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Tesla and SpaceX Merger Talks Heat Up After Strong Earnings · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Chuck Zada and Paul Lane.
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  Speaker 2: Chuck, Paul, Tucker with you here. And we kick things
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  Speaker 2: off with.
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  Speaker 4: I'm going to tell you a little bit of a
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  Speaker 4: victory lap on my part. Some people say they don't
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  Speaker 4: like to take victory laps. I say those people are lying.
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  Speaker 4: It's one thing to be humble about things, like we're
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  Speaker 4: not always right, but hey, when you are right, it's
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  Speaker 4: okay to be like, yeah, I was right. And likewise,
• 1:39
  Speaker 4: when you're wrong, you got to be like, hey, I
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  Speaker 4: was wrong. It's like you got to own both sides
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  Speaker 4: of the coin. And in this case, last week, when
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  Speaker 4: Tesla unveiled their Roadster by having it do a flip
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  Speaker 4: off a little half loop, I said, hey, it sure
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  Speaker 4: seems like they're trying to make this thing seem spacey
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  Speaker 4: because maybe they want to merge Tesla and SpaceX. Now,
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  Speaker 4: this was not exactly going out.
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  Speaker 1: On a limb.
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  Speaker 5: That had been mentioned before.
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  Speaker 4: This was not exactly going out on a limb, given
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  Speaker 4: that Elon Musk, owns a bunch of Tesla shares, owns
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  Speaker 4: a bunch of SpaceX shares, and has a history of
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  Speaker 4: merging his companies from time to time. But yesterday on
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  Speaker 4: the SpaceX conference call, where SpaceX had a really nice
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  Speaker 4: little quarter of earnings, a good quarter, they have finished
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  Speaker 4: the merger of not the merger, but the acquisition of Cursor,
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  Speaker 4: who is a, Cursor, if you're not familiar with them,
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  Speaker 4: they are an AI-powered coding tool. And so that revenue
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  Speaker 4: is obviously factoring into the growth and the profits that
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  Speaker 4: we've seen here. And so as part of the earnings call,
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  Speaker 4: Musk coming out and saying, yeah, there's groups at each
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  Speaker 4: side that are involved in potentially exploring a merger. He says, basically,
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  Speaker 4: I can't comment on any of it because I'm obviously
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  Speaker 4: an interested party, but there's groups on each side that
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  Speaker 4: are talking about doing something right now.
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  Speaker 5: He certainly flirted with the line of it. I believe
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  Speaker 5: during the call, it was recorded that he said it
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  Speaker 5: would be a good idea three times. And now what
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  Speaker 5: it comes down to, and clearly the way the stocks
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  Speaker 5: are trading today, it indicates that there's certainly momentum behind this.
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  Speaker 5: SpaceX is up about 12% in early trading, and Tesla's
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  Speaker 5: up about three and a third percent in the first
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  Speaker 5: half hour of trading here. So it certainly seems like, Chuck,
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  Speaker 5: this has significant potential to happen in terms of the
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  Speaker 5: mechanics of it. As you mentioned, Musk owns about 44%
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  Speaker 5: of SpaceX and he owns about 28% of Tesla. The
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  Speaker 5: Tesla shareholders would need to get over the 50% approval
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  Speaker 5: level in order to merge with SpaceX. This would create
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  Speaker 5: the largest merger of all time in terms of market cap.
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  Speaker 5: SpaceX had been sitting around, I believe, a little over $ 2. 25
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  Speaker 5: trillion for its market cap, and Tesla's a little bit
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  Speaker 5: over $ 1 trillion. So certainly a lot of excitement on
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  Speaker 5: this news today, $ 1. 5 trillion for the market cap of Tesla.
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  Speaker 5: And what was a very good quarter for SpaceX here
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  Speaker 5: in terms of the numbers that we saw, they came
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  Speaker 5: in with about $ 4. 4 billion of net income. That was
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  Speaker 5: significantly up from where they were a year ago in
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  Speaker 5: this same quarter where they had reported a loss. They
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  Speaker 5: are generating a significant amount of revenue from leasing out
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  Speaker 5: their cloud computing. This had been discussed.
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  Speaker 2: Yeah, they signed a few deals in the course of
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  Speaker 2: the spring and summer.
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  Speaker 5: Yeah, exactly. Anthropic, I believe, is paying them about a
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  Speaker 5: billion dollars a month if memory serves on... The leasing
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  Speaker 5: out of cloud computing, that whole unit in general generated
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  Speaker 5: about $ 7. 6 billion in revenue. That was a nine times
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  Speaker 5: increase from where that was last year. And even just
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  Speaker 5: their AI operations themselves, forget the leasing agreements with Anthropic
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  Speaker 5: and some of the other big players. reported a $ 430
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  Speaker 5: million income. So not a significant number, but that was
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  Speaker 5: a $ 1. 7 billion loss last year. So a lot of
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  Speaker 5: good numbers here across the board. Revenue for the company
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  Speaker 5: in general up to about $ 14. 5 billion double where it
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  Speaker 5: was last year. So it seems as if they are
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  Speaker 5: pretty well firing on all cylinders. This was a really
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  Speaker 5: good quarter. I didn't really find anything to poke holes in.
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  Speaker 1: In it.
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  Speaker 5: I'm not sure if anything stood out to you that
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  Speaker 5: viewed as negative. They're still spending a lot of money,
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  Speaker 5: but they're at least getting the growth with it.
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  Speaker 4: Yeah, I think along with the positives that you mentioned here,
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  Speaker 4: when we go and talk about, okay, some of the
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  Speaker 4: stuff that quite honestly, didn't make sense on the conference call.
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  Speaker 4: Musk said, hey, look, we think that SpaceX is going
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  Speaker 4: to be able to have revenue by the end of
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  Speaker 4: next year of $ 500 billion to a trillion dollars. And
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  Speaker 4: I just want to put this in context, because when
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  Speaker 4: we look at the largest publicly traded companies out there,
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  Speaker 4: there are, well, the Again, you look at the numbers,
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  Speaker 4: and there are none that have a trillion dollars in revenue.
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  Speaker 4: As an example, Amazon does the most revenue out of
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  Speaker 4: any publicly traded company in the world.
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  Speaker 2: They do about $ 775 billion in revenue.
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  Speaker 5: That's going to get $ 600, yeah.
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  Speaker 4: Walmart does about $ 735 billion.
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  Speaker 2: You go down the list.
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  Speaker 4: Apple does around $ 466 billion. So there's only two companies
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  Speaker 4: in the world, publicly traded ones. that do more than
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  Speaker 4: $ 500 billion in revenue. And the idea that SpaceX is
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  Speaker 4: going to do $ 500 billion to a trillion in revenue
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  Speaker 4: next year fundamentally doesn't make sense because I just don't
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  Speaker 4: know where that spending would come from. There's not just
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  Speaker 4: like an extra trillion dollars in new spending lying around
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  Speaker 4: that companies are like, yeah, we're going to just spend
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  Speaker 4: this money. Remember, if you look at, like, the projections
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  Speaker 4: where we stand right now, the annual run rate for
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  Speaker 4: AI-related spend between the two big guys out there, Anthropic
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  Speaker 4: and OpenAI, is estimated to be somewhere around $ 100 to
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  Speaker 4: $ 120 billion. You're talking about 10x-ing that by the end
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  Speaker 4: of next year to get to those guys being at,
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  Speaker 4: you And based on what we've seen from the growth
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  Speaker 4: rates of those spending levels in the past several months,
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  Speaker 4: they're slowing down.
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  Speaker 2: They're not accelerating.
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  Speaker 4: So I don't think we're going to get there. So
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  Speaker 4: I think that we can look at this and say, hey,
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  Speaker 4: it's pretty clear that SpaceX is seeing some really impressive
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  Speaker 4: growth as far as, again, being able to lease out
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  Speaker 4: these data centers and things like that. But it's also
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  Speaker 4: fundamentally unclear to me that there is any realistic path
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  Speaker 4: to SpaceX having anywhere near a trillion dollars in revenue
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  Speaker 4: by the end of next year, given that there isn't
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  Speaker 4: a single company in the world that has a trillion
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  Speaker 4: dollars in annual revenue right now.
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  Speaker 5: That logic is sound. I cannot beat that up.
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  Speaker 2: That's my point.
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  Speaker 4: You know, it's, I'm just going to, I mean, again, like,
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  Speaker 4: Google is an example, has like $ 450 billion in revenue.
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  Speaker 4: Do we really think, like, let's even say that there's
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  Speaker 4: going to be a trillion in AI spending next year,
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  Speaker 4: which I don't think there will be.
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  Speaker 2: Which is estimated by all that. Not in CapEx.
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  Speaker 5: Okay.
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  Speaker 4: Let's say there's going to be a trillion in, like,
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  Speaker 4: actual spending by companies on AI.
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  Speaker 2: Because the CapEx is separate from that.
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  Speaker 1: Right, right.
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  Speaker 3: Okay.
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  Speaker 4: The CapEx is like, we're going to build this. I'm saying, hey,
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  Speaker 4: companies paying for AI models are going to spend a bit.
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  Speaker 4: Because that's what you need in order to get SpaceX
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  Speaker 4: to a trillion dollars in revenue next year. Do we
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  Speaker 4: really think SpaceX is going to capture all of that?
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  Speaker 1: No.
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  Speaker 2: No, we don't. So if you want to say, what's
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  Speaker 2: SpaceX doing revenue for this quarter?
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  Speaker 1: $ 14.
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  Speaker 5: 5 billion. Okay.
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  Speaker 4: So let's say they do $ 14. 5, so that's an annualized
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  Speaker 4: rate of about $ 60 billion. I'm willing to even go
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  Speaker 4: out and say, okay, in a crazy high-end fashion.
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  Speaker 2: $ 120 billion.
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  Speaker 5: 120, 150, you know, like somewhere in that range. Look
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  Speaker 5: at like the Nvidia stuff when that really exploded.
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  Speaker 3: Sure.
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  Speaker 2: Doublings.
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  Speaker 4: I'm willing to say like, yes, like if they hit everything,
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  Speaker 4: like could they do that?
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  Speaker 5: Yes.
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  Speaker 4: Do I think that that's, you know, likely and going
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  Speaker 4: to happen? I have no idea. I'm not pretending. to
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  Speaker 4: you know be able to say like oh yeah it's
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  Speaker 4: gonna but could I see it as a possibility sure
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  Speaker 4: could I see a trillion dollars as a possibility no
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  Speaker 4: because that just doesn't make sense So, good quarter from SpaceX.
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  Speaker 4: Nice little runway that they have to grow from here.
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  Speaker 4: And I think, again, exactly what you want to see
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  Speaker 4: from a relatively new publicly traded company making their second
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  Speaker 4: public earnings report.
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  Speaker 5: Yeah, certainly the big takeaway from this will be all
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  Speaker 5: the conjecture on the Tesla and SpaceX merger, which... is
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  Speaker 5: going to just only heat up, it sounds like, after
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  Speaker 5: this earning call. And it seems like that it is
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  Speaker 5: more likely than it was a week or so ago
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  Speaker 5: that these two become a united company at some point.
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  Speaker 4: Let's take a quick break. When we come back, we're
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  Speaker 4: talking Netflix and oil. Not together, but we're talking about
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  Speaker 4: both of those next.
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  Speaker 4: Before we get to talking about Netflix, we've got to
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  Speaker 4: talk a little bit about this Wall Street Journal exclusive
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  Speaker 4: that came out yesterday.
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  Speaker 3: It's like 20 minutes ago.
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  Speaker 2: Half hour ago.
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  Speaker 4: If you're not familiar with PHP, it is a scripting
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  Speaker 4: language that the best way I can describe it, it's
• 11:59
  Speaker 4: kind of the back end under the hood for a
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  Speaker 4: vast swath of the internet. You don't need to know
• 12:07
  Speaker 4: any more than that because, quite honestly, my knowledge is
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  Speaker 4: relatively limited. I remember playing around with it during late 90s,
• 12:14
  Speaker 4: early 2000s, building websites and stuff like that, but my
• 12:17
  Speaker 4: knowledge is minor. But just know that PHP is a
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  Speaker 4: scripting language that is the back end that makes the
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  Speaker 4: Internet function in a lot of cases the way that
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  Speaker 4: it does today. And so basically what we have here
• 12:30
  Speaker 4: is that the creators of PHP disclose that there is
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  Speaker 4: a critical security issue that hackers could use to take
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  Speaker 4: control of any system that runs its software. And so
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  Speaker 4: this is problematic.
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  Speaker 2: They subsequently....
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  Speaker 4: This was recently, within the last 15-20 minutes, they have
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  Speaker 4: now released a patch for two critical vulnerabilities that all
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  Speaker 4: PHP installations that are connected to the web, which is
• 13:00
  Speaker 4: basically all of them, because I don't know what else
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  Speaker 4: you would use it for, but basically saying, hey, you
• 13:05
  Speaker 4: need to update to these patches, so anyone who's involved
• 13:09
  Speaker 4: in managing websites or domains at any scale today, they're
• 13:12
  Speaker 4: going to be pretty busy making sure that this is
• 13:14
  Speaker 4: happening in order to prevent all kinds of problems from
• 13:20
  Speaker 4: popping up. PHP occasionally does run into these issues. This
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  Speaker 4: is the biggest one that we've seen in probably a
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  Speaker 4: decade or so, and so you've got this race now
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  Speaker 4: to release, or rather to update, all of the instances
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  Speaker 4: that are running PHP as quickly as possible, because you
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  Speaker 4: better believe that today, You have all kinds of automated
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  Speaker 4: bots that are going to get spooled up to try
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  Speaker 4: to attack as many of these as quickly as possible.
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  Speaker 4: And so it is very much a different world than
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  Speaker 4: the last time we saw an issue of this scale
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  Speaker 4: with PHP.
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  Speaker 5: Yeah, it's interesting. Just an excerpt here from the piece
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  Speaker 5: from the Wall Street Journal. This class of bugs had
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  Speaker 5: been hiding in the source code for years. A security
• 14:06
  Speaker 5: researcher had flagged its problem decades earlier as a problem area,
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  Speaker 5: but the flaw had been considered too difficult to exploit
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  Speaker 5: and was largely forgotten. Now, with the help of chat
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  Speaker 5: GPT or GPT 5.6 Sol, this was uncovered in a
• 14:24
  Speaker 5: far more efficient manner and it's it is scary when
• 14:28
  Speaker 5: you read this stuff you're talking about 70 of the
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  Speaker 5: world's websites at risk here it's.
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  Speaker 4: A problem uh let's talk a little bit about uh
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  Speaker 4: netflix then now that we've covered our uh doomsday uh
• 14:40
  Speaker 4: should we have a bug of the day tucker it
• 14:42
  Speaker 4: feels like we you know maybe not of the day
• 14:45
  Speaker 4: but there's at least a bug of the week we
• 14:46
  Speaker 4: used to do our data breach of the week This
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  Speaker 4: feels like it's trending in that direction.
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  Speaker 3: It seems like it's every other day we're getting one
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  Speaker 3: of these reports. But this one seems like a doozy,
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  Speaker 3: so something to keep an eye on here.
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  Speaker 4: Can you get some kind of, like, bug of the
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  Speaker 4: week liner that we could drop in?
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  Speaker 2: You know, like, it's creepy, crawly, it's the bug of
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  Speaker 2: the week. Like, something like that. I don't know.
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  Speaker 4: But in any case, Netflix reported earnings yesterday, and they're
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  Speaker 4: just kind of lackluster. At this point, it's they're pushing
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  Speaker 4: as much as they can on the price lever to
• 15:19
  Speaker 4: try to drive revenue. But there's just not that many
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  Speaker 4: people left in the world that don't have Netflix that
• 15:25
  Speaker 4: want it on a regular basis. The content, if I'm
• 15:29
  Speaker 4: being honest, is someone who has a Netflix subscription. Basically,
• 15:34
  Speaker 4: all of the Netflix-produced content outside of some of their
• 15:40
  Speaker 4: dumb dating reality stuff, I think, largely is the same
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  Speaker 4: and just sucks today. It's just mind-numbing content that doesn't
• 15:49
  Speaker 4: have anything unique to it. There's no point of view.
• 15:53
  Speaker 4: There's no interesting discussions to be had about most of it.
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  Speaker 4: And I think they're feeling this, and they've pretty much
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  Speaker 4: admitted as much because... They're getting rid of their content head.
• 16:03
  Speaker 4: They got rid of another division chief yesterday as well.
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  Speaker 5: The film content head, too, for movies.
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  Speaker 4: So you're kind of sitting there and you're like, okay,
• 16:11
  Speaker 4: they know they've got a problem with their content. But remember,
• 16:16
  Speaker 4: it's a big ship to steer when you're talking about
• 16:18
  Speaker 4: content production. The stuff that you start putting into production
• 16:21
  Speaker 4: today has already been in development for a couple of years.
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  Speaker 1: Right.
• 16:26
  Speaker 4: They might not see results on this until like 2028,
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  Speaker 4: 2029 in terms of can they actually produce the stuff
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  Speaker 4: that's needed to turn the ship here?
• 16:35
  Speaker 5: I think it does come down to as simple as
• 16:37
  Speaker 5: they just, they need another hit. You know, long gone
• 16:39
  Speaker 5: are the days of Stranger Things and Squid Games. Those
• 16:42
  Speaker 5: were the franchises that had really been the last hits
• 16:46
  Speaker 5: that Netflix had come out with on the show side
• 16:49
  Speaker 5: of things. From the movie side, they had some momentum
• 16:51
  Speaker 5: last summer and with K-pop Demon Hunters and Happy Gilmore
• 16:55
  Speaker 5: 2 in terms of a lot of people tuning in
• 16:57
  Speaker 5: to watch those things. It's an interesting place that they
• 16:59
  Speaker 5: find themselves in now with the Warner Brothers acquisition failing
• 17:02
  Speaker 5: earlier this year. That had sent the stock down, and
• 17:05
  Speaker 5: they really haven't recovered momentum since. They don't disclose subscriber
• 17:09
  Speaker 5: count since early 2025. They have the benefit, unlike other
• 17:13
  Speaker 5: streaming services, where the churn that they see is very low.
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  Speaker 5: It's only around 2%, according to Antenna. That's far below
• 17:20
  Speaker 5: less than some of its peers, but none of its
• 17:23
  Speaker 5: peers are at the same size and scale of Netflix.
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  Speaker 5: It just seems like to get the momentum going on
• 17:30
  Speaker 5: this company, it comes down to something as simple as
• 17:32
  Speaker 5: just having the next show that everyone's talking about and
• 17:37
  Speaker 5: is interested in. And it just seems like it's been
• 17:39
  Speaker 5: a while since that has been the case. They've now
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  Speaker 5: really acknowledged it to your point with cutting 6% of
• 17:44
  Speaker 5: their workforce and replacing all the heads on the content
• 17:48
  Speaker 5: side of things here.
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  Speaker 2: Let me ask you a couple of different questions.
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  Speaker 4: Is there a show today that really is just, like,
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  Speaker 4: you know, like, the show that captures, like, public imagination?
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  Speaker 4: I mean, you go back through, like, the 2010s and
• 18:04
  Speaker 4: you had, you know, Game of Thrones. You had The
• 18:07
  Speaker 4: Sopranos back in the day.
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  Speaker 2: Like, Breaking Bad. Breaking Bad, yeah.
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  Speaker 4: Is there one out there on any platform that gets
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  Speaker 4: to that level of widespread focus?
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  Speaker 1: No.
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  Speaker 5: I just feel like everything is so fragmented now that
• 18:21
  Speaker 5: everybody is sliced up and dealt what is best for
• 18:24
  Speaker 5: Chuck or Tucker or Paul. There is not that community
• 18:28
  Speaker 5: experience of all of us watching the same show and
• 18:31
  Speaker 5: coming to work on Monday and talking about the finale of,
• 18:34
  Speaker 5: Game of Thrones or Breaking Bad or whatever it may be.
• 18:37
  Speaker 5: Part of that is because there's just so many of
• 18:39
  Speaker 5: these frigging streaming services. It's too many platforms. It's impossible
• 18:42
  Speaker 5: to keep track of. Chuck, you could tell me about
• 18:44
  Speaker 5: a great show. I would say, wait, what is that on?
• 18:46
  Speaker 5: Apple TV? Oh, I don't have that one. And it
• 18:49
  Speaker 5: just sort of stalls the whole process versus the simplistic
• 18:53
  Speaker 5: way before Breaking Bad was AMC, Sopranos, HBO. There was
• 18:57
  Speaker 5: far fewer options, so you would gravitate to it more quickly.
• 19:00
  Speaker 2: So let me ask you this now.
• 19:02
  Speaker 4: Out of all of the different producers, who's got the
• 19:04
  Speaker 4: best slate in the aggregate?
• 19:06
  Speaker 5: It seems like Apple TV has the most now.
• 19:08
  Speaker 2: I'm going there as well. Tucker, what do you think? Yeah,
• 19:10
  Speaker 2: I would agree with that.
• 19:11
  Speaker 3: I mean, they just cleaned up with Widow's Bay.
• 19:13
  Speaker 2: Did they? Oh, at the Emmys?
• 19:15
  Speaker 1: Yeah.
• 19:15
  Speaker 3: Matthew Rhys won two Emmys for two different shows.
• 19:18
  Speaker 2: It's because Matthew Rhys is the dude. Like, he's a dude, man.
• 19:21
  Speaker 2: He's a dude.
• 19:24
  Speaker 3: He is a dude.
• 19:24
  Speaker 2: Let's take a quick break.
• 19:27
  Speaker 5: True.
• 19:27
  Speaker 2: When we return, Todd Lutzky, the other dude.
• 19:30
  Speaker 1: He's a dude.
• 19:31
  Speaker 2: He's coming by right after this.
• 19:40
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:43
  Speaker 1: TFE Show. Breaking business news is always first, right here
• 19:47
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:52
  Speaker 1: Street Watch. Tracking the stocks, the data, and the headlines
• 19:56
  Speaker 1: driving markets so far today, right here on the Financial
• 19:59
  Speaker 1: Exchange Radio Network.
• 20:00
  Speaker 3: Markets are mixed with more third quarter earnings as SpaceX
• 20:04
  Speaker 3: and Tesla making headlines surrounding a potential mega merger. Right now,
• 20:09
  Speaker 3: the Dow is down only nine points. S & P
• 20:12
  Speaker 3: 500 is up over a tenth of a percent or
• 20:14
  Speaker 3: 12 points higher. NASDAQ up six-tenths of a percent or
• 20:17
  Speaker 3: 156 points up. Russell 2000 is up a third of
• 20:21
  Speaker 3: a percent. Ten-year Treasury real down one basis point at 5.102%.
• 20:24
  Speaker 3: Crude oil flat at $ 97. Brent also flat at $ 108
• 20:26
  Speaker 3: a barrel. SpaceX rallying 10% after the rocket and AI
• 20:28
  Speaker 3: company posted A 161% jump in third quarter revenue. Elon
• 20:40
  Speaker 3: Musk also.
• 20:40
  Speaker 2: Said that.
• 20:42
  Speaker 3: SpaceX and Tesla have formed special committees to discuss a
• 20:47
  Speaker 3: potential merger. Tesla up 3% and will report earnings after
• 20:52
  Speaker 3: today's close. Meta up 1% ahead of its earnings after
• 20:55
  Speaker 3: today's closing bell. Meanwhile, Netflix shares are sinking over 4%
• 21:00
  Speaker 3: after the streaming giant reported its lowest revenue growth in
• 21:03
  Speaker 3: years and acknowledged it could do better.
• 21:05
  Speaker 2: With U.S.
• 21:06
  Speaker 3: Programming, Supermicrocomputer jumping 10% after the data center server company
• 21:11
  Speaker 3: raised its fiscal first quarter revenue outlook. And Abbott Laboratories
• 21:16
  Speaker 3: plans to spin off its nutrition unit into a separate
• 21:19
  Speaker 3: publicly traded company. Abbott Lab stock is down by 2%.
• 21:25
  Speaker 3: I'm Tucker Silva and that is Wall Street Watch.
• 21:28
  Speaker 1: This is Ask Todd on the Financial Exchange Radio Network.
• 21:32
  Speaker 1: If you have an existing estate plan or are in
• 21:34
  Speaker 1: the market for one, Todd Lutzke is here to answer
• 21:37
  Speaker 1: your questions and help you plan for later life. Ask
• 21:40
  Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
• 21:43
  Speaker 1: New England for more than 35 years, helping families with
• 21:46
  Speaker 1: estate and tax planning, Medicaid planning, and probate law. Visit CushingDolan.com. Now,
• 21:52
  Speaker 1: here's Todd Lutzke.
• 21:55
  Speaker 4: We've got Todd Lutzky here live in studio on the
• 21:59
  Speaker 4: Financial Exchange because he wants to answer your estate planning questions.
• 22:04
  Speaker 4: That's what he's here for. That's why we call the
• 22:05
  Speaker 4: segment Ask Todd. Phone lines, they are wide open at 888-205-2263.
• 22:10
  Speaker 2: Again, that's 888-205-2263.
• 22:11
  Speaker 4: We can usually get through two or three of your calls,
• 22:14
  Speaker 4: so Get calling so that you can get in line
• 22:23
  Speaker 4: and we can get to you because otherwise we won't. Again,
• 22:28
  Speaker 4: 888-205-2263 is the number.
• 22:31
  Speaker 1: Mr.
• 22:31
  Speaker 2: Lutzky, how are you today? I'm doing great. How are
• 22:34
  Speaker 2: you doing? Okay. Had a daughter's goldfish died over the weekend.
• 22:40
  Speaker 2: Your daughter has goldfish?
• 22:41
  Speaker 1: Uh-huh.
• 22:42
  Speaker 2: Offered to get her another one just like it.
• 22:45
  Speaker 1: Yeah.
• 22:45
  Speaker 2: She said, why would I want two dead goldfish? That's true.
• 22:48
  Speaker 2: I couldn't disagree there. Todd, I want to talk to
• 22:51
  Speaker 2: you a little bit about annual gifting.
• 22:54
  Speaker 4: What is the annual gifting limit for 2026 before you
• 22:59
  Speaker 4: run into the gift tax exclusion?
• 23:04
  Speaker 6: So and I think it's a great question because so
• 23:08
  Speaker 6: many people ask me all the time. I'll tell them
• 23:10
  Speaker 6: how much they can give away and they'll say, oh.
• 23:13
  Speaker 6: I heard that you can only give away $ 19, 000 because
• 23:16
  Speaker 6: I'll give them a much bigger number. I'll give them
• 23:18
  Speaker 6: the $ 15 million number and they're like, whoa, wait a minute.
• 23:21
  Speaker 6: I heard I can only give away $ 19, 000. So let
• 23:25
  Speaker 6: me explain the difference. And of course, a lot of
• 23:27
  Speaker 6: you that have been listening over the years, you probably
• 23:29
  Speaker 6: know that way back when, when we started this, this
• 23:32
  Speaker 6: exemption that you speak of, this present interest exclusion amount
• 23:38
  Speaker 6: was $.
• 23:38
  Speaker 5: 10, 000.
• 23:39
  Speaker 2: It was $ 10, 000.
• 23:40
  Speaker 1: Yep.
• 23:40
  Speaker 2: But it's been indexed for inflation. So- over the years,
• 23:43
  Speaker 2: it's now creeped up to 19.
• 23:46
  Speaker 6: So when you're thinking of the 10, it's the same 10,
• 23:48
  Speaker 6: except now it's 19.
• 23:50
  Speaker 2: What is this?
• 23:51
  Speaker 5: It is the.
• 23:52
  Speaker 6: Ability to gift per person per year, $ 19, 000. And when
• 23:59
  Speaker 6: I say that to anybody, it doesn't have to be
• 24:01
  Speaker 6: a family member. So, you know, if you want to
• 24:03
  Speaker 6: give me some money, that's okay. At 19,000 per year,
• 24:08
  Speaker 6: per person, and you do not have to report it anywhere.
• 24:14
  Speaker 6: Tell the government nothing, file no income, gift tax return, nothing.
• 24:19
  Speaker 6: So it's a freebie versus, and by the way, if
• 24:24
  Speaker 6: you're married and you want to make gifts, you can
• 24:26
  Speaker 6: move a lot of money, right? So if you've got
• 24:27
  Speaker 6: a bunch of kids and grandkids, you can set up
• 24:29
  Speaker 6: a trust and you can start moving between husband and wife.
• 24:32
  Speaker 6: You can move $ 38, 000 per year. And if you've got,
• 24:37
  Speaker 6: you know, three kids and six grandkids in a trust,
• 24:40
  Speaker 6: you can count each head. So now it's $ 38, 000 times
• 24:44
  Speaker 6: nine if you really wanted to. Do you know what
• 24:46
  Speaker 6: that adds up to?
• 24:49
  Speaker 1: No.
• 24:49
  Speaker 2: $ 342, 000. That's why I just gave you the number. You're welcome.
• 24:53
  Speaker 2: So it's a lot of money, though. That's what you said, Chuck.
• 24:56
  Speaker 2: That's a lot. $ 342, 000. That's a big, big chunk of change.
• 24:59
  Speaker 6: I'm not suggesting that people can do that.
• 25:01
  Speaker 3: Sure.
• 25:02
  Speaker 6: But, you know, it just helps you understand the power
• 25:05
  Speaker 6: of gifting without reporting a single thing.
• 25:09
  Speaker 5: Right?
• 25:10
  Speaker 2: You can do that.
• 25:11
  Speaker 3: Now.
• 25:13
  Speaker 6: I can conversely tell you that you also have the
• 25:17
  Speaker 6: ability to give away once in your lifetime $ 15 million.
• 25:25
  Speaker 6: So I have $ 15 million, you have $ 15 million, my
• 25:28
  Speaker 6: wife has $ 15 million.
• 25:29
  Speaker 2: That's also equal, oddly enough, to our estate.
• 25:34
  Speaker 6: Tax exemption, which of course we have to have because
• 25:36
  Speaker 6: if you didn't have the gift tax rules, you'd have
• 25:39
  Speaker 6: no estate tax teeth, right?
• 25:40
  Speaker 2: Because right before you died, everybody would just give away
• 25:43
  Speaker 2: All their assets.
• 25:43
  Speaker 1: Sure.
• 25:44
  Speaker 6: And there'd be no gift tax or no estate tax.
• 25:47
  Speaker 6: So you have to have the gift tax rules. So
• 25:50
  Speaker 6: you can use your exemption, $ 15 million, either when you die,
• 25:54
  Speaker 6: which most people do, but higher net worth people might
• 25:57
  Speaker 6: want to use it while they're alive by making a gift.
• 26:00
  Speaker 6: So I'm allowed to give away, let's say, $ 10 million
• 26:03
  Speaker 6: to a trust, perhaps for my benefit if I choose
• 26:05
  Speaker 6: to do it that way.
• 26:07
  Speaker 2: And that gift, I would have to file immediately.
• 26:10
  Speaker 6: A 709 gift tax return, report that to the government.
• 26:14
  Speaker 6: And then I would not pay any gift tax, but
• 26:17
  Speaker 6: I would eat into my $ 15 million exemption by 10 million,
• 26:21
  Speaker 6: leaving me with only 5 million over my lifetime to exempt.
• 26:24
  Speaker 6: But at least I moved assets out of my estate
• 26:28
  Speaker 6: and all the future growth folks. It's not just what
• 26:31
  Speaker 6: you move today. It's the future growth that really matters.
• 26:35
  Speaker 4: Todd, when's the last time you actually saw someone have
• 26:37
  Speaker 4: to pay a gift tax?
• 26:39
  Speaker 2: Have you ever? I have.
• 26:41
  Speaker 6: I mean, there's sometimes we tell people to make net
• 26:44
  Speaker 6: taxable gifts. There's a benefit to a net taxable gift
• 26:48
  Speaker 6: because you can actually leverage how much you're giving away.
• 26:51
  Speaker 6: So there can be times, I'll be getting into the
• 26:53
  Speaker 6: weeds with this one, but there can be times that
• 26:57
  Speaker 6: it makes sense to do.
• 26:57
  Speaker 2: A net taxable gift. But mostly you're right, Chuck. Few
• 27:00
  Speaker 2: and far between when that's the case. Yeah, you don't
• 27:01
  Speaker 2: need to pay a gift tax.
• 27:03
  Speaker 4: Talking with Todd Lutzky from Cushing and Dolan, and we
• 27:07
  Speaker 4: still have room on the phone lines for your estate
• 27:10
  Speaker 4: planning questions. That number is 888-205-2263. Again, this is your
• 27:18
  Speaker 4: chance to ask Todd your estate planning questions live on
• 27:21
  Speaker 4: air right now. 888-205-2263 is the number. We're going to
• 27:29
  Speaker 4: take a quick break, but when we return... We're going
• 27:32
  Speaker 4: to get right to your questions with Todd. That phone
• 27:34
  Speaker 4: number is 888-205-2263. Again, it is 888-205-2263. Ask Todd with
• 27:37
  Speaker 4: Todd Lutzke. Every Wednesday at 1030. Only here on the
• 27:40
  Speaker 4: Financial Exchange Radio Network.
• 27:43
  Speaker 1: You're listening to Ask Todd with Todd Lutzke on the
• 27:47
  Speaker 1: Financial Exchange Radio Network.
• 28:11
  Speaker 4: Still room on the phone lines for your estate planning
• 28:14
  Speaker 4: questions at 888-205-2263. Again, that number is 888-205-2263. And this
• 28:18
  Speaker 4: is your chance to ask Todd Lutzky your.
• 28:21
  Speaker 2: Estate planning questions.
• 28:22
  Speaker 5: Again, 888-205-2263.
• 28:23
  Speaker 2: Todd, let me ask you this one. If someone decides
• 28:24
  Speaker 2: that they want to.
• 28:40
  Speaker 4: Conduct some gifting to, again, children, like heirs, whoever it
• 28:45
  Speaker 4: may be. Out of cash, appreciated stock, real estate, or
• 28:54
  Speaker 4: business interests, can you rank those from... Best to worst
• 29:00
  Speaker 4: general thoughts of which are the ones that people should
• 29:03
  Speaker 4: consider gifting first versus last?
• 29:05
  Speaker 6: Yeah, and I think that is such a good question
• 29:08
  Speaker 6: because so many people think, oh, just give because giving
• 29:12
  Speaker 6: is easy.
• 29:13
  Speaker 2: It isn't.
• 29:15
  Speaker 1: Why?
• 29:15
  Speaker 2: Because of what you just said.
• 29:17
  Speaker 6: So if I'm going to start giving away something, the
• 29:19
  Speaker 6: number one, I'll just start with number one for you,
• 29:21
  Speaker 6: the number one best item to gift from this group
• 29:24
  Speaker 6: that you gave me is an easy no-brainer, cash.
• 29:28
  Speaker 2: How come? Cash is king. That's how. But it's king why?
• 29:33
  Speaker 6: It's king because there's no built-in gain in cash.
• 29:39
  Speaker 2: Cash... is cash.
• 29:40
  Speaker 6: So if I give away a $ 500, 000 of cash, I've
• 29:46
  Speaker 6: given away $ 500, 000 of cash and the person who has
• 29:49
  Speaker 6: it is going to incur no income tax and no
• 29:51
  Speaker 6: gift tax and that's just theirs and there's nothing to sell.
• 29:55
  Speaker 6: But if I gave away my investment portfolio that I
• 29:58
  Speaker 6: bought for you know, $ 100 and now it's $ 500, 000, there's
• 30:05
  Speaker 6: a lot of gain built in there. Or I've saved $ 100, 000,
• 30:08
  Speaker 6: it's worth $ 500, 000. Now there's, you know, $ 400, 000 of built-in
• 30:12
  Speaker 6: gain in there. Well, now I've given away $ 500, 000. That's true.
• 30:16
  Speaker 6: But I've also given that person a tax bill, which
• 30:20
  Speaker 6: is the gain on $ 400, 000. And when they liquidate that stock,
• 30:24
  Speaker 6: they have to pay the capital gains tax where that
• 30:26
  Speaker 6: capital gains tax bill could go away if I died
• 30:30
  Speaker 6: owning that stock and instead gave away cash.
• 30:33
  Speaker 4: Todd, we got George from Woburn on the line for you. George,
• 30:37
  Speaker 4: what is your question for Tom Lutzky?
• 30:41
  Speaker 5: Good morning.
• 30:42
  Speaker 6: About six years ago, my wife and I did an
• 30:44
  Speaker 6: irrevocable trust with you, but recently we purchased a sum
• 30:48
  Speaker 6: up place at the Cape.
• 30:50
  Speaker 5: And what will we do to protect that?
• 30:52
  Speaker 2: When did you buy that?
• 30:54
  Speaker 5: Uh, January 26th.
• 30:57
  Speaker 2: This year?
• 30:59
  Speaker 5: Yes.
• 30:59
  Speaker 2: Okay.
• 31:00
  Speaker 6: And you said six years ago you set up irrevocable trusts?
• 31:06
  Speaker 1: Yes.
• 31:06
  Speaker 2: Okay. And is there one for you and one for
• 31:09
  Speaker 2: your wife? We did two or was it just one?
• 31:12
  Speaker 2: Just one. Just one like, you know, George Family Trust,
• 31:15
  Speaker 2: we'll call it. So, okay.
• 31:17
  Speaker 6: So it's one joint irrevocable trust, which means, you know, again,
• 31:21
  Speaker 6: this from an estate tax standpoint, it helps me understand
• 31:24
  Speaker 6: the value of the assets. At the time when we
• 31:26
  Speaker 6: did your plan, you were probably worth less than $ 2
• 31:30
  Speaker 6: million in total so that I would have done one
• 31:33
  Speaker 6: joint irrevocable trust. So now, how much is this house worth?
• 31:37
  Speaker 5: $ 700, 000.
• 31:40
  Speaker 6: So that's just one asset now. Of course, your assets
• 31:43
  Speaker 6: have grown since six years ago. You simply need to
• 31:47
  Speaker 6: prepare a deed. By the way, are you going to
• 31:49
  Speaker 6: live in this house? It could be your primary residence?
• 31:52
  Speaker 5: No.
• 31:53
  Speaker 2: Are you going to rent it?
• 31:55
  Speaker 1: Nope.
• 31:55
  Speaker 2: Oh, great.
• 31:56
  Speaker 6: So just call it a vacation home. So now you
• 31:58
  Speaker 6: simply just need to take that property and transfer it
• 32:01
  Speaker 6: into the trust. Let me ask you one more question.
• 32:02
  Speaker 6: Did you borrow to buy it or did you pay cash?
• 32:06
  Speaker 6: Pay cash.
• 32:07
  Speaker 4: Excellent.
• 32:08
  Speaker 2: So all good news across the board.
• 32:10
  Speaker 6: Simply need to prepare a deed, transferring the property from
• 32:13
  Speaker 6: your name into the irrevocable trust. And in your case,
• 32:17
  Speaker 6: since it's these Medicaid irrevocable trusts, and since we're talking
• 32:20
  Speaker 6: about gifting, this would not be a completed gift for
• 32:25
  Speaker 6: gift tax purposes. You do not have to worry about
• 32:27
  Speaker 6: filing any gift tax returns. It's not a gift. It's
• 32:30
  Speaker 6: going to just be put into the trust. But then
• 32:33
  Speaker 6: it will do one other thing. It will start your
• 32:36
  Speaker 6: five-year waiting period for Medicaid eligibility in all over again,
• 32:41
  Speaker 6: but only for that house. So the other stuff that
• 32:44
  Speaker 6: you put in six years ago, just remember that if
• 32:46
  Speaker 6: there's other real estate or money from the sale of
• 32:49
  Speaker 6: real estate, if you've sold any, that's all protected. It's
• 32:53
  Speaker 6: just a new five years for this item, but it
• 32:57
  Speaker 6: will be doing what you want. It'll avoid probate, provide
• 32:59
  Speaker 6: bloodline planning to your family and take care of you.
• 33:01
  Speaker 6: So certainly we can help you with that if you
• 33:03
  Speaker 6: need to. And that's the answer for that. Folks, you know,
• 33:07
  Speaker 6: this is great, though, because he just mentioned, you know,
• 33:09
  Speaker 6: I got something new, and this is what you do
• 33:11
  Speaker 6: with an estate plan. You keep in touch. You say,
• 33:14
  Speaker 6: you know, life events change. I need to, you know,
• 33:16
  Speaker 6: keep my estate plan moving forward. Well, gifting assets might
• 33:20
  Speaker 6: be an idea. In this case, even though it was
• 33:22
  Speaker 6: an irrevocable trust, it's not a gift. It's an incomplete
• 33:25
  Speaker 6: gift for gift tax purposes. That's still included in his
• 33:28
  Speaker 6: estate for estate taxes. He's going to get a step-up
• 33:30
  Speaker 6: in basis when he dies. But the point of the guide,
• 33:34
  Speaker 6: the point of me making this is this guide getting
• 33:36
  Speaker 6: the most out of making gifts is just that. What
• 33:40
  Speaker 6: do we give away? Like Chuck asked, do I give
• 33:42
  Speaker 6: away cash? Do I give away a depreciated rental property?
• 33:45
  Speaker 2: No, right? Maybe, maybe not.
• 33:47
  Speaker 6: You got to read the guide to figure out which
• 33:49
  Speaker 6: kind of gift is right to make. And the other
• 33:51
  Speaker 6: thing that's important is how do I give it away?
• 33:54
  Speaker 6: I don't want to just dump things in my kids' hands.
• 33:56
  Speaker 6: In fact, I might want to put it in a
• 33:58
  Speaker 6: trust to control it for my kids. Or I might
• 34:01
  Speaker 6: want to just gift it away in a way in
• 34:02
  Speaker 6: which I can still enjoy what I gave away.
• 34:04
  Speaker 2: Let's face it.
• 34:05
  Speaker 6: I got to live too. And I want to do
• 34:07
  Speaker 6: the both things. I want to enjoy what I give
• 34:09
  Speaker 6: away and reduce my estate taxes. Folks, there's so many
• 34:12
  Speaker 6: things to think about when you're giving away assets. Call
• 34:16
  Speaker 6: and get the guide and figure out whether or not
• 34:19
  Speaker 6: gifting fits into your estate plan.
• 34:21
  Speaker 2: It may. It may not.
• 34:22
  Speaker 3: 866-848-5699.
• 34:27
  Speaker 6: Or LegalExchangeShow.com. Again, 866-848-5699, or LegalExchangeShow.com. And you can also
• 34:37
  Speaker 6: go to Cushing, Dolan, PC, our Instagram page for more information.
• 34:41
  Speaker 4: Todd, how does someone make the decision with assets in
• 34:45
  Speaker 4: terms of, hey, what's the calculus between, okay, I want
• 34:50
  Speaker 4: to start making gifts of these versus, hey, I need
• 34:53
  Speaker 4: to create some kind of document some kind of trust
• 34:57
  Speaker 4: or something, and maybe the assets need to be held
• 34:59
  Speaker 4: by that to accomplish my goals over a longer term instead.
• 35:03
  Speaker 2: How do you figure out what the right tool is
• 35:05
  Speaker 2: for you?
• 35:06
  Speaker 6: I think it probably has a lot to do with
• 35:08
  Speaker 6: how much you're giving away. I would think that would
• 35:11
  Speaker 6: probably be the driving force. If I'm just maybe giving
• 35:15
  Speaker 6: a down payment to my daughter to buy a home,
• 35:18
  Speaker 6: I might want her just to have it so that
• 35:20
  Speaker 6: she can go buy the home. But if I'm talking
• 35:23
  Speaker 6: about making, you know, ongoing, like you said, like when
• 35:25
  Speaker 6: we talked about that $ 38, 000, say I want to set
• 35:29
  Speaker 6: up something now and my kids, the other thing would
• 35:31
  Speaker 6: be age of children. You know, are they mature, responsible?
• 35:34
  Speaker 6: Can they hold it? Do I want to also include
• 35:36
  Speaker 6: grandkids who are certainly maybe not of age, not ready
• 35:40
  Speaker 6: to handle that kind of money? I'd want to set
• 35:43
  Speaker 6: up a trust for something like that because I would say, listen,
• 35:47
  Speaker 6: I'm not going to put.
• 35:48
  Speaker 2: $ 338, 000 in right now. But you know what?
• 35:49
  Speaker 6: I might take, 38, 38, 30. I might put, you know,
• 35:55
  Speaker 6: annually 38,000 and I might put, you know, 40,000 in annually.
• 36:00
  Speaker 6: Let it build up over time. And if that's the case,
• 36:03
  Speaker 6: I want that. I want it to build up. I
• 36:05
  Speaker 6: want to control it. And if I put it in
• 36:07
  Speaker 6: that trust, I can control the trustee. I could even
• 36:09
  Speaker 6: be a trustee. Well, not the giver. Like if the
• 36:12
  Speaker 6: spouse gives, say I was to give, I might have
• 36:15
  Speaker 6: my wife be the trustee. So now we have some
• 36:18
  Speaker 6: control over the assets as to when they will come
• 36:20
  Speaker 6: out of here.
• 36:22
  Speaker 2: To the hands of the kids or the grandkids, right?
• 36:25
  Speaker 6: So I really think it becomes a function of what
• 36:28
  Speaker 6: the goal is of your gifting. If it's just to
• 36:32
  Speaker 6: give it to them because they want to buy something
• 36:33
  Speaker 6: right away, fine. But if it's over time building wealth,
• 36:37
  Speaker 6: the other reason I'm not giving it to them is
• 36:39
  Speaker 6: it's building up because I'm adding to it over time.
• 36:42
  Speaker 6: But it's also if they died, it's not going to
• 36:43
  Speaker 6: be included in their estate for estate tax purposes and
• 36:46
  Speaker 6: it's going to be protected from their creditor. So to me,
• 36:50
  Speaker 6: it's really all about what the goal is of your
• 36:54
  Speaker 6: ultimate gifting. So I hope that helps a little.
• 36:57
  Speaker 2: It certainly does. Mr.
• 36:58
  Speaker 4: Lutzky, thank you so much for joining us today. We
• 37:01
  Speaker 4: appreciate it.
• 37:02
  Speaker 2: It's always a pleasure. Thank you.
• 37:04
  Speaker 1: This has been Ask Todd on the Financial Exchange Radio Network.
• 37:07
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• 37:10
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• 37:13
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• 37:23
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