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Is the economy still inflated? · The Financial Exchange Show

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Speaker 1: Zutta and Paul Lane.
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Speaker 2: It's Chuck, Paul and Tucker with you here. And as
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Speaker 2: we continue through the first full week of trading in December,
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Speaker 2: we got Jay Powell. It's right, it's gonna be us
1:24
Speaker 2: speaking today, not at a FED meeting. There's no FED
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Speaker 2: meeting today. The next one is two weeks from today.
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Speaker 2: I believe on the eighteenth is going to be the
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Speaker 2: policy announswment Yeap eighteenth at two pm. But Powell is
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Speaker 2: going to be speaking this afternoon at one And the
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Speaker 2: question is what tone is he going to take in
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Speaker 2: his final speech of you know twenty twenty four before
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Speaker 2: that last FED meeting your thoughts, Paul.
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Speaker 3: I won't imagine that he'll have anything extremely excite insightful
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Speaker 3: in terms of what we'll hear today. Ultimately, we're gonna
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Speaker 3: get a cup pieces of data that he'll likely lean
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Speaker 3: on as something that needs to be evaluated prior to
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Speaker 3: making any decision as to what they'll do on the eighteenth.
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Speaker 3: We'll get the jobs report for the month of November
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Speaker 3: on Friday this week, and that's one piece of data
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Speaker 3: that will glean from. And then I believe an inflation
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Speaker 3: report comes out the eleventh, but it's somewhere within the
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Speaker 3: next week or two here, So those two pieces of
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Speaker 3: information are going to be important to look at. Obviously,
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Speaker 3: the October jobs report was very much muddied by the
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Speaker 3: hurricane impacts as well as some of the strikes that
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Speaker 3: boeing this one perhaps may be a little bit inflated
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Speaker 3: in terms of what we get for Friday's data. Yeah,
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Speaker 3: but overall, it seems like in my mind, strategically, there's
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Speaker 3: no reason to lean one way or another. Obviously, he
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Speaker 3: did have some commentary recently that on November fourteenth, and
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Speaker 3: his most recent public appearance where he and I quote said,
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Speaker 3: the economy is not sending any signals that we need
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Speaker 3: to be in a hurry to lower rates. So perhaps
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Speaker 3: that message will be reiterate here this afternoon.
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Speaker 2: Yeah, and if you look at the expectations right now,
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Speaker 2: remember again it's it's two weeks until the next FED meeting.
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Speaker 2: Expectations are seventy four percent chance of a cut at
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Speaker 2: that meeting, twenty six percent chance that the FED simply
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Speaker 2: maintains rates where they are. And when we look out
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Speaker 2: over the next year. Markets are only projecting in two
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Speaker 2: more cuts after that before the end of twenty twenty five,
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Speaker 2: So basically saying, hey, you're probably in a pretty good
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Speaker 2: spot as far as interest rates go. You don't necessarily
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Speaker 2: need to cut, you don't necessarily need to hike, and
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Speaker 2: you can probably keep them where they are. So the
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Speaker 2: market at this point, for the first time in a while,
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Speaker 2: is saying, Yeah, the Fed's good, they don't need to
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Speaker 2: do anything.
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Speaker 4: Which you might be like, oh, like, that's great.
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Speaker 2: The only problem is that the market's been basically wrong
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Speaker 2: for the last three years in terms of what they
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Speaker 2: thought the FED should be doing. In twenty twenty two,
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Speaker 2: they said, hey, the Fed's only gonna hike three quarters
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Speaker 2: of a percent. FED ended up hiking more than four
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Speaker 2: percent that year, and then they started pricing in interest
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Speaker 2: rate cuts in twenty twenty three and twenty four. That
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Speaker 2: finally started to materialize this year, but at a far
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Speaker 2: later time and slower pace than initially projected. So I
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Speaker 2: think in terms of you know, what you want to
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Speaker 2: hear from Jay Powell today, quite honestly, nothing like we
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Speaker 2: don't need more talk about you know this and that,
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Speaker 2: Like I'm tired of I'm tired of trying to interpret
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Speaker 2: every single economic release in terms of how is this
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Speaker 2: going to impact what the Fed does next week? It's
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Speaker 2: like no, like they need a better longer term strategic
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Speaker 2: plan and less, well, I need to watch this data
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Speaker 2: point in this you know report, because who knows like
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Speaker 2: the none of these reports are are written in stone there.
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Speaker 2: They're all reports that they're surveys, their estimates, and so
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Speaker 2: you need to be looking at the broader picture and
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Speaker 2: not just hey, what does this report of this data
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Speaker 2: point inside it say? And it feels like the Fed's
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Speaker 2: getting a little too micro on this stuff.
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Speaker 3: Now, well, let's talk about the broader picture a little bit.
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Speaker 3: Where we sit from an economic standpoint is in a
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Speaker 3: pretty strong place. We had GDP for Q three. The
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Speaker 3: second estimate just came out within the last week or so.
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Speaker 3: That came in at about two point eight percent, So
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Speaker 3: just to be clear, we typically average around two percent
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Speaker 3: economic growth, and to see over that is a really
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Speaker 3: strong number from a GDP perspective. Consumer spending in that
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Speaker 3: Q three was up about three and a half percent,
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Speaker 3: so the consumer has been resilient. If you look at inflation,
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Speaker 3: you can make the argument a little bit hotter there,
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Speaker 3: where you have the year over year core prices or
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Speaker 3: the core PC running at about three point three percent,
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Speaker 3: the CPI Consumer Price Index, which has energy and food
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Speaker 3: price into it, is about two point six.
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Speaker 4: And then you have a labor market that was an.
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Speaker 3: Area of concern but sits right now at four point
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Speaker 3: one percent unemployment and eighty point six percent of the
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Speaker 3: prime age workers. So those people who are anywhere from
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Speaker 3: twenty five to fifty four are working. You kind of
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Speaker 3: assess all those data points. My view is, you know,
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Speaker 3: we're in a relatively strong economy. It's hard to poke
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Speaker 3: too many holes at where we sit today. So to
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Speaker 3: kind of back his point, is there a necessary rush
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Speaker 3: to cut not none in my mind.
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Speaker 2: I think if you look at the other piece to that,
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Speaker 2: which is the inflation side of things, it's hey, the
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Speaker 2: core inflation number. We talk about the headline a lot.
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Speaker 2: Where CPI is at two point six, core is at
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Speaker 2: what three three? I think right now, you look at
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Speaker 2: this and you say, okay, so you've got one employment
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Speaker 2: which you know you noted there. The core inflation number
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Speaker 2: is also one that still is elevated, and the risk
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Speaker 2: is here, here's the risk if core inflation is running
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Speaker 2: two percent. The fluctuations that you might see in energy
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Speaker 2: and food prices, they might take that headline inflation number
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Speaker 2: between like two seven and one three. Like you've got
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Speaker 2: kind of this range that you're in if you are
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Speaker 2: seeing core elevated at three to three. Well, the reason
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Speaker 2: that the headlines at two six is because if you
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Speaker 2: look at the last year and how this is filtering
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Speaker 2: into the CPI, energy prices are down twelve point four percent.
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Speaker 4: Over the last year.
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Speaker 1: Right.
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Speaker 4: Do energy prices fall twelve point four percent every year?
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Speaker 3: Yes, I mean they've they've fluctuated, No, but not negatively
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Speaker 3: every They don't fall.
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Speaker 2: Twelve point four No. No, Sometimes they go up ten
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Speaker 2: percent sometimes like they move a lot.
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Speaker 4: They're very volatile, and that's why not usually in one direction.
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Speaker 4: The risk here.
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Speaker 2: Let's just say that everything else is the same next
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Speaker 2: year except energy prices. Let's say that oil does make
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Speaker 2: it huge. Let's say it goes from seventy right now
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Speaker 2: to seventy eight at the end of next year. Everything
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Speaker 2: else stays the same. Do you end up with four
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Speaker 2: percent inflation just because oil went from a ten percent
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Speaker 2: help to a ten percent drag? Like there's a world
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Speaker 2: in which that happens, and if inflation is running four
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Speaker 2: percent next year, hey, does the Fed look through that
8:20
Speaker 2: the same way The edges probably know they they can
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Speaker 2: afford to look through it right now and say they're
8:27
Speaker 2: gonna cut because energy prices have been coming down. But
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Speaker 2: if energy prices start moving up and headlines back at
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Speaker 2: four percent and the Fed's only got the Fed funds
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Speaker 2: rate at four and a quarter, probably like, no, we
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Speaker 2: got a hike, we gotta move back up one percent then.
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Speaker 2: And I'm not saying that this will or won't happen.
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Speaker 2: I'm just saying these are things that we need to
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Speaker 2: just consider as possibilities, because right now, if you want
8:53
Speaker 2: the danger in this market, it's that the market is saying, yeah,
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Speaker 2: we're gonna get through next year. The economy is going
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Speaker 2: to continue to grow like two and a half to
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Speaker 2: three percent, inflation's gonna stay low, nothing's going to go wrong.
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Speaker 2: And look, that might be the case if we're being
9:09
Speaker 2: entirely honest. Anyone who's predicted this market falling apart for
9:13
Speaker 2: the last two years has gotten repeatedly bludgeoned by the
9:18
Speaker 2: market saying, now, dude, you're wrong, it's not it's not
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Speaker 2: what's happening. The economy has been saying I'm stronger than
9:25
Speaker 2: you think, and people have not listened in general. So
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Speaker 2: I think that the risk that's out there is, Hey,
9:33
Speaker 2: maybe this is the time when the economy is weaker,
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Speaker 2: or inflation comes back or something.
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Speaker 4: We don't know. But all all I'm.
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Speaker 2: Saying here is hey, with with that, With that core
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Speaker 2: inflation number settling in in that mid three percent range,
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Speaker 2: there's some danger there. You don't need to freak out
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Speaker 2: about it, but you can't expect energy prices to just
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Speaker 2: fall ten percent.
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Speaker 4: Every year to help the headline number. Let's take a
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Speaker 4: quick break.
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Speaker 2: When we come back, let's see let's talk a little
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Speaker 2: bit about South Korea, because this was freaking wild yesterday.
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Speaker 2: We're going to talk about what was going on there
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Speaker 2: when we return.
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11:12
Speaker 2: So yesterday, I think it was around nine thirty AM
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Speaker 2: Eastern Time, which is like eleven thirty pm in Korea,
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Speaker 2: the Korean president.
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Speaker 4: Decided to declare martial law.
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Speaker 2: Now, it's not because anything was going on at eleven
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Speaker 2: thirty pm on a Is it Monday or Tuesday or Wednesday?
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Speaker 6: There?
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Speaker 4: At that point it was Tuesday. Well, no, it was tuesday. Here, Yeah,
11:42
Speaker 4: it's still Tuesday.
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Speaker 3: There are eleven thirty Yeah.
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Speaker 4: Are you sure that it's not on the other side
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Speaker 4: of the international dateline, It's not. I'm pretty positive.
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Speaker 5: It's still Tuesday, and now if it was twelve, it
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Speaker 5: will be Wednesday.
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Speaker 2: Well, no, but it depends what day it is because
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Speaker 2: it's on the other side of the world. Okay, Paul,
11:59
Speaker 2: how does the international date line work?
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Speaker 4: Right now?
12:03
Speaker 2: It is Thursday in see, this is what I'm saying Korea.
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Speaker 2: So it was actually Wednesday. No, but it was becoming Wednesday.
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Speaker 2: It was because it was almost Wednesday.
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Speaker 4: That's what I'm saying that. Yeah, right, but but it's close.
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Speaker 4: So this is why I had to get it right.
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Speaker 5: Okay, well Thursday.
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Speaker 2: That well, no, now it is Thursday in Korea because
12:23
Speaker 2: it's an hour later than it was twenty five hours ago. Anyways,
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Speaker 2: the South Korean president decided to declare martial law.
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Speaker 4: And I have.
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Speaker 2: Three buddies who live in Korea, to or from Korea,
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Speaker 2: and one is stationed there in the military. And so
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Speaker 2: immediately I'm like, hey, guys, what's going on. I don't
12:47
Speaker 2: know anything about Korean politics, Like, fill me in on
12:50
Speaker 2: what the deal is. And here's the long story short.
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Speaker 2: As far as I can understand, the Korean president heading
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Speaker 2: into this had an approval rating of nineteen percent.
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Speaker 4: Which is bad.
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Speaker 2: Like basically everyone in Korea aside from you know, four
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Speaker 2: and five, Koreans were like, no, this is not gonna work. Also,
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Speaker 2: does not have control of the legislature about one hundred
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Speaker 2: about two thirds of the legislature is the opposition party,
13:20
Speaker 2: and so things generally just were not going well for
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Speaker 2: the Korean president. So the thought is that the Korean
13:26
Speaker 2: president was basically like, hey, if I take control of
13:29
Speaker 2: the government with you know, a military coup, I'll be
13:32
Speaker 2: able to stay in power and I can you know,
13:34
Speaker 2: kind of control things. Unfortunately, this lasted like maybe an
13:41
Speaker 2: hour or two because the Korean parliament members came back
13:46
Speaker 2: into session. There were videos I was watching these online
13:50
Speaker 2: that there were legislature members that were streaming themselves climbing
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Speaker 2: back like over the walls of the capital building to
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Speaker 2: get into sessions so they could vote for martial law
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Speaker 2: to be dissolved. Which the way that the Korean Constitution,
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Speaker 2: I guess is written, is that if the legislature votes
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Speaker 2: to halt martial law, the president then has to convene
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Speaker 2: his cabinet and halt martial law. So they managed to
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Speaker 2: get enough people back into parliament to vote on this.
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Speaker 3: One hundred and ninety to zero against the measure.
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Speaker 4: Yeah, so it was pretty conclusive.
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Speaker 3: And twenty of them were from his own party.
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Speaker 2: Yes, even members of his own party were like, no,
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Speaker 2: we had no idea that this was going on. The military,
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Speaker 2: who was, you know, being called upon to implement martial
14:38
Speaker 2: law was kind of like, we're not even really sure
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Speaker 2: what we're doing here. There were other videos afterwards of
14:43
Speaker 2: people in the military apologizing to civilians for basically like
14:50
Speaker 2: instituting martial law. So the whole thing was just an
14:52
Speaker 2: abject disaster. The president is going to end up being
14:55
Speaker 2: voted out of power by the Korean legislature pretty soon here.
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Speaker 2: But this is a pretty big reminder that there's pretty
15:04
Speaker 2: significant political risk almost anywhere in the world.
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Speaker 4: And like, you don't have to go back that South Korea.
15:15
Speaker 2: I don't know if a ton of people remember, I'm
15:18
Speaker 2: sure that a lot of our listeners who were you know, older, remember,
15:20
Speaker 2: until the late nineteen eighties was a military dictatorship. It
15:24
Speaker 2: has not had this long history of free and fair
15:28
Speaker 2: elections and you know democracy, and you know, that's not
15:33
Speaker 2: really what it's been until recently. And so when it
15:37
Speaker 2: comes to the world economy and you know, basically either
15:44
Speaker 2: global supply chains where South Korea is hugely important for
15:47
Speaker 2: anything manufacturing related, whether you're talking heavy machinery, semiconductors, computers, electronics,
15:53
Speaker 2: like you have huge multinational firms that have monster operations there.
16:00
Speaker 2: Those are all potentially at risk because of political upheaval.
16:03
Speaker 2: But also you talk about, hey, if if you're a
16:07
Speaker 2: US investors, like, oh, like I'd like to invest in
16:10
Speaker 2: Korean stocks, you've got to remember that. It's like there
16:14
Speaker 2: are risks that are out there that admittedly are tail risks.
16:17
Speaker 2: Obviously this this didn't work, but it seems more like
16:21
Speaker 2: it didn't work because it was poorly planned out rather
16:24
Speaker 2: than hey, it could never work. So they like again
16:28
Speaker 2: just kind of a wild scene that we ended up
16:32
Speaker 2: seeing there. The best summary that I've seen to this
16:35
Speaker 2: point is, again the whole thing's kind of humorous now
16:40
Speaker 2: just because no one was hurt, no one was killed,
16:42
Speaker 2: and like the whole thing just kind of flamed out
16:46
Speaker 2: South Korean presence basically like I declare martial law, like
16:50
Speaker 2: kind of all Michael Scott from the office, and then
16:53
Speaker 2: you get South Korean people just wandering around the street
16:55
Speaker 2: at midnight on a Tuesday, like, what the heck are
16:57
Speaker 2: you talking about man the assemblies, like, dude, not gonna work.
17:02
Speaker 2: And then two hours later I Undeclare Marshall law, like
17:07
Speaker 2: that's basically what.
17:08
Speaker 4: Ended up happening.
17:09
Speaker 3: To be fair, he got five or six hours. But yes,
17:11
Speaker 3: that is that is exactly the case here. They are
17:15
Speaker 3: going to need ten votes. It sounds like to get
17:18
Speaker 3: the foam of JORDI. I'm sure that they will likely
17:21
Speaker 3: get them. The idea would be he would be impeached
17:23
Speaker 3: by Friday or Saturday. But no, you're absolutely right. Just
17:27
Speaker 3: an absolutely crazy story. Some of the other things I
17:31
Speaker 3: read pertaining to the president, I wasn't at all familiar
17:35
Speaker 3: with it, Just like you that he was looking to
17:37
Speaker 3: c ever since he gotten office in twenty twenty two,
17:39
Speaker 3: he's been looking to clamp down on speech and the
17:42
Speaker 3: spread of disinformation and going after news organizations and so.
17:47
Speaker 4: Her worked well on this one.
17:49
Speaker 3: This was a lot of his frustration. Just to give
17:52
Speaker 3: some more background to why he decided to go down
17:55
Speaker 3: this road, though, quite a relief to see a democracy
18:01
Speaker 3: working in favor so quickly to reverse what was a awful,
18:06
Speaker 3: unplanned decision.
18:08
Speaker 2: And again, if you want further evidence that the Korean
18:11
Speaker 2: president unit is probably going to be out by the
18:13
Speaker 2: end of this week. The Korean Confederation of Trade Unions
18:17
Speaker 2: has also announced a general strike as a result of this,
18:21
Speaker 2: and they have said that we are on indefinite general
18:24
Speaker 2: strike until the union administration steps down. So trade unions
18:28
Speaker 2: in Korea are pretty big and pretty powerful, and when
18:32
Speaker 2: you talk about a general strike, it's basically saying, look,
18:34
Speaker 2: nothing's happening in Soul until you're gone. It's not going
18:39
Speaker 2: to take long for the current administration in Korea to
18:44
Speaker 2: end up stepping down.
18:45
Speaker 3: You have to wonder if he had a couple a
18:47
Speaker 3: couple of cocktails in his system where we confirmed the
18:50
Speaker 3: timing was eleven thirty, So it's reasonable that he was
18:53
Speaker 3: just so fed up and perhaps a little excited that
18:58
Speaker 3: he would make such a rass decision such an obscure time.
19:01
Speaker 4: It's it's on a Tuesday.
19:03
Speaker 2: On a Tuesday, It's it's hard to say what the
19:08
Speaker 2: plan was here, but whatever it was, it was not
19:13
Speaker 2: good and it didn't work. And again, I think this
19:18
Speaker 2: this morning, anything, is just a reminder that, especially when
19:22
Speaker 2: you're dealing with international investing, it's it's kind of a
19:27
Speaker 2: different beast in terms of.
19:28
Speaker 4: You know, some of the things you have to be
19:30
Speaker 4: concerned about.
19:31
Speaker 2: Quick break Here we got Wall Street Watch and ask
19:33
Speaker 2: Todd next.
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20:01
Speaker 5: Markets are in positive territory as traders react to new
20:04
Speaker 5: batch of third quarter earnings. Wall Street will also shift
20:08
Speaker 5: their attention to a speech from FED Chairman Jerome Powell
20:12
Speaker 5: early this afternoon. Right now, the Dow is up by
20:16
Speaker 5: three tenths of a percent, or one hundred and thirty
20:18
Speaker 5: two points. S and P five hundred is up by
20:21
Speaker 5: about a third of a percent or nineteen points, and
20:23
Speaker 5: the Nasdaq is up nearly one percent higher, or one
20:26
Speaker 5: hundred and seventy seven points. Russell two thousand is up
20:29
Speaker 5: over a third of a percent or eight points. Ten
20:32
Speaker 5: year treasureealed is up by one basis point four point
20:36
Speaker 5: two to three percent, and crude oil is off a
20:38
Speaker 5: third of a percent, trading in sixty nine dollars and
20:41
Speaker 5: seventy cents a barrel. Shocking and sad news this morning,
20:46
Speaker 5: where United Health Group CEO Brian Thompson was fatally shot
20:50
Speaker 5: outside a hotel in Manhattan this morning. Police believe Thompson
20:54
Speaker 5: was targeted in the attack, which happened during the company's
20:57
Speaker 5: annual investor conference, where Thompson had arrived early to prepare. Meanwhile,
21:02
Speaker 5: shares in Salesforce jumping by over eight percent after the
21:06
Speaker 5: business software provider hiked its annual revenue outlook after its
21:10
Speaker 5: AI agent helped drive better than expected third quarter sales.
21:14
Speaker 5: Chip maker Marvel Technology also posted strong AI demand while
21:19
Speaker 5: its current quarter outlook and pressed sending Shares in that
21:23
Speaker 5: stock up by twenty two percent. Elsewhere, Pure Storage jumping
21:27
Speaker 5: by twenty five percent after the data storage management company
21:30
Speaker 5: boosted its annual revenue outlook after a better than expected quarter.
21:36
Speaker 5: And over to retail, where foot Locker shares dropping by
21:39
Speaker 5: nearly ten percent after the sneaker retailer cut its annual
21:43
Speaker 5: guidance and its third quarter results missed expectations due to
21:48
Speaker 5: higher promotions and soft customer spending. I'm Tucker Silva and
21:53
Speaker 5: that's Wall Street Watch.
21:55
Speaker 1: This is ASKEDID on the Financial Exchange radio network. We
22:00
Speaker 1: have an existing estate plan or in the market for
22:02
Speaker 1: one Todd Letsky is here to answer your questions and
22:05
Speaker 1: help you plan for a later life. Ask Todd is
22:07
Speaker 1: presented by Cushing and Dolan, serving Massachusetts and New England
22:10
Speaker 1: for more than thirty five years, helping families with a
22:13
Speaker 1: state and tax planning, Medicaid planning, and probate law. Visit
22:17
Speaker 1: Cushingdolan dot com. Now here's Todd Lutsky.
22:21
Speaker 2: And we do have Todd Lotsky from Cushing and Dolan
22:24
Speaker 2: with us right now for Ask Todd. As always, it's
22:28
Speaker 2: your chance to ask Todd your estate planning questions. I'm
22:32
Speaker 2: sure some of them came up over the Thanksgiving dinner table.
22:36
Speaker 2: So the studio lines are open at eight eight eight
22:39
Speaker 2: to zero five two two six three. We do have
22:43
Speaker 2: limited space on those phone lines, so do make sure
22:45
Speaker 2: that you call early to make sure that you can
22:47
Speaker 2: get your question answered by Todd. That number again is
22:51
Speaker 2: eight eight eight two zero five two two six three,
22:55
Speaker 2: and we've got those lines open one more time at
22:58
Speaker 2: eight eight eight to zero five. I've two two sixty three.
23:02
Speaker 2: Mister Lutsky, how are you today?
23:05
Speaker 7: I am great and you doing well?
23:08
Speaker 2: But did you happen to see that Rudolph the Red
23:12
Speaker 2: nose reindeer just got his latest grades for the semester grades.
23:18
Speaker 4: Yeah, no, went down in history, that's true, he does. Yeah, yeah,
23:23
Speaker 4: it wasn't good.
23:24
Speaker 2: Let's talk a little bit about the estate tax todd
23:29
Speaker 2: in terms of the federal estate tax thresholds right now,
23:33
Speaker 2: where do they currently stand and how many families are
23:37
Speaker 2: typically impacted by the federal estate tax in a given year.
23:40
Speaker 6: So it's a great question for now because there was
23:43
Speaker 6: an election that is going to impact the answer to
23:47
Speaker 6: that question, we believe. So currently the estate tax exemption
23:52
Speaker 6: is thirteen point six million federally, So this is for
23:55
Speaker 6: everybody listening right federally, doesn't matter what state you're in,
24:00
Speaker 6: going to have to address that separately. So thirteen point
24:04
Speaker 6: six million. That means if you die and you leave
24:06
Speaker 6: assets more than thirteen point six million to someone other
24:10
Speaker 6: than a spouse, then you have a tax problem now
24:15
Speaker 6: to a spouse. Remember, folks, it's unlimited, which is the
24:19
Speaker 6: trap for the unwary.
24:21
Speaker 7: Right.
24:21
Speaker 6: Those are the people who say, oh, I just leave
24:22
Speaker 6: everything to my spouse and that's great, except it would
24:27
Speaker 6: cause the spouse to be poised to maybe pay more
24:30
Speaker 6: taxes when the spouse dies. Uh, because you didn't shelter
24:35
Speaker 6: any on the first death and wasted this thirteen point
24:37
Speaker 6: six million. Now you said where they headed. Well, next
24:42
Speaker 6: year twenty twenty five, right around the corner, it's gonna
24:46
Speaker 6: be thirteen point nine million, call it thirteen nine ten
24:49
Speaker 6: called thirteen point nine million each per person? Oh good,
24:54
Speaker 6: heading in the right direction. Even more, we can leave
24:57
Speaker 6: without paying a federal death tax. Now, the concern in
25:02
Speaker 6: the election, I think that needs to be factored into
25:05
Speaker 6: our decisions now going forward is you know, we're not
25:08
Speaker 6: entirely sure like we were before that that exemption. Come
25:12
Speaker 6: twenty twenty six, January one, sure is going to drop
25:18
Speaker 6: down to five million, four ninety huge drop right index
25:23
Speaker 6: for inflation, which we peg at about seven million, that's
25:28
Speaker 6: still out there. That means that is going to happen
25:33
Speaker 6: unless the government can act to stop it from happening. Okay,
25:40
Speaker 6: that's still a big if. I mean, it did seem
25:42
Speaker 6: more like a mandate before, because you know, I thought
25:45
Speaker 6: that's what it was. But it looks like the majority
25:48
Speaker 6: in the House is going to be you know, razor
25:49
Speaker 6: thin sure and we're looking at like one vote. So
25:54
Speaker 6: is it going to happen? We don't know, I think
25:55
Speaker 6: we have to keep an eye on it, but you
25:57
Speaker 6: have to know that unless they actually get together act
26:00
Speaker 6: and the government over the past eight years has not
26:02
Speaker 6: been good at acting, so I'm not sure it will
26:05
Speaker 6: or will not happen. But I think with the election
26:07
Speaker 6: you have a better shot at that not coming down
26:10
Speaker 6: to seven than you did before, So keep that in mind.
26:15
Speaker 7: However, as a separate matter, some of.
26:18
Speaker 6: You listeners, not all, have to be more concerned with
26:22
Speaker 6: the state estate tax. Right We have it in Maine,
26:26
Speaker 6: we have it in Connecticut, we have it in New York,
26:28
Speaker 6: we have it in Massachusetts. We don't have it in
26:30
Speaker 6: New Hampshire, so flock there no estate tax at the
26:33
Speaker 6: state level, but otherwise the state estate tax exemptions are low,
26:39
Speaker 6: and here in Massachusetts it's only two million dollars per person,
26:43
Speaker 6: and there could be in a state tax, So I
26:45
Speaker 6: think you need to know that those are kind of
26:47
Speaker 6: like they're not going anywhere anytime soon. There's nothing on
26:50
Speaker 6: the horizon for this state levels, at least here around
26:53
Speaker 6: New England, so bear that in mind depending on where
26:56
Speaker 6: you live.
26:57
Speaker 2: Talking with Todd Lutsky from the law firm of Cushing
26:59
Speaker 2: and Dolan, if you've got a question to ask Todd,
27:01
Speaker 2: this is your chance to do so live on air
27:04
Speaker 2: right now. Studio line still have some room on them
27:07
Speaker 2: at eight eight eight to zero five two two six three.
27:11
Speaker 2: That number is eight eight eight to zero five two
27:15
Speaker 2: two six three. Remember it's first come, first serve. We're
27:17
Speaker 2: gonna take a quick break here, but when we come back,
27:21
Speaker 2: it's right to your questions with Todd. Eight eight eight
27:24
Speaker 2: to zero five two two sixty three.
27:28
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:31
Speaker 1: only here on the Financial Exchange Radio Network. Todd Letsky
27:37
Speaker 1: answers your questions about a state and elder life planning
27:40
Speaker 1: every Wednesday at ten thirty right here on the Financial
27:43
Speaker 1: Exchange Radio Network.
27:53
Speaker 4: Again, we've got Todd Lutsky here.
27:54
Speaker 2: If you've got a question for him, you can call
27:56
Speaker 2: the studio at eight eight eight to zero five two
27:59
Speaker 2: two six three.
28:01
Speaker 4: Todd, we got one for you here. Hector and Taunton.
28:04
Speaker 4: You are on with Todd Letsky. What's your question for him?
28:07
Speaker 8: Yeah? My mom has a three family and she's in
28:12
Speaker 8: the nursing home. She's been there for five years, six years,
28:16
Speaker 8: and we did the she's on Mass Healthy we did.
28:21
Speaker 8: We did the mass health application this year, and they're
28:25
Speaker 8: saying that we can't that we she can't deduct the
28:33
Speaker 8: property taxes, the insurance, and the water bill uh from
28:38
Speaker 8: her portion of the mass health payment. So my question
28:42
Speaker 8: is who's I mean, who's responsible to make those payments? Well,
28:47
Speaker 8: on her on her house?
28:48
Speaker 6: Yeah, I think first and foremost is the house still
28:52
Speaker 6: in her name?
28:54
Speaker 9: Well?
28:54
Speaker 8: Yeah, life estate. Yeah, the house, she's got the house
28:58
Speaker 8: and the life of state. And then my brother and
29:00
Speaker 8: I in Hevitt had remained there after she passed.
29:03
Speaker 6: Oh, so it's in a life estate arrangement. So what
29:05
Speaker 6: that means for everybody is that she transferred this three
29:08
Speaker 6: family home of which she lived in one and so
29:13
Speaker 6: she reserved the right to live there. When you reserve
29:16
Speaker 6: this little life estate nugget, it's a nugget of ownership
29:20
Speaker 6: that gives you not only the right to live there,
29:23
Speaker 6: but also the right to pay all the bills and
29:27
Speaker 6: the right to collect all the income. Okay, so I
29:30
Speaker 6: assume as part of her patient pay amount. Right, they're
29:36
Speaker 6: saying to you, you're on Medicaid because the house is
29:40
Speaker 6: now non countable, one because it's your primary residence, and
29:44
Speaker 6: two maybe because you're renting it, but the rent belongs
29:48
Speaker 6: to her, and so that goes to the nursing home
29:52
Speaker 6: as her part of her patient pay amount. Now, the
29:56
Speaker 6: rule is that the net rent goes to her for
30:01
Speaker 6: her patient pay amount. She is entitled to use the
30:05
Speaker 6: rent to pay these bills on the house, at least
30:10
Speaker 6: as it relates to the rental portion. Okay, at least
30:14
Speaker 6: as it rent relates to the rental portion of the house,
30:17
Speaker 6: which would be two thirds of the house. So you
30:20
Speaker 6: should be able to argue that two thirds of those bills,
30:22
Speaker 6: at a bare minimum, are paid to offset the rent,
30:26
Speaker 6: and then whatever the net rent is goes to the
30:29
Speaker 6: nursing home as part of the patient pay amount. The
30:33
Speaker 6: arguably the portion that and she still is the owner,
30:37
Speaker 6: but arguably the portion that is her primary residence. They'll say, look, kids,
30:42
Speaker 6: you know, technically the house is non countable, but you know,
30:45
Speaker 6: you don't you don't have you're on medicaid, you don't
30:47
Speaker 6: really have a lot of spare money. So you kids
30:50
Speaker 6: may need to pay for the you know, maintenance, upkeep, taxes,
30:54
Speaker 6: bills for one third, but I think you could easily
30:57
Speaker 6: argue that two thirds offset. It's the rent and you
31:01
Speaker 6: have a lower net rent argument, but you're going to
31:04
Speaker 6: have to go to them and you're gonna have to
31:05
Speaker 6: explain this to them. And that's that's the stuff that
31:07
Speaker 6: you know that usually elder law lawyers help with when
31:10
Speaker 6: you're going through the medicaid application process.
31:13
Speaker 7: But I get this. This is your renewal every year.
31:15
Speaker 6: So I'm surprised after six years that they're suddenly bringing
31:20
Speaker 6: this up. Why would it be any different than the
31:23
Speaker 6: last five years. I don't know, but I hope that
31:26
Speaker 6: helps a little folks this Obviously, that's just one of
31:30
Speaker 6: the problems that exist out there when you're when you're
31:33
Speaker 6: doing planning. In this case, this was just life estate planning.
31:37
Speaker 6: The new guide for the month that I want to
31:39
Speaker 6: have you pay attention to is a tale of two objectives,
31:43
Speaker 6: reducing estate taxes and like Hector situation, protecting these assets
31:49
Speaker 6: from the nursing home. So some folks want to just
31:52
Speaker 6: learn about Hey, I don't care about the nursing homes.
31:55
Speaker 6: But this guide explains the revocable trust. It explains the
31:59
Speaker 6: marital share, the remainder share, and how they work to
32:01
Speaker 6: shelter taxes on the first death from both federal and
32:06
Speaker 6: a state perspective, and it explains the operation of the trust.
32:10
Speaker 6: So if you want to just learn how to reduce
32:12
Speaker 6: your taxes and avoid probate, the guides for you. If
32:16
Speaker 6: you want to add nursing home protection to that equation,
32:20
Speaker 6: well this guide's for you too, because there's a separate
32:22
Speaker 6: section that runs an example and it calculates the tax
32:26
Speaker 6: for you. You could put your own numbers in, and
32:28
Speaker 6: it shows you how to shelter assets from estate taxes
32:32
Speaker 6: with a marital share and a remainder share that are
32:34
Speaker 6: a little different than the revocable trust, so it reduces
32:39
Speaker 6: the estate tax and at the same time provides protection
32:43
Speaker 6: from the nursing home going forward. So either way, folks,
32:47
Speaker 6: this guide might be for you. It's new for the
32:49
Speaker 6: month eight six six eight four eight five six nine
32:53
Speaker 6: nine or Legal Exchange Show dot com again eight sixty
32:57
Speaker 6: six eight four eight five six or Legal Exchange Show
33:01
Speaker 6: dot com.
33:02
Speaker 2: Todd, I've got another one for you here. Let's go
33:04
Speaker 2: to Catherine in Boston. Catherine, what is your question for Todd?
33:09
Speaker 9: Yes, I have a had a sister that passed away,
33:12
Speaker 9: and she had a realty trust and her and they
33:21
Speaker 9: were vocable realty trust her. I am the beneficiary on
33:27
Speaker 9: all of her retirement accounts, and my question is can
33:33
Speaker 9: I put off doing the r m D on those
33:37
Speaker 9: accounts until next year because I I somebody said that
33:43
Speaker 9: the new Secure Act allows allows you to delay taking.
33:48
Speaker 6: The r m D, So that is a The Secure
33:52
Speaker 6: Act is a complicated animal, like anything dealing with designated
33:56
Speaker 6: be dealing with iras. I tell you, what I do
34:01
Speaker 6: know about it is that you know you are allowed.
34:05
Speaker 6: You're actually as a sibling. You're one of the exceptions
34:09
Speaker 6: they call them. You know, you're a you're a a
34:13
Speaker 6: a special designated beneficiary, not just a regular designated beneficiary
34:18
Speaker 6: for for lack of a better term, meaning you're one
34:21
Speaker 6: of the few people who are if you're within ten
34:25
Speaker 6: years of age of the participant, you're allowed to actually
34:31
Speaker 6: take out the asset over your life expectancy. And that's
34:36
Speaker 6: a benefit because if it was a regular designated beneficiary, right,
34:42
Speaker 6: a plain old designated beneficiary, then you have to like
34:46
Speaker 6: a child, let's say, then you would have to take
34:49
Speaker 6: it out over ten years, which could cause it to
34:52
Speaker 6: come out faster than it otherwise would. So for you,
34:58
Speaker 6: you get to take it out over your life's expectancy. Now,
35:01
Speaker 6: how old are you?
35:02
Speaker 9: I'm the same age, which.
35:04
Speaker 6: I don't know how old that is. Seventy seven. Yeah,
35:09
Speaker 6: so you get to take it out over a seventy
35:11
Speaker 6: seven year old life expectancy because again you're a special
35:15
Speaker 6: designated beneficiary. Now the question is do you have to
35:19
Speaker 6: take it out this year or next year? I think
35:22
Speaker 6: you have to look and see did she already make
35:25
Speaker 6: her required minimum distribution this year? I mean if she did,
35:30
Speaker 6: then there was a distribution this year and you must
35:32
Speaker 6: start taking Remember next year is only thirty days away,
35:35
Speaker 6: so next year is right around the corner. So you
35:39
Speaker 6: just need to find out for sure. And I don't
35:41
Speaker 6: know that I have that answer whether you have to
35:43
Speaker 6: take one this year or take it next year. For sure,
35:49
Speaker 6: you have to take it next year, Okay, I just
35:52
Speaker 6: don't know if you need to take it this year
35:55
Speaker 6: or not without actually going and reading that that's secure.
36:00
Speaker 6: But you know, if you've got a financial advisor, they
36:02
Speaker 6: might know that, your your accountant might know. Just trying
36:05
Speaker 6: to give you some folks to to check with on that.
36:08
Speaker 6: My bigger question that you didn't ask was you're the
36:11
Speaker 6: designated beneficiary on that realty trust. You said, I'm not
36:16
Speaker 6: on the realty trust.
36:17
Speaker 7: You're not.
36:18
Speaker 9: I'm I'm on all of her.
36:22
Speaker 7: No, I'm asking about the realty trust.
36:24
Speaker 1: That not.
36:25
Speaker 9: Unfortunately she changed that as the last few weeks of
36:30
Speaker 9: her life and she gave me her home.
36:34
Speaker 7: Oh, wasn't the home in the realty trust.
36:37
Speaker 9: The home is in the realty trust. But I had
36:40
Speaker 9: not been in the realty trust to receive the home.
36:43
Speaker 9: Oh that's problem.
36:45
Speaker 6: Yeah, that's a big problem. So whoever's listed as the
36:48
Speaker 6: designated beneficiary on that account is going to be on
36:52
Speaker 6: that realty trust is really who's entitled to that home.
36:55
Speaker 6: So yeah, check into that and see if you can
36:57
Speaker 6: get that squared away. Lots going on in this case.
37:00
Speaker 6: Great question, Catherine, Thank you, and I think we'll wrap
37:04
Speaker 6: it up.
37:04
Speaker 4: Mister Lutsky, thank you so much for your time today.
37:06
Speaker 7: Always a pleasure.
37:08
Speaker 1: This has been asked Todd on the Financial Exchange Radio network.
37:12
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
37:17
Speaker 1: thirty years, helping families with the state and tax planning,
37:20
Speaker 1: Medicaid planning, and probate law. Call eight hundred and three
37:23
Speaker 1: nine three four thousand and one, or visit Cushingdolan dot com.
37:27
Speaker 1: The views expressed in this segment are solely those of
37:29
Speaker 1: Cushing and Dolan. Armstrong advisor. He does not provide any
37:31
Speaker 1: legal or tax advice. Please consult with your legal or
37:33
Speaker 1: tax advisor on such matters. Cushing and Armstrong do not
37:36
Speaker 1: endorse each other and are not affiliated