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Is America's place in the World Economic Order in jeopardy? · The Financial Exchange Show

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Speaker 1: and Paul Lane.
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Speaker 2: Chuck PAULK. Tucker with you here today and as we
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Speaker 2: kick things off, not all eyes, but I'd say the
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Speaker 2: vast majority of them continue to be focused on Davos, Switzerland,
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Speaker 2: where you've got world leaders and billionaires. Robin Elbow's talking about, Hey,
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Speaker 2: what do we want to do this year? What do
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Speaker 2: we think about, you know, expansion plans for this business?
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Speaker 2: What do we think about expansion plans for that one?
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Speaker 2: But the topic that everyone's been talking about over the
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Speaker 2: last few days is one that, quite honestly, I don't.
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Speaker 3: Think she's brought up before.
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Speaker 2: We No, quite honestly, I'll make the case that you know,
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Speaker 2: up until the last year, I don't know if the
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Speaker 2: average American has thought of Greenland ever. And I don't
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Speaker 2: say that with any disrespect to Greenland in and of itself.
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Speaker 2: It's just like it's fundamentally the only thing that we
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Speaker 2: hear about Greenland. Like, correct me if I'm wrong. You
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Speaker 2: learn in like third grade, here are the things that
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Speaker 2: you learn. You learned that Leif Erickson came across it
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Speaker 2: way back when, and you learn that Greenland is actually
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Speaker 2: made of ice in Iceland is actually green, yes, And
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Speaker 2: other than that, I don't think the average person really
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Speaker 2: has thought about Greenland that much over the course of
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Speaker 2: their life. It's just not something that is particularly important
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Speaker 2: to the average Americans daily lived experience, you know, unlike
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Speaker 2: you know, everything else that you have to do, eat, sleep,
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Speaker 2: go to work, and YadA YadA. But it's in the
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Speaker 2: news now, and so clearly you've got some tensions that
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Speaker 2: have been building over this over the last couple of
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Speaker 2: weeks in particular, and culminating in the last day or two,
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Speaker 2: where it appears that, at least from a talking perspective,
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Speaker 2: you've got other world leaders that appear to be getting
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Speaker 2: kind of sick of the hole. Okay, like, you know,
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Speaker 2: we want to take Greenland thing, and it's at the
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Speaker 2: point where I think you're likely it kind of put
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Speaker 2: up a shut up time as far as hey, what's
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Speaker 2: actually going to happen on this.
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Speaker 4: Yes, it does appear that President Trump just this morning
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Speaker 4: ruled out using force to acquire Greenland. But in general,
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Speaker 4: what we've seen from from the markets over the course
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Speaker 4: of yesterday's action, where there was a you know, pretty
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Speaker 4: significant sell off, not crazy, was this sort of sell
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Speaker 4: America trade where you saw interest rates moving in an
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Speaker 4: upwards trajectory. You had the US tenure treasury up about
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Speaker 4: five or six base points, the US thirty year treasury
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Speaker 4: spiked as well. You also saw a pretty significant rally
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Speaker 4: in the metals, so the sort of safe haven play
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Speaker 4: with gold and silver upticking pretty significantly, and then you know,
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Speaker 4: some sell off on the US markets. There was some
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Speaker 4: noise made that the Danish pension system sold some of
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Speaker 4: their US treasury. So it seems like from the stack today, Chuck,
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Speaker 4: in general, it is reminiscent of April of last year
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Speaker 4: a little bit with very bit. Yeah, yeah, just a touch,
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Speaker 4: not not nearly as significant. But I'm not willing to
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Speaker 4: go where some of these pieces are going, which is
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Speaker 4: kind of questioning the US's standing from a global economic perspective.
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Speaker 4: I think it's a little bit whiplash in terms of
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Speaker 4: the reaction here in some of the pieces in the
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Speaker 4: Wall Street Journal and other publications out there.
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Speaker 2: So let's talk about, you know, kind of where the
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Speaker 2: rubber actually meets the road on this stuff, because as
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Speaker 2: we've seen, whether you're talking about you know, from europeam
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Speaker 2: leaders or quite honestly, like from the President, you'll hear
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Speaker 2: talk about, hey, we wanted this, we wanted that, and
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Speaker 2: then it's Okay, here's what we're actually implementing. And I'm
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Speaker 2: a big believer in pay attention to what people do,
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Speaker 2: not want people say, because ultimately talk is cheap. Like
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Speaker 2: anyone can say like, oh, like we want to do
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Speaker 2: this or we want to do that, it's hey, what
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Speaker 2: are we actually going to do? And I want to
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Speaker 2: talk about this in a couple of respects. The first
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Speaker 2: is I've heard from a number of completely panicked people
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Speaker 2: over the last couple of days noting like, hey, Europe
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Speaker 2: holds like eight trillion dollars in US treasuries, Like what
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Speaker 2: happened if what would happen like to the financial system
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Speaker 2: if they just decided to sell them? And so this
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Speaker 2: is like, quite honestly, the the most ridiculous thing that
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Speaker 2: we've heard in terms of just not being grounded in reality,
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Speaker 2: for several reasons. The first is, Paul, correct me if
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Speaker 2: I'm wrong, But last time I checked, Europe does not
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Speaker 2: you know, act in a cohesive fashion with every single
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Speaker 2: like there is no just like right, like you know,
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Speaker 2: the Greeks and the Germans are always getting along, the
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Speaker 2: Spaniards and the French or just you know, always buddy, buddy, No,
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Speaker 2: like they've got differences of opinion on these things. There's
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Speaker 2: no just head of Europe sitting there looking at this
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Speaker 2: treasury portfolio being like do I press the sell button today?
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Speaker 2: So like, first of all, like just from a like
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Speaker 2: unified approach standpoint, there is none in Europe. So it's
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Speaker 2: not something where Europe would suddenly wake up and be like,
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Speaker 2: we're gonna sell all of these today. The second piece,
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Speaker 2: if Europe did act in a you know, a completely
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Speaker 2: unified manner and said, hey, we're gonna sell all of
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Speaker 2: these today, basically what would happen is there is no
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Speaker 2: market to execute that kind of trade. So first of all,
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Speaker 2: they couldn't. And second, whatever they wanted to move the
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Speaker 2: money into you would take such a hit with basically
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Speaker 2: moving like any kind of significant volume in that fashion,
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Speaker 2: then you'd probably lose half to two thirds of your
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Speaker 2: money right off the bat. Anyways, so it's like, let's
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Speaker 2: pump the brakes on what may or may not happen
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Speaker 2: now if you want to have you know, some interesting
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Speaker 2: other conversations that I think are actually happening in Europe
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Speaker 2: right now amongst different pension funds and investment vehicles and
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Speaker 2: things like that. Here are some of the ones that
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Speaker 2: may be coming up. Hey, we, as a pension fund
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Speaker 2: own X dollars in US treasuries? Do we want to
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Speaker 2: sell a portion of that soon? If we do, great,
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Speaker 2: we can do that. More importantly, Hey, when those bonds mature,
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Speaker 2: do we want to reinvest them all into US treasuries
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Speaker 2: or do we want to diversify them differently? Those are
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Speaker 2: conversations that could be happening. Other questions. Hey, on the
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Speaker 2: US equity side of things, do we, as European you know,
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Speaker 2: investment managers want to continue to allocate so highly to
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Speaker 2: the US and the future, or do we want to
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Speaker 2: plan on reducing those allocations over time not to zero? Okay, Again,
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Speaker 2: these are not dumb people. They might, you know, live
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Speaker 2: in a different country and have different things that they're
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Speaker 2: focusing on, but they're not inherently like stupid or anything like.
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Speaker 2: That's not what we're talking about. So they might say, yeah,
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Speaker 2: like right now, our fund might hold you know that
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Speaker 2: this you know, pension fund X might hold you know,
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Speaker 2: fifty percent European stocks in fifty percent US. Maybe they decide, hey,
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Speaker 2: do we want to adjust down to forty percent US
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Speaker 2: over the next five years. I could see those as
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Speaker 2: being plausible conversations. And these are conversations that, based on
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Speaker 2: you know, kind of what's what's coming out, probably are
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Speaker 2: starting to happen in a number of different respects and
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Speaker 2: could impact investment flows to the United States over longer
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Speaker 2: periods of time and ways that you know could have
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Speaker 2: an impact. But like, let's get rid of this idea
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Speaker 2: that like Europe is gonna just wake up tomorrow and
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Speaker 2: be like, well, let's go and you know, liquidate all
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Speaker 2: of our US treasury holdings like a No, Like they're
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Speaker 2: not dumb, be they can't actually do that, Like there's
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Speaker 2: no market to do so uh and and and see,
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Speaker 2: like if you just look at how these things operate,
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Speaker 2: like there is no unified approach like it just it
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Speaker 2: doesn't work like that. So I think we need to
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Speaker 2: get rid of some of the hysterics around some of
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Speaker 2: this stuff and get back to being a little bit
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Speaker 2: more grounded in reality and what can and can't happen.
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Speaker 2: It is clear that again, these tensions are higher and
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Speaker 2: these conversations are being had, but I think the impacts
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Speaker 2: likely play out over a period of months and years.
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Speaker 2: If they do and the other thing. Just to keep
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Speaker 2: in mind, I'm not one hundred percent sure that they
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Speaker 2: do play out in any large scale fashion. They may
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Speaker 2: they may not. But just because someone talks about doing
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Speaker 2: something doesn't mean they're actually going to do anything either.
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Speaker 3: Paul, Right, I'm with you.
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Speaker 2: So I think one other piece just while what I'll
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Speaker 2: add people looking at like the US bond market yesterday
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Speaker 2: and being like, oh, like this must have been about Greenland. Paul,
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Speaker 2: Has there been any news about Japan invading Greenland in
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Speaker 2: the last week? No, Tucker, can you confirm there's been
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Speaker 2: no news? Okay, I got a little wordy.
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Speaker 3: I missed that. My kids have been sick, but off
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Speaker 3: my gage.
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Speaker 2: So the reason that I bring this up is if
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Speaker 2: you take a look at Japanese thirty year bond yields,
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Speaker 2: just as an example, the Japanese thirty year bond yield yesterday,
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Speaker 2: yesterday went from three point five six to three point
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Speaker 2: seven to seven percent. That's twenty one basis points. That's
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Speaker 2: a bigger move than what happened in US markets. The
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Speaker 2: point that I make on this it's not just what
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Speaker 2: was going on between the US and Greenland that was
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Speaker 2: moving US. You know, treasury markets yesterday. There is a
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Speaker 2: larger thing of foot that is happening in global bond
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Speaker 2: markets overall. And I'm not really convinced that the bond
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Speaker 2: market move yesterday had anything to do with the Greenland situation,
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Speaker 2: because if it did, then explain to me Japanese government
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Speaker 2: bonds blowing out by you know, twice as much as
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Speaker 2: US government bonds. If you go and take a look
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Speaker 2: at the United Kingdom just as an example, and their guilts,
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Speaker 2: their ten year guilts. Those I'm trying to pull up.
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Speaker 2: Actually it hasn't even processed through for yesterday at it,
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Speaker 2: so I don't know what the move was, but I'm
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Speaker 2: guessing when I look tomorrow it will be up as well,
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Speaker 2: because this was not just a US focused interest rate move.
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Speaker 2: US stocks did feel it more than international ones, but
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Speaker 2: the interest rate phenomenon was global yesterday, and so I
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Speaker 2: think that you need to, you know, think about these
11:41
Speaker 2: things when trying to come up with, you know, the
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Speaker 2: right story on this. I'm not convinced that what we
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Speaker 2: saw yesterday was Greenland related with at least what was
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Speaker 2: going on in the bond market. Inequities maybe a little bit,
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Speaker 2: I don't really know, but just be careful about ascribing,
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Speaker 2: you know, blame to any one particular story, because there
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Speaker 2: are a lot of different things that go on here.
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Speaker 2: Let's take a quick break. When we do return, let's
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Speaker 2: talk a little bit about, Hey, what happens if we
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Speaker 2: do see you know, a prolonged slump inequities hasn't been
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Speaker 2: the case over the last year, obviously very much the opposite.
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Speaker 2: But a piece in the Wall Street Journal talking about this,
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Speaker 2: what could we see if equities start to slump? We'll
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Speaker 2: discuss right after this.
12:20
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Speaker 2: Paul, there's a piece in the Wall Street Journal this morning.
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Speaker 2: It's titled A stock slump could Slam the economy. First,
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Speaker 2: I do feel the obligatory need to point out that
13:32
Speaker 2: like every time we get a two percent down day
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Speaker 2: in markets, now you get one of these pieces published.
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Speaker 2: So like, I mean, I just think it's ridiculous. But
13:42
Speaker 2: describe to me what is being outlined in this piece.
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Speaker 4: This hits on the point that we talked about quite
13:47
Speaker 4: frequently last year on the program, this idea that the
13:52
Speaker 4: stock market has been a tremendous run in the United
13:54
Speaker 4: States of the course of the last three years or so,
13:57
Speaker 4: and as a result of that, you have people who
14:00
Speaker 4: are in high income to your thresholds. So those households
14:03
Speaker 4: making over two hundred and fifty thousand are more kind
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Speaker 4: of the top ten percent of the United States household incomes.
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Speaker 4: They have a lot of their wealth in stocks, whether
14:12
Speaker 4: that's in four or one case or just in regular
14:14
Speaker 4: investment accounts. And the biggest statistic that stood out to
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Speaker 4: me in my mind last year was this idea that
14:21
Speaker 4: those people account for basically half of the spending throughout
14:24
Speaker 4: the United States.
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Speaker 3: That's a record that goes back.
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Speaker 4: To nineteen eighty nine where we haven't seen it get
14:30
Speaker 4: that high. And so as a result of that, you
14:33
Speaker 4: have this sort of imbalance where you have a lot
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Speaker 4: of wealthy people who are accounting for a lot of
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Speaker 4: the spending. A lot of their wealth is tied to stocks,
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Speaker 4: and if stocks were to sell off, that could lead
14:45
Speaker 4: to the economy slowing down and basically having an adverse
14:49
Speaker 4: effect on consumer spending and some of these other areas
14:53
Speaker 4: that are tracked in terms of economic health. You also
14:55
Speaker 4: have a large concentration of wealth within seven or eight
15:00
Speaker 4: companies in the s and P. Five hundred, the best
15:03
Speaker 4: you know US benchmark that you have for the markets
15:05
Speaker 4: that leaves you know, markets in a little bit more
15:09
Speaker 4: sensitive spot. Again, these are I'm just giving the parameters
15:13
Speaker 4: around the piece. I'm not saying I sit here and
15:17
Speaker 4: view it as a huge concern. I do wonder aloud
15:20
Speaker 4: that the stock market rally that we've seen over the
15:22
Speaker 4: last three or four years, and it does seem like
15:25
Speaker 4: a lot of the spending being congested in that top
15:27
Speaker 4: tier that if we were to see a pretty big
15:30
Speaker 4: self with the markets, I do wonder how that would
15:33
Speaker 4: impact GDP and things like that. I do think it
15:36
Speaker 4: would be a negative impact. But how severe is that
15:38
Speaker 4: impacts is something that I just am curious. I don't
15:41
Speaker 4: want to see it, but it would be interesting to
15:43
Speaker 4: see what does happen if that is the case.
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Speaker 2: Yeah, and look, the stuff that's in this piece is
15:48
Speaker 2: it's stuff that we've talked about in that Hey, we've
15:50
Speaker 2: seen slowing income growth overall over the last year or so,
15:54
Speaker 2: but it hasn't impacted consumer spending. And we've brought up, hey,
15:58
Speaker 2: there are more Americans now than ever both as you know,
16:01
Speaker 2: an absolute number, and that just as you know a
16:03
Speaker 2: percentage of overall Americans that are receiving incomes from things
16:09
Speaker 2: like social Security and their portfolio and pensions as opposed
16:13
Speaker 2: to you know, coming from just going out and working
16:17
Speaker 2: a job. There still are one hundred and seventy million
16:20
Speaker 2: Americans that are employed on any particular you know, day, week, month. Again,
16:25
Speaker 2: these are estimates from you know, the Bureau of Labor Statistics,
16:28
Speaker 2: but they are a large number of Americans that are
16:32
Speaker 2: seventy two years old and not working, not planning on working,
16:36
Speaker 2: and they get their twelve hundred dollars Social Security check
16:39
Speaker 2: and maybe they pull one thousand dollars a month out
16:41
Speaker 2: of their portfolio and that is their spending for the month.
16:45
Speaker 2: And so if that portfolio is impacted, does it cause
16:48
Speaker 2: an impact? There? The other place that I think is
16:51
Speaker 2: undeniable in this again, like talk to talk to people
16:55
Speaker 2: in their twenties and you'll you'll get this. There are
16:59
Speaker 2: people that you know, hey, they've got eight hundred dollars
17:02
Speaker 2: in a brokerage account and they're you know, using different
17:06
Speaker 2: you know, option strategies, you know, like zero days to
17:10
Speaker 2: expiration this and that, and hey, like this was up
17:12
Speaker 2: and I made five hundred bucks and I can go
17:13
Speaker 2: out and spend that this week. And that's absolutely happening
17:16
Speaker 2: at the margins as well. If you see a market
17:20
Speaker 2: that goes into any kind of extended slowdown does that
17:26
Speaker 2: kind of spending dry up as well? And so I
17:29
Speaker 2: think there are a lot of different ways that you
17:30
Speaker 2: can look at this. And again I get to the
17:34
Speaker 2: point where I can agree with the premise of the piece.
17:38
Speaker 2: I think the idea that hey, we're in a stock
17:40
Speaker 2: slump because we're now two and a half percent away
17:42
Speaker 2: from all time highs instead of half a percent away
17:45
Speaker 2: from all time highs, I find laughable. And this happens
17:49
Speaker 2: not even every year now, it's like every month that
17:51
Speaker 2: we have one of these dips. It happens because look,
17:55
Speaker 2: we had one of these October. People started talking about it,
17:58
Speaker 2: we had one in November. We've talked about it, we
18:01
Speaker 2: had one in December, people talked about it in ogology, Welkers.
18:04
Speaker 2: Now it's January and the Wall Street journals publishing pieces
18:07
Speaker 2: on it. So a prolonged stock slump will happen at
18:11
Speaker 2: some point. Stocks don't just go up every year historically,
18:16
Speaker 2: at least maybe things will change, you know, maybe it's
18:18
Speaker 2: a whole new world now. But my guess is stocks
18:20
Speaker 2: probably aren't just gonna go up every year for the
18:22
Speaker 2: rest of our lives. But I just don't know that
18:26
Speaker 2: you can look at this right now and be like,
18:28
Speaker 2: this is the time when the slump begins. It may
18:32
Speaker 2: it may not. I don't have you know, strong conviction
18:35
Speaker 2: where I look at this and I'm like, yeah, this
18:37
Speaker 2: is the time. They're concerns, but they're always concerns.
18:40
Speaker 4: The other tried and true peace to put out is
18:44
Speaker 4: all the other four hundred and ninety three companies in
18:46
Speaker 4: the S and P five hundred.
18:47
Speaker 3: You know, this is their year to take over.
18:50
Speaker 4: And it may be, but it just feels like every
18:52
Speaker 4: single time we get to the start of a new
18:54
Speaker 4: year and you go through six days of trading activity,
18:57
Speaker 4: everyone wants to start to point to the fact that
18:59
Speaker 4: there is going to be, you know, this weakness in
19:01
Speaker 4: that group, and we'll see maybe there is, maybe there isn't.
19:04
Speaker 4: But it just seems like those two are sort of
19:06
Speaker 4: the go tos.
19:07
Speaker 2: I'm closer on the ladder for reasons that we've outlined
19:10
Speaker 2: over the last few months. Then this is the start
19:13
Speaker 2: of a prolonged down market. Yeah, you know, I'm closer
19:16
Speaker 2: on Hey, the data center trade for reasons X, Y
19:20
Speaker 2: and Z might be starting to get a little bit
19:22
Speaker 2: long in the tooth as opposed to Yeah, the bear
19:26
Speaker 2: markets here like I just I don't know about that.
19:29
Speaker 2: Let's take a quick break. When we come back, we've
19:31
Speaker 2: got Wall Street watching the Todd Lutsky joins us for
19:34
Speaker 2: Ask Todd.
19:41
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20:00
Speaker 5: Well after yesterday's sell off, with the SMP five hundred
20:03
Speaker 5: and Nasdaq plunged over two percent, Marcus today are rebounding
20:08
Speaker 5: as wells He reacts to President Trump's remarks at the
20:10
Speaker 5: World Economic Forum in Davos this morning, where Trump called
20:13
Speaker 5: for immediate negotiations to acquire Greenland and said he won't
20:18
Speaker 5: use force Right now, the Dow is up nearly one percent,
20:21
Speaker 5: or four hundred and seventy seven points, SMP five hundred
20:25
Speaker 5: up nearly one percent as well, or sixty six points higher.
20:28
Speaker 5: NASDAC up about one percent as well, or two hundred
20:31
Speaker 5: and thirty points higher. Russell two thousand up one and
20:34
Speaker 5: a half percent. Ten year Treasury yield is down one
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Speaker 5: basis point at four point two eight one percent, and
20:42
Speaker 5: crude oil is down about a third of a percent,
20:45
Speaker 5: rating just above sixty dollars barrel. Netflix shares falling over
20:49
Speaker 5: three percent after the streaming giant posted better than expected
20:53
Speaker 5: quarterly results. The company also counted a record three hundred
20:56
Speaker 5: and twenty five million global paid subscribers. However, concerns about
21:01
Speaker 5: rising costs for Netflix are weighing on the stock. Meanwhile,
21:04
Speaker 5: United Airline stock up over two percent after the carrier
21:08
Speaker 5: said it expects earnings to jump this year, with its
21:11
Speaker 5: Price Your Seats and loyalty program outperforming standard ticket sales.
21:15
Speaker 5: In the previous quarter, is a loyalty program revenue climbed
21:19
Speaker 5: ten percent, while its premium offerings grew nine percent. Elsewhere,
21:23
Speaker 5: Craft find shares it down almost five percent follow news
21:26
Speaker 5: at Berkshire Hathway may soon sell some or all of
21:29
Speaker 5: its stake in the food maker, just months after the
21:32
Speaker 5: firm announced plans to split into two companies in Johnson
21:36
Speaker 5: and Johnson stock down over one and a half percent
21:39
Speaker 5: after the pharmaceutical company posted stronger than expected financial forecast
21:43
Speaker 5: for this year, in addition to solid earnings for the
21:47
Speaker 5: previous quarter. I'm Tucker Silva and that is Wall Street Watch.
21:52
Speaker 1: This is Asked Todd on the Financial Exchange Radio network.
21:56
Speaker 1: If you have an existing estate plan or in the
21:58
Speaker 1: market for one, Letsky is here to answer your questions
22:01
Speaker 1: and help you plan for a later life. Ask Todd
22:04
Speaker 1: is presented by Cushing and Dolan, serving Massachusetts and New
22:07
Speaker 1: England for more than thirty five years, helping families with
22:10
Speaker 1: estate and tax planning, medicaid planning, and probate law. Visit
22:14
Speaker 1: Cushingdolan dot com. Now here's Todd Lutsky.
22:20
Speaker 2: Ask promised from now joined by Todd Lutsky from the
22:23
Speaker 2: law firm of Cushing and Dolan for Ask Todd. This
22:28
Speaker 2: is your chance to ask Todd your estate planning questions
22:31
Speaker 2: live on air right now, at this very particular moment
22:34
Speaker 2: in time, phone lines are wide open. We've cleared them
22:38
Speaker 2: for you at eight eight eight two zero five two
22:40
Speaker 2: two sixty three. That is the number to call to
22:43
Speaker 2: ask Todd your estate planning questions live on air right
22:46
Speaker 2: now again. Eight eight eight two zero five two two
22:51
Speaker 2: sixty three is the number, and we've got plenty of room,
22:54
Speaker 2: But make sure that you get in early because we
22:56
Speaker 2: can usually only get to two or three calls. That
22:59
Speaker 2: phone number again is eight eight eight two zero five
23:04
Speaker 2: two two six three. Mister Lutsky, how you doing today?
23:08
Speaker 6: I'm doing great?
23:09
Speaker 2: And you uh doing okay? I went too over the
23:12
Speaker 2: long weekend. I was trying to buy a new mirror
23:14
Speaker 2: and I went to the store and the guy tried
23:17
Speaker 2: to sell me a broken one. Yeah, and I said, man,
23:20
Speaker 2: that really reflects poorly on you. You know, it just
23:25
Speaker 2: was not good. Todd, I want to talk to you
23:27
Speaker 2: a little bit about the five year lookback period that
23:31
Speaker 2: is often referenced for protecting assets from long term care costs.
23:36
Speaker 2: Can you give listeners a little bit of detail, maybe
23:39
Speaker 2: an example or two of just how that five year
23:42
Speaker 2: lookback actually works in practice, Like what does it mean,
23:45
Speaker 2: like what actually happens during a medicaid application for that
23:49
Speaker 2: five year lookback?
23:51
Speaker 6: Yeah, I think it's important to understand not only the
23:54
Speaker 6: five year lookback, but you know, conversely, the penalty period calculation.
23:58
Speaker 6: There's actually two different calculations that are done. So the
24:03
Speaker 6: most common one, the one you're referring to, is this
24:06
Speaker 6: five year waiting period. So if you were to take
24:09
Speaker 6: an asset and move an asset, the rule generally is
24:13
Speaker 6: that you take an asset that is otherwise available to
24:17
Speaker 6: the nursing home and put it somewhere that it's no
24:21
Speaker 6: longer available, and you don't get back fair market value
24:25
Speaker 6: in exchange for the transfer. That's a bad thing. That's
24:28
Speaker 6: a disqualifying transfer. And so from the moment you do that,
24:32
Speaker 6: call it the date of gift. The moment you do that,
24:37
Speaker 6: that starts a five year waiting period. So for the
24:40
Speaker 6: next five years you are not able to apply for Medicaid.
24:47
Speaker 6: In other words, if you stay out of a nursing
24:48
Speaker 6: home for five years, then whatever you transferred, probably to
24:53
Speaker 6: one of these Medicaid irrevocable trusts, would then be protected
24:57
Speaker 6: from the cost of long term care and no payback
25:01
Speaker 6: provision needed. Okay, so that's that's pretty clear. So you
25:05
Speaker 6: don't have to worry about the value how much you transferred,
25:08
Speaker 6: what it was worth. You just know that it's five years.
25:12
Speaker 6: It could be a dollar, it's five years, okay, so
25:16
Speaker 6: we don't have to worry about that calculation. But if
25:20
Speaker 6: you make a gift, do this transfer, and want to
25:25
Speaker 6: apply for nursing home care, say after two years, well
25:29
Speaker 6: then what would happen is they would say, well, not
25:31
Speaker 6: only did you not make the five years, but maybe
25:33
Speaker 6: the penalty period is shorter, and the penalty period is
25:37
Speaker 6: the value of the transfer. Let's say two hundred thousand
25:41
Speaker 6: divide by the average monthly cost of nursing home care
25:44
Speaker 6: in the state, which that number fluctuates all the time.
25:47
Speaker 6: I don't know exactly the number today. I think it's
25:49
Speaker 6: somewhere around fifteen grand, fourteen or fifteen grand, and then
25:54
Speaker 6: you divide that out and it gives you a number
25:56
Speaker 6: of months. Now, that number of months could be far
25:59
Speaker 6: less than five years. People say, well, that's great. Yeah,
26:03
Speaker 6: well that's great, but that's not how it works. That
26:07
Speaker 6: smaller penalty period would not begin to run until you
26:12
Speaker 6: enter a nursing home, apply for Medicaid and get denied
26:16
Speaker 6: because of that transfer. That's when the start date would run.
26:20
Speaker 6: So we're much happier with just the five years. Get
26:23
Speaker 6: it in, get it done, move on, and get over it.
26:26
Speaker 6: So there's a little difference between the two. But yeah,
26:29
Speaker 6: getting that five year clock started, folks, Planning in advance
26:34
Speaker 6: is generally better than not planning in advance, and you
26:37
Speaker 6: have more options when you do it. For example, even
26:41
Speaker 6: if you had gotten past four years and you got sick,
26:45
Speaker 6: you might say Oh you know what, I'll just private
26:47
Speaker 6: pay for one year and now I'll protect all these
26:49
Speaker 6: assets that I transferred at the cost of maybe one
26:52
Speaker 6: hundred grand.
26:53
Speaker 3: I might do that.
26:54
Speaker 6: You'd have that option available, So always good to get
26:57
Speaker 6: the clock running.
26:58
Speaker 2: Folks, talking with Todd Lutsky from the law firm of
27:01
Speaker 2: Cushing and Dolan. Still room on the phone lines for
27:04
Speaker 2: your estate planning questions. Eight eight eight to zero five
27:09
Speaker 2: two two sixty three is the number to call again?
27:12
Speaker 2: That is eight eight eight to zero five two two
27:16
Speaker 2: six three. We're gonna take a quick break right now,
27:18
Speaker 2: but when we come back, it is right to your
27:21
Speaker 2: calls with Todd Lutsky. That phone number one more time
27:25
Speaker 2: is eight eight eight to zero five two two sixty three.
27:30
Speaker 2: Your calls when we return.
27:32
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:36
Speaker 1: only here on the Financial Exchange Radio Network. You're listening
27:41
Speaker 1: to Ask Todd with Todd Lutsky on the Financial Exchange
27:45
Speaker 1: Radio Network.
27:52
Speaker 2: All right, let's get right to your calls for Todd Lutsky.
27:56
Speaker 2: First in the queue. Oh I just closed my eyes. Okay,
28:00
Speaker 2: here we go, first in the queue for mister Letsky.
28:03
Speaker 2: We got Chris in Milton, Chris, what's your question for Todd?
28:07
Speaker 7: Hi, Todd, Okay, I'm helping the family of a deceased
28:12
Speaker 7: relative to a Massachusetts a state tax return. Okay, you know,
28:18
Speaker 7: sadly anyway, sadly. The question I have is, there's four
28:26
Speaker 7: lots of land in Florida. You know, land isn't as
28:29
Speaker 7: expensive as here, but they're worth about one hundred and
28:31
Speaker 7: fifty thousand in total. Okay, And I've seen three different
28:36
Speaker 7: approaches to how to handle that on the massive state
28:40
Speaker 7: tax return.
28:41
Speaker 2: Okay.
28:41
Speaker 6: I can stop you right here and give you the answer. Okay, ready, ready,
28:45
Speaker 6: as ready, great question, and you can read the statue
28:50
Speaker 6: six ways to Sunday. And I've I've lectured on this.
28:53
Speaker 6: They get it wrong. Okay. So Massachusetts, let's just be
28:58
Speaker 6: clear Massa Chusetts. Well, first of all, the person that died,
29:03
Speaker 6: I assume is a Massachusetts resident, correct okay, and owns
29:07
Speaker 6: out of state property in Florida.
29:09
Speaker 7: Correct, yep, correct, yup, it's worth one hundred and fifty thousand.
29:13
Speaker 6: Massachusetts cannot tax out of state property. There's a dissori case.
29:19
Speaker 6: That's the name of the case, the dissory case that
29:22
Speaker 6: it was done, and it was stated that it is
29:25
Speaker 6: unconstitutional for Massachusetts to tax out of state property. But
29:30
Speaker 6: the way they tell you to calculate it on the
29:33
Speaker 6: seven oh six, even in the instructions to the seven
29:37
Speaker 6: oh six, is inaccurate. Okay, So the way you report
29:41
Speaker 6: it is you simply put on the seven oh six
29:44
Speaker 6: tax return, you know, let's just call it Florida property
29:47
Speaker 6: located at XYZ Street, you know, describe it and put
29:53
Speaker 6: zero next to the value zero. Do not put a
29:57
Speaker 6: value on it. You can show it, but put zero.
30:02
Speaker 6: It is not taxed, it's not subject to a calculation,
30:06
Speaker 6: it's just not taxed. So hopefully that helps you. And
30:11
Speaker 6: I know the instructions are incorrect in terms of telling
30:13
Speaker 6: you how to report it, and oftentimes the statute, although
30:16
Speaker 6: I think they're working on updating and I think they
30:18
Speaker 6: updated it in August of twenty twenty five finally, and
30:22
Speaker 6: I think they got it right. I think it's sixty
30:24
Speaker 6: five C is the statute, and you can find out
30:28
Speaker 6: how they calculate the tax but not taxable. So great question,
30:32
Speaker 6: and I think that Chris helps a lot of people
30:35
Speaker 6: out there. Even practitioners sometimes don't realize that it's tax
30:39
Speaker 6: that it's not taxable in mass and they might even
30:42
Speaker 6: now be saying I'm going to go back and amend
30:44
Speaker 6: my seven h six is that I've done for my
30:46
Speaker 6: clients to get a refund because I actually ended up
30:49
Speaker 6: paying tax on it when I should not be So
30:53
Speaker 6: great question. Thanks for that. And folks, that's somebody who
30:56
Speaker 6: passed away. But people who are living and are faced
30:59
Speaker 6: with nursing home care last minute, we have a guide
31:02
Speaker 6: long term care planning for the procrastinator right It helps
31:06
Speaker 6: us understand not to write the check last minute. People
31:10
Speaker 6: who have done planning are going to have some assets
31:13
Speaker 6: outside the trust, that's okay. People who have not done
31:16
Speaker 6: planning are going to have more assets at risk. So
31:19
Speaker 6: there's something for everyone in this guide. If you're faced
31:21
Speaker 6: with going into a nursing home, this guide will help
31:25
Speaker 6: you understand how annuities work to protect excess dollars excess resources,
31:30
Speaker 6: and it will also explain pool trusts. It also explains
31:34
Speaker 6: how assets are accountable and not countable depending on you
31:38
Speaker 6: know what they are, from houses to rental properties, to
31:42
Speaker 6: vacation homes to iras, yes life insurance. They're all treated
31:46
Speaker 6: differently for married couples and for single people, so you
31:51
Speaker 6: need to understand the difference. Folks, get the guide, don't
31:54
Speaker 6: write the check eight sixty six eight four eight five
31:58
Speaker 6: six nine or Legal Exchange show dot com. You can
32:02
Speaker 6: download it there again eight six six eight four eight
32:06
Speaker 6: five six nine nine or Legal Exchange Show dot com.
32:10
Speaker 2: Todd got another one for you. Let's go to Steve
32:12
Speaker 2: in Plymouth. Steve, what's your question for Todd?
32:16
Speaker 8: Yeah, I think thank you for having me. I think
32:19
Speaker 8: you partially answered my question with this last answer. I
32:24
Speaker 8: was initially calling to find out what type of vehicles
32:29
Speaker 8: could this five year look back utilize, And it sounds
32:36
Speaker 8: like there's different types of trust that you had mentioned.
32:39
Speaker 8: And my second question was what happens if I move
32:42
Speaker 8: during the five year period and go to a different
32:46
Speaker 8: states the five year clock reset or how does that work?
32:51
Speaker 6: So great question and for everybody, folks. When when I
32:54
Speaker 6: mentioned trust, there there's really only one kind that I'm
32:58
Speaker 6: aware of. So if I'm going to be doing makes
33:00
Speaker 6: it so much easier for everybody. Right, if I'm going
33:03
Speaker 6: to be trying to protect assets from the cost of
33:06
Speaker 6: long term care, I'm going to use a Medicaid grant
33:10
Speaker 6: or irrevocable income only trust. I would make the title
33:15
Speaker 6: longer if I could, but that's basically the description of
33:19
Speaker 6: the kind of trust that you need. There's really no
33:22
Speaker 6: other kind that I'm aware of that will give you
33:25
Speaker 6: that protection. And yes, to your point, Steve, the moment
33:29
Speaker 6: you put the assets into that trust, whether it's a
33:34
Speaker 6: home of vacation, home, money, a brokerage account, doesn't matter.
33:39
Speaker 6: Not your IRA, but these other assets, that starts the
33:44
Speaker 6: five year clock running. And if you stay out of
33:47
Speaker 6: a nursing home for five years and then get sick,
33:51
Speaker 6: those assets are protected and not subject to a state
33:55
Speaker 6: recovery or payback to the state after you pass. That
34:01
Speaker 6: takes care of that piece. Then of course you ask
34:03
Speaker 6: what happens if I move? If you move, not a problem.
34:08
Speaker 6: I've been at this for over thirty years and i
34:10
Speaker 6: can't tell you how many people I've kicked out of
34:12
Speaker 6: the state. Now I shouldn't say it that way, but
34:14
Speaker 6: you know that they want to protect assets, they want
34:16
Speaker 6: to not pay a state taxes, they want to move
34:18
Speaker 6: to a state that doesn't have a state taxes. But yes,
34:22
Speaker 6: that happens. And if they move, whether it's during the
34:26
Speaker 6: five year waiting period or after it doesn't matter. Yes,
34:30
Speaker 6: you need to update, say you move to Florida, you
34:32
Speaker 6: need to update all of your estate planning documents, the will,
34:35
Speaker 6: the healthcare, the power of attorney to reflect Florida. But
34:39
Speaker 6: you don't have to change the trust and you will
34:41
Speaker 6: not reset the five year waiting period. So I think
34:45
Speaker 6: we've addressed your questions. Hope that helps. So that, Folks,
34:49
Speaker 6: is basically the plan for Steve and I hope I
34:53
Speaker 6: addressed that for Kirk, for Chris as well.
34:56
Speaker 2: Todd. We were talking earlier in the segment just about
35:00
Speaker 2: you know that five year look back period. Someone isn't
35:04
Speaker 2: through that five year period. What options are available for
35:07
Speaker 2: last minute planning, just in terms of you know, quick
35:10
Speaker 2: general summary.
35:11
Speaker 6: So I think let's just put some numbers to it
35:13
Speaker 6: so we can make sense. Let's say we've put in
35:16
Speaker 6: an irrevocable trust, like I was just talking about with Steve.
35:19
Speaker 6: Let's say we put in an irrevocable trust, a million
35:22
Speaker 6: dollar home and five hundred thousand dollars investment portfolio, and
35:26
Speaker 6: we're four years into our waiting period. Okay, put outside
35:31
Speaker 6: the trust. There's always something right, like what well the
35:33
Speaker 6: IRA that never went in the trust? We couldn't put
35:36
Speaker 6: that in the trust because if we moved it to
35:38
Speaker 6: a trust, we would have, you know, a huge income
35:41
Speaker 6: tax hit. So let's say there's a half a million
35:44
Speaker 6: dollars sitting in an IRA and fifty thousand sitting in there,
35:48
Speaker 6: you know, their their personal bank account. Okay, folks, this
35:53
Speaker 6: is typical. This is exactly what you might run into
35:56
Speaker 6: even after you've done the planning, which is why the
35:57
Speaker 6: guide is really for everyone, because there's always going to
35:59
Speaker 6: be these assets outside the trust. But because they got
36:03
Speaker 6: this clock started, one of the options I would give
36:06
Speaker 6: them when they would come in the door would be, well,
36:09
Speaker 6: you're four years in. You could just private pay for
36:13
Speaker 6: one year and that'll get you to the five years.
36:17
Speaker 6: And if I private pay for one year, I will
36:20
Speaker 6: protect one point five million dollars of assets that I
36:23
Speaker 6: tucked away in the trust years ago. Correct, correct? I
36:26
Speaker 6: tell them, great idea, Well how much is that going
36:29
Speaker 6: to cost me?
36:29
Speaker 8: Well?
36:30
Speaker 6: I don't know, probably about one hundred and forty grand,
36:33
Speaker 6: but you know what, you might be getting thirty grand
36:35
Speaker 6: or so in social security, so it's really only going
36:38
Speaker 6: to cost you about one hundred and ten grand. Oh look,
36:41
Speaker 6: I got five hundred thousand of my IRA. I'll just
36:44
Speaker 6: use that and then after that we've protected a million five.
36:50
Speaker 6: Then we will then apply all the things that are
36:53
Speaker 6: listed in this guide as to how to protect the
36:55
Speaker 6: balance of these assets that are outside the trust so
36:58
Speaker 6: that you could still become eligible for medicaid. So hopefully
37:02
Speaker 6: that's helpful.
37:03
Speaker 2: Fantastic, mister Watski, Thank you so much for the time.
37:06
Speaker 2: We appreciate it.
37:07
Speaker 6: Always a pleasure. Thank you.
37:09
Speaker 1: This has been Asked Todd on the Financial Exchange Radio network.
37:13
Speaker 1: Ask Todd with Todd. Lutsky has been presented by Cushing
37:15
Speaker 1: and Dolan, serving Massachusetts and New England for more than
37:18
Speaker 1: thirty years, helping families with the state and tax planning,
37:21
Speaker 1: Medicaid planning and probate law. Call eight hundred three nine
37:24
Speaker 1: three four thousand and one or visit Cushingdolan dot com.
37:28
Speaker 1: The views expressed in this segment are solely those of
37:30
Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
37:32
Speaker 1: or tax advice. Please consult with your illegal or tax
37:34
Speaker 1: advisor on such matters. Cushing and Armstrong do not endorse
37:37
Speaker 1: each other and are not affiliated