeling and everything, is they say, this is what
we think is going to happen, and here's the policy
that we prescribe. Like they don't just look at the
snapshot of where things are today, they look at where
they think things will be in the future, and they say,
this is what I think needs to be done. I'm
getting to the point where, again, my you know, brain
(16:25):
model is not as fancy as the FED models, but
I'm getting to a point where it's like, I see
the issue on the labor side being more acute in
twenty six than the inflation one next year.
Speaker 4 (16:37):
Yeah, if you're really worried about an economic slow down,
then I get and you assume no supply shocks, and
you assume that inflation expectations which are elevated Michigan's got
it at nearly five percent one year ahead, if you
assume that's going to again, I'm just assuming away all
the problems here. If you're willing to do that and
focus just on the labor market cut away.
Speaker 3 (17:00):
Yeah, that's where I get to. That's honest. Like I'm
common there at this point.
Speaker 4 (17:06):
But I'm a hawk. You're either a hawky or not.
And this is maybe it's a liberal conservative thing.
Speaker 3 (17:12):
I don't know.
Speaker 4 (17:13):
You know, I'm fiscally conservative. Maybe that translates into conservative.
I'd rather kill inflation. My favorite number would be close
to zero. But there are plenty of far more accomplished
researchers than I am who are very comfortable with three
to five. I could live with that, but in a
otherwise quiescent environment, And maybe we're not, and maybe things
are fluid. Maybe I should be thinking more dynamically, but
I'm I'm aggressive when it comes to inflation. I'd rather
(17:37):
squash it. But maybe I'm paranoid after the experience of
the nineteen seventies and the experience we just had three
years ago when we seriously underestimated the supply demand gap.
Speaker 2 (17:49):
Look, I totally get that, and who knows, Like if
either of us are right, Yeah, I say, this is
where I think things are going on the inflation side.
It can obviously like I don't have a crystal ball,
but this is what I'm seeing right now and kind
of where I land. And yes, like I would like
(18:12):
to see inflation lower than it is today. I think
we're going there quite honestly, because the housing market's going
to take us there. That's where I think that we're
going is housing is going to drag us there because
prices are falling and likely to fall throughout more of
the country next year than they have this year.
Speaker 4 (18:35):
Yeah, that's one part of the economy. It's a big part, obviously.
Speaker 2 (18:38):
It's it's historically it's been that marginal piece. It's housing
leads the economy. And maybe I'm too anchored to that
view still because look, for the last five years, housing
has not let the economy. Housing has been kind of
like dragged like along by everything else. But I guess
I'm kind of looking at it and I see where
home prices are going, and I kind of say, look,
(19:00):
I've seen that story before. And usually once you start
seeing year over year negative home prices nationally, which we'll
get to in Q one or Q two based on
listing prices and where things are going on that front,
we'll get there in Q one or Q two. That's
pretty tough for the economy. And that's where I think
(19:21):
we are going, is negative national home prices.
Speaker 3 (19:23):
That's fair.
Speaker 2 (19:24):
Let's take a quick break. When we return Wall Street
Watch and Todd Lensky joins us. Ask Todd, get your
questions ready.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter. At
TFE show. Breaking business news is always first right here
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Watch a complete look and what's moving markets so far
today right here on the Financial Exchange Radio networ.
Speaker 5 (20:00):
Markets are mixed as Wall Street reacts to the ADP
Private employment report for November posted this morning, which fell
thirty two thousand, worse than expectations of an increase of
ten thousand. Right now, the Dow is up four tenths
of a percent, SMP five hundred is edging a tenth
of a percent higher, Nasdaq is dipping by merely eleven points,
(20:20):
Russell two thousand is up over eight tenths of a percent.
Ten You're treasurreeled down one basis point at four point
zero five excuse four point zero seven to five percent,
and crude oil up about one percent higher, trading just
above fifty nine dollars a barrel. Macy's posted its highest
quarterly sales in more than three years, as the department
(20:41):
store chains turnaround strategy showed signs of momentum. Furthermore, Macy's
raised its full year sales in earnings outlook for second
consecutive quarter. However, its outlook anticipates challenges in the holiday quarter,
including selective spending by consumers and higher tariffs. Macy stock
is edging higher mean, while shares an American Eagle surging
(21:02):
fourteen percent after the retailer beat third quarter earning z
and revenue forecast and also reads its same store sales
guidance as it is seeing a strong start to the
shopping season. Holiday shopping season, that is elsewhere. Delta expects
to take a two hundred million dollar profit hit in
the final quarter after the carrier was forced to slash
(21:22):
flights due to the recent record government shutdown. Delta stock
is rising two percent. Chip maker Marvel Technology agreed to
buy Celestial Ai and a three point two five billion
dollar deal. Marvel also posted robust quarterly results in forecasts,
setting shares jumping nearly seven percent higher. In cybersecurity company
CrowdStrike posted a bigger quarterly loss then a year ago
(21:46):
and narrowed its annual sales growth forecast. CrowdStrike shares are
down by about two percent. I'm Tucker Silva and that
is Wall Street Watch.
Speaker 1 (21:56):
This is asked Todd on the Financial Exchange Radio net.
If you have an existing estate plan or in the
market for one. Todd Lutsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate law.
(22:17):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:24):
As promised, we are now joined by the one and
only Todd Lutsky from the law firm of Cushing and Dolan.
Segment is called Ask Todd Bicutt because it is your
chance to ask Todd your estate planning questions. And we've
(22:45):
got phone lines open at eight eight eight to zero
five two two six three. Again that number is eight
eight eight two zero five two two sixty three. We
usually get through two to three questions, so make sure
you get calling early and often so you can speak to Todd.
Speaker 3 (23:02):
Todd. How you doing today? I am doing great and
you I'm doing pretty well. I just finished writing a
book on penguins.
Speaker 6 (23:08):
You like penguins.
Speaker 3 (23:09):
It would have been easier if I wrote it on paper.
Speaker 2 (23:11):
Yeah, that's true, but you know, we'll do what we
can Todd want to talk to you a little bit
about is state taxes when it comes to.
Speaker 3 (23:22):
Trusts, how can they help.
Speaker 2 (23:24):
Manage estate tax payments or how much is owed on
a state taxes both at the federal and state level.
Speaker 6 (23:32):
So the rule is that if you leave every and
this is really the trust by the way, from an
estate planning standpoint, in taxes, you know it's they only
work to double your exemption if you're married. Right, If
you're single, you we all have our own exemption and
the goal is to use our exemption either before we
(23:56):
die by gifting if that's appropriate for you, or when
you die through sheltering in trusts. If you are single,
you only have one exemption, so you can't double it
as a single person.
Speaker 3 (24:10):
Just to make that clear, So, as.
Speaker 6 (24:13):
A married couple, when one spouse dies, if you've got
the trust in place, right, let's start with. Not having
the trust in place might be easier. If you don't
have the trust in place, all the assets will simply
just pass to the survivor under something called the marital deduction.
It's an unlimited marital deduction. What that means is that
(24:36):
you can leave as much as you want between spouses,
and there's no tax federal or state death tax, which,
of course, if the government's giving us this thing, it
can't be good for us, right, It's generally good for them,
so we need to figure out how to use it.
It's good for them because now the survivor has all
(24:57):
the assets and has success xuly pushed the surviving spouse's
estate into as high a possible bracket as it could be,
hoping that when the survivor dies, that the value of
the survivor's estate exceeds the exemption. We would hope both
federally and state. Now, sometimes it might not exceed the
(25:18):
federal but it would exceed the state. Remember, the state
exemption is only two million, and the federal exemption is
going to be fifteen million. Come January one. It's thirteen
point nine to nine million today. When I tell you
what these exemptions are, they are the amount of assets
that you can leave to somebody other than a spouse
(25:39):
and not pay tax. Go over that and you pay tax. Okay,
that's a little bit about the exemptions. If you're married
and you have a trust, now you put assets in
the trust, even if it's a joint trust like we're
talking about last month. You put assets in the trust
on the first death, you allocate assets to a remainder
(26:03):
share and a marital share, and these buckets are designed
to hold the assets for the surviving spouse, but subjecting
them to tax on the first death in a manner
that will never result in tax, never result in an
amount more than either the federal or the state exemption. Therefore,
no tax is due on the first death, and then
(26:24):
on the second death. The assets are held in this
trust for the survivor's benefit, but they don't own them. Therefore,
when the survivor dies, they are not taxed in the
survivor's of state again federal or state based on the
remainder share or the marital share numbers. So that you've
claimed and sheltered those assets from future taxation. And that's
(26:46):
how you use the estate tax exemptions.
Speaker 2 (26:49):
Talk with Todd Lutsky from Cushingen Dolan. Still have room
on the phone lines at eight eight eight two zero
five two two six y three. That is the number
to call to ask Todd your state planning questions live
on air right now. Eight eight eight to zero five
two two sixty three is the number. We're gonna take
(27:10):
a quick break here, but when we return, we are
going to get right to your questions with Todd. That
number is eight eight eight to zero five two two
six three. Again it is eight eight eight two zero
five two two sixty three. Quick break, Then your questions
with Todd.
Speaker 1 (27:29):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (27:54):
Talk with Todd Lutsky from the law firm of Kushigan Nolan.
We got room on the phone lines at eight eight
eight two zero five two two sixty three for your
estate planning questions. It's your chance to ask them to
Todd again. That number is eight eight eight to zero
five two two sixty three.
Speaker 3 (28:12):
Todd.
Speaker 2 (28:12):
Let's say that you've had legal work done. How do
you know if the work that you've had done, the
trust that you've had produced, have the necessary components to
manage state and federal estate taxes.
Speaker 6 (28:25):
So you know, you always hope that your trusts are
drafted right. You know, I get it that certain lawyers
maybe shouldn't be doing a state tax planning and do
it anyway, and maybe they're not right. So I've heard
these stories, so you're right to ask the question. I
think the way to do it would be when you
when you look at your trust, there's going to be
(28:46):
a paragraph that says what happens during the donors life
or something to that effect. Let's say during the donors' life,
and then read it and it'll show you what you
can do. So let's assume the trust is revocable for
the moment. It'll show you what you can do and
what you can't do. Then look and this is whether
(29:07):
it's irrevocable or revocable, so either trust. Then look a
little further down, and it's usually in the first couple
of pages, so you're not digging deep into the document.
Speaker 1 (29:20):
You know.
Speaker 6 (29:20):
Look a little further down and you're gonna find a
paragraph that says, upon the death of the donor, or
if it's a joint trust, upon the death of the
you know, first donor to die, there will be a
marital share and a remainder share. Look right after that,
(29:42):
it'll say it breaks down into these buckets. If it
has these two buckets, or or a marital share, a
special marital share and a general marital share. If it
has these three buckets broken down, without trying to understand
the formula, which I don't want you to try to understand,
just know that likely with those buckets there, the correct
(30:04):
formula will be in there to take care of the
estate tax. That's the buckets you're looking for in order
to do this. But you know what, folks, that's a
great question, because the guide we're giving away this month
is balancing asset protection and avoiding estate taxes. It talks
about portability, the pros and cons of electing portability, which
(30:25):
is exactly the exemptions dealing with the unused exemption of
this first spouse to die, which is what we talked
about earlier when Chuck asked a question, and it also
explains exactly the way to calculate your estate tax. It
talks about a revocable trust and all three of these buckets,
how they're funded, how they're designed, and you could put
(30:47):
your own numbers in and see what tax liability you
would have. It also then breaks down into a smaller
section dealing with irrevocable trusts and how the marital shares
and remainder shares work in those trusts to shelter estate
taxes and at the same time protect it from the
nursing home. So I think you'll get your answers little
(31:07):
something for everyone in this guide. Folks call and get it.
It's brand new for the month eight six six eight
four eight five six nine nine or Legal Exchange show
dot com. You can download it right there again eight
six six eight four eight five six nine nine or
Legal Exchange Show dot com.
Speaker 2 (31:26):
Todd got a caller on the line for you. Let's
go to George in Wuburn. George, what's your question for
Tom Lutsky?
Speaker 7 (31:34):
Hi question on gifting. My wife and I have three
adult children, and I was wondering we can give nineteen
thousand dollars each thirty eight thousand dollars to each kid annually.
I believe if that's not taxed, is that a better strategy?
Then at some point, you know it would be in
(31:54):
their inheritance to do an annual thirty eight thousand gift
to well.
Speaker 3 (32:02):
It kind of a function.
Speaker 6 (32:04):
It's great question because gifting requires a little bit more
of an analysis. So let me just ask you a
question in terms of your overall estate, real estate money,
IRA's investments, life insurance death benefit. Give me a round number.
What do you think you're worth?
Speaker 7 (32:21):
Four millionaires?
Speaker 6 (32:22):
Okay, so if you're right at four million, and you're
a married couple with proper estate planning, we should be
able to completely eliminate your Massachusetts estate tax. Remember it's
a two million dollar exemption each. I can't say for
sure because I don't know exactly the type of assets,
like how much are iras and how much are not
(32:44):
iras and things like that, but we're pretty close to
being able to eliminate your your mass estate tax even
without making the gift. Okay, even without making the gift.
Now that's the state analysis. The federal analysis is the
exemption is thirteen point nine million each, So obviously you're
(33:08):
way below that number. So the first thing we would
say is there's no tax reason for me to make
a gift to save federal estate taxes because I'm way
under it. So that forty percent not an issue Massachusetts.
We turn our attention back to that and saying, well,
if we go over the four million, let's say we're
(33:29):
at four point five million, well the tax will occur
on the amount over the exemption, So yeah, we could
have some tax there. The next question would be what's
the rate. Well, yeah, it's about ten eleven percent on
the amount over the exemption. Okay, well, you know, if
(33:49):
it's five hundred thousand, it's you know, fifty grand I
mean yeah, I mean it's taxes.
Speaker 3 (33:53):
I don't want to pay it. I get it, But
is it worth it? Right? Is it worth it? Now?
Speaker 6 (34:00):
For the nineteen thousand dollars apiece? I assume you're giving away.
Would it be cash you're thinking about giving?
Speaker 5 (34:06):
Yeah?
Speaker 6 (34:07):
Okay, So then if it's cash you're thinking about giving,
you're giving it and it's not going to cause a
problem at all. Okay. Why it's not going to cause
a problem is because cash is cash, and there's no
built in gain in the cash, cause you have to
think about capital gains tax when you make gifts, and
gift tax okay, so, and state tax. So since you're
(34:30):
you know, at that realm, if you're giving away the
cash and it makes you feel good again, I get it,
giving away stuff while I'm alive, letting my kids enjoy it,
letting them see it, and I see them enjoying it
while I'm alive. There's a benefit to that. I like it,
And we can make that gift and for the nineteen
thousand per year per person that you mentioned. As long
as it's cash, there's no problem. There's no filing a
(34:54):
gift tax return, there's no reporting anything, and there's no
paying any tax. Write them a check and go about
your business and that can work. But again, if you're
doing it because it feels good, that's fine, but it
doesn't need to be done. So I'm just going to
expand the question a little bit for everyone else. You know, folks,
(35:14):
if if I was at five million dollars in an
estate and I wanted to bring my estate down to
four million so that I save the mass tax, it's okay.
You can do that by making a gift, but you
have to compare what it is you're giving. Like here,
George's doing a great deal. Giving us away cash is
no problem. But what if I had a million dollar
(35:36):
vacation home that I wanted to get out of my
estate that's worth five million, and I want to bring
it down to four million, so I give away this
one million dollar a piece of property, and well, Todd,
won't that work. I'll be now at four million and
I'll have no estate tax. Yeah, I think ultimately with
the new rules, it will work. Right, that will reduce
your estate. And let's say we save the estate. How
(36:00):
much would the estate tax be and MASS on a
five million dollar estate, let's call it about one hundred thousand.
Speaker 3 (36:07):
Right, But what if this vacation.
Speaker 6 (36:09):
Home that I'm giving away because that's ten percent of
the amount over has a built in gain. Maybe I
bought it for two fifty it's worth a million. I
got seven hundred and fifty thousand of built in gain.
Well if I give that away, yeah, I saved the
one hundred thousand in mass estate tax. Sounds great, But
my kids now have a piece of property with a
(36:30):
built in gain of seven point fifty. The tax on
that is somewhere around two fifty two hundred and fifty
thousand dollars of tax because it's built in gain on
the seven to fifty. Instead, I might tell that person
keep it. I'm happier dying owning it, giving mass one
(36:50):
hundred thousand dollars because then when my family inherits it,
they get a brand new basis equal to fair market value.
And I saved the two hundred and fifty thousand in
capital gains. So lots to think about when you give folks,
what you're giving and how to gift very important.
Speaker 3 (37:06):
Mister Wutski, thank you so much for joining us today.
Speaker 6 (37:09):
Always a pleasure. Thank you.
Speaker 1 (37:11):
This has been Asked Odd on the Financial Exchange Radio network.
Ask Todd with Todd Lutsky has been presented by Cushing
and Dolan, serving Massachusetts and New England for more than
thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(37:32):
Cushing and Dolan Armstrong Advisor. He does not provide any
legal or tax advice. Please consult with your legal or
tax advisor on such matters. Cushing and Armstrong do not
endorse each other and are not affiliated.
Speaker 2 (37:41):
Still more to come as we head towards the second
hour of the show, be talking a little bit about
holiday shopping, including Macy's latest earnings.
Speaker 3 (37:50):
Also going to be.
Speaker 2 (37:51):
Talking more about the current state of artificial intelligence, and
then big chatter, that big talk that we need to
have about how housing. Heading into twenty twenty six because
the trends are unmistakable in terms of what we are
seeing there, and we need to talk about, you know,
(38:12):
where things are probably going for housing next year. Quick
break all that and more coming up an hour two
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(01:06):
and Mark Fandetti.
Speaker 2 (01:11):
Chuck Mark Tucker with you here on a Wednesday, and
we're gonna kick things off with this piece from Barons.
Speaker 3 (01:24):
November.
Speaker 2 (01:24):
ADP jobs data could complicate the Fed's rate decision. First
of all, I really don't think the Fed is paying
a ton of attention to the ADP report. I just
don't think it's something that is really on their radar.
And the reason why is historically what has mattered to
the Fed is what is going on with the unemployment rate.
And given the fact that historically the ADP report has
(01:48):
not had a strong correlation with the unemployment report, the
FED has generally said, no, we're not gonna pay you know,
a ton of attention, like it's it's not something anyone
really pays attention to because it's just historically not been
something that's a great month to month's correlation with the
unemployment rate.
Speaker 4 (02:07):
You're looking like, yeah, I found that it does. Maybe
a sample I was looking at was wrong. It helps
you predict it a little bit.
Speaker 3 (02:14):
The what kind of correlation you know the AP If
you know ADP recently it's been good, Like history, it
has not.
Speaker 4 (02:21):
Whatever fred DA, Federal Reserve Economic ID I don't know why
I'm waving at the camera, but anyway, whatever, the Federal
Reserve Economic Database goes back to maybe it's only the
early twenty twenties, I forget. But if you know it,
it helps you do a better forecast of the.
Speaker 3 (02:35):
The last two years, it's been very lot.
Speaker 4 (02:37):
Yeah, and that can distort averages, which is what I'm
reporting to you.
Speaker 2 (02:40):
Never mind, So I think here's here's where I get
to when when looking at this the.
Speaker 3 (02:49):
FED.
Speaker 2 (02:50):
The reason why the Fed's not going to care about
the ADP report is because it's one report and they
generally haven't paid attention to it.
Speaker 3 (02:56):
Ever, I see your point. Okay, what does matter right now?
Speaker 2 (03:01):
Fed's Beage book, which came out last week, says that
employment is shrinking. ADP says employment is shrinking. The BLS
says the unemployment rate is going up, continuous jobless claims
rising five to seven percent year over year. You've got
warn notices that are rising. Challenger Grand Christmas is saying
(03:23):
that layoffs are going up. It's really hard right now
to find something out there that you look at and say, yep,
labor markets cranking. And so given that, yeah, absolutely, I
don't think the November ADP jobs data could complicate the
Fed's rate decision, especially since it came in this morning
(03:44):
bad thirty two thousand jobs lost compared to a range
of five to fifteen thousand gained expected. And I think
that when you look at this, ultimately the outlier that
we have right now is that the September jobs, the
headline jobs created number came and stronger than anticipated, even
as the unemployment rate rose. But basically aside from that,
(04:09):
the message that you're getting right now is, yes, companies
haven't been laying people off, you know, too quickly this year.
There are signs that may be starting to shift, and
the overall hiring picture has remained very, very slow. And
so as such, net job growth is probably somewhere around zero.
(04:29):
It might be plus or minus fifty thousand for a month,
but it's probably somewhere flat ish. And assuming that those
errors don't trend in any direction, flat is not really
a great place for a job market to be.
Speaker 3 (04:46):
If you will get.
Speaker 2 (04:47):
Other data that we track, another one that's out there
with holding four solid security taxes and FIKA. If you
look at the data, we've gone through a deceleration since
the middle of the year, where fighter Withholding was growing
at a rate of about seven percent in July, it's
now declined each of the last four months to be
(05:09):
at around a three point two percent annual growth rate.
You might say, hey, why is fighta withholding you know
growing at three percent despite a flat job market?
Speaker 3 (05:19):
Is in there a disconnect there? And the answer that
I'll say.
Speaker 2 (05:20):
Is no, because if you are working generally, even if
you stay at the same company, you might get a
raise of one to three percent, and if you're hopping
to a new firm, you might get a paid you know,
bump of four to six percent, and so three percent
year over year growth, and FIGHTA Withholding, which is actually
capturing like what's going into the US treasury from payrolls,
(05:43):
is pretty consistent with flat job growth. The place where
things get dangerous is if FIGHTA Withholding continues to decline here,
because now that's indicative of a labor market that is
in decline. But all these factors are pointing towards the
same thing, which is the labor market's been weakening for
the last three to four years now, since mid twenty two.
(06:04):
It's probably starting to reach a critical point where if
it doesn't improve in Q one of twenty six.
Speaker 3 (06:13):
You've got some real.
Speaker 2 (06:13):
Issues that show up in the economy, and as such,
I continue to be in the same place, which is
the FED, based on what they've already done, should be
cutting in December. But that cut is not likely to matter,
because if the economy worsens, you're gonna need another one
hundred and fifty two hundred basis points of cuts. Anyways,
(06:34):
a policy error is not made at one meeting. It's
made by making the wrong choice repeatedly, and so whether
the FED does or doesn't cut in December is immaterial.
Speaker 3 (06:44):
In my opinion, the.
Speaker 4 (06:46):
FED may not be able to do anything about a
softening labor market. It depends on why the labor market
is softening.
Speaker 1 (06:51):
Sure, the FED.
Speaker 4 (06:52):
You could think of the FED as controlling demand. That's
a real oversimplification, but we all know that they control
in a literal sense, the money supply. They can print money,
they tell the Treasury to print money, they credit it
to banks, and banks lend it. That is a very
short fairy tale of the mechanism. So they try to
stimulate the economy when they think it's getting solved, and
(07:15):
vice versa when they think it's running too hot. That
suggests there is some happy medium. We don't know what
that is. You could call it the nature. You ever
took an economics class, you recognize the neutral or natural
rate of unemployment. Milton Friedman, among others, came up with
the concept, really popularized. It exists. We just don't know
what it is. Maybe the right natural rate has gone
up where cutting immigration. Sure, labor market changed a lot
(07:37):
after COVID. Maybe the natural rate or the non inflationary
rate not technically the same things, but I'll use those
terms interchangeably. Maybe the non inflationary rate of unemployment and
that sound that means just what it says. You go
below it pushes inflation up, you stay added or above it.
Inflation is the static or falling. That non inflationary rate
may have gone up. We don't know. That's the FEDS challenge.
(08:01):
Inflation as we know is. I'll give the counter to
the argument you made. Inflation is still elevated. Maybe the
natural rate is. And growth by all accounts in the
data has been foggy lately or just missing. Growth is
still on track to hit a trend or potential which
is roughly two percent. Maybe FED funds is just right,
(08:23):
That's what worries me a bit.
Speaker 3 (08:25):
I think so couple pieces just on this.
Speaker 2 (08:28):
If you want to take the view that, hey, the
Fed doesn't need to do something, and you're looking for
data points in your favor, one that is showing up
the last couple of weeks, indeed's Jobs Posting Index is
showing a meaningful rise in job openings.
Speaker 1 (08:42):
Yeah.
Speaker 2 (08:43):
The counter to this is that it showed a similar
bump in late August that turned out to be like
a one month bump and then resumed a decline that
it's been on since the start of twenty twenty two.
So again, I don't think you can say there's a
clear change in trend yet because it's been three weeks
of inclin reached openings, and three weeks does not a
new trend make there. But if you're looking for positive
(09:04):
data in the labor market, this is, you know, one
of those few data points that you can point to
and say, yeah, things are things are better here on
the inflation side of things.
Speaker 4 (09:14):
Can I say one thing about labor though? Yah, I'm
not disputing that it's softening. I'm wondering whether the yeah,
I know you and I are we're not arguing we
just pretend to What I'm wondering is can the FED
doing We're pretending?
Speaker 3 (09:25):
You think we're pretending. I hate you.
Speaker 2 (09:27):
You think we're pretending. You're Tucker to turn your mic
off for the show, and now you're fired after that show.
First of all, Jack, now I'm I mean labor market
could be uh indisputably softening. I wonder if the FED
can do anything. It sounds foolish because we think of
the FED as a miracle worker. But never mind the
(09:48):
lags with which policy works. You hinted at this interest
rate cuts today may not affect the economy for a few,
even several quarters. What if we don't have a demand problem.
This was the problem throughout the nineteen seventies, So I'm
having the nightmares that we're reliving it.
Speaker 4 (10:01):
The FED kept thinking, right, The FED kept thinking, the
natural rate is lower than the actual rate. We can
do something about that. We could stimulate demand. What they
weren't taking into account was that they misread. They didn't
think of the They didn't think of things in the terms.
This is a little bit of an anachronism. They didn't
think of it in these terms. But the parallels are
(10:22):
pretty clear. They just misread the productive potential of the
economy over and over again throughout the nineteen seventies, and
they misread underlying inflationary pressure over and over again. So
we ended up with a decade of choppy growth, still
good on average, but choppy and uncomfortably high inflation that
it took a massive recession to ring out of the economy. Sorry,
go ahead, quick break.
Speaker 2 (10:42):
When we come back, I want to talk more about
that inflation piece after this.
Speaker 1 (10:46):
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(11:09):
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Radio Network.
Speaker 5 (11:16):
This segment of The Financial Exchange is brought to you
by the US Virgin Islands Department of Tourism. There's still
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Speaker 2 (11:56):
In the last segment, we were talking about the upcoming
FED meeting and this uh push pull between you know,
inflation and the unemployment rate, and you know the challenge
that the FED is facing. And I gotta tell you,
the more that I look at what is developing right now,
(12:17):
the less concerned I am about a continued inflationary impulse
in twenty six. It's not to say that it might
not rear its head at some point later, but I'm
just unconcerned about it for next year for a couple
of reasons.
Speaker 3 (12:33):
The first is mark we talk of.
Speaker 2 (12:37):
An awful lot about, you know, the conditions that are
necessary for inflation to take hold. And it's something again
like no one knows the exact formula because there is
no exact formula. It evolves and changes over time, but
it's some combination of Hey, high inflation is caused by
excess demand, reduced supply, and high inflation expectations. Is that
(12:58):
a fair place to start I can go with that.
So let's look at those three pieces the one that
I am.
Speaker 4 (13:04):
You said, did you say supply shocks in there? Because
in the short term, of course they I would put
the supply shock term on there.
Speaker 3 (13:09):
Yeah, I said, you know, high whatever, Yeah, so whatever.
Speaker 2 (13:16):
Here's the place that I'm looking here is ultimately when
we look at tariff induced inflation.
Speaker 4 (13:24):
Yeah, that'd be a supply shock.
Speaker 2 (13:25):
Yet it's very much something where the rate of change matters.
If you impose a fifteen percent tariff and all else
being equal, nothing else changes once you lap that year
of that tariff imposition, that tariff has been absorbed by
the inflation during that year, and anything from there is
(13:47):
neutral in theory because you're not changing the tariff.
Speaker 4 (13:52):
Yeah, the problem is that would affect expectations, probably correct,
But yeah, so one time change is different. Than a graduation.
Speaker 2 (13:59):
It doesn't necessary passed through. Like tariffs are something that
I really thought again, if you had imposed like the
full weight of them initially in April, they could have
had a huge impact on the economy. House say, yeah, probably,
And as we get to you know, next year, I
just don't think that that's going to be a major
factor because they're in place and it's going to be
what it's going to be, or if the Supreme Court
(14:20):
says no, you can't do this, it's going to be
even lower.
Speaker 3 (14:22):
Either way, I don't.
Speaker 2 (14:23):
See tariffs as being a major issue for inflation in
twenty six the way they have been a problem in
twenty five. If you will get you know, goods related
in place, which is clearly risen. So this brings us
over to the services side of things. And I got
to tell you, based on what we're seeing in the
housing market, shelter disinflation is picking up speed.
Speaker 3 (14:46):
Rapidly. Uh.
Speaker 2 (14:47):
You know, prices are falling in the housing market in
large portions of the country. Now they are not in
the Northeast because of you know, different conditions that exist
to begin with, but housing is like to have significant
disinflationary trends through twenty twenty six, and as part of
a result of home price is falling, I think you
(15:09):
are likely to see some struggles in the construction industry,
which in turn impacts the demand side as employment weakens further.
Speaker 3 (15:16):
And so I.
Speaker 2 (15:18):
Get to a place where goods inflation I don't think
is going to be impacted by tariffs in twenty six
the same way it was this year. Services inflation. The
dominant piece there is housing. I don't think you are
going to see any problems on that side based on
what we're seeing in the housing market, and I think
demand is likely to continue to weaken in the first
(15:39):
part of next year, and so I don't see twenty
six being a problem on the inflation side, which gets
me more towards Hey, if there is a real problem
on the labor side, which the data is starting to indicate.
To be honest, I'm getting to a point where I
might be okay with the FED starting to cut faster than.
Speaker 4 (15:59):
Yeah, you're kind of begging the question. You've assumed away
all the problems, But yeah, if it all works out.
Speaker 2 (16:04):
Like that, isn't that what the FED does with you know,
their modeling and everything, is they say, this is what
we think is going to happen, and here's the policy
that we prescribe. Like they don't just look at the
snapshot of where things are today, they look at where
they think things will be in the future, and they say,
this is what I think needs to be done. I'm
getting to the point where, again, my you know, brain
(16:25):
model is not as fancy as the FED models, but
I'm getting to a point where it's like, I see
the issue on the labor side being more acute in
twenty six than the inflation one next year.
Speaker 4 (16:37):
Yeah, if you're really worried about an economic slow down,
then I get and you assume no supply shocks, and
you assume that inflation expectations which are elevated Michigan's got
it at nearly five percent one year ahead, if you
assume that's going to again, I'm just assuming away all
the problems here. If you're willing to do that and
focus just on the labor market cut away.
Speaker 3 (17:00):
Yeah, that's where I get to. That's honest. Like I'm
common there at this point.
Speaker 4 (17:06):
But I'm a hawk. You're either a hawky or not.
And this is maybe it's a liberal conservative thing.
Speaker 3 (17:12):
I don't know.
Speaker 4 (17:13):
You know, I'm fiscally conservative. Maybe that translates into conservative.
I'd rather kill inflation. My favorite number would be close
to zero. But there are plenty of far more accomplished
researchers than I am who are very comfortable with three
to five. I could live with that, but in a
otherwise quiescent environment, And maybe we're not, and maybe things
are fluid. Maybe I should be thinking more dynamically, but
I'm I'm aggressive when it comes to inflation. I'd rather
(17:37):
squash it. But maybe I'm paranoid after the experience of
the nineteen seventies and the experience we just had three
years ago when we seriously underestimated the supply demand gap.
Speaker 2 (17:49):
Look, I totally get that, and who knows, Like if
either of us are right, Yeah, I say, this is
where I think things are going on the inflation side.
It can obviously like I don't have a crystal ball,
but this is what I'm seeing right now and kind
of where I land. And yes, like I would like
(18:12):
to see inflation lower than it is today. I think
we're going there quite honestly, because the housing market's going
to take us there. That's where I think that we're
going is housing is going to drag us there because
prices are falling and likely to fall throughout more of
the country next year than they have this year.
Speaker 4 (18:35):
Yeah, that's one part of the economy. It's a big part, obviously.
Speaker 2 (18:38):
It's it's historically it's been that marginal piece. It's housing
leads the economy. And maybe I'm too anchored to that
view still because look, for the last five years, housing
has not let the economy. Housing has been kind of
like dragged like along by everything else. But I guess
I'm kind of looking at it and I see where
home prices are going, and I kind of say, look,
(19:00):
I've seen that story before. And usually once you start
seeing year over year negative home prices nationally, which we'll
get to in Q one or Q two based on
listing prices and where things are going on that front,
we'll get there in Q one or Q two. That's
pretty tough for the economy. And that's where I think
(19:21):
we are going, is negative national home prices.
Speaker 3 (19:23):
That's fair.
Speaker 2 (19:24):
Let's take a quick break. When we return Wall Street
Watch and Todd Lensky joins us. Ask Todd, get your
questions ready.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter. At
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look and what's moving markets so far
today right here on the Financial Exchange Radio networ.
Speaker 5 (20:00):
Markets are mixed as Wall Street reacts to the ADP
Private employment report for November posted this morning, which fell
thirty two thousand, worse than expectations of an increase of
ten thousand. Right now, the Dow is up four tenths
of a percent, SMP five hundred is edging a tenth
of a percent higher, Nasdaq is dipping by merely eleven points,
(20:20):
Russell two thousand is up over eight tenths of a percent.
Ten You're treasurreeled down one basis point at four point
zero five excuse four point zero seven to five percent,
and crude oil up about one percent higher, trading just
above fifty nine dollars a barrel. Macy's posted its highest
quarterly sales in more than three years, as the department
(20:41):
store chains turnaround strategy showed signs of momentum. Furthermore, Macy's
raised its full year sales in earnings outlook for second
consecutive quarter. However, its outlook anticipates challenges in the holiday quarter,
including selective spending by consumers and higher tariffs. Macy stock
is edging higher mean, while shares an American Eagle surging
(21:02):
fourteen percent after the retailer beat third quarter earning z
and revenue forecast and also reads its same store sales
guidance as it is seeing a strong start to the
shopping season. Holiday shopping season, that is elsewhere. Delta expects
to take a two hundred million dollar profit hit in
the final quarter after the carrier was forced to slash
(21:22):
flights due to the recent record government shutdown. Delta stock
is rising two percent. Chip maker Marvel Technology agreed to
buy Celestial Ai and a three point two five billion
dollar deal. Marvel also posted robust quarterly results in forecasts,
setting shares jumping nearly seven percent higher. In cybersecurity company
CrowdStrike posted a bigger quarterly loss then a year ago
(21:46):
and narrowed its annual sales growth forecast. CrowdStrike shares are
down by about two percent. I'm Tucker Silva and that
is Wall Street Watch.
Speaker 1 (21:56):
This is asked Todd on the Financial Exchange Radio net.
If you have an existing estate plan or in the
market for one. Todd Lutsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate law.
(22:17):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (22:24):
As promised, we are now joined by the one and
only Todd Lutsky from the law firm of Cushing and Dolan.
Segment is called Ask Todd Bicutt because it is your
chance to ask Todd your estate planning questions. And we've
(22:45):
got phone lines open at eight eight eight to zero
five two two six three. Again that number is eight
eight eight two zero five two two sixty three. We
usually get through two to three questions, so make sure
you get calling early and often so you can speak to Todd.
Speaker 3 (23:02):
Todd. How you doing today? I am doing great and
you I'm doing pretty well. I just finished writing a
book on penguins.
Speaker 6 (23:08):
You like penguins.
Speaker 3 (23:09):
It would have been easier if I wrote it on paper.
Speaker 2 (23:11):
Yeah, that's true, but you know, we'll do what we
can Todd want to talk to you a little bit
about is state taxes when it comes to.
Speaker 3 (23:22):
Trusts, how can they help.
Speaker 2 (23:24):
Manage estate tax payments or how much is owed on
a state taxes both at the federal and state level.
Speaker 6 (23:32):
So the rule is that if you leave every and
this is really the trust by the way, from an
estate planning standpoint, in taxes, you know it's they only
work to double your exemption if you're married. Right, If
you're single, you we all have our own exemption and
the goal is to use our exemption either before we
(23:56):
die by gifting if that's appropriate for you, or when
you die through sheltering in trusts. If you are single,
you only have one exemption, so you can't double it
as a single person.
Speaker 3 (24:10):
Just to make that clear, So, as.
Speaker 6 (24:13):
A married couple, when one spouse dies, if you've got
the trust in place, right, let's start with. Not having
the trust in place might be easier. If you don't
have the trust in place, all the assets will simply
just pass to the survivor under something called the marital deduction.
It's an unlimited marital deduction. What that means is that
(24:36):
you can leave as much as you want between spouses,
and there's no tax federal or state death tax, which,
of course, if the government's giving us this thing, it
can't be good for us, right, It's generally good for them,
so we need to figure out how to use it.
It's good for them because now the survivor has all
(24:57):
the assets and has success xuly pushed the surviving spouse's
estate into as high a possible bracket as it could be,
hoping that when the survivor dies, that the value of
the survivor's estate exceeds the exemption. We would hope both
federally and state. Now, sometimes it might not exceed the
(25:18):
federal but it would exceed the state. Remember, the state
exemption is only two million, and the federal exemption is
going to be fifteen million. Come January one. It's thirteen
point nine to nine million today. When I tell you
what these exemptions are, they are the amount of assets
that you can leave to somebody other than a spouse
(25:39):
and not pay tax. Go over that and you pay tax. Okay,
that's a little bit about the exemptions. If you're married
and you have a trust, now you put assets in
the trust, even if it's a joint trust like we're
talking about last month. You put assets in the trust
on the first death, you allocate assets to a remainder
(26:03):
share and a marital share, and these buckets are designed
to hold the assets for the surviving spouse, but subjecting
them to tax on the first death in a manner
that will never result in tax, never result in an
amount more than either the federal or the state exemption. Therefore,
no tax is due on the first death, and then
(26:24):
on the second death. The assets are held in this
trust for the survivor's benefit, but they don't own them. Therefore,
when the survivor dies, they are not taxed in the
survivor's of state again federal or state based on the
remainder share or the marital share numbers. So that you've
claimed and sheltered those assets from future taxation. And that's
(26:46):
how you use the estate tax exemptions.
Speaker 2 (26:49):
Talk with Todd Lutsky from Cushingen Dolan. Still have room
on the phone lines at eight eight eight two zero
five two two six y three. That is the number
to call to ask Todd your state planning questions live
on air right now. Eight eight eight to zero five
two two sixty three is the number. We're gonna take
(27:10):
a quick break here, but when we return, we are
going to get right to your questions with Todd. That
number is eight eight eight to zero five two two
six three. Again it is eight eight eight two zero
five two two sixty three. Quick break, Then your questions
with Todd.
Speaker 1 (27:29):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (27:54):
Talk with Todd Lutsky from the law firm of Kushigan Nolan.
We got room on the phone lines at eight eight
eight two zero five two two sixty three for your
estate planning questions. It's your chance to ask them to
Todd again. That number is eight eight eight to zero
five two two sixty three.
Speaker 3 (28:12):
Todd.
Speaker 2 (28:12):
Let's say that you've had legal work done. How do
you know if the work that you've had done, the
trust that you've had produced, have the necessary components to
manage state and federal estate taxes.
Speaker 6 (28:25):
So you know, you always hope that your trusts are
drafted right. You know, I get it that certain lawyers
maybe shouldn't be doing a state tax planning and do
it anyway, and maybe they're not right. So I've heard
these stories, so you're right to ask the question. I
think the way to do it would be when you
when you look at your trust, there's going to be
(28:46):
a paragraph that says what happens during the donors life
or something to that effect. Let's say during the donors' life,
and then read it and it'll show you what you
can do. So let's assume the trust is revocable for
the moment. It'll show you what you can do and
what you can't do. Then look and this is whether
(29:07):
it's irrevocable or revocable, so either trust. Then look a
little further down, and it's usually in the first couple
of pages, so you're not digging deep into the document.
Speaker 1 (29:20):
You know.
Speaker 6 (29:20):
Look a little further down and you're gonna find a
paragraph that says, upon the death of the donor, or
if it's a joint trust, upon the death of the
you know, first donor to die, there will be a
marital share and a remainder share. Look right after that,
(29:42):
it'll say it breaks down into these buckets. If it
has these two buckets, or or a marital share, a
special marital share and a general marital share. If it
has these three buckets broken down, without trying to understand
the formula, which I don't want you to try to understand,
just know that likely with those buckets there, the correct
(30:04):
formula will be in there to take care of the
estate tax. That's the buckets you're looking for in order
to do this. But you know what, folks, that's a
great question, because the guide we're giving away this month
is balancing asset protection and avoiding estate taxes. It talks
about portability, the pros and cons of electing portability, which
(30:25):
is exactly the exemptions dealing with the unused exemption of
this first spouse to die, which is what we talked
about earlier when Chuck asked a question, and it also
explains exactly the way to calculate your estate tax. It
talks about a revocable trust and all three of these buckets,
how they're funded, how they're designed, and you could put
(30:47):
your own numbers in and see what tax liability you
would have. It also then breaks down into a smaller
section dealing with irrevocable trusts and how the marital shares
and remainder shares work in those trusts to shelter estate
taxes and at the same time protect it from the
nursing home. So I think you'll get your answers little
(31:07):
something for everyone in this guide. Folks call and get it.
It's brand new for the month eight six six eight
four eight five six nine nine or Legal Exchange show
dot com. You can download it right there again eight
six six eight four eight five six nine nine or
Legal Exchange Show dot com.
Speaker 2 (31:26):
Todd got a caller on the line for you. Let's
go to George in Wuburn. George, what's your question for
Tom Lutsky?
Speaker 7 (31:34):
Hi question on gifting. My wife and I have three
adult children, and I was wondering we can give nineteen
thousand dollars each thirty eight thousand dollars to each kid annually.
I believe if that's not taxed, is that a better strategy?
Then at some point, you know it would be in
(31:54):
their inheritance to do an annual thirty eight thousand gift
to well.
Speaker 3 (32:02):
It kind of a function.
Speaker 6 (32:04):
It's great question because gifting requires a little bit more
of an analysis. So let me just ask you a
question in terms of your overall estate, real estate money,
IRA's investments, life insurance death benefit. Give me a round number.
What do you think you're worth?
Speaker 7 (32:21):
Four millionaires?
Speaker 6 (32:22):
Okay, so if you're right at four million, and you're
a married couple with proper estate planning, we should be
able to completely eliminate your Massachusetts estate tax. Remember it's
a two million dollar exemption each. I can't say for
sure because I don't know exactly the type of assets,
like how much are iras and how much are not
(32:44):
iras and things like that, but we're pretty close to
being able to eliminate your your mass estate tax even
without making the gift. Okay, even without making the gift.
Now that's the state analysis. The federal analysis is the
exemption is thirteen point nine million each, So obviously you're
(33:08):
way below that number. So the first thing we would
say is there's no tax reason for me to make
a gift to save federal estate taxes because I'm way
under it. So that forty percent not an issue Massachusetts.
We turn our attention back to that and saying, well,
if we go over the four million, let's say we're
(33:29):
at four point five million, well the tax will occur
on the amount over the exemption, So yeah, we could
have some tax there. The next question would be what's
the rate. Well, yeah, it's about ten eleven percent on
the amount over the exemption. Okay, well, you know, if
(33:49):
it's five hundred thousand, it's you know, fifty grand I
mean yeah, I mean it's taxes.
Speaker 3 (33:53):
I don't want to pay it. I get it, But
is it worth it? Right? Is it worth it? Now?
Speaker 6 (34:00):
For the nineteen thousand dollars apiece? I assume you're giving away.
Would it be cash you're thinking about giving?
Speaker 5 (34:06):
Yeah?
Speaker 6 (34:07):
Okay, So then if it's cash you're thinking about giving,
you're giving it and it's not going to cause a
problem at all. Okay. Why it's not going to cause
a problem is because cash is cash, and there's no
built in gain in the cash, cause you have to
think about capital gains tax when you make gifts, and
gift tax okay, so, and state tax. So since you're
(34:30):
you know, at that realm, if you're giving away the
cash and it makes you feel good again, I get it,
giving away stuff while I'm alive, letting my kids enjoy it,
letting them see it, and I see them enjoying it
while I'm alive. There's a benefit to that. I like it,
And we can make that gift and for the nineteen
thousand per year per person that you mentioned. As long
as it's cash, there's no problem. There's no filing a
(34:54):
gift tax return, there's no reporting anything, and there's no
paying any tax. Write them a check and go about
your business and that can work. But again, if you're
doing it because it feels good, that's fine, but it
doesn't need to be done. So I'm just going to
expand the question a little bit for everyone else. You know, folks,
(35:14):
if if I was at five million dollars in an
estate and I wanted to bring my estate down to
four million so that I save the mass tax, it's okay.
You can do that by making a gift, but you
have to compare what it is you're giving. Like here,
George's doing a great deal. Giving us away cash is
no problem. But what if I had a million dollar
(35:36):
vacation home that I wanted to get out of my
estate that's worth five million, and I want to bring
it down to four million, so I give away this
one million dollar a piece of property, and well, Todd,
won't that work. I'll be now at four million and
I'll have no estate tax. Yeah, I think ultimately with
the new rules, it will work. Right, that will reduce
your estate. And let's say we save the estate. How
(36:00):
much would the estate tax be and MASS on a
five million dollar estate, let's call it about one hundred thousand.
Speaker 3 (36:07):
Right, But what if this vacation.
Speaker 6 (36:09):
Home that I'm giving away because that's ten percent of
the amount over has a built in gain. Maybe I
bought it for two fifty it's worth a million. I
got seven hundred and fifty thousand of built in gain.
Well if I give that away, yeah, I saved the
one hundred thousand in mass estate tax. Sounds great, But
my kids now have a piece of property with a
(36:30):
built in gain of seven point fifty. The tax on
that is somewhere around two fifty two hundred and fifty
thousand dollars of tax because it's built in gain on
the seven to fifty. Instead, I might tell that person
keep it. I'm happier dying owning it, giving mass one
(36:50):
hundred thousand dollars because then when my family inherits it,
they get a brand new basis equal to fair market value.
And I saved the two hundred and fifty thousand in
capital gains. So lots to think about when you give folks,
what you're giving and how to gift very important.
Speaker 3 (37:06):
Mister Wutski, thank you so much for joining us today.
Speaker 6 (37:09):
Always a pleasure. Thank you.
Speaker 1 (37:11):
This has been Asked Odd on the Financial Exchange Radio network.
Ask Todd with Todd Lutsky has been presented by Cushing
and Dolan, serving Massachusetts and New England for more than
thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
three four thousand and one or visit Cushingdolan dot com.
The views expressed in this segment are solely those of
(37:32):
Cushing and Dolan Armstrong Advisor. He does not provide any
legal or tax advice. Please consult with your legal or
tax advisor on such matters. Cushing and Armstrong do not
endorse each other and are not affiliated.
Speaker 2 (37:41):
Still more to come as we head towards the second
hour of the show, be talking a little bit about
holiday shopping, including Macy's latest earnings.
Speaker 3 (37:50):
Also going to be.
Speaker 2 (37:51):
Talking more about the current state of artificial intelligence, and
then big chatter, that big talk that we need to
have about how housing. Heading into twenty twenty six because
the trends are unmistakable in terms of what we are
seeing there, and we need to talk about, you know,
(38:12):
where things are probably going for housing next year. Quick
break all that and more coming up an hour two
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