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Trump ramps up tariff blitz · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada
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Speaker 1: and Paul Lane.
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Speaker 2: Chuck Paul and talker with you today, and we kick
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Speaker 2: things off with a piece from the bloomy Berg truck
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Speaker 2: ramps up tariff blitz with India pharma chips in sights.
1:22
Speaker 2: And basically what this is talking about is the Trump
1:26
Speaker 2: administration threatening to raise additional tariffs on India in theory
1:33
Speaker 2: for the purchase of Russian oil. But this is happening
1:38
Speaker 2: at the same time that China remains the largest purchaser
1:40
Speaker 2: of Russian oil and there's no talk of doing so there,
1:43
Speaker 2: And so I think that, you know, there's some questions
1:45
Speaker 2: as to hey, is that a red herring and is
1:47
Speaker 2: there something else that's actually going on in these negotiations
1:52
Speaker 2: between the United States and India. I personally find this
1:55
Speaker 2: kind of interesting for two reasons. The first being that
2:00
Speaker 2: President Modi has generally had a pretty good rapport with
2:06
Speaker 2: both President Trump and Vice President JD. Vance, who visited
2:09
Speaker 2: India I think it was maybe three or four months ago,
2:12
Speaker 2: and you know, had supposedly a very good visit there,
2:16
Speaker 2: and so trying to make sense of this, it's clearly
2:22
Speaker 2: not about Russian oil. I know that's what's being said here.
2:26
Speaker 2: But if it were about Russian oil, then China would
2:28
Speaker 2: be being threatened with the same thing and they're not.
2:31
Speaker 2: So what do you make of what's going on here
2:34
Speaker 2: between the US and India right now?
2:36
Speaker 3: Well, I think.
2:37
Speaker 4: One strategic point that you have to point out here
2:39
Speaker 4: when discussing this subject is that China has leverage in
2:42
Speaker 4: the sense that they have the rare earth metals in
2:45
Speaker 4: place that they've been able to utilize as a negotiating
2:49
Speaker 4: chip against the United States. Where we saw with fighter
2:52
Speaker 4: jets and numerous other items. Those are critical and we
2:55
Speaker 4: just do not have the capacity to manufacture those things domestically.
2:59
Speaker 4: There's there's really only one option in town, so you're
3:03
Speaker 4: fully reliant upon them in terms of that market share.
3:05
Speaker 4: If you compare that to India, the subject that's at
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Speaker 4: the discussion and focus today, they don't have that same
3:12
Speaker 4: sort of leverage. There isn't something that is so critical
3:15
Speaker 4: from an import perspective that India provides the United States
3:19
Speaker 4: that would allow for US to perhaps not better the knees,
3:23
Speaker 4: but be more willing to negotiate. There's a little bit
3:26
Speaker 4: more wiggle room for Trump to be more aggressive on
3:30
Speaker 4: the tear front here. So I would have to think
3:32
Speaker 4: that there's some sort of issue that's been a hang
3:35
Speaker 4: up in terms of negotiations, and this is Trump using
3:38
Speaker 4: tactics that we've seen him use in other instances of
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Speaker 4: trying to sort of lay down the hammer in order
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Speaker 4: to perhaps bring India to the negotiating table to settle things.
3:48
Speaker 4: And it's in their advantage to try and do something here,
3:52
Speaker 4: just because they have got a lot of focus and
3:54
Speaker 4: attention to become the newer, next sort of goal an
4:00
Speaker 4: opportunity for manufacturing, So it would make sense for them
4:04
Speaker 4: to try and close the deal. That's sort of what
4:07
Speaker 4: I make of it, is that they just don't have
4:08
Speaker 4: the leverage and so you can be a little bit
4:10
Speaker 4: harsher with them. The Russian oil has just happened to
4:12
Speaker 4: be the mechanism that he's using to draw the focus there.
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Speaker 2: And obviously you have to sit here and you'll get
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Speaker 2: this and say, okay, is this going to actually go
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Speaker 2: into effect or is this just a negotiating poy because
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Speaker 2: in general, the higher tariffs that have been threatened have
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Speaker 2: pretty much extensively when it comes to country specific ones,
4:35
Speaker 2: not actually been implemented to the level that has been threatened. Obviously,
4:40
Speaker 2: we have this new round of tariffs that's going to
4:42
Speaker 2: be going into place on Friday, that was announced late
4:46
Speaker 2: last Thursday. But it's something where hey, is this going
4:52
Speaker 2: to actually go in place or do you end up,
4:55
Speaker 2: you know, kind of getting these things across the finish line.
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Speaker 2: And this was just you know, part of the whole problem.
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Speaker 2: So we're forgive me if we've said this before. We're
5:03
Speaker 2: gonna have to wait and see.
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Speaker 4: Yeah, I thought I saw that the the twenty five
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Speaker 4: percent additional tarists on India had been imposed here, but
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Speaker 4: I'm still trying to look through and this is moments ago,
5:12
Speaker 4: but we'll continue to monitor the situation.
5:15
Speaker 2: Things are evolving quickly, like like the ours are with
5:18
Speaker 2: this stuff. The other piece that the President talked about
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Speaker 2: yesterday was within the next week or so, he's going
5:26
Speaker 2: to be announcing the tariff policy as it relates to
5:32
Speaker 2: semiconductors and pharmaceuticals. And the big thing that was of no,
5:38
Speaker 2: we didn't get anything when it came to semiconductors, but
5:42
Speaker 2: I'll read a quote here from the President. We'll be
5:44
Speaker 2: putting initially a small tariff on pharmaceuticals, but in one year,
5:48
Speaker 2: one and a half years maximum, it's gonna go to
5:50
Speaker 2: one hundred and fifty percent and then go to two
5:52
Speaker 2: hundred and fifty percent because we want pharmaceuticals made in
5:55
Speaker 2: our country. So we're gonna have to see, you know,
5:57
Speaker 2: what the mechanism is and what things are are are
6:00
Speaker 2: laid out here, and obviously there's always the possibility because
6:03
Speaker 2: this is being done through executive orders. Two possibilities actually,
6:08
Speaker 2: one is, you know, it's you know, potentially challenged in
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Speaker 2: court and ruled that the president does not possess the
6:14
Speaker 2: power to do so. The second is this can always
6:17
Speaker 2: be amended and changed, as we've seen with tariffs over
6:20
Speaker 2: the course.
6:21
Speaker 3: Of this year.
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Speaker 2: But those are some of the first concrete numbers that
6:25
Speaker 2: we've heard from the President when it comes to some
6:28
Speaker 2: of these additional sector specific tariffs that are being discussed.
6:32
Speaker 4: On the pharmaceutical side of things. We're taking these tariff
6:36
Speaker 4: stories day by day, so I can't speculate on what
6:38
Speaker 4: they look like or a year from now, even though
6:40
Speaker 4: those numbers sound rather shocking and I feel like from
6:43
Speaker 4: a healthcare perspective, that would create all sorts of issues potentially,
6:46
Speaker 4: But let's take it day by day and see sort
6:49
Speaker 4: of what next week brings. It does seem like at
6:51
Speaker 4: least we're going to get some sort of initial tariffs
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Speaker 4: in place, and that's harmful for India on the pharmaceutical
6:57
Speaker 4: side of things. And we'll see what the semiconductor looks
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Speaker 4: like too, because obviously that has significant impact to a
7:05
Speaker 4: lot of the tailwind that the market has been provided.
7:09
Speaker 4: Over the course of these first eight months. It's been again,
7:12
Speaker 4: not heavily I would say, I think it's fair to
7:15
Speaker 4: say heavily concentrated within some of the the AI spending
7:18
Speaker 4: in the tech section, which has ruled the day for
7:20
Speaker 4: the last couple of years.
7:22
Speaker 2: This gets us to this piece from the Wall Street Journal,
7:25
Speaker 2: where the headline I think is worth digging into the
7:28
Speaker 2: tariff effect billions in revenue but no economic earthquake, And
7:32
Speaker 2: pretty much what it lays out here is what we've
7:34
Speaker 2: said for the last couple months, which is, look, to
7:37
Speaker 2: this point, the actual measurable impact of tariffs on the
7:41
Speaker 2: US economy is uncertain at most. You know, it's it's
7:48
Speaker 2: not something where you can definitively point to anything and say, yes,
7:52
Speaker 2: this is happening because of tariffs.
7:55
Speaker 3: We started to get.
7:56
Speaker 2: Maybe a little sense in the last CPI reading with
7:59
Speaker 2: some of the numbers on certain categories of goods that
8:02
Speaker 2: we're starting to see prices moving up. But beyond that,
8:07
Speaker 2: the labor market, even though job growth is slowing overall,
8:11
Speaker 2: you're not seeing an increase in layoffs. You're not seeing
8:14
Speaker 2: you know, a major increase in jobless claims or anything
8:17
Speaker 2: like that. So there's not much on that side. Retail
8:20
Speaker 2: sales haven't been particularly good, but they've been slowing for
8:24
Speaker 2: the last year and a half. It's a trend that's
8:26
Speaker 2: been in place for quite some time, and so I
8:30
Speaker 2: think when you look at it, it's something where there
8:33
Speaker 2: hasn't really been a meaningful impact of the tariffs to
8:37
Speaker 2: the economic data that we've gotten to this point.
8:40
Speaker 3: But and this is, you know, kind of the counterpoint.
8:43
Speaker 2: The average effective tariff rate is just now creeping up
8:46
Speaker 2: to ten percent for the month of June, which is
8:47
Speaker 2: the last month that we have full data for. And remember,
8:50
Speaker 2: something that's imported in June typically doesn't hit store shelves
8:54
Speaker 2: or you know, go out to its end buyer for
8:57
Speaker 2: another thirty to sixty days after, just because it's come
9:00
Speaker 2: into the port. Then it's got to be sent to
9:02
Speaker 2: you know, a regional distribution place. Then finally out to
9:04
Speaker 2: where it's going to go. So it's very possible that
9:08
Speaker 2: we start seeing the data changing over the next couple months.
9:12
Speaker 2: I'm also open to the possibility that companies continue to
9:16
Speaker 2: absorb this and it mostly shows up on the earning
9:18
Speaker 2: side of things rather than anything dramatic and other economic data.
9:22
Speaker 2: The question then is, Okay, if companies are, you know,
9:25
Speaker 2: feeling this on earnings, do they do what they typically
9:28
Speaker 2: do when earnings and margins are pressured, which is do
9:30
Speaker 2: they start to lay people off? And that's where you
9:33
Speaker 2: know the impact is felt.
9:34
Speaker 4: Cut head count. Yeah, the next couple of months, we've
9:35
Speaker 4: mentioned it before and what we'll say it again, are
9:37
Speaker 4: going to be critical to get the full gauge of
9:40
Speaker 4: what the tariff impact is going to be, because, like
9:42
Speaker 4: you mentioned, and this piece lays down on the Wall
9:44
Speaker 4: Street Journal, minimal impact over the first couple months here.
9:48
Speaker 4: You could point to that CPI report that you're referencing
9:51
Speaker 4: where we did see a bit of uptick there. In
9:54
Speaker 4: terms of the other side of it, Obviously, a big
9:57
Speaker 4: focus behind these initiatives is to try to reach manufacturing,
10:01
Speaker 4: and the point that's laid out here in the Wall
10:02
Speaker 4: Street Journal, that's worth noting is that we haven't really
10:06
Speaker 4: seen any developments on that front. And granted it's early,
10:08
Speaker 4: we're six months into this or so maybe a little
10:11
Speaker 4: bit less. There needs to be a resolution on these
10:16
Speaker 4: tariffs within the next couple months. We need sort of
10:18
Speaker 4: a final verdict on what the rates are going to be.
10:22
Speaker 4: If the administration is going to want to get its
10:25
Speaker 4: intended effect of having companies scrutinize whether or not they
10:28
Speaker 4: want to manufacture domestically, that you know, some clarity will
10:33
Speaker 4: be helpful and hopefully that we get that over the
10:35
Speaker 4: course of the next month or two.
10:36
Speaker 2: And by the way, we did just have this was
10:40
Speaker 2: just now an executive order posted by the White House
10:44
Speaker 2: imposing an additional twenty five percent tariff on India. And
10:48
Speaker 2: this is going to be effective. Let's see subject to
10:52
Speaker 2: section three of the sort, this rate of duty shall
10:55
Speaker 2: be effective with respect to goods entered for consumption or
10:58
Speaker 2: withdrawn from warehouse for consumption honor after twelve oh one
11:01
Speaker 2: am Eastern twenty one days after the date of this
11:04
Speaker 2: Order three, So effective August twenty seventh. So once again,
11:10
Speaker 2: will this go into effect or not three weeks from now?
11:13
Speaker 2: Tune in then let's take a quick break. When we return,
11:17
Speaker 2: let's talk about some earnings from last night.
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12:11
Speaker 2: Advanced micro Device is more commonly referred to as AMED
12:17
Speaker 2: or AMD. They reported earnings after the bell yesterday and
12:24
Speaker 2: they had overall pretty darn good profit growth, pretty darn
12:29
Speaker 2: good revenue growth. But the stock down about seven percent
12:34
Speaker 2: today despite revenue up thirty two percent year over year.
12:39
Speaker 2: What gives is this just a case where we've seen
12:42
Speaker 2: this in semi's all quarter quite honestly, where despite good numbers,
12:47
Speaker 2: maybe semiconductor stocks just got a little too out of
12:50
Speaker 2: control over the last couple months and now just need
12:53
Speaker 2: to come back to earth because the numbers are good
12:55
Speaker 2: for the earnings, but they're not that good.
13:00
Speaker 4: Your thoughts, there's a couple of things you could point
13:02
Speaker 4: to here on you know, perhaps why they're selling off.
13:05
Speaker 4: I believe they're off about seven percent. AMD stock is
13:09
Speaker 4: in early trading here. Some of it is the impact
13:12
Speaker 4: from the restrictions on exports to China and some of
13:16
Speaker 4: their chips. They have a version of their chips that
13:19
Speaker 4: back in April and video faced this too, that they
13:21
Speaker 4: weren't able to export the chips AMD to China. That
13:25
Speaker 4: was an eight hundred million dollar impact on Q two
13:28
Speaker 4: and they're estimating that it could could be an impact
13:30
Speaker 4: of one point five billion on the year. However, it
13:33
Speaker 4: does seem like the administration had recently allowed for the
13:38
Speaker 4: resuming the exports of these chips to China. In the
13:42
Speaker 4: next month or two, that could occur, but it's really
13:45
Speaker 4: on a bigger level, Chuck and their gross margins got
13:48
Speaker 4: a little nicked up to this quarter on on a
13:51
Speaker 4: more major level, it's the reason that Nvidia stock has
13:55
Speaker 4: done so fantastic over the course of the last several
13:57
Speaker 4: years is that the chips that in Vidia develops are
14:01
Speaker 4: the best in class. However, you could probably argue that
14:04
Speaker 4: AMD from a price perspective and performance is pretty a
14:07
Speaker 4: pretty close second. But it's the pairing of the hardware
14:10
Speaker 4: and software that Nvidia has that makes it so dominant.
14:13
Speaker 4: And to try and simplify this as much as possible,
14:16
Speaker 4: on the technology side, the developers, the people who use
14:19
Speaker 4: these in Nvidia chips to develop chet, EBT or all
14:22
Speaker 4: these other AI systems and programs that we talk about.
14:26
Speaker 4: It's that relationship there that makes in Vidia's chips so
14:30
Speaker 4: attractive and allows them to command such a high gross margin.
14:33
Speaker 4: And AMD doesn't have that same sort of pairing in place,
14:38
Speaker 4: where they have a great development platform on the software
14:40
Speaker 4: side and their chip to pair with, and that's really
14:43
Speaker 4: why they've struggled versus in Nvidia. And there's demand certainly
14:48
Speaker 4: for lower cost options, and if they could come out
14:51
Speaker 4: with a good software program, they could probably take some
14:54
Speaker 4: market share from media. But that's why they've struggled here.
14:57
Speaker 4: That's not necessarily all the story today on the self.
15:00
Speaker 4: That's the larger reason why it hasn't done as well
15:02
Speaker 4: as Nvidia has.
15:03
Speaker 2: Yeah, if if if you're listening and you want to
15:05
Speaker 2: sound like you have like some real knowledge of what
15:10
Speaker 2: what Paul just talked about, uh, the software side of things.
15:12
Speaker 2: And Vidia has a platform called kudas c U, d A,
15:16
Speaker 2: and basically what it is, uh, it is a computing
15:19
Speaker 2: platform that helps to coordinate uh large numbers of processors
15:23
Speaker 2: to do what you want them uh to do and
15:27
Speaker 2: basically have you know, the utility that you want from them.
15:30
Speaker 2: So in video combines, it's you know, strong technology in
15:34
Speaker 2: the actual processor with this Kuda platform. And that's what
15:38
Speaker 2: Paul's talking about. So if you want to you know,
15:40
Speaker 2: sound really really smart at cocktail parties, just say, yeah,
15:43
Speaker 2: in Vidia's Kuda platform is is just cranking and you'll
15:47
Speaker 2: you'll be good man, like that's that's all you need there.
15:49
Speaker 2: So there's definitely something to that.
15:51
Speaker 3: I know that.
15:53
Speaker 2: And again I'm in terms of my knowledge of like
15:58
Speaker 2: how these AI systems work, I'm maybe like a one
16:00
Speaker 2: and a half out of ten, I think. So it's
16:03
Speaker 2: you know, very elementary, but one of the things that
16:06
Speaker 2: I have heard. Is so there's there's two different processes
16:10
Speaker 2: that are you know, kind of front and center when
16:12
Speaker 2: it comes to generative AI. There is what's called training,
16:16
Speaker 2: which is basically feeding all of the data into the
16:18
Speaker 2: model so that it'll you know, know, what decide.
16:20
Speaker 4: Does TPT know everything on the web.
16:23
Speaker 2: And then there's what's called inference, And inference is the
16:27
Speaker 2: process by which the model then makes predictions about, you know,
16:33
Speaker 2: stuff that it hasn't seen before and you know, thinks
16:36
Speaker 2: kind of And what I have heard and done some
16:40
Speaker 2: very very basic reading on is that for the purposes
16:44
Speaker 2: of inference, KUDA doesn't necessarily provide quite the same advantages.
16:49
Speaker 2: And given that we're starting to reach kind of a
16:52
Speaker 2: peek in terms of you don't necessarily get too many
16:55
Speaker 2: gains from training a model on that many more parameters
16:58
Speaker 2: that we've already trained on. A lot of the future
17:00
Speaker 2: gains are going to be from making inference better and
17:03
Speaker 2: faster and more efficient, and so in VIDIA may lose
17:06
Speaker 2: a little bit of its edge there, but it's unclear
17:08
Speaker 2: how much it loses. But but this is just something
17:11
Speaker 2: to watch in terms of the competition in that space
17:13
Speaker 2: and whether other companies like AMD or proprietary designs from
17:18
Speaker 2: other you know companies can can start to you know,
17:21
Speaker 2: make inroads into in Vidia's business. But the word of
17:25
Speaker 2: the day is Kuda. So there's that super micro computer.
17:30
Speaker 2: The company whose stock went absolutely bonkers. Was that at
17:35
Speaker 2: the beginning of last year. I'm trying to remember, yeah, okay,
17:39
Speaker 2: so yeah it was. This was the company that in
17:44
Speaker 2: basically early twenty four went from twenty nine dollars a
17:47
Speaker 2: share up to like one hundred and twenty in a
17:50
Speaker 2: span of you know weeks, and now sits here at
17:53
Speaker 2: around forty five bucks a share because things got you
17:56
Speaker 2: know a little bit out of control. But they're also
17:58
Speaker 2: involved in the process for data center construction. They help
18:05
Speaker 2: to you know, basically put together servers, storage, you know,
18:10
Speaker 2: workstation stuff like that. They do a lot of the
18:11
Speaker 2: assembly on these platforms. They reported some disappointing earnings there,
18:16
Speaker 2: and so again it really does seem we haven't gotten
18:20
Speaker 2: Vidia earnings because they always report after everyone else. They're
18:23
Speaker 2: usually in like two or three weeks. Yes, everyone else
18:27
Speaker 2: in the semispace is kind of showing some signs of
18:31
Speaker 2: just hey, we can't get over that hump anymore. In
18:34
Speaker 2: terms of the growth rate. It's not that we're not growing,
18:37
Speaker 2: it's just that growth rates rolling over a little bit.
18:39
Speaker 2: And you wonder if Nvidia comes in like they've done
18:43
Speaker 2: so many times in the last couple of years and
18:45
Speaker 2: ends up saving that space and kind of the whole
18:48
Speaker 2: market with their earnings, because they've done that three or
18:52
Speaker 2: four times that I can remember pretty distinctly.
18:54
Speaker 4: I think there's a case that you can make that
18:56
Speaker 4: they may just with some of the China impact, they
18:59
Speaker 4: might just revise guidance upwards for the rest of the year.
19:02
Speaker 4: But who knows, We'll see in.
19:03
Speaker 3: A couple of weeks.
19:04
Speaker 2: So this is what is going on in the world
19:08
Speaker 2: of semiconductors generally, aside from Nvidio, it has not been
19:11
Speaker 2: a great quarter for semiconductor earnings, which is problematic given
19:17
Speaker 2: how they've been a major driver of this rebound in
19:20
Speaker 2: the market. And you know, you just kind of got
19:22
Speaker 2: to watch and see what happens if leadership has to change.
19:25
Speaker 2: Quick break here when we return, it's Wall Street Watch
19:28
Speaker 2: and we're joined by Todd Lutsky.
19:31
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20:01
Speaker 5: Markets in mixed territory as traders react to a new
20:04
Speaker 5: mix of second quarter earnings in addition to President Trump
20:08
Speaker 5: signing an executive order imposing an additional twenty five percent
20:12
Speaker 5: tariff on India. Right now, the Dow is down by
20:15
Speaker 5: nearly two tenths of one percent, or seventy seven points lower.
20:19
Speaker 5: SMP five hundred is edging eight points higher about a
20:22
Speaker 5: tenth of a percent. Nasdaq goes up by a quarter
20:25
Speaker 5: for a percent, or fifty one points. Rusted two thousand
20:28
Speaker 5: is down by three tenths of one percent. Tenure Treasure
20:31
Speaker 5: reeled up two basis points at four point two one
20:34
Speaker 5: six percent, and crude oil up eight tenths of a
20:38
Speaker 5: percent higher, trading at sixty five dollars and sixty nine
20:40
Speaker 5: cents a barrel. McDonald's reported earnings ahead of the open
20:43
Speaker 5: this morning, beating Street forecast as the fast food giants
20:47
Speaker 5: said its same store sales rebounded to grow three point
20:50
Speaker 5: eight percent in the previous quarter. McDonald's also saw success
20:54
Speaker 5: in its promotions through new products such as a Happy
20:57
Speaker 5: Meal linked to Minecraft. McDonald is up by three percent. Meanwhile,
21:02
Speaker 5: Disney down by nearly four percent, despite the media in
21:05
Speaker 5: entertainment giant beating earnings estimates and meeting revenue expectations in
21:09
Speaker 5: the previous quarter. Disney also hiked its annual profit forecast
21:13
Speaker 5: for streaming inexperiences. Furthermore, the NFL reached a deal with
21:18
Speaker 5: Disney in which it will take a ten percent stake
21:21
Speaker 5: in ESPN in return for control of media assets including
21:25
Speaker 5: the NFL network and Red Zone. Elsewhere and d down
21:29
Speaker 5: by seven percent despite the chip maker beating earnings in
21:32
Speaker 5: revenue forecast. Another tech name and super micro Computer sinking
21:37
Speaker 5: almost twenty percent after the server maker reported disappointing quarterly results.
21:41
Speaker 5: In issued week quarterly earnings, the company also cut its
21:45
Speaker 5: annual revenue outlook, and Uber revealed its revenue increase eighteen
21:51
Speaker 5: percent from a year ago. The right hailing and food
21:54
Speaker 5: delivery company also said it authorized a twenty billion dollars
21:57
Speaker 5: share buyback.
21:58
Speaker 1: Uber shares are.
21:59
Speaker 5: Down over two percent. I'm Tucker Silvan. That is Wallstree 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
22:14
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
22:20
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.
22:32
Speaker 2: Todd Lotsky from Cushing and Dolan does now join us
22:35
Speaker 2: live in studio, and he's here to answer your estate
22:38
Speaker 2: planning questions. Phone lines are wide open at eight eight
22:42
Speaker 2: eight two zero five two two sixty three. That is
22:46
Speaker 2: eight eight eight two zero five two two six three.
22:50
Speaker 2: So if you've got questions about your estate plan. If
22:53
Speaker 2: you don't have an estate planet, I wanted to ask
22:55
Speaker 2: some questions about where do you get started? This is
22:58
Speaker 2: the number to call to ask Todd your question live
23:00
Speaker 2: on air again eight eight eight to zero five.
23:04
Speaker 3: Two two six three.
23:05
Speaker 2: We can usually get through two to three year calls,
23:07
Speaker 2: so get calling early, get calling often again. That number
23:11
Speaker 2: is eight eight eight to zero five two two six three.
23:16
Speaker 3: Mister W. Lootsky, how are you doing today?
23:18
Speaker 6: I'm doing wonderful. How about yourself good?
23:21
Speaker 2: I was on Instagram the other day, Yeah, and I
23:24
Speaker 2: saw did you see this thing about the the green
23:26
Speaker 2: stripe dog that was just invented?
23:29
Speaker 6: Green stripe dog.
23:31
Speaker 2: Scientists put this thing together. It's it's part dog, part
23:34
Speaker 2: watermelon to calling it a melancholy.
23:37
Speaker 6: Oh my gosh. Yeah, I'm gonna give you a Collie Todd.
23:41
Speaker 2: I want to talk to you a little bit about
23:43
Speaker 2: different types of trust today, specifically nomine realty trust.
23:49
Speaker 3: What is it and what does it actually do? You know?
23:54
Speaker 6: This is probably the best trust to ask about because
23:59
Speaker 6: it's one that is not a trust.
24:02
Speaker 2: How So, what you're saying is when is a trust
24:06
Speaker 2: not actually a trust?
24:08
Speaker 6: I think, and this would be the answer. It's OK
24:10
Speaker 6: when it's a nominee realty trust because through this so
24:14
Speaker 6: they shouldn't and it is. It's just that confusing, Chuck,
24:16
Speaker 6: You're right on the on the money here. It's it's
24:19
Speaker 6: called a trust, but it's really not. Remember the word
24:21
Speaker 6: nominee in there is what changes everything. So a nominee
24:25
Speaker 6: realty trust is often used too frequently and oftentimes by
24:29
Speaker 6: real estate lawyers that just want to say, oh, you
24:31
Speaker 6: just bought a house let's put your house in a
24:33
Speaker 6: trust and they and they create this Nominee realty trust
24:35
Speaker 6: for you. They don't mean to not be doing anything
24:37
Speaker 6: for you, but it really doesn't do anything for you,
24:39
Speaker 6: but it could cause problems. Example, a Nominee realty trust
24:43
Speaker 6: is different than what we'll call a true trust because
24:46
Speaker 6: in a true trust, the trustee of the trust is
24:48
Speaker 6: the one that controls and does things for the trust,
24:53
Speaker 6: buy sales, invests, you name it. A Nominee realty trust
24:57
Speaker 6: is not controlled by the trustee. In fact, there's language
25:00
Speaker 6: in the trust that says the trustee can't do anything
25:03
Speaker 6: unless they're directed to do so by the beneficiaries. And
25:07
Speaker 6: unlike a true trust, there's actually a schedule of beneficiaries
25:11
Speaker 6: in a Nominee realty trust that is generally attached to
25:14
Speaker 6: the Nominee realty trust, which oftentimes gets lost, so nobody
25:18
Speaker 6: ever knows who really is the beneficiary.
25:20
Speaker 3: But set that aside.
25:22
Speaker 6: If you put this asset into a trust, and you
25:24
Speaker 6: name let's say mom and dad put the house in
25:26
Speaker 6: a trust. They just bought it and they throw it
25:28
Speaker 6: into a Nominee realty trust, and the schedule of beneficiaries
25:31
Speaker 6: is mom and Dad well, they technically still own it
25:35
Speaker 6: because the beneficiary is really the owner because they're the
25:38
Speaker 6: ones that control the trust. They're the ones that tell
25:40
Speaker 6: the trustee what to do. And I guess there's no harm,
25:44
Speaker 6: no foul there, But you haven't done anything. The worst
25:47
Speaker 6: part is, or the problem is when they throw it
25:51
Speaker 6: into a nominee realty trust and they name the kids
25:53
Speaker 6: as the beneficiaries. Uh uh oh, Now you didn't realize
25:57
Speaker 6: that you made a completed gift to your children of
25:59
Speaker 6: what's in that trust. You don't own it anymore, the
26:02
Speaker 6: kids own it.
26:04
Speaker 3: Can you do that?
26:04
Speaker 7: If that?
26:05
Speaker 2: If that happens, like, is there just a reset button
26:07
Speaker 2: that you can use?
26:08
Speaker 7: There?
26:09
Speaker 6: Can It's called getting along with your children? If you
26:12
Speaker 6: get along with your children, then the reset button is
26:14
Speaker 6: we're gonna change the schedule of beneficiaries and put it
26:16
Speaker 6: back to mom and dad, and then we're gonna take
26:18
Speaker 6: the house out of this trust and we're gonna do
26:20
Speaker 6: real estate planning for mom and dad and do true trusts.
26:25
Speaker 6: So so yeah, But like I was saying, the biggest
26:28
Speaker 6: problem is when you stick the kids on as trusty
26:30
Speaker 6: as beneficiaries. Now you're like, oh, oh, I gave away
26:33
Speaker 6: my house. I didn't mean to, but you did. And
26:37
Speaker 6: they might not even know it, but boy, if they
26:39
Speaker 6: get a divorce, they're gonna know it.
26:41
Speaker 2: Talk with Todd Lotsky from the law firm of Cushing
26:44
Speaker 2: and Dole, And we've got space on the phone line
26:46
Speaker 2: still at eight eight Sorry, that's eight eight eight two
26:50
Speaker 2: zero five two two six three. That is the number
26:52
Speaker 2: called Ask Todd your estate planning questions again eight eight
26:56
Speaker 2: eight to zero five two two six three. We've got
27:00
Speaker 2: a quick break right now, but when we return it's
27:03
Speaker 2: going to be right to your questions with Todd. That
27:06
Speaker 2: phone number again is eight eight eight two zero five
27:10
Speaker 2: two two six three.
27:12
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:16
Speaker 1: only here on the Financial Exchange Radio Network. Don't miss
27:22
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:25
Speaker 1: only here on the Financial Exchange Radio Network.
27:38
Speaker 2: All right, let's get right to your calls with Todd Lutsky.
27:41
Speaker 2: First up, we got Joe in Ellington. Joe, you're on
27:44
Speaker 2: with Todd.
27:46
Speaker 6: How you doing good? What's up?
27:49
Speaker 7: All right?
27:50
Speaker 4: DNA?
27:50
Speaker 2: Much question for you.
27:51
Speaker 1: I'm getting a little older on my fifty seven our
27:56
Speaker 1: house is paid off.
27:57
Speaker 6: We don't really, we don't really have any debt.
28:00
Speaker 4: I'm trying to figure.
28:01
Speaker 6: Out the best way to protect my property if I
28:05
Speaker 6: get in bad health.
28:06
Speaker 7: We don't want to lose the property.
28:07
Speaker 6: How old your wife? My wife is fifty two, okay,
28:12
Speaker 6: so a little on the even younger side. Younger side, yeah,
28:16
Speaker 6: generally sixty and over. But there's no magic depending on
28:19
Speaker 6: your family situation. I mean, you're fifty seven. We always
28:21
Speaker 6: plan for the older person, not that that's old, but
28:25
Speaker 6: but you know, it does take five years to get started.
28:27
Speaker 6: So you know, a house that's paid off is a
28:30
Speaker 6: perfect asset for one of these Medicaid irrevocable trusts. I
28:33
Speaker 6: think depending on where you are and your whole family kids,
28:36
Speaker 6: how old they are, and how independent or still on
28:40
Speaker 6: the you know, payroll they are, it might might make
28:43
Speaker 6: a difference for you. And of course the size of
28:45
Speaker 6: your estate might matter. So like if you had to guess,
28:48
Speaker 6: are you under the four million dollar Massachusetts exemption amount
28:52
Speaker 6: all in?
28:52
Speaker 7: Oh yeah, definitely yep.
28:54
Speaker 6: And I'm actually from Connecticut as well. Oh that's no problem.
28:57
Speaker 6: So Connecticut even has a much higher exemption, so you're
28:59
Speaker 6: definitely no tax worries for you, so it's more about protection,
29:04
Speaker 6: and so yeah, I would say it's very possible. I
29:06
Speaker 6: would think about the irrevocable medicaid type trust that we
29:09
Speaker 6: speak a lot about. It's also in the guide we're
29:12
Speaker 6: giving away this month, so that might be good to get.
29:15
Speaker 6: But I say, yes, you probably putting your house into
29:18
Speaker 6: an irrevocable medicaid trust would probably be the way to
29:22
Speaker 6: go as the best way to protect these assets, not
29:24
Speaker 6: only from just a nursing home and creditors, but probate
29:27
Speaker 6: and it'll ensure a nice easy flow in a bloodline
29:30
Speaker 6: plan to your family. So hopefully that helps. I would
29:33
Speaker 6: definitely get on the horn with an estate planning lawyer
29:36
Speaker 6: and see if you can't get that going, and your
29:39
Speaker 6: call is timely, because that's one of the got one
29:43
Speaker 6: in our guide this month, the top seven estate planning trusts.
29:47
Speaker 6: That's one of the trusts that are in here, not
29:49
Speaker 6: only revocable trusts, irrevocable Medicaid trusts, irrevocable life insurance trusts.
29:55
Speaker 6: First to die, second to die. You know, there's a
29:58
Speaker 6: pool trust. If you have a special needs ch there's
30:00
Speaker 6: a special needs trust in here explained and of course,
30:03
Speaker 6: Chuck the Nominee Realty Trust, which is the most misunderstood trust.
30:07
Speaker 6: It sort of leads the pack in this planning guide. So, folks,
30:12
Speaker 6: if you've never done your planning and you want to
30:14
Speaker 6: figure out what is right for you, how to get
30:16
Speaker 6: started in your plan this guide is for you. If
30:19
Speaker 6: you've done your planning and you'd think, me, you know what,
30:21
Speaker 6: I haven't looked at it in ten years. Maybe I
30:23
Speaker 6: should see if I need an update or a different
30:25
Speaker 6: trust might be better for me. This guide's for you.
30:29
Speaker 6: Call and get the guide eight six six eight four
30:32
Speaker 6: eight five six nine nine or Legal Exchange Show dot com.
30:36
Speaker 6: It also gives you all the tax advice that goes
30:38
Speaker 6: with them eight six six eight four eight five six
30:42
Speaker 6: nine nine or Legal Exchange Show dot com.
30:46
Speaker 2: Todd, we've got another four hero. Let's go to Chris
30:48
Speaker 2: in Wittensville. Chris, you are on with Tom.
30:51
Speaker 3: Lutsky either gide How you doing?
30:54
Speaker 6: What's what's your question?
30:56
Speaker 7: Sure? Well? My uh, I wish my wife had listened
31:00
Speaker 7: to the show as much as I do. Unfortunately, her
31:06
Speaker 7: mom is very very old and you know, probably very
31:09
Speaker 7: close to the the.
31:11
Speaker 6: Nursing home retired.
31:12
Speaker 7: Yeah, nursing home at this point, and so, uh they
31:16
Speaker 7: what they she did is she put the kids on
31:21
Speaker 7: the name on the house, the ownership of the house and.
31:26
Speaker 3: All the kids.
31:28
Speaker 6: Yeah, so she she transferred the home to I'm just
31:32
Speaker 6: gonna put this to the kids. Did she retain any
31:36
Speaker 6: kind of an interest like a life estate? Do you
31:38
Speaker 6: remember that word?
31:40
Speaker 3: Uh?
31:41
Speaker 7: No, I don't, And unfortunately I wasn't involved at the time.
31:45
Speaker 7: I think all that they all that they did is
31:49
Speaker 7: the husband, excuse me, the mom and the dad were
31:51
Speaker 7: listed and they listed the kids as owners of the
31:55
Speaker 7: home as well. I think that's how they structured that
31:59
Speaker 7: as best as I can from what when I'm told.
32:02
Speaker 7: And then and then the rest of the assets, you know,
32:04
Speaker 7: the money that's available, was it they just she just
32:09
Speaker 7: has uh you know, they still own it, you know,
32:13
Speaker 7: the the mom because the husband is passed away now.
32:17
Speaker 6: So the money, the money, these accounts you think are
32:20
Speaker 6: just in mom's name alone.
32:22
Speaker 7: I do, yep, I really believe that. And so I
32:25
Speaker 7: didn't know if there was any advice at this point
32:28
Speaker 7: to say, you know what, what is there anything at all?
32:31
Speaker 6: Well, let me do it. Let me ask you this,
32:32
Speaker 6: how long ago did she transfer the house to the
32:35
Speaker 6: kids completely.
32:37
Speaker 7: That was that was more than five years. I do
32:40
Speaker 7: know that that was probably ten years ago.
32:43
Speaker 6: Okay. So and how much money would you say is
32:45
Speaker 6: kicking around if you had to guess.
32:47
Speaker 7: Oh, I don't know, eighty thousand bucks.
32:50
Speaker 6: Okay. So the money is not really the issue. It's
32:52
Speaker 6: this house that's the big prize. I assume that's the
32:55
Speaker 6: that's the most valuable asset in her estate. So I
32:58
Speaker 6: would say that the problem is it's not in her
33:00
Speaker 6: estate anymore, which for your call and your question is
33:04
Speaker 6: is not a problem because one of the things you're
33:07
Speaker 6: asking about is Todd. You know she's going to a
33:10
Speaker 6: nursing home, and if she goes to a nursing home,
33:14
Speaker 6: is the house going to be protected from the nursing home?
33:17
Speaker 6: The answer is it will be. I mean, it's done
33:21
Speaker 6: more than five years ago. She made a transfer of
33:25
Speaker 6: an asset for less than fair market value in return,
33:29
Speaker 6: so that's considered a disqualifying transfer, so she doesn't own it.
33:33
Speaker 6: If she stays out of a nursing home for five years,
33:36
Speaker 6: it will be protected from the nursing home. Now, I
33:39
Speaker 6: don't love this. I would never offer this as advice
33:42
Speaker 6: to somebody, but and There's a lot of negatives that
33:46
Speaker 6: go with it, but I think we've got beyond those
33:48
Speaker 6: at this point. So the good news is, at least
33:51
Speaker 6: that's not on the table. You only have eighty thousand
33:53
Speaker 6: dollars to deal with. So if she needed nursing home
33:56
Speaker 6: care tomorrow, we would simply apply. We would, you know,
34:00
Speaker 6: we would you know, prepay a funeral and any other
34:03
Speaker 6: miscellaneous expenses that we needed to get out of the way.
34:05
Speaker 6: We would pay and then just either buy an annuity
34:08
Speaker 6: for the difference that's left. Remember we got to get
34:12
Speaker 6: her down to two thousand bucks, you know, or we
34:14
Speaker 6: simply private pay the nursing home a few months so,
34:17
Speaker 6: you know, spend what you can get on medicaid. She
34:21
Speaker 6: would be eligible for medicaid, you know right away. The
34:23
Speaker 6: downside is you kids got to carry over basis in
34:26
Speaker 6: that property, and so there could be a built in
34:29
Speaker 6: gain when you guys go to sell the property. You
34:32
Speaker 6: follow me on that, I do, yeah, yeah, So you know,
34:36
Speaker 6: it's not horrible and if you at least it'll be
34:39
Speaker 6: protected from the nursing home. Now, my question is when
34:41
Speaker 6: she gave it away, did she continue to live there
34:44
Speaker 6: and sort of pay all the bills for all these years. Yep, certainly,
34:48
Speaker 6: so the upside on that score would be And a
34:52
Speaker 6: lot of people don't know this, but there's something out
34:54
Speaker 6: there called the Estate of Gwen. It's a case that
34:58
Speaker 6: came down in the mid seventies that says, if you
35:03
Speaker 6: give something away like she did, but retain I'm sorry,
35:08
Speaker 6: give something away and retain nothing legally, which she didn't,
35:13
Speaker 6: but continue to live there and pay the bills and
35:16
Speaker 6: enjoy what you gave away. Well, then the government came
35:21
Speaker 6: back and said, well, that's like giving it away but
35:24
Speaker 6: retaining the right to live there even though you didn't.
35:27
Speaker 6: Actually you're going to get an implied life estate. Why
35:31
Speaker 6: because you actually did live there and you actually did
35:34
Speaker 6: pay all the bills. So therefore, in that case, the
35:38
Speaker 6: government said that whole value like retaining a life estate,
35:43
Speaker 6: has to be included in her estate for estate tax purposes.
35:47
Speaker 6: What that means is it will be subject to a
35:50
Speaker 6: state tax. But it got a step up in basis
35:54
Speaker 6: to eliminate the built in gain. Okay, And so the
35:59
Speaker 6: good news here is it's protected from the nursing home.
36:02
Speaker 6: And the bad news until we talk about the estate
36:05
Speaker 6: of Gwen, was you kids would have a carryover basis
36:07
Speaker 6: with a large capital gain built in. Now we can
36:10
Speaker 6: probably claim the estate of Gwen to get a step
36:13
Speaker 6: up in basis when she dies. And like you said,
36:17
Speaker 6: if you included that in the nineteen seventy six case
36:21
Speaker 6: that resulted in an estate tax liability or a win
36:25
Speaker 6: for the irs, well we can turn that around on
36:28
Speaker 6: them today and have this same rule apply cause the
36:32
Speaker 6: house to be included get the step up in basis,
36:35
Speaker 6: so you kids don't have to pay any capital gains
36:37
Speaker 6: tax when you go to sell it. But the inclusion
36:40
Speaker 6: of the full value of the house coupled with her
36:43
Speaker 6: eighty grand is not going to cause an estate tax liability.
36:48
Speaker 6: So we win on the estate tax front and we
36:51
Speaker 6: win on the capital gains tax front. So a little
36:54
Speaker 6: bit to think about, but I think overall you're probably
36:57
Speaker 6: gonna be okay here, but you're going to need to
36:59
Speaker 6: see a lawyer to get on Medicaid when the time comes.
37:02
Speaker 2: Mister Lutsky, thank you so much for joining us again today.
37:06
Speaker 6: Always a pleasure. Thank you.
37:08
Speaker 1: This has been asked Todd on the Financial Exchange Radio
37:11
Speaker 1: Network Aske 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 three nine
37:23
Speaker 1: three four thousand and one or visit Cushingdolan dot com.
37:27
Speaker 1: The views expressed in this segment are solely those of
37:29
Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
37:31
Speaker 1: or tax advice. Please consult with your illegal or tax
37:33
Speaker 1: advisor on such matters. Cushing and Armstrong do not endorse
37:36
Speaker 1: each other and are not affiliated