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What if Trump brings no clarity to the tariff issue? · The Financial Exchange Show

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Speaker 2: Kicking off Wednesday here on the Financial Exchange Chuck, Mark
1:13
Speaker 2: and Tucker with You and Big Stories. Look, we got
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Speaker 2: a four pm announcement from the Trump administration as to
1:20
Speaker 2: how they are going to proceed with tariff policy, and
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Speaker 2: quite honestly, no one has any idea what is coming here.
1:30
Speaker 2: Bloomberg this morning reported that the plans are still in
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Speaker 2: flux and they're still trying to kind of finalize the decision.
1:39
Speaker 2: The Wall Street Journal just a little while ago reported
1:42
Speaker 2: that the US Trade Representative Office brought President Trump a
1:48
Speaker 2: new potential plan to the table this morning. And so
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Speaker 2: we have absolutely no idea what we are going to
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Speaker 2: see in terms of tariff rates on which countries, But
2:01
Speaker 2: we're gonna know by the end of the day today.
2:04
Speaker 2: And I think what's interesting about this again, I'm not
2:08
Speaker 2: gonna speculate on what we're going to get because that's useless,
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Speaker 2: Like and honestly, like, no one cares what my speculation
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Speaker 2: is on what the tariff rate is. Like, it's I'm
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Speaker 2: not in a position where I decide any of this,
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Speaker 2: So who cares what I think about where this is
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Speaker 2: going to land. What I do think is interesting to
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Speaker 2: explore is what's going on with markets this week, because
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Speaker 2: there are two different things that I think are interesting
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Speaker 2: to watch on this and the first is, hey, how
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Speaker 2: do markets behave before and after the tariff announcement? But
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Speaker 2: the second piece is going to be, hey, how does
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Speaker 2: the US economy actually react afterwards as well, which is
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Speaker 2: going to take a longer time to play out and
2:52
Speaker 2: will eventually influence markets as well. But what I find
2:56
Speaker 2: interesting right now is, look, we've been getting close and
3:00
Speaker 2: closer to the tariff announcements. Again, like time, time moves
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Speaker 2: in one direction, at least as far as us you know,
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Speaker 2: humans can perceive it, and so every day we've been getting,
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Speaker 2: you know, a day closer. And the story last week
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Speaker 2: was pretty straightforward. We had you know, a little bit
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Speaker 2: of a rally to kick the week off on March
3:24
Speaker 2: twenty fourth, after I think it was, you know, the
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Speaker 2: piece over the weekend, Hey we're not going to be
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Speaker 2: getting any sector tariffs from the Wall Street Journal. I
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Speaker 2: think that was, you know, when this was published. And
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Speaker 2: two days later, on Wednesday, President Trump comes out and says, no,
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Speaker 2: I'm imposing auto tariffs beginning you know, shortly into April.
3:43
Speaker 2: I think it's April third, is what he said. And
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Speaker 2: so March twenty sixth markets so off. They saw off
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Speaker 2: again on last Thursday and again on Friday, so you
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Speaker 2: kind of get this puke into the weekend, and not
3:54
Speaker 2: just a puke into the weekend, but also something really
3:57
Speaker 2: interesting where after hours on Friday, normally, like the after
4:01
Speaker 2: hours Friday trading session is pretty quiet, everyone goes home,
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Speaker 2: everyone closes up shop, everyone's like by Felicia, like I'm
4:08
Speaker 2: getting out of here, and instead after hours Friday you
4:12
Speaker 2: get a continuation of the puke Friday after hours puke rare,
4:20
Speaker 2: but you know happened. And this typically is an indication
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Speaker 2: that you're going to get a bad open in the
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Speaker 2: futures market on Sunday night in the event that nothing
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Speaker 2: happens in the you know, intervening time, that you don't
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Speaker 2: get any announcements over the weekend, which we didn't, So
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Speaker 2: futures open pukey mcpuke face on Sunday night, s and
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Speaker 2: p futures down one percent basically right off the bat,
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Speaker 2: and you're like, oh, this is gonna get you know,
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Speaker 2: kind of gnarly heading into you know, the announcement on Wednesday.
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Speaker 2: The open on Monday so again I'm kind of building
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Speaker 2: this story over you know, a few days here. The
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Speaker 2: open on Monday confirms said Puke. He actually falls about
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Speaker 2: one and a half percent at its lowest on Monday,
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Speaker 2: and then rallies and finishes positive, not just a little
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Speaker 2: bit like thirty forty points positive for the day. It
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Speaker 2: then yesterday falls again about two thirds maybe three quarters
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Speaker 2: of a percent, and then rallies and finishes up about
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Speaker 2: a third of a percent. And today again early trading,
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Speaker 2: you look at it, You're like, okays, some PE's down one
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Speaker 2: percent and then rallies back almost to flat, and who
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Speaker 2: knows where it ends up by the end of the day.
5:37
Speaker 2: But what I do find interesting on this is, hey, if, if,
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Speaker 2: if markets in the aggregate we're expressing, you know, any
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Speaker 2: fear about what's what's coming, it's not being demonstrated in
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Speaker 2: the price action of stocks as a whole right now.
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Speaker 2: And that's kind of interesting given where things looked like
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Speaker 2: they may have gone, you know, Friday evening heading into
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Speaker 2: Sunday evening, look like this could be kind of a
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Speaker 2: gnarly week. But to this point, it looks like stocks
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Speaker 2: are not being largely impacted by the pending announcement at
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Speaker 2: four pm today, Yeah, which is kind of interesting.
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Speaker 3: For reasons you've already mentioned. I think we don't know
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Speaker 3: what it will contain. Is this going to be a
6:17
Speaker 3: lot of theater and glitz. It seems to be set
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Speaker 3: up as a reality TV show event. The schedule released
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Speaker 3: by the White House reads like a reality TV show.
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Speaker 3: A new wonderful policy will be introduced at four, markets
6:31
Speaker 3: will react at eight. The world will bow at the
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Speaker 3: regime's feet. And I say regime just as a group
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Speaker 3: of people running the show. I'm not comparing to the
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Speaker 3: Kmiere Rouge or something. It's comical, but it's all theatrics.
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Speaker 3: I'm not going to judge the theatrics of it. Maybe
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Speaker 3: politically it'll play brilliantly, but economically it could be just
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Speaker 3: a big puff of brief puff of smoke and nothing.
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Speaker 2: We have no idea, right, which is why, which.
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Speaker 3: Explains the relatively stayed we're seeing. Given the harm that
7:02
Speaker 3: tariffs could do, stocks don't seem to be flinching, at
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Speaker 3: least dramatically at this point, so it seems a little
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Speaker 3: disp They seem a little bit complacent, But tomorrow morning
7:13
Speaker 3: could be a totally different story.
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Speaker 2: I'll make the case. And I know that this is
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Speaker 2: going to sound kind of weird because everyone's been focused
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Speaker 2: on this announcement for the last at least the last
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Speaker 2: like two or three weeks. Ever since market's bottomed in
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Speaker 2: mid mid March, everyone's kind of been forward to looking
7:30
Speaker 2: to Okay, what are we going to get April second?
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Speaker 2: What are we going to get April second? I think
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Speaker 2: it's almost people have been viewing this as like the
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Speaker 2: end date where Okay, we get clarity and then we
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Speaker 2: move forward. Yeah, what if that's not really the case?
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Speaker 2: And what I mean by that is not that we
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Speaker 2: don't get clarity, like we may get Okay, here's exactly
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Speaker 2: what the policy is is going to be. I'm not
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Speaker 2: saying that we won't get that, but more, Hey, what
7:58
Speaker 2: ultimately is going to matter in all this is not
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Speaker 2: what the announcement is today, but how the economy then
8:04
Speaker 2: evolves over the next six to nine months, and how
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Speaker 2: the policy evolves with the economy, because, as we have
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Speaker 2: seen with previous tariff announcements, what you get during the
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Speaker 2: initial announcement is not often where the policy ends up
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Speaker 2: landing in its final form.
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Speaker 3: Yeah, I don't think anybody believes exactly exactly what you
8:24
Speaker 3: just said. He may be using this. This is the
8:26
Speaker 3: art of the deal, and so to understand this, you
8:28
Speaker 3: have to understand the art of the deal. And the
8:30
Speaker 3: art of the deal evolved in midtown Manhattan buying and
8:33
Speaker 3: selling buildings. So sometimes you go in all hot and heavy,
8:37
Speaker 3: it's saying you want it, and then you walk away
8:39
Speaker 3: at the last minute, or you walk away when you
8:42
Speaker 3: got when you're at the bank with the seller. This
8:44
Speaker 3: is all the what's the word I'm looking for, the
8:51
Speaker 3: like a ritual, I guess associated with that type of business.
8:56
Speaker 3: He's doing the art of the deal, which is his
8:58
Speaker 3: mo Now, with respect to our enomy and really the
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Speaker 3: world economy, does the art of the deal translate to
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Speaker 3: this domain, We're gonna find out. I don't think it does,
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Speaker 3: because state craft and policy making trade policy making specifically
9:12
Speaker 3: is different than buying and selling buildings. But this is
9:14
Speaker 3: just the art of the deal. You pull out at
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Speaker 3: the last minute, you say you really want it, then
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Speaker 3: you don't. Then you say bad things about the other
9:20
Speaker 3: guy in the newspaper. Then you go to his kids
9:22
Speaker 3: wedding the next year because all's well, and then you
9:24
Speaker 3: have a breakup the year. It's it's just it's the
9:26
Speaker 3: chaos of the domain in which he made his chops,
9:30
Speaker 3: and he's applying that same mentality here. So no, I
9:33
Speaker 3: don't I wouldn't expect whatever's announced today to be policy Friday,
9:38
Speaker 3: a week, a month, never mind a year. That in
9:41
Speaker 3: of itself, though, is bad for investment and therefore growth.
9:45
Speaker 3: None of this is good for economic growth. To keep
9:47
Speaker 3: everybody guessing in a perpetual state of confusion, as you've
9:51
Speaker 3: pointed out many times, causes businesses to hold off on
9:54
Speaker 3: making investment decisions, which in the long run will hamper
9:58
Speaker 3: and in the short run too, economic Growth's.
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Speaker 2: Take a quick break here. When we return, let's talk
10:06
Speaker 2: a little bit about what we are seeing from auto sales.
10:08
Speaker 2: We got a bunch of data late yesterday and early
10:11
Speaker 2: this morning. We'll talk about what Q one auto sales
10:13
Speaker 2: look like right after this.
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11:11
Speaker 2: So we've been getting a whole bunch of auto sales
11:14
Speaker 2: data over the last twenty four hours or so. The
11:18
Speaker 2: different manufacturers report. We also get kind of a national
11:22
Speaker 2: report on what we saw. Total vehicle sales for March
11:26
Speaker 2: moved at an annualized pace of nearly seventeen point eight
11:31
Speaker 2: million units. To put this into context, the prior month
11:36
Speaker 2: came in at an annualized pace of sixteen million, and
11:39
Speaker 2: the consensus estimate was fifteen point nine million for this month. Also,
11:45
Speaker 2: if you look at this number, it is the highest
11:48
Speaker 2: pace of auto sales in a month since April of
11:52
Speaker 2: twenty twenty one. So it is very clear to me,
11:56
Speaker 2: especially given the announcement last week and then the commentary
12:00
Speaker 2: that we've gotten from different auto leaders. As an example,
12:05
Speaker 2: Brandy Parker, who is the CEO of Hyundai Motor North America,
12:09
Speaker 2: said quote, this past weekend was by far the best
12:12
Speaker 2: weekend I've seen in a very long time. This obviously
12:16
Speaker 2: all spurred by the threat of auto tariffs that are
12:20
Speaker 2: set to take effect tomorrow. So you look at this
12:24
Speaker 2: and you try to say, okay, like, what does this mean?
12:28
Speaker 2: And clearly it's not something where you have this sustainable
12:33
Speaker 2: move to this number of cars being sold this year.
12:37
Speaker 2: You're not going to see eighteen million vehicles actually sold
12:40
Speaker 2: over the course of this year. But rather it's likely
12:43
Speaker 2: demand being pulled forward. And so the two questions that
12:48
Speaker 2: I think you have on this, in my opinion, number
12:51
Speaker 2: one is there not is there how much more room
12:55
Speaker 2: is there for demand to be pulled forward? Because there
12:57
Speaker 2: are definitely still people sitting there today and even probably
13:00
Speaker 2: into this weekend. In the next you know couple, hey,
13:03
Speaker 2: like could tariffs get worse? Should I be buying a
13:06
Speaker 2: car now instead of you know, waiting till later. So
13:08
Speaker 2: there's there's still probably gonna be some of that in April.
13:12
Speaker 2: But I think that the two questions that come out
13:14
Speaker 2: of that, then maybe this is three questions total. Is
13:18
Speaker 2: I've lost count of the questions. I apologize I was
13:20
Speaker 2: told there'd be no math. I think the the other
13:24
Speaker 2: ones that arise there are, Okay, how much is the
13:28
Speaker 2: demand drop off afterwards? You know, how much demand is
13:32
Speaker 2: truly being pulled forward?
13:33
Speaker 5: Here?
13:34
Speaker 2: Like do we see you know a few months where
13:37
Speaker 2: auto sales decline back down to like fifteen million and
13:39
Speaker 2: an annualized rate, do we go as low as like
13:41
Speaker 2: fourteen or thirteen? I don't know. But beyond that, the
13:46
Speaker 2: other thing that I'm just thinking of here is, you know,
13:48
Speaker 2: I was talking to someone last week, as an example,
13:52
Speaker 2: who was making this very decision, and they were saying, look,
13:56
Speaker 2: I don't really need a new car right now, but
14:00
Speaker 2: I'm going to it a couple of years, and I'm
14:01
Speaker 2: nervous about what they are going to cost, so I'm
14:04
Speaker 2: going to buy one, and they're you know, financing a
14:07
Speaker 2: good chunk of it. And so where I land on
14:12
Speaker 2: this as kind just a question that there's no answer.
14:15
Speaker 2: But you know, the vast majority of people who buy
14:18
Speaker 2: vehicles either finance them or lease them. Like the person
14:22
Speaker 2: who walks into the car and puts down you know,
14:24
Speaker 2: the forty eight thousand dollars for the average new car
14:26
Speaker 2: price today, you know on the desk that person's a
14:29
Speaker 2: rare breed. There aren't many people that just go in
14:31
Speaker 2: and pay cash for their vehicle in the new car
14:34
Speaker 2: market these days. So the other question that I have
14:37
Speaker 2: then is, Okay, if you're borrowing this money, now you've
14:41
Speaker 2: got this extra payment that you're making on a monthly
14:44
Speaker 2: basis that again, the person that I was talking to
14:47
Speaker 2: otherwise wasn't going to have that payment for a couple
14:49
Speaker 2: of years at least. That is money that has already
14:53
Speaker 2: been spent now that is being sucked out of their
14:55
Speaker 2: spending power in the future. So does this have any
14:57
Speaker 2: impact on other discretion spending over the rest of the year. Then,
15:02
Speaker 2: you know, if someone now has a five hundred dollars
15:05
Speaker 2: a month car payment that they otherwise wouldn't have, Hey,
15:09
Speaker 2: how does that impact their spending in other areas?
15:12
Speaker 3: Yeah?
15:13
Speaker 2: Hard to say, So, I don't know, No, I have
15:16
Speaker 2: no idea.
15:16
Speaker 3: Yeah, I will say that this is another example of
15:19
Speaker 3: how policy uncertainty affects real economic forces. And variables if
15:27
Speaker 3: you like.
15:28
Speaker 2: And by the way, sorry no, no, no, go ahead, okay,
15:33
Speaker 2: So where I the other thing on this is like
15:34
Speaker 2: specifically talking about that. Talk to any car dealer right now.
15:37
Speaker 2: And if you go to them and you're like, hey,
15:40
Speaker 2: you give me your best deal right now because I'm
15:42
Speaker 2: nervous about tariffs, they're going to say to you, I
15:45
Speaker 2: have no deals. And the reason is twofold. Number one,
15:48
Speaker 2: you're not the only person saying that. Clearly there's plenty
15:50
Speaker 2: of demand. Number two, Hey, they've got you over a barrel.
15:55
Speaker 2: They know that if you have to wait, prices are
15:57
Speaker 2: going to go up. Why are they going to discwn
16:00
Speaker 2: a vehicle that already maybe discounted relative to what it
16:03
Speaker 2: might cost tomorrow. You will not get good discounts and
16:06
Speaker 2: deals from auto sell from you know, auto dealers. You're
16:12
Speaker 2: not going to get those. If you're showing up today,
16:15
Speaker 2: they're gonna stay fine, you want the car today, this
16:18
Speaker 2: is what you're paying. Otherwise pay more tomorrow.
16:21
Speaker 3: So the look, yeah, the things you're talking about are
16:23
Speaker 3: what makes it hard to separate movements around the trend.
16:28
Speaker 3: So you asked earlier in your comments about whether or
16:32
Speaker 3: not this new seasonally adjusted annual pace was sustainable. And
16:35
Speaker 3: another way to phrase that is are we on a
16:37
Speaker 3: new trend line? Here? Is the trend line moved or
16:40
Speaker 3: is this just a big cyclical temporary that is, movement
16:45
Speaker 3: around the old trend line. And moreover, if demand drives
16:50
Speaker 3: up when tariffs are imposed, will the new trend line
16:52
Speaker 3: be lower? I'm asking a couple of differents. We don't know,
16:55
Speaker 3: but these are the types of things that researchers find
16:58
Speaker 3: that these these questions are the reasons why this tariff policy.
17:05
Speaker 3: And I put policy in quotes because we don't have
17:08
Speaker 3: one yet. We haven't add one to this point. It's
17:10
Speaker 3: more like this sort of whimsical on off, fits and
17:13
Speaker 3: starts type approach. Why this is infuriating it really it
17:18
Speaker 3: makes the already challenging job of figuring out what is
17:22
Speaker 3: the economy doing today? Is inflation stable going up, going down?
17:25
Speaker 3: Is growth stable up down, et cetera. This makes it
17:29
Speaker 3: all the more difficult to make sense of the economic
17:31
Speaker 3: data we get from month to month.
17:34
Speaker 2: But that's that's the world we live in now. On
17:36
Speaker 2: the company's specific auto sales, one of the ones that
17:39
Speaker 2: everyone was paying attention to is, hey, what's Tesla going
17:41
Speaker 2: to report, given you know everything going on, and so
17:48
Speaker 2: what we saw this year?
17:49
Speaker 1: Can I happy?
17:50
Speaker 3: Some people don't know what you mean by that. They
17:52
Speaker 3: think no, they think Musk is you think they do? Yes,
17:55
Speaker 3: because I've talked to people.
17:57
Speaker 2: Everyone knows that. Everyone everyone knows that Tesla is a
18:00
Speaker 2: controversial brand right now, and everyone knows it's because of
18:03
Speaker 2: Elon Musk.
18:03
Speaker 3: But some people think it's just because he's just trying
18:05
Speaker 3: to cut some spending.
18:06
Speaker 2: Well, I'm not saying that. I'm not talking about the
18:09
Speaker 2: reasons for it. I'm I'm just saying, Okay, everyone knows
18:13
Speaker 2: that there's something going on with Tesla right now. Like
18:15
Speaker 2: I'm not describing good, bad, uglier like what everyone thinks,
18:19
Speaker 2: because I don't give a crap what everyone thinks about
18:23
Speaker 2: Elon Musk. It's not my problem. Yeah, I got other
18:26
Speaker 2: things to worry about then what everyone thinks about Elon Musk.
18:30
Speaker 2: So yeah, I describe it just as hey. People were
18:32
Speaker 2: interested in Tesla because of everything going on. The delivery
18:37
Speaker 2: numbers were bad. They came into three hundred and thirty
18:39
Speaker 2: six thousand for the quarter, down thirteen percent for the year,
18:44
Speaker 2: and they came in below expectations. Three hundred and sixty
18:48
Speaker 2: to three hundred and eighty thousand units delivered, So the
18:53
Speaker 2: numbers came in not particularly good. The stock had sold
18:56
Speaker 2: off thirty six percent through yesterday, so you know, you
19:00
Speaker 2: could make a case, hey, it was kind of you know,
19:02
Speaker 2: pricing in something bad. So it's only down a couple
19:05
Speaker 2: percentage points today. But ultimately this is a question of, hey,
19:10
Speaker 2: how does an automaker that's priced in this fashion find
19:14
Speaker 2: a way to stay cash flow positive given the declines
19:18
Speaker 2: that they're seeing, And what does it mean for, you know,
19:22
Speaker 2: how their outlook looks over the subsequent quarters from a
19:26
Speaker 2: cash perspective. These are things that we'll have to pay
19:28
Speaker 2: attention to on it. Let's take a quick break. When
19:31
Speaker 2: we come back. We're joined by Todd Latsky for Ask
19:34
Speaker 2: Todd after this, Like us.
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20:01
Speaker 4: Well, Tariff days Here and Wall Street will shift their
20:04
Speaker 4: full attention to President Trump's tariff announcement at four pm
20:08
Speaker 4: this afternoon from Washington. At the moment, the market's pretty flat.
20:14
Speaker 4: At the moment, Dow is up by only thirty three points,
20:17
Speaker 4: SMP five hundred is completely flat, and the Nasdaq is
20:21
Speaker 4: dipping by eight points. Russell two thousand also completely flat.
20:25
Speaker 4: Tenure treasureeled is down by one basis point of four
20:29
Speaker 4: point one four percent, and crude oil is flat. You
20:33
Speaker 4: guessed it, trading just above seventy one.
20:36
Speaker 1: Dollars a barrel.
20:37
Speaker 4: Tesla down by two percent after the ev maker saw
20:41
Speaker 4: its first quarter deliveries drop thirteen percent. Furthermore, separate data
20:45
Speaker 4: showed that the ev maker's China sales fell eleven percent
20:49
Speaker 4: in March. Sticking with the tariff theme, where auto stocks
20:52
Speaker 4: continue to see attention, Ford is up by one and
20:54
Speaker 4: a half percent, GM up by one percent. In Stallantis,
20:58
Speaker 4: the parent company to JEEP, is down by about one percent. Meanwhile,
21:02
Speaker 4: Nvidia shares down by one percent. As investor's way how
21:05
Speaker 4: much this semiconductor industry might be impacted by tariffs after
21:10
Speaker 4: its recent serg excuse me, after its surge since its
21:13
Speaker 4: IPO on Monday, Newsmax shares pulling back by forty nine
21:17
Speaker 4: percent today. Elsewhere, Ensino shares down by twenty four percent
21:22
Speaker 4: after the cloud banking firm posted week fourth quarter earnings
21:26
Speaker 4: and guidance for the current quarter and full year. Pecko
21:29
Speaker 4: up by seventeen percent after recent SEC filing showed that
21:34
Speaker 4: CEO Joel Anderson Anderson purchased nearly one point six million
21:39
Speaker 4: shares more volatility for recent IPO core weave since its
21:43
Speaker 4: disappointing IPO on Friday yesterday, the stock surge forty two
21:47
Speaker 4: percent today, Shares up another fourteen percent today, and Hymns
21:52
Speaker 4: and Herds down by two percent after some analysts noted
21:55
Speaker 4: the company's ZEP bound price point of nearly nineteen hundred
21:58
Speaker 4: dollars per month as being too high. I'm Tucker Silvan,
22:02
Speaker 4: that's Wall Street Watch.
22:05
Speaker 1: This is Ask Todd on the Financial Exchange Radio Network.
22:09
Speaker 1: If you have an existing estate plan or in the
22:11
Speaker 1: market for one, Todd Lutsky is here to answer your
22:13
Speaker 1: questions and help you plan for a later life. Ask
22:16
Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
22:19
Speaker 1: New England for more than thirty five years, helping families
22:23
Speaker 1: with estate and tax planning, Medicaid planning, and probate law.
22:26
Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky and.
22:32
Speaker 2: As promised for join now by Todd Lutsky from the
22:34
Speaker 2: law firm of Cushing and Dolan. The segment is asked, Todd,
22:37
Speaker 2: it's your chance to ask Todd your estate planning questions.
22:41
Speaker 2: Last week, I think we had either four or five callers.
22:44
Speaker 2: We got through three of them, so there's some urgency
22:47
Speaker 2: to make sure you're at the front of the lines
22:48
Speaker 2: that we can get to. Your call. Phone line is
22:50
Speaker 2: open at eight eight eight two zero five two two
22:54
Speaker 2: six three. That is the studio number to speak to
22:57
Speaker 2: Todd Lutsky right now about your estate planning questions. Again,
23:01
Speaker 2: eight eight eight to zero five two two sixty three
23:05
Speaker 2: is the number to speak to Todd. We got the
23:07
Speaker 2: phone lines open and are waiting for you at eight
23:11
Speaker 2: eight eight to zero five two two six three. Mister Lutsky,
23:16
Speaker 2: how are you today?
23:17
Speaker 6: I am never better?
23:18
Speaker 2: How are you? I? I'm okay, just okay, okay. Well,
23:22
Speaker 2: so I knew you were coming in today, So I
23:24
Speaker 2: was I was talking to my wife about some estate
23:26
Speaker 2: planning stuff and was like, hey, I'd like to be cremated. Yeah,
23:30
Speaker 2: you know, it seems seemed reasonable. She made an appointment
23:33
Speaker 2: for Tuesday a little earlier than I was. But you know,
23:39
Speaker 2: it's this is this is what it is, Todd. I
23:41
Speaker 2: want to talk to you today about beneficiaries and basically
23:46
Speaker 2: the right and wrong ways to get assets to the
23:50
Speaker 2: people you want them to end up with. Let's say
23:52
Speaker 2: that I have a child who I want to inherit
23:56
Speaker 2: property and investment account, whatever it may be. What is
23:59
Speaker 2: the the upside and downside of me just saying hey,
24:03
Speaker 2: I'm gonna put you as a joint owner on a
24:06
Speaker 2: piece of real estate or an investment account.
24:08
Speaker 6: Well, those are two very big important differences in the
24:11
Speaker 6: type of assets you're mentioning. So so real estate versus
24:16
Speaker 6: are not real versus, but real estate. And let's say
24:19
Speaker 6: a brokerage account. Well, let's start with the brokerage account,
24:21
Speaker 6: because that one's easier. So this is why we do planning, right, folks.
24:25
Speaker 6: We don't just throw people's names on our accounts, although
24:29
Speaker 6: we do, but we shouldn't. And the reason we don't
24:34
Speaker 6: do that is when you add a child's name as
24:38
Speaker 6: Chuck indicated to a brokerage account and let's say it's joint, well,
24:44
Speaker 6: you haven't quite completed the gift yet. That's true because
24:47
Speaker 6: either party can go into a joint account typically and
24:52
Speaker 6: take out the money. So until the gift is until
24:56
Speaker 6: the other party, the child, let's say, actually goes and
25:00
Speaker 6: remove the money, that would complete the gift. Until then,
25:04
Speaker 6: you haven't actually made a completed gift. But to me,
25:06
Speaker 6: I'm scared enough just by the fact that the child
25:09
Speaker 6: could go in and take the money.
25:10
Speaker 2: So one, that's a problem.
25:12
Speaker 6: Two, when you add a child's name to it, you've
25:15
Speaker 6: exposed that child's creditor. That child's creditors can now access
25:21
Speaker 6: half the account. So one, I've exposed it to the
25:25
Speaker 6: kids creditors, which I really don't like. Now I can
25:28
Speaker 6: tell you the upside of doing that is, of course,
25:30
Speaker 6: when you pass, it will avoid probate and automatically go
25:34
Speaker 6: to that surviving joint owner.
25:37
Speaker 2: So I guess that's a positive. I don't think it is,
25:40
Speaker 2: but it's a positive.
25:43
Speaker 6: The real problem with that, though, is generally if you
25:46
Speaker 6: don't have just one child, and you have let's say
25:49
Speaker 6: three kids, and this particular child happens to live close by,
25:54
Speaker 6: which is not uncommon, so for convenience purposes, you're thinking,
25:59
Speaker 6: I'm gonna throw this particular child's name on not only
26:02
Speaker 6: my brokerage account perhaps, Chuck, but also the bank accounts
26:06
Speaker 6: so that they can what pay bills and help me
26:09
Speaker 6: out as I need it done. Well, if you've done
26:13
Speaker 6: that on two three accounts and you have multiple children
26:16
Speaker 6: and that then you die while that child likely is
26:19
Speaker 6: just going to get all those accounts, and you've disinherited
26:22
Speaker 6: effectively your other children, which you might not have meant
26:26
Speaker 6: to do so, but but you've done it. So folks,
26:30
Speaker 6: that's just a few of the problems with it. But
26:32
Speaker 6: that's why I wouldn't do that. And of course with
26:34
Speaker 6: real estate it's even worse. You've completed the gift, you know,
26:38
Speaker 6: you exposed it to the kids creditors. You can't sell
26:40
Speaker 6: it without that person's name, I mean, without that joint
26:43
Speaker 6: owner helping you have the proceeds would go to that
26:46
Speaker 6: joint owner. I mean, just on and on problems with
26:50
Speaker 6: putting a child's name on a on a piece of property.
26:53
Speaker 2: Talking with Todd Lutsky from the law firm of Cushing
26:55
Speaker 2: and Dolan. If you have a question for Todd, this
26:59
Speaker 2: is your chance to ask ask him live on air.
27:01
Speaker 2: Studio line is opened still with some room Onnitor eight
27:04
Speaker 2: eight eight to zero five two two sixty three. That
27:08
Speaker 2: is the number to call to speak with Todd Lutsky
27:10
Speaker 2: about your estate planning questions again. Eight eight eight to
27:15
Speaker 2: zero five two two six three. We're gonna take a
27:19
Speaker 2: quick break here, but when we come back, it's gonna
27:21
Speaker 2: be right to your questions with Todd Lutsky again. That
27:25
Speaker 2: phone number is eight eight eight to zero five two
27:28
Speaker 2: two six three. One more time, it's eight eight eight
27:32
Speaker 2: to zero five two two six three.
27:36
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:39
Speaker 1: only here on the Financial Exchange Radio Network. You're listening
27:46
Speaker 1: to Ask Todd with Todd Lutsky on the Financial Exchange
27:50
Speaker 1: Radio Network.
27:58
Speaker 2: Still got some room on the phone lines if you'd
27:59
Speaker 2: like to speak Tod Lutsky. We got plenty of space
28:02
Speaker 2: so that you can ask your estate planning questions. Eight
28:05
Speaker 2: eight eight to zero five two two sixty three is
28:08
Speaker 2: the number again. It's eight eight eight to zero five
28:13
Speaker 2: two two sixty three. Let's go to Carleen from Florida. Carleen,
28:16
Speaker 2: what's your question for Tod Lutsky.
28:19
Speaker 7: I have an irrevocable trust in. My nephew is the trustee,
28:24
Speaker 7: and I would like to get an equity line. Is
28:27
Speaker 7: there any way that I can do that?
28:30
Speaker 1: So?
28:31
Speaker 6: Uh, how long ago did you set this trust up?
28:35
Speaker 7: Oh? Was in twenty fourteen.
28:37
Speaker 6: Two thy fourteen? And your house? Is this your primary
28:41
Speaker 6: residence that you put in?
28:43
Speaker 3: Yeah?
28:44
Speaker 6: Okay? And and by chance, when you set this trust
28:49
Speaker 6: up and deeded the property into this trust, do you
28:54
Speaker 6: recall anybody using the word life estate reserving a life
28:59
Speaker 6: estate for you?
29:00
Speaker 7: That's what my tax to say. It says my niece
29:04
Speaker 7: and two nephews. It says, yeah, I can't even think
29:09
Speaker 7: is that awful? SND irrevocable. Wait a minute, I.
29:16
Speaker 6: Think, yeah, yeah, you'red.
29:21
Speaker 7: Irrevocable trust irrevocable Trust of twenty fourteen. And it does
29:28
Speaker 7: and above that, it says Colleen mcgloftin that's me life
29:32
Speaker 7: of state SND irrevocable Trust of twenty fourteen.
29:36
Speaker 6: Okay, well that's very helpful, thank you. So a couple
29:40
Speaker 6: of things. When you reserve a life estate, it allows
29:44
Speaker 6: you not only to live there, but it allows you
29:46
Speaker 6: to keep existing mortgages if you had one when you
29:49
Speaker 6: put it in, which you may not have, but to
29:53
Speaker 6: get a revert to get a mortgage now you can try.
29:58
Speaker 6: I can't tell you the bank's going to do it.
29:59
Speaker 6: Every banks different, but you're ultimately gonna need the trustee
30:03
Speaker 6: of the trust to sign off and the life tenant
30:06
Speaker 6: to sign off on the mortgage. Okay, so you're gonna
30:10
Speaker 6: need both and and I don't know that the bank
30:15
Speaker 6: will actually do that. So the one thing I always
30:17
Speaker 6: tell clients when they're setting up these trusts are you
30:22
Speaker 6: can't borrow against the property without creating, you know, without
30:27
Speaker 6: resetting that five year clock. So you're way beyond the
30:29
Speaker 6: five year medicaid clock. So your house is protected. So
30:33
Speaker 6: you need to think about it. If you've if you've not,
30:35
Speaker 6: if you're doing this in the future for everybody else listening.
30:38
Speaker 6: You reserve a life estate like Carlen did, right, but
30:41
Speaker 6: you get the reverse mortgage or not the reverse mortgage,
30:45
Speaker 6: the the home equity line of credit established before you
30:49
Speaker 6: create the trust, and that way you then transfer the
30:53
Speaker 6: encumbered property to the trust reserve. The life of state
30:57
Speaker 6: preserves the home equity line of credit even though you
31:02
Speaker 6: may not have borrowed against it in twenty fourteen in
31:05
Speaker 6: this example, when the trust was set up, but you
31:08
Speaker 6: established it. So now when Carlene says, I'd like to borrow.
31:12
Speaker 6: She could because she would have already had the home
31:16
Speaker 6: equity line of credit with that life estate, and she
31:19
Speaker 6: could tap the mortgage anytime she wants and it doesn't
31:22
Speaker 6: trigger the du on sale clause. But unfortunately, Carleen, it
31:25
Speaker 6: sounds to me like you did not do that prior
31:28
Speaker 6: to putting the property into the trust. So in order
31:32
Speaker 6: for you to get a home equity line now likely
31:35
Speaker 6: you're going to have to deed the property out or
31:37
Speaker 6: at least the remainder interest out of the trust to
31:41
Speaker 6: the kid's nieces, nephews, whoever you plan on leaving it to,
31:45
Speaker 6: and keep your life estate, and then all of you
31:49
Speaker 6: could go to the bank and get a mortgage and
31:51
Speaker 6: not reset the clock. If you want to reset the clock,
31:55
Speaker 6: then you need to take the property out, get it
31:59
Speaker 6: to a ch or beneficiary whoever's listed, and have them
32:02
Speaker 6: give it back to you, get your mortgage, put it
32:05
Speaker 6: in the trust, reserve a life estate. The downside with
32:09
Speaker 6: that is you're resetting your five year clock. Depending on
32:11
Speaker 6: how old you are, you may not want to do that.
32:15
Speaker 6: So it's a very good question, and hopefully that answered
32:20
Speaker 6: it for you.
32:21
Speaker 2: But folks.
32:23
Speaker 6: Interestingly enough, it's a new month and we've got a
32:25
Speaker 6: new guide and doing these life estates, which was the
32:29
Speaker 6: old month's guide. You know, you kind of give up.
32:32
Speaker 6: It's a way of leaving assets to family members. But
32:35
Speaker 6: the guide this month is how to leave assets to beneficiaries,
32:40
Speaker 6: whoever that might be. What's the best way to do it?
32:43
Speaker 6: Is it outright? Is it staggered distributions? Do I want
32:47
Speaker 6: to control it for you know, the divorce proof situation.
32:51
Speaker 6: Do I want to get it to a next generation,
32:54
Speaker 6: a state tax free? Do I have children that are
32:57
Speaker 6: special needs? I mean, there's so much to think about
32:59
Speaker 6: when you leaving your assets to your children, and this
33:03
Speaker 6: guide will get you there. So if you're starting your
33:05
Speaker 6: estate planning and you're thinking, well, how should I leave
33:07
Speaker 6: my assets? Get the guide eight six six eight four
33:12
Speaker 6: eight five six nine nine or Legal Exchange Show dot
33:16
Speaker 6: com again eight six six eight four eight five six
33:20
Speaker 6: nine nine or Legal Exchange Show dot Com.
33:23
Speaker 2: Got another one for you. Tom's go to Pam in Maine. Pam,
33:27
Speaker 2: what's your question for Todd Lutsky?
33:31
Speaker 5: Well, it's exactly what he needs to open the show with.
33:33
Speaker 5: I was just at my daughter's place in New York
33:35
Speaker 5: and we were going over everything and there's just one
33:38
Speaker 5: daughter and myself at this point. Huh, don't anticipate there
33:43
Speaker 5: being anymore. She does have a husband, and I have
33:48
Speaker 5: many assets over many different venues. You're approximately a million dollars, okay,
33:54
Speaker 5: but the house is the main thing for her. She's like,
33:58
Speaker 5: I don't want to sell my childhood home and she
34:01
Speaker 5: doesn't want need to lose it basically to you know,
34:06
Speaker 5: in the event that I have to go into a home.
34:08
Speaker 6: Yes, So you know, it sounds like the house is
34:12
Speaker 6: a big item and it is for a lot of people,
34:14
Speaker 6: and so I think the type of planning that you
34:16
Speaker 6: would need to do to protect it for her, assuming
34:19
Speaker 6: you want to protect it for her. Again, we do
34:21
Speaker 6: what the client wants, not always what the children want.
34:24
Speaker 6: So I want you to know that you would be
34:26
Speaker 6: the decision maker. But if that is something you wish
34:29
Speaker 6: to do, Yes, with a with an estate worth around
34:32
Speaker 6: a million dollars, in the house worth some portion of that,
34:36
Speaker 6: I absolutely would transfer it to an irrevocable medicaid trust.
34:40
Speaker 6: Whether we reserve a life estate or not would be
34:43
Speaker 6: something we would determine. Then putting it in there is
34:46
Speaker 6: going to keep you in control. Can't get into every
34:48
Speaker 6: detail today, but you'd be ninety eight percent in control
34:51
Speaker 6: of that house. But five years down the road, if
34:54
Speaker 6: you got sick and went in the nursing home, it
34:56
Speaker 6: would be protected for your daughter, and then your daughter
34:59
Speaker 6: could of there, or you could control it through the
35:01
Speaker 6: trust for your daughter, any number of those things. So
35:05
Speaker 6: hopefully that helps a little. And yes, you're on the
35:08
Speaker 6: right track. That's exactly the way I would proceed.
35:11
Speaker 2: Got one more for you, Todd. Let's go to David
35:13
Speaker 2: in Tucker. Is this Boston or Brewster Boston? David in Boston.
35:18
Speaker 2: You're up with Todd.
35:20
Speaker 8: Hi, Tod, thanks for taking the call. Just a quick question.
35:24
Speaker 8: I'm single and as I'm getting older, all right, to
35:29
Speaker 8: avoid probate what I wanted to do. I have a
35:32
Speaker 8: very close friend that I want to leave my four
35:35
Speaker 8: oh one k assets too.
35:39
Speaker 6: Yeah, I'm going to leave.
35:40
Speaker 8: My condos to my brother, but to avoid probate, my
35:43
Speaker 8: understanding is that if I put that friend as a beneficiary,
35:48
Speaker 8: that friend will be able to have access to those assets,
35:52
Speaker 8: provided he's able to get a certified death certificate.
35:56
Speaker 6: So so let's you're talking about the four oh one
35:58
Speaker 6: K four one K. Yeah, yeah, if you name a
36:02
Speaker 6: designated beneficiary at the four oh one K, they should
36:05
Speaker 6: be able to walk in to the institution. I suppose
36:08
Speaker 6: if they have a death certificate to prove that you're deceased,
36:11
Speaker 6: and then they'll show their driver's license so they know
36:13
Speaker 6: who they are. Then they'll go pull the form, the
36:16
Speaker 6: designated beneficiary form that the financial institution has and make
36:21
Speaker 6: sure it matches who's sitting in front of them, and
36:24
Speaker 6: if it does, I think that they'll be able to
36:26
Speaker 6: just take take those assets. Not so easy though with
36:29
Speaker 6: the condo, right, what do you plan on doing with that?
36:33
Speaker 8: Well that that I'm not sure just yet. But going
36:36
Speaker 8: back to the going back to the uh four one K.
36:40
Speaker 8: Do I need a certified certificate?
36:42
Speaker 6: Yeah, yeah, just get a certify that's c Reily the
36:45
Speaker 6: only kind you can get. Get him a certified death certificate,
36:47
Speaker 6: and well he'll get it. He'll just go to the registry.
36:50
Speaker 6: He'll just go to the to the you know, to
36:52
Speaker 6: the board there and pick it up. So yes, so
36:55
Speaker 6: I hope that helps a little. Though we do gotta
36:57
Speaker 6: we got to scoot. But yeah, the condo would be
36:58
Speaker 6: my only comment. Pay it attention to the condo. Probably
37:01
Speaker 6: use a trust for that.
37:03
Speaker 2: Mister Lutski, thank you so much for joining us today.
37:05
Speaker 6: All my pleasure.
37:06
Speaker 3: Thank you.
37:08
Speaker 1: This has been asked Todd on the Financial Exchange Radio
37:11
Speaker 1: network Ask Todd with Todd. Lutsky has been presented by
37:14
Speaker 1: Cushing and Dolan, serving Massachusetts and New England for more
37:17
Speaker 1: than thirty years, helping families with the state and tax planning,
37:20
Speaker 1: Medicaid planning, and probate law. Call eight hundred and three
37:23
Speaker 1: nine three four thousand and one or visit Cushingdolan dot com.
37:26
Speaker 1: The views expressed in this segment are solely those of
37:28
Speaker 1: Cushing and Dolan Armstrong advisor. He does not provide any
37:31
Speaker 1: legal or tax advice. Please consult with your illegal or
37:33
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37:35
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