Latest / The Financial Exchange Show / Inflation hits new three-year low, how will the Fed respond?

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Inflation hits new three-year low, how will the Fed respond? · The Financial Exchange Show

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Speaker 2: Chuck, Paul and Tucker with you here on a CPI Wednesday.
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Speaker 3: Not as closely followed as Jobs Friday, because well, CPI
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doesn't always happen on a Wednesday, so it doesn't have
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a catchy title like that. Sometimes PPI comes before CPI,
1:28
but not this month. Yeah, it's just not as closely followed.
1:33
But in the last two and a half years, CPI,
1:38
you could make the case, has been the most important
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report each month because it's the first meaningful inflation data
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that we get in during a time in which inflation,
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high inflation has been the main problem. It's been the
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key focus for us in terms of determining FED policy.
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You know, how things are going to play out in
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the economy and so on and so forth. That has
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shifted over the last six months, in my opinion, where
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there is no meaningful inflationary impulse out there today. It's
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not to say that one won't show up six or
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twelve months from now, but the inflation data is largely
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pretty subdued these days, and the bigger question has been
2:20
on the slowing growth environment in the United States, and
2:24
as such, the focus has shifted, in my opinion, from
2:27
CPI to things like jobs, retail sales, you know, car sales,
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things along those lines, as a more meaningful measure of
2:36
where the economy is and as the most important thing
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to focus on. But we did get CPI data this morning.
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Came out at point two percent for the headline for
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the month, two point five percent for the last twelve months.
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Core came in a touch higher than anticipated at point
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three percent. Core inflation annually stayed at three point two
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so still struggling to get that core inflation down, And
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Paul interested to get your thoughts on whether that sticky
3:02
core inflation number is caused for concern or just a
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whole bunch of poppycock.
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Speaker 4: I don't think it's a cost for concern. Poppy coop
3:12
maybe be too strong as to it not being significant
3:16
at all. But that was the one major takeaway from
3:19
this report, Chuck, is that overall a lot of these
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numbers came in line with what we anticipated. However, as
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you mentioned, that Core is a little bit higher, and
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it was largely due to the fact that the shelter
3:30
costs which make up about a third of the core
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CPI data were up by about a half percent month
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over month and five plus percent year over year, So
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that was the biggest contributing factor in terms of what
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you prefaced us going to this inflation report on. I'm
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in full agreement that it really seems like the last
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three to four months that jobs have been a much
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more significant priority than the inflation report. None of this data.
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While I was a touch concern by the fact that
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core CPI came in a little bit higher, it's not
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something that is going to shift policy. If you look
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at the CME FED Fund futures, which try and do
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a job of assessing a probability for the cut in
4:16
the next upcoming meeting, which will be a week from today,
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it seems as if there's continues to be a very
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strong likelihood about eighty five percent chance that we will
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see a quarter basis point cut come next week. And
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perhaps if the core CPI data came in on the
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other side, not higher, but rather significantly lower, maybe more
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arguments could have been made to this idea of a
4:41
fifty basis point cut. But to me, the reason that
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core CPI is significant it being a touch higher. It
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reinforced that business as usual twenty five basis point cut
4:50
likely coming next week.
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Speaker 5: Yeah.
4:51
Speaker 3: Here's why I don't think it really matters is again,
4:55
one data point can be high or low. It doesn't
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necessarily mean anything about the broader case. In point two
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months ago, core CPI came in at point oh six percent,
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and no one was like, oh gee, there's no inflation ever. Like, No,
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that was one month. But the last four months, if
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you look at the data, core CPI is averaging an
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annualized rate of two percent. It's right in line. So
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the fact that you have one that comes in, you know,
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touch higher, okay, like throw it into the blender, see
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what happens. But ultimately you've got a four month trend
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that's right in line with where the FED wants it
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to be. And when you look at that three point
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two percent yearly number, the bulk of it is concentrated
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in a period that you're going to be coming up
5:33
against and able to replace in the annual data. Now,
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September of last year was point three two, October point
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twenty four, November point three one, December point two eight,
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January point three nine, February point three six, March point three, six,
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So you're coming up against those cycles. If you continue
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to print even just point two eight, that three to
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two is gonna slide into the high twos over the
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next few months. And if you print you know more
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like we've seen the last three month before this, you're sliding.
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Speaker 2: Into the mid twes.
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Speaker 3: And the FED can comfortably say, yeah, there's no problem
6:05
here on the And look, if you start printing it
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a point four again, yeah we've.
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Speaker 2: Got some issues.
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Speaker 3: But what's the case for a point four print at
6:13
this point with the US economy slowing? You have to
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be able to explain where that is going to come from.
6:19
And I don't think that that data is in evidence
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right now.
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Speaker 4: And we should point out on the core CPI when
6:24
we mentioned that metric or that statistic, it is stripping
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out the impacts of food and energy. So it's just
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looking at all of the basket of goods in CPI
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without the impacts of food and energy. Noteworthy on this
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report because we saw, as Chuck mentioned, a two and
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a half percent year over year print for headline CPI
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which does include the impacts of gas and energy, and
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those were gas and energy specifically were a big contributor
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to the fact that we came in with a pretty
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light print on headline CPI where we saw that gas
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month over a month was down about zero point six
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percent and off about ten percent from a year ago.
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As we sit in a time frame now where I
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believe West Texas crewed is at sixty five hovering around
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sixty five dollars a bear ou at the moment.
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Speaker 3: Yeah, and talking just about gas and where we're gonna
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go on this, gasoline futures are now at the point
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where there is a very legitimate chance that by i'll
7:22
say month end, by end of September, the triple A
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national AVERAGEUR gas prices right now is at three to
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twenty five and three tenths, which is down about twenty
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five cents over the last five.
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Speaker 2: Weeks or so.
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Speaker 3: There is a very real chance that gas prices nationally
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are under three dollars a gallon on average by the
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end of this month, based on what happened to gasoline
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futures in the last week, if they end up staying there.
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So don't count your chickens and this and that, but
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it looks like that is the environment that we're heading into,
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and that makes it for a very muted headline number
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coming over the next month. Remember they start surveying for
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the CPI usually it's it's towards the end of the
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second week of the month for gas prices, so they're
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gonna start, you know, pretty soon right now. In a
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month ago, the national average is three forty four, so
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you're gonna get you know, probably a I would say
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a five to six percent pullback in the CPI number
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for gasoline for September, and that just makes it hard
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to have a high headline number.
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Speaker 2: The core number. Hey, we're gonna have.
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Speaker 3: To see what it ends up being, but probably a
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pretty good chance you're getting some some muted numbers there.
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So the high CPI number kind of look at that
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and say, okay, high core this month. I'm not sure
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that it means anything, and everything else is in a
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good but not great spot there if you do want
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some things to watch when it comes to CPI.
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Speaker 2: One of the data points I got by the name.
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Speaker 3: Of Michael McDonough from Bloomberg pulls this data every month.
8:54
He looks at, hey, this month, what what share of
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the CPI components are growing at a rate of more
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than four percent annualized? Last month? It was around thirty
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seven percent. This month did take up slightly to around
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thirty nine percent, So you know, about four and ten
9:11
components in CPI are still growing at a rate greater
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than four percent annually. If you go back to when
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inflation you know, was typically consistently running.
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Speaker 2: You know, around two to two and a half percent,
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you were.
9:25
Speaker 3: Seeing anywhere from like twenty to thirty percent of these
9:28
readings coming through it a north of four percent range.
9:32
Speaker 2: So it's not like you you know, need to get
9:33
down to zero.
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Speaker 3: But there still is a little work, in my opinion,
9:36
to get back to where you'd like to see with
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around twenty five percent of components growing north of four percent.
9:43
At its worst in early twenty twenty two, over seventy
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percent of components in the CPI were growing at north
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of a four percent clip.
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Speaker 2: Sure, So that's what we're.
9:55
Speaker 3: Seeing in terms of the CPI data. I do want
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to take a quick break here, and when come back,
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I do want to talk about how this affects the
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FED and how it potentially impacts their policy and recession chances,
10:08
because I do think there's some meat on that bone,
10:11
So we'll go after that when we come back on
10:15
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Speaker 3: So the we talked about the CPI data in the
11:25
last segment and I want to kind of address this
11:29
as it comes to FED policy from here, because as
11:33
of right now, the Chicago Market Exchanges fedwatch tool is projecting,
11:38
and again it's not projecting like market participants are projecting
11:41
an eighty five percent chance now of a quarter percent cut,
11:45
only a fifteen percent chance of a fifty basis point
11:48
cut next month or next week. Rather ultimately, like, I'm
11:54
of the belief that what happens next week doesn't matter
11:57
a ton because it's one FED meeting. What matters more
11:59
is the path over the next five or six FED
12:02
meetings and how low rates need to get there. Here's
12:07
the piece that I think makes next week matter somewhat,
12:11
which is, Look, there are five FED meetings between now
12:16
and mid March, and if you do think the economy
12:21
is worsening and you use one of those meetings to
12:24
do a quarter percent cut, it means that, hey, you've
12:28
got to kind of backload the additional cuts that you need.
12:31
If there's a recession that's coming, you can't get in
12:34
front of it as quickly as you might like to.
12:37
And so the next few months I think are particularly
12:40
critical for the US economy in terms of being able
12:42
to avoid recession. And so if you cut a quarter
12:45
percent at the September meeting next week and the economic
12:49
data worsens, you've only got two more meetings this year
12:51
in which to cut, and you say, okay, how low
12:54
can I get rates? You know in that time period,
12:57
maybe I go fifty in November and then seventy five
13:00
i've in December. If things continue to worsen, I've cut
13:03
one and a half percent. Is that enough to, you know,
13:06
kind of stave off what I think is coming? I'm
13:09
not sure, Like if you if a recession is actually coming,
13:13
that's that's not big enough. Historically we've needed between two
13:16
hundred and four hundred basis points or two to four
13:18
percent in cuts during recessions. Why do I only want
13:23
to move rates by one and a half percent over
13:24
three months? And this gets back to and I know
13:27
the FED doesn't work this way, but look in I'm
13:31
gonna toot my own horn, which I freaking love to
13:34
do if I'm being honest. In January of twenty twenty two,
13:39
we were on the show and I said, look, the
13:40
FED should just hike rates five percent and call to day.
13:43
And ultimately they basically hiked five percent, but over like
13:46
two years instead of just doing it all at once.
13:49
And I know why they don't do it all at once,
13:50
because that would be kind of a big thing for
13:53
the market to absorb.
13:54
Speaker 4: It could up end the financial system to the banks
13:57
and put them in a tough spot.
13:58
Speaker 3: If if you are the Fed and you think there
14:01
is a recession coming, which based on basically everything that
14:03
Jaypoalll is telling us, based on what some of the
14:06
data out there is saying, is a legit possibility right now,
14:10
take the FED funds rate down to three in a
14:12
quarter like, cut two and a quarter percent, get yourself
14:15
into the low end of the rage that you need
14:16
to cut to, and just call it a day and
14:18
see how market's doing and how the economy does. The
14:22
risk in doing so, Okay, do you potentially reignite inflation, Sure,
14:27
but like where's the inflation coming from right now? All
14:30
the data that we're getting worldwide. The Chinese economy sucks.
14:37
It's technical definition, it's why oils. It's sixty five a
14:40
barrel right now, and gas prices are going to probably
14:43
be in the twos by the end of the month.
14:46
The European economy right now sucks, like Europe is in
14:52
danger of falling into recession as well. You look at
14:54
German manufacturing data, you look at data out of the
14:56
UK on job creation.
14:58
Speaker 2: It's horrible.
15:00
Speaker 3: And so where's the inflationary impulse going to come from?
15:02
All the FED cut too quickly?
15:04
Speaker 4: What Here's where I push back on that a little bit.
15:08
I'm glad we're covering the subject today because I do
15:10
feel as if from the housing market perspective side of things,
15:13
if you really take down rates significantly, perhaps there's an
15:17
argument to be made that inflation could could tick up
15:20
as a result of that. Whether it's Helock's home improvement,
15:25
more buyers going on the market, kind of stimulating the
15:28
housing market. I don't know necessarily if it would be
15:30
enough to really stoke back inflation concerns. So that would
15:33
be one side of my potential costs for concern, but
15:37
the greater one would be more so on this idea
15:40
that we don't know necessarily. If I guess, I would
15:43
ask you, why are we convinced that there is a
15:48
recession that is imminent? Okay, labor market weakening, But I
15:51
don't know if I would sit here and tell you
15:54
that I'm convinced over the next three to six months
15:57
that we're going in that direction. I don't feel there's
16:00
enough the economic innerc indicators point that way, and I
16:03
could be wrong in missing something, And that would be
16:05
my concern about making this dramatic cut, because I can't
16:07
tell you, and maybe you could tell me, like, what
16:10
are the indicators that point to it being imminent?
16:14
Speaker 3: Nothing points to it being imminent. Again, I would say
16:16
it's like a coin flip right now. So I'm not saying, hey,
16:19
it's definitely happening, but I think that the the impact
16:24
on the economy is asymmetric with the recession happening compared
16:28
to one. No, And what I mean by that is,
16:31
if you have a recession against it's been a while
16:33
since we've actually been through one, you gotta go back
16:36
to two thousand and eight, two thousand and nine. I
16:38
don't killing twenty twenty because like twenty twenty was different.
16:42
That was not the economy causing a recession. That was, hey,
16:45
we stopped doing stuff, and that has consequences. Recessions they're
16:51
not all like two thousand and eight. Some of them
16:53
are more mild, some of them are shorter, some of
16:54
them are longer, Like you don't know what you're gonna get,
16:57
but they all leave these lasting scars on the economy
17:00
and on participants of the economy. It's not something where
17:02
you just go through and you're like, oh, like everything's
17:04
fine after six months. Remember in two thousand and eight,
17:07
it took us five or six years. It was like
17:09
twenty fourteen by the time we finally started to really
17:12
dig out. And the downside of going into a recession,
17:18
in my opinion, is dramatically higher than the downside of
17:24
moving too soon to cut interest rates right now, because
17:28
what's the worst thing that happens if you cut too
17:30
much today? In my opinion, Okay, inflation maybe has a
17:34
little second bubble back, probably not as steep as twenty
17:37
twenty two because people still aren't sitting on as much
17:39
cash as then, Supply chains aren't as snarled as then.
17:42
The global economic picture is much slower. There's just not
17:44
as much economic activity. So like the worst downside in
17:48
my opinion, inflation comes back to four maybe five percent.
17:54
The worst downside if you're late on a recession call,
17:58
unemployment goes up to six percent, and that's something that
18:02
takes years to you.
18:03
Speaker 2: Know, unwind.
18:04
Speaker 3: So maybe again it's my it's my personal view on
18:08
this is that recessions you really want to avoid because
18:12
they're they're bad.
18:14
Speaker 2: They're they're they're really bad. It's yeah, it's it's basically
18:18
sound like.
18:20
Speaker 3: Bad, good economy, good chuck like growth, like I know,
18:26
but you really don't want to go through recessions because
18:29
they do leave these lasting scars on economies and like
18:32
on individuals too. You know, to talk to anyone that
18:36
went through that bout of job loss in the late
18:39
two thousands.
18:40
Speaker 2: So that what we call that technically.
18:42
Speaker 4: I think that's fair.
18:43
Speaker 2: It doesn't make it.
18:44
Speaker 3: I think it's like twenty ninety nine, right oh eight, Yeah,
18:47
talk to anyone who went through that, and you know
18:50
it takes years to even kind of get back into
18:52
jobs in some cases, and you're earning powers depressed for
18:55
a few years after and it's it's hard.
18:57
Speaker 2: It can take like five or six years to get
18:59
back on your feet.
19:00
Speaker 4: I mean, that's such a seismic recession, you know, to mention,
19:04
look at nineteen ninety.
19:05
Speaker 2: Look at two thousand and one.
19:06
Speaker 3: Yeah those ones are those weren't as bad, right, but
19:09
it still took like two or three years to get
19:11
back to normal.
19:12
Speaker 2: And I know.
19:12
Speaker 3: We say, well, it's only a few years, like you'll
19:14
be fine, but try living through two years. Yeah, like
19:18
in the suck and it's it's different to take a
19:22
quick break when we come back. We're joined by Todd
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20:02
Speaker 6: A little bit of a sell off going on on
20:03
Wall Street as traders are reacting to the latest measure
20:07
of inflation, the Consumer Price Index, where consumer prices climbed
20:12
two point five percent on an annual basis in August,
20:15
in line with expectations. Right now, the Dow is down
20:19
by one and three quarters of a percent, or seven
20:22
hundred and sixteen points. SMP five hundred is down one
20:25
and a half percent or eighty two points. In the
20:28
NASDAC down just over one percent of one hundred and
20:31
eighty four points. Russell two thousand is down by about
20:33
one and a half percent as well. Tenure Treasure reeled
20:36
down by two basis points at three point sixty two percent.
20:40
In crude oil rebounding today up one and a half percent,
20:44
trading at sixty six dollars and sixty seven cents a barrel.
20:47
Speaker 2: A couple of.
20:48
Speaker 6: Companies that reported after the bell yesterday are garnering attention.
20:51
Where Game Stop shares down by seventeen percent after the
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video game retailer reported a sharp decline in sales. For
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the most recent quarter. The company generated seven hundred and
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ninety eight million dollars in revenue, marketing a more than
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a twenty percent drop in sales from a year ago. Meanwhile,
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Dave Andbusters up by one percent after the arcade and
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restaurant operator b quarterly earnings expectations last evening. However, revenue
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fell just short of street forecasts. Elsewhere, shares in Trump
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Media and Technology down by sixteen percent in reaction to
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last night's presidential debate, and Jeffries upgraded Williams Sonoma to
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buy from hold. What The analyst said the home furniture
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has hidden gems within its portfolio and can benefit from
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even a modest recovery in the housing market. I'm Tucker Silvan.
21:41
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to zero five two two six three. We do have
22:47
the phone lines open, so get calling and we will
22:50
get to your calls in just a little bit.
22:52
Speaker 2: But mister Todd Lutsky, how are you today?
22:54
Speaker 5: I am never better?
22:55
Speaker 2: How you doing struggling?
22:56
Speaker 5: Yeah, it's always something with you.
22:58
Speaker 3: Wife got a little upset with me and said that
23:01
I have no sense of direction. No, and I was
23:03
kind of like, where's this coming from? And then I
23:06
just got up and right. So it was, uh, you know,
23:11
kind of a tough night, but we're doing better today.
23:14
I want to talk to you a little bit about
23:16
revocable trusts. I know everyone likes to talk about the
23:20
irrevocable or irrevocable trusts, but basic revocable trust what does
23:27
it do? And what's the situation where that is.
23:30
Speaker 2: The right tool for a family to use for their planning.
23:34
Speaker 7: Yeah, and that's really I think that the last part
23:37
of that question is really the most important part is
23:39
how do we know what's right?
23:40
Speaker 1: Right?
23:40
Speaker 7: I mean that part of the thing is in the
23:42
guide we're given away this month, there's seven trusts, but
23:44
there's a lot more than that in the real world, right,
23:46
There's all kinds of trusts. And the job is not
23:48
just to determine how this trust works, but whether or
23:51
not it's the right trust for you, and we don't
23:54
always know. We have to ask a lot of individual
23:56
questions to find out. I know, I'm going to say
24:00
if you're a family and you're maybe younger, let's say,
24:05
you know, thirties, forties, maybe fifties, and you have children
24:12
and you're concerned about you know, there might be miners,
24:16
and you want to control things for their benefit when
24:18
you're gone, but you want to stay in complete control
24:20
of your assets, And I would say revocable is probably
24:24
going to work for you right these are And I'm
24:26
not even worried about size of the estate so much.
24:28
It's pretty much age. You know that's going to say,
24:31
you know, I'm at a point where I want to
24:33
stay in control of my assets. I want to avoid
24:36
the probate. I want to reduce or eliminate again federal
24:41
or state death tax, it depends. Federal is going to
24:45
start coming into play a lot more lately. I mean,
24:47
as we get closer and closer to January twenty twenty six,
24:50
we're going to start to see how federal becomes a
24:53
bigger issue for a lot more people. Never mind just
24:56
your state, whatever state you have, there's about fifteen of
24:58
them that have a death tax, so you want to
25:01
look at those those numbers are much smaller. So I
25:04
want to avoid the probate. I want to stay in control.
25:07
I want to reduce my estate tax liability. But most importantly,
25:12
I got perhaps minor children or children in general, that
25:16
I want to make sure either they can't own the
25:18
assets if they're minor, so the trust will own it
25:20
when I die, or if they're older, I want to
25:23
protect it for future divorces, creditors, things for the children.
25:28
I'd say revocable trust would be would be right for
25:32
that segment of the population.
25:35
Speaker 3: When you talk about, hey, you know the downsides and
25:40
things that you're missing on that side, Is it really
25:44
the protection from creditors that nursing home protection is the
25:48
only thing missing, or there are other things that you
25:50
don't necessarily get inside that wrapper of the revocable trust.
25:53
Speaker 5: Yeah, it's a fair question.
25:54
Speaker 7: I kind of did mention all the positives, and that's
25:57
because there really are no negatives. And I say that,
26:00
I mean, I mean it right. This is a revocable trust.
26:03
It's your alter ego, and I think to your point, Chuck.
26:06
People ask me all the time they go, you know,
26:08
what is a trust It's like it's this thing that
26:11
they can't get their hands around. Right, it's a bunch
26:14
of paper like this. Right, it's a bunch of paper,
26:16
but it's an entity. But it's an entity you control.
26:20
You're the trustee under your Social Security number, you file
26:24
your own taxes, and you do everything you would do
26:27
with the assets inside there, just like they weren't inside there.
26:31
Speaker 5: So Chuck, no negative.
26:34
Speaker 3: Talking with Todd Lutsky from the law firm of Cushing
26:36
and Dolan. If you've got a question for Todd about
26:40
your estate plan, this is the chance to ask it.
26:42
We still have room on the phone lines here at
26:44
eight eight eight two zero five two two sixty three.
26:48
That is the number to call to ask Todd your
26:51
question about your estate plan. Again, that number is eight
26:55
eight eight two zero five two two sixty three. Still
26:59
a spot or two avail, So uh, do make sure
27:01
you call in if you have a question for Todd.
27:04
That number again is eight eight eight to zero five
27:08
two two six three. We're gonna take a quick break,
27:11
but after we come back, it's right to your questions
27:14
with Todd. That number one more time is eight eight
27:16
eight to zero five two two sixty three.
27:20
Speaker 1: Ask Todd with Todd Letsky every Wednesday at ten thirty
27:24
only here on the Financial Exchange Radio Network. Todd Letsky
27:29
answers your questions about a state and elder life planning
27:32
every Wednesday at ten thirty, right here on the Financial
27:35
Exchange Radio Network.
27:46
Speaker 3: All right, Todd, we've got callers lined up for you.
27:48
Let's go to Jim in the car. Jim, you're on
27:51
with Todd Letsky. What's your question for him?
27:54
Speaker 8: Well, I uh, I had a trust, irrevocable trust put
27:58
together by Todd almost four years ago. In the question
28:03
I have, I've got a house. It's virtually it has
28:11
no value.
28:12
Speaker 9: It's depreciated.
28:14
Speaker 8: It's almost a fully depreciated asset. I'm entertaining swapping it
28:19
out to a ten thirty one exchange so I'll get
28:25
rid of the house, probably get a bank loan for
28:28
the balance. Now my question is for the new property
28:31
coming in, does the clock, the five year clock start
28:36
again or do I still dealing with the four foot
28:40
the four years that I have from the original house.
28:43
Speaker 7: So great, great question. Let me just ask you one
28:45
thing you plan on selling the house, getting money in
28:47
the trust and using the same money to buy another house.
28:50
Speaker 5: Correct.
28:52
Speaker 8: That is correct.
28:52
Speaker 7: Okay, because so the answer is if you do it
28:55
that way, you will not restart the clock, so you
29:00
will have one more year to go on the new
29:03
house being protected. So this is a great question because
29:07
it really shows the flexibility built into these trusts. One,
29:12
it's a Grand Tour trust. So because it's a Grand
29:14
Tour trust, you mentioned a minute ago that you wanted
29:17
to do this ten thirty one exchange. What that means
29:21
is you're selling property that has a lot of built
29:24
in gain and then you don't want to pay the
29:27
tax on that gain, so you're going to defer the
29:30
gain by replacing the property with like kind property. Can
29:36
you do it when it's in an irrevocable trust. Yes,
29:40
because it's a Grand Tour trust, And because it's means
29:43
Grand tor trust means you're the owner for income tax purposes,
29:48
so you have all the same benefits you would as
29:51
if you owned it for income tax purposes. So great news.
29:55
You can do the ten thirty one exchange. You can
29:58
defer the gain and and have it built into the
30:01
new property. And when you buy and sell through the trust.
30:05
As long as the money comes in the trust and
30:08
goes back out of the trust to buy new property
30:10
that comes in the trust, you will not restart the
30:14
five year waiting period, and in one year the new
30:17
property will be protected from the cost of long term care.
30:21
Speaker 5: So great question.
30:22
Speaker 7: I hope that helps a lot, and folks, that is
30:25
exactly why you want to get this guide. This guide
30:28
not only talks about Medicaid irrevocable trusts, which is what
30:31
Jim was talking about, but it adds seven six other
30:35
trusts from nominee realty trusts to revocable trust that Chuck
30:39
and I were talking about earlier, to you know, special
30:42
needs trust if you have a child, or sole benefit trusts,
30:46
life insurance trusts. It's really designed to explain a lot
30:51
of these trusts. And if you've never done a state planning,
30:54
this guide will help you figure out what's right for you.
30:58
If you've done planning and you want to switch, might
31:01
be helpful as well, So call Get the Guide eight
31:04
six six eight four eight five six nine nine or
31:08
Legal Exchange show dot com. Demystifying the Top seven Estate
31:12
planning trusts eight sixty six eight four eight five six
31:17
ninety nine or Legal Exchange Show dot Com.
31:20
Speaker 2: Next up for you, Todd is Tom in Burlington. Tom.
31:24
What is your question for Todd Lunsky?
31:27
Speaker 9: Yes, good morning. I have a piece of rental property.
31:29
My father and I have it in the revocable trust.
31:33
Were both trustees. If he was to pass and I
31:35
sold it, would I be paying capital gains in the
31:38
whole property or just have So?
31:40
Speaker 7: Is this property when you say it's in the revocable trust,
31:43
is the revocable trust your dad's revocable trust.
31:48
Speaker 9: We're both on it as trustee.
31:50
Speaker 5: No, no, no, no, But that doesn't matter.
31:52
Speaker 7: Who the trustee is is irrelevant who owned the property,
31:56
whose name was on the property prior to it going
31:59
into the rear vocable trust.
32:01
Speaker 9: It was in a state when my grandfather and there
32:05
was a deed putting anything into this trust.
32:07
Speaker 7: Back well, when your grandfather died, did the property go
32:11
to your dad?
32:14
Speaker 9: His dad and his sister and his sister signed off
32:17
and put it into this trust.
32:19
Speaker 7: So your dad got it one hundred percent. In other words,
32:22
it went to your dad and your and his sister.
32:25
Your sister gave it to your dad, and your dad
32:27
put it one hundred percent into this trust. Yes, if
32:31
that's how it went, you don't own any part of it, okay,
32:36
which is good actually, because if you don't own any
32:40
part of it, even though you're the trustee on the trust,
32:44
when he dies, because it's a revocable trust, the assets
32:50
in there will be one hundred percent included in his
32:54
gross estate, not his probate estate. It'll avoid probate, but
32:59
it'll be included in his gross estate, thereby giving the
33:03
beneficiaries who get it upon his death. Let's assume it's
33:07
his kids and you're one of them. When you kids
33:11
get the property, you will get it with a brand
33:14
new basis equal to fair market value. Example, if the
33:18
house is worth a million on the date of death,
33:21
regardless of how much it was rented, and the basis
33:25
depreciated during life. When you kids get it, if it's
33:29
worth a million on the date of death, it's as
33:30
if you paid a million dollars for it. And then
33:34
if you sell it relatively close to death, close after death,
33:38
there will be zero capital gains tax to be paid.
33:42
Speaker 5: So hopefully that answers your question.
33:45
Speaker 2: Todd, I've got another one here for you.
33:46
Speaker 3: Let's see if we can get through this call from
33:49
Joyce in rent them. Joyce, We've only got a couple minutes,
33:52
so you've got to be quick. But what's your question
33:53
for Todd?
33:55
Speaker 5: Hey, I'll be real quick.
33:56
Speaker 4: My husband and I have a revocable trust and I
33:59
wanted to know if.
34:00
Speaker 9: We should have a checking accounts in the revocable trust
34:03
in our stock also.
34:05
Speaker 7: Great question answer, quick answer of course is yes they
34:09
should be in there. But let me explain a little
34:11
bit about why and how. So when you have a
34:15
revocable trust, and again, I know the guide talks about
34:18
many trusts, this is a revocable trust. So when you
34:21
have a revocable trust, there is almost nothing that shouldn't
34:26
be in there. Accept retirement accounts. Okay, so your bank accounts,
34:31
your rental property like Tom had, or a primary residence
34:35
like you might have, should be retitled to the trust.
34:40
And then yes, your investment portfolio should also be titled
34:45
to the trust. Your bank accounts. Now, some people say,
34:49
why bother putting a you know, a small bank account
34:52
into the trust.
34:53
Speaker 5: Well, don't you don't have to?
34:55
Speaker 7: Sometimes they say I don't want to change my checking account,
34:57
I don't want to get new checks. You can't put
35:01
those in the trust. You can, there's no downside to
35:05
doing it right. If you want to leave a small
35:07
account out, you can, but there's no downside. Everything is
35:11
in your Social Security number. When you retitle these to
35:13
the trust, there's no separate tax return, and you are
35:17
one hundred percent in charge of what's in there. Now,
35:20
why am I stressing everything should go in there? Because
35:24
if it's not in there, you might not be helping
35:28
your estate tax liability situation, which is likely one of
35:32
the reasons you.
35:33
Speaker 5: Have a revocable trust.
35:35
Speaker 7: In other words, on the first death, you want to
35:37
shelter assets so they're not taxed on the second death.
35:42
And if they're not in the trust to be sheltered,
35:45
then you're wasting some of your exemption. So if it's
35:49
just jointly owned, it goes to each other and you
35:53
waste sheltering it first day taxes. So the more you
35:56
can put in a revocable trust likely the better. Sorry
35:59
for the long way to answer, but I hope that
36:01
that helps out.
36:02
Speaker 3: Mister Lutski. Thank you so much for joining us today.
36:05
We appreciate it.
36:06
Speaker 5: You're always always a pleasure. Thank you.
36:09
Speaker 1: This has been asked ODD on the Financial Exchange Radio network.
36:12
Ask Todd with Todd Lutsky has been presented by Cushing
36:15
and Dolan, serving Massachusetts and New England for more than
36:18
thirty years, helping families with the state and tax planning,
36:21
Medicaid planning, and probate law. Call eight hundred and three
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nine three four thousand and one or visit Cushing Doolan
36:26
dot com. The views expressed in this segment are solely
36:29
those of Cushing and Dolan Armstrong advisor. He does not
36:31
provide any legal or tax advice. Please consult with your
36:33
legal or tax advisor on such matters. Cushing and Armstrong
36:36
do not endorse each other and are not affiliated. Cushing
36:38
and Dolan are experts in elder life planning and taxation.
36:42
They know that every family is unique and that every
36:44
estate plan must be different. Early planning is crucial if
36:47
you want to stress free retirement and trusts are oftentimes
36:50
the document of choice to help protect your assets, but
36:53
with so many kinds of trusts, you need to learn
36:55
about which one is right for your plan. Revocable and
36:58
irrevocable trusts are most common, but there are several differences,
37:01
as well as numerous tax implications with each. If you
37:04
are ready to start your planning or need to a fresh
37:06
and existing plan, Call Cushing and Dolan and ask for
37:09
their new guide called Dmistifying the Top seven Estate Planning Trusts.
37:12
Learn how to protect your assets and potentially eliminate your
37:15
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37:22
That's eight sixty six eight four eight five six ninety nine,
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37:28
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