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Is this the biggest Fed meeting in years? · The Financial Exchange Show

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Face is the Financial Exchange with Chuck Zada and Mark Fandetti.
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Speaker 2: And a very happy FED Day to all those who
1:15
celebrate It is Chuck, Mark and Tucker with you. And
1:20
at two pm Eastern time today, the one and only
1:25
Federal Reserve will announce its latest interest rate decision and
1:29
change it to monetary policy. The expectation today kind of
1:35
all over the place, quite honestly. Normally heading into a
1:38
FED meeting. By the morning of said FED meeting, the
1:43
CME Fedwatch tool, the FED Fund's futures pricing is usually
1:47
somewhere in the vicinity of ninety five to ninety nine
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percent certain of what the FED is going to do
1:53
at a minimum. Today, we've got a little bit of
1:57
drama here. So this episode of the FED is brought
2:02
to you by the same people who produce The Bachelor
2:04
and Bachelorette, and it's the most dramatic FED meeting it history.
2:09
Speaker 1: Mark.
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Speaker 2: My wrong or right is it's not actually the most
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dramatic in history.
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Speaker 3: But it's not that old. Chuck. I don't know about
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every single one.
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Speaker 2: You probably don't have a mental rodex that you go
2:20
through in terms of in.
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Speaker 3: Terms of okay in terms of uncertainty as to what
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they're gonna do to You remember two thousand and eight
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and nine where there were interim rate cuts, interim measures.
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That whole period was one of elevated, exhaustingly elevated uncertainty.
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This went on for several months, So as a period
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that will that will probably I hope not be matched
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in our lifetimes. As far as uncertainty about the balance
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between inflation and unemployment that the FED is trying to strike,
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and that is at the core of this, we should
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lose sight of that those two things in the short
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term are in perfect and the FED is walking a
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knife's edge here. As far as far as the uncertainty
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about where the risks lie right now, it's it's as
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high as it gets in a normal ie non two
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thousand and eight, which we're all still shell shocked from
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at least I am a business cycle chuck. So yeah,
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I think you're describing it correctly.
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Speaker 2: Like this is actually a really interesting one. We've poop
3:22
pooed a number of the other FED meetings this year
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being like, hey, this doesn't really matter, like they're not
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going to do anything, nothing's happening, blah, blah blah. This one,
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there's actually a little bit of intriguing, and not just
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because of what happens today, but hey, what does the
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FED think? There are two numbers, in my opinion, that
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matter for markets more than even what the FED does today.
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What does the FED project unemployment to be at the
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end of this year and next year? And what does
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the FED project the FED funds rate to be at
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the conclusion of this year next year? Because that tells
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you two things in my opinion. It tells you how
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high is the FED willing to let unemployment go. And
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based on Powell's comments at Jackson Hole, where he said,
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in no uncertain terms, I don't want unemployment moving any
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higher than where we are, you would expect that the
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unemployment rate that they stayed at the end of twenty
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twenty four would be four point two, maybe four point three,
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because otherwise they're basically saying their policy doesn't work. Like
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that's the implication. I'm not saying that that's true. I'm
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just saying that's the implication that gets read. And as
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far as hey, what are they going to do about it?
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This is where you know, you do have the potential
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for a little bit of a shake up in terms
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of how markets are pricing things because we don't know.
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Even let's say the FED does go today, there are
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three remaining meetings, including today in twenty twenty four. Is
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it fifty twenty five twenty five for the rate cuts?
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Is it fifty twenty five zero? Is it fifty to
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fifty to fifty? Is it fifty seventy five, seventy five.
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I mean, there's a wide range of potential outcomes here,
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and all of it stems from something that you touched
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on at the outset, which is, if I'm being completely honest,
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I don't have any read on where this economy is
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going right now. It is all over the place. And
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that is different from a month and a half ago,
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where in early August the data was pretty consistently pointing
5:25
down regardless of what you were looking at. Today, you
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look at it and you're like, okay, so job growth
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is slowing. We know that job openings are slowing. The
5:37
labor market as a whole seems to be slowing. That's
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fairly conclusive. But retail sales have beaten expectations the last
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two months, and so we're seeing a little bit of
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a growth impulse. There. We just got this morning building
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permits and housing starts data, which jumped significantly month over
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month as interest rates fell. The counter to that, even
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within that own data is housing completions went up dramatically,
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and so the number of units under construction, which is
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what actually matters for how many construction workers are needed,
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continues to fall at a pretty rapid clip. So even
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within housing, it's kind of like, I don't really know
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what's going on here at the moment. You take a
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look at the industrial production numbers that we got yesterday,
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I think the technical term is knocked the cover off
6:24
the ball. They were great. But then you look at
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ism manufacturing and all these surveys about how manufacturing is doing,
6:32
and it's kind of like, well, things are really bad here.
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There's nothing conclusive pointing in either direction right now. And
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what I will say is if that continues, isn't that
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exactly what the soft landing looks like, where you don't
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know exactly where you're going, but you just kinda well,
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you model around this area.
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Speaker 3: You never know exactly where you're going. There are too
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many forces acting on the economy, some in headwind fashion.
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Oh there's entail wind fashion. I e summer supportive of growth,
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others tend to retard it. You don't know the best
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guess right now, Chuck, As you point out, I think
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is summarized by the Atlanta Fed's GDP statistics, which takes
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into account yesterday's industrial production and capacity utilization, both of
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which look just fine, which take into account other metrics
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like retail sales, which we got yesterday, and it can
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be bewildering. I understand we throw a lot of data
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points out at you without because we're getting them too.
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It's real time. We're just reacting. There's very little context.
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Should I pay attention to this? Shouldn't I? How much
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weight should I assign it? I find it perplexing personally,
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without retreating to my little economic models that we're all
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trained to use. Thankfully, the Atlanta Fed does this for
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us in real time. They call it g now. It
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is not a forecast. It is a now cast, which
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means it is a snapshot of what the economy is
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likely doing right now, not what it will do over
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the remainder of the quarter. And according to that measure
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which aggregates and waits appropriately all this other stuff that
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we're throwing at you, the economy is growing at an
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above speed limit or trend I'll use those terms interchangeably
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rate of about two and a half percent after inflation annualized.
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It is not obvious to me just using that again
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aggregation that the Atlanta Fed produces that the Fed needs
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to implement emergency support to economic demand right now. If
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it does that, it runs the risk of inflation resurging.
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Maybe not to five or six percent. That would probably
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require a special factor hitting the economy from outside, like
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an oil price or a supply shock, but because there
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may still be too much demand in the pipeline causing
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the economy to run above it's natural if you like
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its normal rate, it's speed limit less. Formally, we just
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don't know what about.
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Speaker 2: When we look at some of these other things. That Again,
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the thing with economics that I always come back to
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is none of the metrics or indicators that we use
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are reliable one hundred percent of the time. It's not
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Physics is something that I like to say quite often,
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there are no hard and fast rules. There are rules
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that work sometimes, they then they break, then they work again,
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and they break again. Like it, nothing works all the time.
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One example of this that economists have been looking at
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for the last twenty years now since they had the
9:24
data available to them. Is called the beverage curve or
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the beverage curve. It's been pronounced both ways. I think
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beverridge is the right one. That's the one that you
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tell me more fun, which one beverridge beverage?
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Speaker 3: I like beverage.
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Speaker 2: I don't know. A couple of adult beverages are a
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nice afternoon as well, But it's neither here nor there
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in any case. This looks at the ratio of or
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not the ratio looks at the plot of job openings
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to unemployment, the unemployment rate.
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Speaker 3: Jobs without workers to workers without jobs.
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Speaker 2: Yes, and generally the trend is hey, as job openings
10:00
come down, the unemployment rate goes up. And what do
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we have right now as job openings are coming down
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and the unemployment rate has started to move up in
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line with that in a way that is making this
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curve work in a way that it didn't for the
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last couple of years. It was kind of irrelevant for
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a couple of years. Again it didn't work. Then well
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you look at that and you say, okay, I really
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want to get ahead of that, because I don't want
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to head further up that curve to where unemployment starts
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to move up quickly towards five and a half six percent,
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because now I'm costing three to four million jobs. And
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why am I costing those jobs? If inflation is running
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two and a half to three percent, it's not running
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nine percent anymore. Why do I want to cost three
10:38
to four million jobs to try to get inflation down
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an extra half a percent?
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Speaker 3: That yeah, we lucked out there because the curve was
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This is not technical. It's going to sound like I'm
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trying to be technical, but I'm not. When a curve
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is flat, any curve, you got to move a lot
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on the horizontal for a little bit of movement on
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the vertical. You can picture this. It is not technical.
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When the curve is more vertical, you get a big
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you get a big drop in the vertical for very
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little movement the heart. So it's like saying vacancies can
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fall a lot without unemployment going up. And that's exactly
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what's happened. That curve went from a pretty shallow slope
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to a very steep slope. Really good trade off. Everybody
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was really worried the Beavers curve was going to stay
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pretty flat, and as it turned out, it steepened a lot.
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Did we luck out? Is it due to fed deafness?
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You know, artfully handling policy?
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Speaker 2: I don't really know, no idea. No. And this is
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the It's both the problem and the beauty of economics.
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It's a problem when people try to proclaim that, hey,
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you have to do this because this is how.
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Speaker 3: It works, because that the real economists don't do that.
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Journalists do that, forgive me, but talking heads do that.
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Investment managers on CNBC with nbas from great schools, but
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they're not economists do that. Real economists are the most
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humble people you'd ever want to meet.
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Speaker 2: But this is the problem is we don't hear from
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real economists, you know. We hear from people on CNBC
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that's like, oh, like this happens, and then this happens,
12:04
and this is why you have to do this and
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it's not always that easy. Yeah, you know, like it's yeah,
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you don't ever hear from the person that's written the
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four hundred page paper on I don't know how the
12:17
number of turtles impact the unemployment rate on a Tuesday
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because someone studied that. They probably haven't actually, because I
12:25
don't know what you would do, but.
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Speaker 3: I hope they didn't get a grant for that.
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Speaker 2: But so it's a problem when we try to reduce
12:31
it to being so simple. But look, the beauty of
12:33
economics is no one really knows how all of it works.
12:36
Quite honestly. We have some general principles that work most
12:40
of the time, but not always, and you kind of
12:45
have to feel your way through it, and there's some
12:48
judgment calls that you do have to make in terms
12:50
of what's actually happening, which, by the way, we also
12:53
don't really know because all of the data that we
12:55
get from surveys and studies, we don't know what's actually
12:59
going on at any point in time either. So let's
13:02
take a quick break here. When we come back, let's
13:06
talk a little bit about two things. I want to
13:08
talk a about how this potentially influences what other central
13:11
banks might do, and b I want to talk a
13:14
little bit about how it potentially impacts individuals and their money.
13:18
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Speaker 2: A lot of focus on the FED, and rightly so,
15:20
being the fact you know that it is the central
15:23
bank for the largest economy on the planet. It matters,
15:27
and also for the one that is uh you know,
15:30
home to the currency that is used for the most
15:33
trade on the planet by an enormous margin. So we
15:38
talk about the fedan awful lot, but remember there are
15:40
a whole bunch of countries. Not every country, but many
15:43
countries have their own central banks, usually the ones with
15:45
their own currencies, and in doing that, they you know,
15:49
have their own monetary policy that they can then conduct
15:52
in order to manage their currency and its value, and
15:57
generally it's value relative to the dollar. Because most of
16:00
the other countries that do have their own currencies, as
16:03
I noted, do a lot of their trade in dollars
16:06
just because that's the standard unit of trade throughout the world.
16:09
And so one of the major concerns for other central
16:12
banks is the relative value of their currency, the dollar,
16:16
in the exchange rates, and how those fluctuate over time.
16:19
So there's a piece here from the Wall Street Journal
16:21
and just talking about how, hey, you've seen some other
16:24
interest rates that have begun to move down as central
16:27
banks have embarked on cutting cycles, but a whole bunch
16:30
of other ones have been waiting for the FED to
16:31
move first, and you might start to get more cutting
16:35
cycles beginning as the FED officially kicks off its cycle
16:39
here today.
16:40
Speaker 3: They have to Most countries, as you point out, are concerned.
16:44
Many are concerned not just with inflation or even primarily,
16:48
as weird as that sounds, most countries central banks which
16:51
manage the money supply like the FED does here, they're
16:54
concerned with the exchange rate. Yes, the FED used to
16:57
be primarily concerned with the exchange rate. That the channel
17:00
through which what the FED does impacts the real economy.
17:04
Real economy is what we all do every day, the
17:06
financial economy. I'm making a bit of an artificial distinction here,
17:09
our stock prices, interest rates, and all these paper if
17:15
you like, things that we refer to. So that's an
17:18
important distinction. The FED uses the financial economy, it influenced
17:22
the real economy. It also influences the exchange rate. Way to,
17:25
the FED does not care what the dollar does visa
17:27
vis foreign currencies. It is a secondary or tertiary or
17:30
whatever the you know, right on down the line concern there.
17:33
Other countries do have to act though, because they have
17:36
assets denominated in dollars, it could if their currency declines
17:41
relative to the dollar is when the FED is raising rates,
17:44
it could impose hardship on their citizens. So in a sense,
17:48
our Fed's job, our central bank's job is easier than
17:51
that of certainly smaller countries they have to follow our lead,
17:56
not vice versa, though it's nice to coordinate, as we've
17:58
been doing with other developed country central banks really since
18:01
eight now.
18:02
Speaker 2: A couple other things, just of note, one that's mentioned
18:05
in this piece, which is you do have some countries
18:08
that are moving in the other direction on rates, And
18:11
one that is fascinating to watch here is Brazil, which
18:16
may actually be raising interest rates shortly because the Brazilian
18:19
economy is absolutely on fire right now and you've seen
18:23
inflation rebounding there. Growth has been, you know, good, but
18:26
a lot of it's being eaten up by inflation there,
18:29
and so you've got Brazil saying, no, we might need
18:31
to move in the other direction. We've talked for the
18:34
last couple of years about the the technical term is
18:38
dumpster fire, that the that the Turkish economy has become,
18:43
and you know how they've been having to move rates
18:45
all over the place in order to try to manage inflation.
18:48
But the one that I'm particularly interested in just because
18:51
again when we talk about what can influence where the
18:54
world economy goes, and even you know, to a certain extent,
18:57
influence what the FED might need to do in the
18:58
future is China. And I'm not looking at China central
19:02
banks so much. But if you think about this from
19:05
the perspective of the Chinese economy, we've talked about it
19:09
for the last couple of years has just been in
19:11
an awful spot because what has been the engine for
19:14
growth for the Chinese economy has been real estate investment
19:17
and foreign money coming in in order to you know,
19:19
build factories and things like that in China for export.
19:23
Both of those have kind of dried up, either voluntarily
19:26
or involuntarily, and China has pretty much refused to do
19:30
any kind of meaningful stimulus for its households.
19:34
Speaker 3: It tried pretty half hearted, though it seems by our
19:36
standards anyway.
19:37
Speaker 2: I don't think they've tried to do anything really. I
19:39
think they've basically been like, no, we're not going to
19:41
do this. And part of me looks at it and says, okay,
19:44
like that that makes sense in one respect, and that
19:47
China doesn't want its you know, economy to they're not
19:52
trying to complete that shift over to a consumer economy.
19:56
It kind of feels that way. But the other thing
19:59
that you kind of and to wonder about is, look
20:01
if the Fed is, you know, trying to slow the
20:05
US economy, and the US economy is a huge driver
20:07
of Chinese economic activity. Well, if you're the Chinese government,
20:11
don't you also kind of wait for any you know,
20:14
meaningful stimulus until the FED starts cutting incentive. So maybe
20:19
you end up with some kind of Chinese stimulus that
20:22
comes after the FED starts cutting as well on the
20:24
fiscal side. So there's a lot in play here and
20:28
really interesting times ahead over the next six to nine months.
20:30
Quick break here, Wall Street Watch and Ask Todd are next.
20:39
Speaker 1: Like us on Facebook and follow us on Twitter at
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TFE show. Breaking business news is always first right here
20:46
on the Financial Exchange Radio Network. Time now for Wall
20:51
Street Watch a complete look at what's moving market so
20:54
far today right here on the Financial Exchange Radio Network.
21:00
Speaker 5: It's FED meeting day, and markets are mostly quiet as
21:03
investors await whether the FED cuts interest rates by either
21:06
quarter or half percentage point. The Central Bank's decision will
21:09
come at two o'clock this afternoon, followed by a press
21:12
conference from FED Chairman Jerome Powell.
21:14
Speaker 2: At two thirty. Right now, the Dow is off.
21:18
Speaker 5: By a quarter percent, SMP five hundred is off by
21:21
only three points, and the Nasdaq is up by twelve points.
21:24
Russell two thousand is flat. Ten year Treasurevealed is up
21:28
by five basis points at three point six y nine percent,
21:31
and crude oil is off by about half a percent,
21:35
trading just below seventy one dollars a barrel. Shares in
21:39
the United States Steel are up three and a half
21:41
percent after Reuters report of the Committee on Foreign Investment
21:44
in the US granted a request to push back a
21:47
review of Nippon Steele's bid for US steel until after
21:51
the election. Meanwhile, General Mills reported ahead of the open
21:55
this morning with the packaged foods company profit dropped fourteen
21:59
percent for the quarter on lighter margins due to higher
22:01
input costs. That stock is up by three quarters of
22:05
a percent Elsewhere. Alphabet is celebrating an anti trust win
22:09
this morning, after the European Union's second highest court overturned
22:13
a near one point seven billion dollar fine against Google.
22:16
Anti trust officials had imposed a fine on the search
22:19
giant for restricting how some websites could display ads sold
22:24
by its rivals. Alphabet shares are flat, and shares an
22:27
Intuitive Machines jumping by sixty one percent after the Space
22:32
Exploration Company was awarded a near five billion dollar contract
22:36
from NASA to provide communication and navigation services on Tucker Silva.
22:42
Speaker 1: And that's Wall Street.
22:43
Speaker 2: Watch.
22:45
Speaker 1: This is Ask Todd on the Financial Exchange Radio network.
22:48
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New England for more than thirty five years, helping families
23:02
with a state and tax planning, Medicaid planning, and probate law.
23:06
Visit Cushingdolan dot com. Now here's Todd.
23:09
Speaker 2: Leutskey and we are now joined by the one and
23:13
only Todd Leutsky from the law firm of Cushing and Dolan.
23:17
The segment is Asked Todd, and it's called up because
23:19
you get to ask Todd your questions. We've got the
23:22
phone lines open for you at eight eight eight to
23:26
zero five two two six three. Last week, I believe
23:29
we had one, maybe two people that we didn't get to.
23:32
So if you happen to be one of those people,
23:35
call eight eight eight two zero five two two six three,
23:37
get in line. Right at the beginning to make sure
23:39
that we get to you if you don't happen to
23:41
be one of those people when you're saying, Gee, I've
23:43
got a question for Todd. Well again eight eight eight
23:46
two zero five two two sixty three. That is the
23:48
number to call to ask Todd your state planning questions
23:52
live on air one more time. That number is eight
23:56
eight eight to zero five two two six three, And
23:59
we can usually only have time for two or three
24:02
of these, So get calling early if you want to
24:04
make sure that we get to you. Mister Lutsky, How
24:05
are you today?
24:06
Speaker 6: I am never better?
24:07
Speaker 1: How are you?
24:08
Speaker 2: I'm okay. I had a bit of a science experiment
24:11
that I was trying yesterday.
24:12
Speaker 6: Yeah, you're into science.
24:14
Speaker 2: I was trying to so I was taking snails out
24:17
of their shell to see if it would make them
24:19
go faster because they you know, they lose that extra weight,
24:22
and it turns out it just makes them more sluggish. Well,
24:26
I get that, So kind of a downer there, Todd.
24:30
I want to talk about irrevocable trust today. Yeah, how
24:34
many different kinds of irrevocable trusts are there? Because I
24:39
hear people talk about them and I know there are
24:42
more than one. I know there's more than two even,
24:43
But like how many different kinds of irrevocable trusts exist
24:47
out in the wild there.
24:48
Speaker 6: So obviously I don't have a definitive number sure for you,
24:52
but but we can certainly talk about a few of
24:54
them that are at least commonly used. We talk a
24:57
lot about the Medicaid irrevocable trust. I won't spend a
25:00
ton of time on that one. But there's also trust
25:03
that are designed to hold life insurance, like an irrevocable
25:06
life insurance trust. And those actually come in two flavors,
25:10
the first to die variety and the second to die variety.
25:14
And what I mean by that is that the life
25:16
insurance that you're putting in these irrevocable trusts are either
25:20
on the life of an individual or on the lives
25:24
of two individuals, which would be second to die.
25:27
Speaker 2: What would be the use cases for each of those?
25:30
Speaker 6: So in those cases, you're thinking, if I have a
25:34
life insurance policy and it's causing my estate to be taxable.
25:40
So this isn't for everybody, right, think about the size
25:44
of your estate and whether or not it's causing a
25:46
significant estate tax impact by having it example, I'm worth
25:52
four million dollars. Oh, but I forgot about my two
25:54
million dollar term life insurance policy that I have. Now
25:57
I'm suddenly worth six million dollars. Well, i'm a Massachusetts standpoint.
26:01
Now I have two million dollars subject toes state tax
26:05
because I can only shelter four million with basic estate
26:09
planning for a married couple. All right, well, that might
26:12
be a reason to do it. Or more importantly, look federally, right,
26:15
if your life insurance is causing you a federal estate tax,
26:20
now you're looking at forty percent hit on the life insurance.
26:24
Speaker 2: On the face value of life.
26:25
Speaker 6: Insurance, that's a big number. So I oftentimes say, look,
26:29
why don't we set up a trust that can become
26:32
the owner and the beneficiary of my policy. If I
26:38
do that, now i've a it's already income tax free,
26:42
but you're converting it to become estate tax free by
26:47
making it owned by this aravocable trust. And that brings
26:51
me to the differences between one of the differences between
26:54
the Medicaid trust and this irrevocable life insurance trust. Clearly,
26:58
control is a big difference. You have a lot less
27:00
control over a life insurance trust, then you do over
27:04
a medicaid trust. But once you put it in there,
27:08
if it now when you die, that face value, that
27:12
money flows in there state tax free. That can be
27:16
very very helpful in your estate. So and you can
27:19
also add other stuff to it if you ever needed to.
27:22
Speaker 2: Talking with Todd Lutsky from the law firm of Cushing
27:24
and Dolan. If you have a question for Todd, this
27:28
is your chance to ask. Studio lines are open at
27:31
eight eight eight two zero five two two six three.
27:34
We do still have a little bit of room, so
27:36
if you've got a question for Todd, make sure you
27:38
calls so that you can ask him again. That number
27:41
is eight eight eight two zero five two two sixty three.
27:45
We're gonna take a quick break here, but when we
27:47
come back, it's going to be right to your questions
27:50
with Todd. That number again is eight eight eight two
27:54
zero five two two sixty three. Your questions when we return.
28:00
Speaker 1: To ask Todd with Todd Lutsky on the Financial Exchange
28:03
Radio Network.
28:14
Speaker 2: Talk with Todd Letsky from the law firm of Chushiing
28:16
and Dolan. Still have one more spot available if you've
28:18
got a question for him at eight eight eight to
28:21
zero five two two sixty three. That number again is
28:24
eight eight eight to zero five two two six three.
28:27
But let's go to our first caller, Norman in Portland. Norman,
28:32
what is your question for Todd Lutsky?
28:37
Speaker 7: I was wondering about the irrevocable trust and I often
28:42
gets mentioned that it's a medicaid kind of a thing. Yeah,
28:46
but my income is such that here in Maine, Maine. Uh,
28:53
I'm more. I have more income than I'll ever I'll
28:57
never qualify for Medicaid, I don't think. And I was wondering,
29:01
is there another reason besides the medicaid to.
29:05
Speaker 6: Have an irrevocable Well, first of all, there's many kinds
29:09
of irrevocable trust, So you're right. It sounds like you know,
29:12
you've run the numbers, and perhaps a medicaid irrevocable trust
29:15
isn't right for you. But depending on the size of
29:18
your estate, you could get into these other irrevocable trusts,
29:21
whether it be like a life insurance trust that we
29:25
talked about during the beginning of the segment, and how
29:28
that can be designed to shelter assets from estate tax purposes.
29:32
If you need to set up a gifting type irrevocable trust.
29:36
Speaker 2: You can do that as well.
29:37
Speaker 6: Again designed to get assets out of your state for
29:41
state tax purposes, but not knowing how much you're worth,
29:45
those kinds of trust might not be needed either. But
29:48
you make a really good point for everybody else listening.
29:52
And I've done this for clients too. They'll come in
29:54
and they'll say, you know, geez, I really want to
29:57
protect my assets from you know, the cost of nursing
30:00
home care. And then I look and I see, you know,
30:03
either a combination of their investment income plus Social Security
30:09
plus pension. And then they tell me they got a
30:11
rental property generating rental income. And then, you know, I
30:13
look at all this income and I say, wow, you're
30:17
really self insured. And if you're self insured, then maybe
30:21
you don't need the Medicaid irrevocable trust. And again they're
30:26
not for everybody, And so sounds Norman like. In your case,
30:30
you're saying, look, I've got so much income coming in
30:32
that even if I was to shelter all of my
30:35
assets from the nursing home, I would be denied because
30:40
I have way too much income.
30:41
Speaker 2: I totally agree.
30:42
Speaker 6: Not knowing your numbers, it can happen folks, and that's
30:46
part of the analysis that needs to be done. Then
30:49
you say, you know what, I don't need the EARV
30:51
Maybe I'll just set up a revocable trust estate plan
30:55
take care of the probate, the estate taxes, the bloodline planning.
31:00
Or if I need more than that, because my value
31:04
of my estate is very large, well then I can
31:06
do the revocable trust coupled with some kind of a
31:09
gifting trust. So great question, Norman, and I hope that
31:13
helps for you. Please apply it to your situation. Excuse me,
31:18
but folks, on that line, we just talked about potentially
31:22
two different kinds of trust, revocable irrevocable gifting and irrevocable
31:29
medicaid trusts. Folks, there's many kinds of irrevocable trusts, many
31:33
kinds of trusts in general. Call and get the guide.
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32:21
Speaker 2: Todd, I've got another caller for you here. Let's go
32:23
to Eric in South Hadley. Eric, what is your question
32:27
for Todd Lunsky? Hi, Bob.
32:31
Speaker 8: My father's in his mid eighties and his life's in poorhouse,
32:35
and he has some extra cash on hand, between five
32:38
and ten thousand dollars that he wanted me to put
32:40
into a safe about of the box they say at
32:43
the bank that you're not Suppo's put cash in there.
32:45
And I'm just wondering what advice I could give him
32:48
to keep that from say the pressing home look back
32:52
if he ends up in one.
32:53
Speaker 7: Uh.
32:54
Speaker 8: He does have a will, but his wife has a
32:56
previous marriage and the thing is going to be split
33:00
divided between her children and my children, and I mean
33:03
and his children. So he's looking for wants to give
33:07
me cash as a gift. He also wants me to
33:09
divide it up among my siblings. And uh, I think
33:13
he's afraid somehow that they're going to take a look
33:16
at that and saying he has he had passes unreported and.
33:19
Speaker 6: So let me let me You said an awful lot
33:21
really fast. So can I just slow you down a
33:23
little bit. It's basically, you've got your dad who's now
33:26
You said he's got a second wife or is he
33:28
not married at the moment.
33:30
Speaker 8: No, he is married. It is a second marriage.
33:33
Speaker 6: Yet, and and he's his health is such that you
33:36
think he's going to actually head into a nursing home.
33:40
Speaker 8: Actually he's in good health. Oh okay, he's fearful of that.
33:44
He has a plan for nursing home care already. He
33:47
already has you know, insurance for that. Okay, he's all
33:51
set on his end of that. But he's afraid that
33:53
there's some kind of a look bad period. He doesn't
33:56
want the cash to be anything that's on the book.
33:59
Speaker 2: Yeah, well, you're absolutely right.
34:01
Speaker 6: So he should then make sure his state, if he's
34:03
got good health, make sure the state plan is in order.
34:05
If it's the kind that needs protection from the nursing
34:08
home set it up. He's got a second marriage right,
34:10
So you might want to make sure that these assets
34:12
are protected not only for his current spouse, but also
34:16
in a way that they'll be left for his kids
34:18
on his side of the family, if that's what he
34:20
and they want. So maybe protecting it is important, even
34:25
if it's not an ear rev even a revocable trust,
34:27
if he's got enough long term care insurance, or he's
34:29
got a nursing home plan in place. As you said,
34:32
even a revocable trust might be in order to just
34:35
make sure you've got good estate planning in place. But
34:38
to your question specifically, if he starts giving you money,
34:42
which he's allowed to do, it will create a five
34:46
year waiting period for Medicaid eligibility purposes. No way to
34:50
hide it. It's going to come out of the account.
34:51
It's going to be deposited in your account. They're going
34:53
to see it coming out of his account because they're
34:55
going to look back five years when and if he
34:59
ever applies for medicaid. Although you said that doesn't seem
35:02
to be the issue, but I hope that at least
35:04
addresses your concern, Todd, I've got one.
35:06
Speaker 2: More caller for you here. Let's go to David and Sandwich. David,
35:09
we only have a couple of minutes here, But what's
35:11
your question for Todd Lutsky.
35:13
Speaker 9: I thought my mother has a medicaid her vocal Grand
35:17
Tour trust. I'm the trustee. Three of my siblings are beneficiaries.
35:21
My mother's asking to give them money on occasion or
35:23
are any tax implications they have to file anything with
35:26
the irs?
35:27
Speaker 6: Are you giving the money from the trust or is
35:29
your mom given the money from.
35:31
Speaker 3: Her personal account from the trust?
35:34
Speaker 6: So it's a grand tour trust, so it's like your
35:37
mom is giving the gift, so one the recipient. And
35:40
this is so confusing for a lot of people, and
35:42
it almost is counterintuitive. The individuals who receive the money
35:48
have no issue. It is not income taxable to them ever,
35:53
and it's not gift taxable to them because they're the recipients.
35:56
Speaker 2: It's the giver.
35:57
Speaker 6: I know, no good deed goes unpunished, right, it's the
36:00
giver that has to pay the tax. So if the
36:03
amount comes out of the trust from that trust is
36:06
larger than eighteen thousand dollars per year per person, then
36:11
they need to file a gift tax return. Doesn't mean
36:14
they're going to pay anything but it means that they
36:16
are going to have to file a gift tax return
36:18
and eat into their a thirteen point six million dollar
36:24
once in a lifetime exemption, so they won't pay any
36:27
but they got a file so really interesting that the
36:30
giver is the one that has to pay it. And
36:32
last comment, money coming out of the trust probably the
36:35
way to go because if it comes out of the
36:38
Medicaid trust, it will not create a new five year
36:42
waiting period for mom, but if she gave it away
36:45
out of her personal account, it would create that five
36:48
year waiting period.
36:49
Speaker 2: Todd Weltski, thank you so much for joining us today.
36:51
Always a pleasure. Thank you.
36:54
Speaker 1: This has been asked on on the Financial Exchange Radio network.
36:57
Asked with Tod Lutsky has been presented by Cushing and Dolan,
37:01
serving Massachusetts and New England for more than thirty years,
37:03
helping families with the state and tax planning, Medicaid planning
37:06
and probate law. Call eight hundred and three nine three
37:09
four thousand and one or visit Cushingdolan dot com. The
37:12
views expressed in this segment are solely those of Cushing
37:14
and Dolan Armstrong Advisor. He does not provide any legal
37:17
or tax advice. Please consult with your legal or tax
37:19
advisor on such matters. Cushing and Armstrong do not endorse
37:21
each other and are not affiliated.
37:23
Speaker 2: Still more to get to as we head towards the
37:26
second hour of the Financial Exchange. A little bit more
37:28
fed talk, but also some chatter about Amazon's move to
37:33
force all office employees back to the office five days
37:38
a week beginning in January. Talk, a little bit more
37:41
on the labor market as well, and then got to
37:45
get to this piece from the Wall Street General. A
37:47
US national debt crisis is coming on with a headline
37:50
like that, you know it has to be a great piece,
37:52
So we'll cover that in the second hour as well,
37:56
and as always we'll have stack Roulette just to make
37:59
sure we get through all the stuff we want to.
38:01
A whole lot more coming an hour two of the
38:04
Financial Exchange