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Low taxes and high tariffs, why won't this strategy work? · The Financial Exchange Show

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with Chuck Zutta and Paul Lane.
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Speaker 2: Chuck, Paul Tucker with you here on a boring Wednesday,
1:16
markets remain stuck in neutral. Look, it's it's been just
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a really boring week so far. And if you try
1:26
to hype up every week like it's the greatest thing ever,
1:29
then look, people are just gonna be like, okay, like
1:32
you're the boy cried wolf. So the last couple of days,
1:35
the SMP has floated up maybe a quarter percent each day.
1:38
Not really a ton of movement today, and it's because,
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quite honestly, we're not really getting any meaningful economic data
1:45
at the moment. Earning season is done at the moment,
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and so absent anything that is a huge surprise to markets,
1:54
there's just nothing to really move markets that much. I mean,
1:57
you look at what came out this morning. Hey, we
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you know mortgage application data. Okay, great, we get that
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every Wednesday, and it, you know, is shown kind of
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the same trends that we've seen, which are higher refinances,
2:08
but still a sluggish purchase index that isn't moving a ton.
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We also got some new home sales data that came
2:16
in basically in line with expectations, not really making any
2:20
waves there. So again, how are markets going to react?
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They're pretty much not going to and this is kind
2:26
of the status quo until kind of tomorrow, but really Friday,
2:32
when Friday, we're gonna be getting PCE inflation data as
2:35
well as personal income and spending. Tomorrow we get some
2:38
GDP data, but it's the second revision, the third reading
2:42
of second quarter GDP, so it's not really anything that
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we haven't seen before. So Friday you get a little
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bit of news. But this is all kind of setting
2:52
up for next week, which I do think has the
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potential to be one of those fun market moving weeks
2:57
because next week, you look at what we have on HAP.
3:01
Monday we got Chicago PMI and Dallas FED Manufacturing Index,
3:04
Powell's also speaking Monday afternoon, Tuesday, ISM Manufacturing and JOLTS report,
3:10
the Job Openings Report, Wednesday, ADP Employment Thursday, ISM Services
3:15
and Weekly Jobless Claims Friday jobs reports. So you get
3:20
this build up through the entire week there and after
3:23
that you're right into earning season the week after. So
3:26
this is kind of the calm before the potential storm.
3:30
I mean again, I don't think anyone has a great
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conclusive read on exactly where this economy is going other
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than it's been slowing down. It's continuing to slow down.
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But in the last month or so, we've started to
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see a few green shoots that indicate parts of it
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might be bottoming. Those parts, you know, when I look
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at the areas that you know, we've seen a little
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bit of improvement, housing starts, in building permits starting to
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show some signs of life. You've got retail sales that
3:59
are still cooking on a pretty good rate at this point.
4:02
On the other hand, the labor market kind of starting
4:07
to look crappy, quite honestly, like it kind of starting
4:09
to look not great. And so there are some different,
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you know, crosswinds that we're seeing in this economy. And
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the question is, hey, are those slow down ones going
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to win out over the one suggesting that we're bottoming.
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And the next couple months of data is going to
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give us the answer there as far as where things go.
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Speaker 3: Yeah, I was trying to look for, you know, any
4:30
piece of data to really hone in on this week
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that is noteworthy, But the overall sentiment is the labor
4:37
market is the most important focus for us, and really
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we won't get further information on that until next week.
4:44
Other than that, you're just kind of parsing through individual
4:47
stories on companies and things like that. And then there's
4:50
obviously a lot of economic policy claims from politicians that
4:55
are being sort of circulated around at the moment.
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Speaker 2: What's being circulated these days?
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Speaker 3: Should we segue into yes?
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Speaker 2: I thought that'd be great.
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Speaker 3: We've got Trump and Kamala Harris both on the campaign trail,
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coming out each day with different economic policies, and we'll
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start here with Trump's one. This is I believe he
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spoke yesterday in Georgia and Savannah, Georgia, where he was
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rebranding a new American industrialism, and in this particular speech
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he mentioned that for companies that are to manufacture in
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the US, he intends to lower the corporate tax rate
5:32
for those companies from twenty one percent to fifteen percent.
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Trump had made headlines because he had gone after John
5:39
Deere for shifting some of the production of one of
5:43
their vehicles from Iowa to a facility in Mexico and
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claiming that he would institute two hundred percent tariffs on them.
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You know, in order to combat or for this effort.
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We've talked about this before, Chuck and I was trying
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to do and digging in this yesterday. There is a
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huge amount of focus from President Trump to try and
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bring back manufacturing jobs the United States and investment foreign
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investment into the United States for manufacturing. And you and
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I have spoken about this concept on the show before.
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Is this something that we necessarily want, you know, this
6:17
idea that just by lowering corporate taxes and potentially assessing
6:22
some tariffs, that America is going to turn into this
6:26
manufacturing dominant country. And some of the numbers I parsed
6:29
through yesterday is we actually do manufacture some things really
6:33
well and actually rate pretty high in certain areas. But
6:36
this idea that this is going to bring thousands, hundreds
6:39
of thousands of jobs here, I'm just not sure if
6:42
that's the case or the best approach to go at
6:43
it from an economic standpoint.
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Speaker 2: Yeah, Look, there are things that you want to make
6:50
in America because in the event of any kind of
6:53
conflict or supply chain disruptions, as you saw back in
6:57
twenty twenty, you want to have domestic supplies of those things. Medicines,
7:03
medical devices, semiconductors, you know, steal things along those lines.
7:10
There's stuff that you want to have domestic supplies of.
7:15
There are other things that you sit there and you say, look,
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if this gets made overseas, whether it is you know,
7:22
in China, Europe or wherever, I don't care where it's
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made because it's not a national security issue and it's
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not a it's not even a quality of life issue.
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I use the example of tickle me elmos. Do I
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care at all where tickle meelmos are made? No, because
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if I can't get enough tickle me almos, I'll find
7:42
something else for the kid to play with. Like, it's
7:45
just not a big problem. There are other things that
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are probably middle ground where you say, look, I might
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not want this to be made in China because of
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you know, concerns about what you know different, you know,
7:59
potential for espionage and things like that. So we're gonna
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cover a story later today about cars. Do I want
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you know, the US to have you know, import to
8:09
be importing you know, cars or you know, transportation equipment
8:13
from China? Probably not, But do I need it to
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be made here as opposed to in Mexico or you
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know a country that does not have similar that I
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do not have similar concerns about espionage with no So
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like that's kind of the middle ground, which is, hey,
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I don't need it here, but I probably don't want
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it made in China or you know, Iran or places
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like that. Iran is obviously kind of a like, we
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don't import anything from Iran's But so there's kind of
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this this mosaic and this patchwork that you build where
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you say, look, there are the things that we need
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to make here, at least in bare minimum quantities, that
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have to be here, and that we need to incentivize
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even if it's a bad thing economically for us to do.
8:58
So that's fine. There's then that middle ground, which is, hey,
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it'd be nice to make these things here. Probably don't
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want the maid in China or in a couple other countries.
9:08
But other than that, it's fine if they're made somewhere else,
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because if we can get them more cheaply from there,
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that's perfectly fine, and it helps to keep the cost
9:16
of living you know, where it needs to be. And
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there are other things where you say, look, do I
9:23
care where my water bottle is made? No, Like, make
9:26
the thing wherever the heck you want as long as
9:28
it you know, passes the basic you know, requirements of
9:32
whatever it is for that like, yeah, don't make the
9:34
water bottle out of letter whatever it is. But okay, fine.
9:39
I think that when we look at the idea of
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hey we need to you know, make everything here, well,
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what's the cost of doing so? Because the reason why
9:48
companies moved production overseas is not because, like the the
9:54
CEOs of major companies didn't get together over the last
9:57
two decades three decades and say, hey, let's move production
10:01
to Asia because we want to give you know, all
10:04
of the American jobs to people in Asia. No, it's
10:07
not really what they did. They looked at it and
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they said, hey, we can improve or maintain our margins
10:13
by moving this production overseas, and so it's cheaper for
10:16
us to produce, cheaper for our customers to buy. And
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that's why they did it. Well, if you're gonna move
10:23
that production back, what happens to that cost? It's not
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a costless shift. And that's the thing. If you really
10:32
want to pay, how much does it tickle me Almo cost?
10:36
Tucker tickle me Elmo cost. Let's see, it looks like
10:41
if you buy one on Amazon right now, it's going
10:45
for twelve ninety nine. Actually, no, I got another one that.
10:49
Speaker 4: I'm seeing one that's fifty bucks.
10:51
Speaker 2: Fifty bucks, fifty bucks for a tickle Meelmo. What's the
10:54
one I have here? Oh, this is just a this
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is not a tickle Mielmo. This is just an Almo.
10:58
Almo's thirteen dollars to get the tickling one. It's it's
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forty to fifty. Do you want to start paying seventy
11:07
five eighty dollars for your tickle Malmos? Probably not? So
11:12
why do you want to make that here? And I'm
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not saying that like we're saying, hey, let's build everything.
11:18
But this is why you don't want to build everything here,
11:20
because you don't need that to be built here. So
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I think as we go through these conversations, it's a
11:28
question of, Hey, how do we prioritize the things that
11:31
we want to really build here in the United States
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because we don't need to build everything here. If we
11:39
can get other places to manufacture at a cheaper price,
11:45
that allows us to buy at those cheaper prices and
11:49
not see significant inflation from trying to bring that production
11:53
back domestically.
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Speaker 3: Yeah, and that's why I think the targeted tariffs approach
11:56
are a better recourse than looking at broad sweeping measures
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where you're assessing a tariff on all imports from Mexico
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or all imports from another country.
12:07
Speaker 2: I'm even fine with the all imports from China thing,
12:09
given the abuses that they That's.
12:11
Speaker 3: Why I did not mention China there.
12:13
Speaker 5: I would have a.
12:13
Speaker 2: Huge problem with what the with what the first Trump
12:17
administration did back in twenty seventeen through twenty twenty. I
12:20
don't think there's any problem there in terms of looking
12:22
at that and saying, yeah, if you want to, you know,
12:24
address the China trade imbalance through tariffs, you know, widespread
12:29
tariffs on China, I think there's a very reasonable case
12:33
to be made that that was the right thing to
12:35
do there.
12:37
Speaker 3: Yeah, I just worry about the retaliatory efforts, not specifically
12:40
of China. I'm on the same page with you there,
12:41
but of other countries to implement these high tariff strategies.
12:46
It just reeks of potential concerns for inflation to reignite
12:50
with some of these policies. And again, this is part
12:52
of the campaign trail, so we have to take a
12:54
lot of these with a many grains of salt because
12:57
you're trying to buy votes. But ultimately it does really
13:02
lead to a lingering concern regarding inflation, which hopefully we've
13:05
resolved at this point over a year half to two
13:09
year battle with it.
13:10
Speaker 2: Just take a quick break here. When we come back,
13:12
we'll talk a little bit about China and their latest
13:14
efforts to try to stimulate the Chinese economy.
13:17
Speaker 1: Right after this, the latest news on inflation, the FED,
13:20
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13:24
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13:54
Speaker 2: The People's Bank of China announced a rate cuts earlier
13:59
this week. They're cutting the and again the Chinese monetary
14:03
system is a little bit different from the US one,
14:06
so when you hear about the stuff that they're doing,
14:08
it's not exactly analogous to what the Federal Reserve does
14:13
in the United States. A quote here from Bloomberg. The
14:16
People's Bank of China cut the rate of the medium
14:18
term lending facility to two percent from two point three percent,
14:22
according to a statement on Wednesday. This is the biggest
14:25
cut that the bank has made since twenty sixteen. It's
14:30
part of the package that they announced yesterday. They also
14:36
lowered the reserve ratio for banks, meaning that banks don't
14:39
need to hold as much cash back when making loans.
14:42
They can basically use more a larger percentage of deposits
14:46
to lend out money. Also, seven day reverse repurchase notes.
14:52
The People's Bank of China has cut the rate on
14:56
those instruments by twenty basis points is expected to cut
14:59
their interest rate those by twenty basis points to one
15:02
and a half percent soon as well. And other things
15:07
that they did they are planning on not planning on.
15:12
They announced the ability for basically Chinese citizens to be
15:17
able to borrow direct from the People's Bank of China
15:20
in order to buy Chinese stocks, which is part of
15:22
the reason that the Chinese stock markets surged yesterday. It's like, hey,
15:25
we'll lend you money to buy equities. Gee, that sounds great,
15:30
and so ultimately the question on this is going to be, look,
15:35
is any of this enough to actually boost the Chinese economy,
15:40
And the answer is it probably provides a boost from
15:44
where it was going otherwise. But you still have an
15:47
economy that's dependent on two things real estate development. Real
15:52
estate development which China has tried to curtail in the
15:54
past few years, and many Chinese citizens are feeling burned
15:57
on because hey, it's a major source of investment for
16:03
the Chinese population, and when it's performed the way it
16:06
has the last several years, they get skittish to invest again, rightly.
16:09
So second piece is foreign direct investment. How much money
16:13
is flowing into China to build new factories and you know,
16:16
things like that to produce exports. And a number of
16:20
companies are looking at the Chinese market right now and saying, hey,
16:23
we're feeling a little bit burned by what's happened here.
16:25
As well. We covered stories in the last couple of
16:27
weeks about how automakers are rethinking their investment in China
16:32
because of this growth of the Chinese domestic ev industry
16:36
that is now pricing out a lot of foreign competition,
16:40
and so hey, you've got that happening. You've got companies
16:43
like Apple saying we want to make more of our
16:45
stuff in India and not you know, directing that investment
16:48
back to China. It's unclear to me how this ultimately
16:52
changes the trajectory of the Chinese economy, which can best
16:56
be described as bad right now.
16:59
Speaker 3: Not to mention, you have just geopolitical tensions in place
17:02
where companies are hesitant to get stuck in, you know,
17:06
mired in any type of crosshairs that when you're dealing
17:09
with the Chinese government. Micron and others have been the
17:12
target of retaliatory efforts where you can be operating your
17:15
business one day and then shut down or in a
17:19
very difficult spot the following day. So there's the uncertainty
17:23
which leads to lessing of the foreign direct investment like
17:26
you mentioned. And then on the real estate side of things,
17:29
Barclays has estimated that approximately eighteen trillion dollars of household
17:33
wealth has been wiped out since twenty twenty one, which
17:36
is equivalent to about sixty k per family. We're talking
17:39
about these yesterday, where the property market's in a really
17:42
difficult spot. A lot of middle class families in China
17:45
rather than using the markets. Their big investment oftentimes is
17:49
is a rental property of some sort. And you have
17:51
this significant backlog we covered over the years many of
17:55
the property developers who went belly up over there, and
17:58
you have a backlog of unfinished homes where they were
18:00
taking deposits for these units that are far behind on
18:04
the completion front. So it just doesn't really seem like
18:07
any of these measures directly will impact clearing out those
18:11
concerns just because you lower barring costs. To me is
18:16
it's a step in the right direction, But to your point,
18:18
it's probably the first of many steps that will need
18:21
to occur before you get this thing trending in the
18:23
right direction.
18:24
Speaker 2: I also have a great stat This is from last week,
18:27
so it's a little bit out of date now, but
18:28
this is from the head of Equities and Markets at
18:33
Wisdom Tree. And if you go back to the start
18:38
of nineteen ninety four, so almost thirty years, and if
18:41
you look at the MSCI China US Dollar Total Return Index,
18:45
so basically, what do you get if you invest in
18:47
the China Index denominated in dollars as a US citizen.
18:51
Pretty much the total return including dividends and everything there
18:58
is negative eleven percent over the thirty year period. Wow,
19:02
negative eleven percent.
19:05
Speaker 3: With a country that was growing on a GDP basis
19:08
double digits during a lot of that timeframe.
19:10
Speaker 2: Most of that bad performance is since twenty sixteen, twenty seventeen,
19:15
and specifically you look at that and it's several years
19:18
after g came to power and has basically run the
19:20
economy into the ground in China as he has tightened
19:25
his grip on the country. Not great, Bob, not great,
19:29
not great. G Let's take a quick break here when
19:32
we come back. We're joined by Todd Lutsky for Ask
19:34
Todd after Wall Street.
19:35
Speaker 1: Watch, Like us on Facebook and follow us on Twitter
19:44
at TFE show. Breaking business news is always first right
19:48
here on the Financial Exchange Radio Network. Time now for
19:53
Wall Street. Watch a complete look at what's moving markets
19:57
so far today right here on the Financial Exchange Radio Network.
20:01
Speaker 4: Well after another positive day and fresh record highs for
20:04
the Dow and SMP five hundred, markets today are pretty
20:07
quiet in mixed territory as Wall Street readies for jobless
20:10
claims tomorrow and more on the inflation front when the
20:13
core PC index is unveiled on Friday morning. Right now,
20:17
the Dow is down by about a third of a percent,
20:19
SMP five hundred is completely flat, and the Nasdaq is
20:23
up by over a quarter of a percent. Russell two
20:26
thousand is down by a third of a percent, Tenure
20:28
Treasure reeled up by three basis points at three point
20:31
seven to seven percent, and crude oil down about one
20:34
and a half percent, treating at seventy dollars and fifty
20:37
two cents a barrel. Breaking news this morning where Google
20:40
filed an antitrust complaint with the European Commission accusing Microsoft
20:45
of using unfair licensing contracts to stifle competition in the
20:49
multi billion dollar cloud computing industry. Google alleges that Microsoft
20:54
uses unfair licensing terms to lock in clients and exert
20:57
control over the cloud market. Both of those stock today
21:00
are flat. Meanwhile, Bloomberg reported that German software developer SAP
21:04
is being investigated by the US Justice Department over potential
21:09
price fixing. That stock is down by two percent. Elsewhere,
21:13
KB Home shares down by four and a half percent
21:16
if the home builder posted weaker than expected fiscal third
21:19
quarter earnings. Where it's your over year housing gross margin
21:23
also fell. Both Generalmoters and Ford received downgrades from Morgan
21:27
Stanley citing China competition and a weakening US consumer. Those
21:31
stocks down anywhere between four and five percent, and Micron
21:35
Technology will post their earnings after today's closing bell. I'm
21:40
Tucker Silva and that's Wall Street Watch.
21:43
Speaker 1: This is Asked Todd on the Financial Exchange Radio Network.
21:47
If you have an existing estate plan or in the
21:49
market for one, Todd Letsky is here to answer your
21:51
questions and help you plan for later life. Ask Todd
21:54
is presented by Cushing and Dolan, serving Massachusetts and New
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England for more than thirty five years, helping families with
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Visit Cushingdolan dot com. Now here's Todd Lutsky.
22:09
Speaker 2: As promised, We're now joined by Todd Lutsky from the
22:12
law firm of Cushing and Dole and the segment is
22:14
Asked Todd, and it's your chance to speak with Todd
22:18
Lutsky live on air about your estate planning questions. Phone
22:22
lines are open at eight eight, eight to zero five
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two two six three. We got plenty of room on
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him right now, but they do fill up. In the
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last couple weeks, we've not gotten through all of the calls,
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so get call on early to make sure you get
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in line and we can get to you again. That
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number is eight eight eight to zero five two two
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sixty three. That is the number to call to speak
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to Todd Lutsky about your estate planning questions. Again. It's eight
22:46
eight eight to zero five two two six three, and
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we'll get to your questions in just a little bit
22:53
one more time. Eight eight eight to zero five two
22:57
two six ' three. Mister Lutsky, how are you doing today?
23:01
Speaker 5: I am doing fine. I'm afraid to ask you though.
23:03
Speaker 2: I'm good. Did you see there was big news yesterday?
23:06
Speaker 5: No, what happened?
23:07
Speaker 2: I'm kind of a dinosaur geek. Oh you are archaeologist.
23:10
They just found a fossilized dinosaur fart. Well, no, I
23:16
didn't realize that. They called it a blast from the past.
23:20
Just very exciting news, Todd. I want to talk a
23:23
little bit about emergency nursing home situations. Let's say that
23:28
someone is in a case where they didn't necessarily do
23:33
any planning and now they have a long term care
23:37
situation that is imminent. Yeah, is there a scenario in
23:43
which it still makes sense to do updated estate planning documents,
23:47
including trusts, as you are heading into a long term
23:51
care situation.
23:52
Speaker 5: So generally not the normal estate planning trust that you
23:56
would think about. Right, that's probably too late for that,
23:59
because because like the Medicaid irrevocable trust that we were referencing,
24:03
the guide and things like that, you need, there's a
24:06
five year waiting rule that many of us have learned
24:08
about in the past, and so it's hard to overcome that.
24:11
But there is, and it is somewhat breaking news the
24:15
pooled trust, which by the way, was around for my
24:19
whole career as practicing in the elder law world, and
24:24
then in I believe March of twenty twenty four, it
24:29
went away by legislation or it went Yeah, they took
24:32
it away as an option. So just earlier this year,
24:36
earlier this year and then lo and behold. Effective now
24:40
I think it's effective December of this year. Pool trusts
24:44
are back by legislation. They actually decided to pass a
24:48
law and not allow these regulations to apply anymore, and
24:50
they went at the legislative level here in Massachusetts, they've
24:54
brought back pool trust and that would be the kind
24:57
of trust that you're referring to here, Chuck, I believe, So.
25:00
Speaker 2: What is a pool trust?
25:02
Speaker 5: A pool trust is one that we actually don't even prepare.
25:05
But when you're applying for medicaid in this scenario you mentioned,
25:09
that's when these would come up. So like a financial
25:11
institution would prepare this pool trust, and then there's this
25:16
charity pool called Plan of Massachusetts and Rhode Island. They're
25:20
the charity, they serve as trustee, and then this money
25:24
gets put into this trust along with other people's money,
25:27
and it gets invested and managed for who for the
25:30
person who put it in, and that money can be
25:33
used for their benefit. But the key is that by
25:37
transferring it into this pooled trust, there's no five year
25:41
waiting period. So again last minute, as you mentioned, you're
25:43
going into the nursing home, this is when you would
25:46
use this and then there's no five year waiting period
25:49
to put it in. The catch is that there's a
25:53
payback provision. So when you pass away, if you've been
25:56
in the nursing home for less than two years, then
25:59
you need to not only give ten percent to charity
26:03
Plan of Massachusetts and Rhode Island and repay the state
26:07
for your care that you receive benefits that you received
26:11
again at a Medicaid rate way better, and then the
26:13
balance can go to the family. Or if you've been
26:16
in there for two years or longer, then you got
26:18
to give twenty percent to charity, pay back the state
26:22
balance to the family. Still, it's a wonderful way of
26:26
getting on Medicaid last minute and leveraging private pay against
26:30
the Medicaid rate, and everybody wins, from the nursing home
26:34
to the state, to the family to the applicant.
26:37
Speaker 2: Talking with Todd Alutski from the law firm of Cushing
26:39
and Dolan. If you have a question to ask Todd
26:42
about your estate plan, still room on the phone lines
26:45
at eight eight eight to zero five two two six three.
26:49
That number again is eight eight eight to zero five
26:53
two two sixty three. We're gonna take a quick break here,
26:56
but when we come back, it's going to be right
26:59
to your question uestions with Todd Lotsky. So again, still
27:02
some room on the phone lines at eight eight eight
27:04
to zero five two two sixty three. When we come back,
27:08
right to your questions with Todd. That number one last
27:10
time is eight eight eight to zero five two two
27:14
sixty three.
27:16
Speaker 1: Ask Todd with Todd Letsky every Wednesday at ten thirty
27:19
only here on the Financial Exchange Radio Network. Todd Letsky
27:25
answers your questions about a state and elder life planning
27:28
every Wednesday at ten thirty, right here on the Financial
27:31
Exchange Radio Network.
27:37
Speaker 2: Still room for one more call for Toddlotsky at eight
27:41
eight eight to zero five two two six three. Let's
27:46
go now to our first caller, though, Mark in Boston. Mark,
27:49
what is your question for Todd?
27:53
Speaker 6: Hey, how you doing? Thanks for taking the call. Quick question.
27:57
I just set up a a will and and a trust,
28:02
a revocable trust. And I've got my home. I own
28:08
my home and it's in an LLC. I've got some
28:10
life insurance stock stuff. But everybody, everything, the beneficiary of
28:14
everything is the the revocable trust. Now, what do I
28:19
have to do to protect this and all my stuff? Againstal,
28:23
I'm going to drop that in a sookable trust.
28:28
Speaker 5: Yeah, let me. And interestingly enough and for everybody listening,
28:31
it just sounds a little like Mark, You're you're kind
28:33
of all over the place, so let me. You said
28:35
a lot of things that mean a lot of things
28:37
to me legally. So let me ask you a couple
28:38
of clarifying questions. One and the one that's most disconcerting
28:42
to me is that you said your home, your primary residence,
28:46
is in a limited liability company. Is that correct?
28:49
Speaker 6: Yes, it's a it's a multi family home.
28:52
Speaker 5: Put it.
28:53
Speaker 6: Uh.
28:55
Speaker 5: I can understand why you did it partly, But the
28:58
thing you need to really remember, and I generally don't
29:01
do this, is even though it's a two family or
29:04
a multi family home. You know, I get that you're
29:07
renting it and you want to protect it, but when
29:09
you put it in an LLC, you immediately lose any
29:12
of the capital gains exclusion that you would get if
29:15
you were to sell it. So if it's a two
29:17
family home, fifty percent of the gain would be you know,
29:20
if you're married, fifty percent of the gain would be
29:23
allowed or available to shelter up to five hundred thousand
29:27
dollars of that gain from taxes. You lose that immediately
29:31
by putting it into an LLC, because now you're telling
29:34
the government that it's not my home anymore. It's now
29:37
a commercial residential property. So that's something we might want
29:40
to fix on. Obviously, I get the protection side of it,
29:43
but you might want to have a lot of umbrella
29:46
coverage on insurance. Umbrella insurance could maybe help with that.
29:49
Then the other piece would be it sounds like everything
29:53
else is centered around your revocable trust. So depending on
29:57
how much you're worth, right, not everybody needs to do
30:00
irrevocable trust. I mean, if you're self insured for the
30:03
nursing home, then you probably don't need to worry. But
30:05
depending on the size of your estate and your age
30:08
like sixty and over, sort of what I think about
30:10
in my head when I mentioned this to clients. But
30:14
if you're in that category and you want to protect
30:16
assets from the nursing home, then we would completely get
30:20
rid of what you have and you would start fresh
30:23
with an irrevocable or if you're married and you're worth
30:26
more than two million dollars, then two irrevocable medicaid trusts,
30:32
and we would take your house and put it in
30:34
that new trust. You know, whether it stays in the
30:37
LLC or not, we would have to discuss. I don't
30:39
love the idea, but you know, we certainly can do it,
30:42
and along with some of your investment portfolios, not IRA accounts,
30:46
not retirement accounts, and we would put those non retirement
30:50
accounts and some of your real estate into these irrevocable trusts.
30:54
And that's the way to go to provide the protection
30:57
from the nursing home while continuing to get the benefits
31:02
of avoiding probate and eliminating or sheltering or reducing your
31:06
estate tax both at the federal and the state level.
31:10
So and of course providing for your family. So it
31:12
does everything the revocable trust does that you have, but
31:15
it adds nursing home protection planning. So that's probably the
31:19
way to go for you, Mark, and you can figure
31:22
out how best to do that, reach out to an
31:25
estate planning attorney and then they can help get your
31:28
your ducks in a row. That said, Mark made us
31:33
touch on two of the top seven estate planning trusts.
31:36
Mark mentioned the revocable, I came back with the irrevocable.
31:40
Those are two of the top seven estate planning trusts
31:43
mentioned in this guide this month. And there's others from
31:46
irrevocable life insurance trusts to sole benefit trust to special
31:51
needs trusts. But we think the top seven, not only
31:54
from a tax perspective, does it explain it It explains
31:57
that how it operates. And most importantly, if you've never
32:01
done your planning, get this learn which trust might be
32:04
right for you before you go in to see the
32:07
estate planning attorney. And if you've already done your planning,
32:10
like Mark, maybe get this and learn how shifting from
32:13
a revocable to an irrevocable might be right for you.
32:17
Eight six six eight four eight five six nine nine
32:22
or Legal Exchange Show dot com again eight six six
32:25
eight four eight five six nine nine or Legal Exchange
32:29
Show dot com.
32:30
Speaker 2: Todd, We've got another one q'ed up for you here.
32:32
Let's go to Mike on the Cape. Mike, what is
32:35
your question for Todd Lunsky?
32:38
Speaker 7: Wellsky, I'm a seventy eight year old and my wife
32:42
is sixty nine. We have property and we have a
32:47
few hundred thousand dollars in the bank, but my wife
32:49
refuses to get a trust or will. I don't know
32:54
what to do about it. I've tried for a couple
32:56
of years now, and I'm not getting any younger, so
32:58
I'm not sure what to do. If you've got an
33:00
answers for me, I would appreciate it.
33:03
Speaker 5: Yeah, So that is a that is a complicated situation, right,
33:06
because when clients come in, and I've I've had a
33:09
few of these, not many, but you know, when clients
33:13
come in, I always say I want both clients. You know,
33:16
Sometimes like a husband or a wife will come in
33:20
and they'll say, oh, you know, my my spouse is
33:22
not interested in this. She'll just do or he'll just
33:25
do whatever whatever we decide to do, or you know,
33:28
and if that's the case, I always tell me, you
33:30
know what, I really want to have the meeting with
33:33
both people here. Why because it's not about numbers, it's
33:37
not about taxes, it's not about probate. While it is
33:41
about those things, it's really about the family behind the
33:43
estate plan, and I need to understand what their wishes
33:46
are and who they want to be, and not only
33:49
who they want to be fiduciaries, but also to understand
33:52
how a trust works when one person passes away, because
33:56
the other one might be the survivor and they need
33:59
to know how it works. So I generally want both there.
34:02
Now that said, in your case, you sometimes get people
34:05
who just don't want to participate. That doesn't mean that
34:08
you can't do an estate plan for yourself. As long
34:12
as we know we're only representing one party. We can
34:16
do that. You can come in and you can set
34:19
up a trust or a will. Again, you probably need
34:22
more than just a will, and at least deal with
34:24
the assets that you have access to or your half
34:28
or you know, and get some of the stuff in
34:31
the trust. And remember we're not going to disinherit your spouse,
34:35
but to the extent possible, you can provide for your
34:38
spouse through your own estate plan. So I'm going to
34:43
say you could probably do a state planning for at
34:46
least some of the assets and try to take care
34:49
of you, your family, and your spouse, even though your
34:53
spouse isn't technically participating in that plan. So that that
34:57
might be a way to look at that.
34:59
Speaker 2: Todd early we had talked a little bit about the
35:02
idea of hey, do you update your estate plan if
35:06
you have an imminent long term care situation? I think
35:10
we covered that decently well. But yeah, as far as
35:13
what else you can consider if you have an imminent
35:16
long term care situation? What what are other options that
35:18
might be on the table for people depending on the
35:20
situation they find themselves in.
35:23
Speaker 5: So if we're if we're looking at this is last minute. Again, yes,
35:27
So if you're looking at last minute, the pool trust
35:30
ideas is really the way to go when you're older
35:32
and annuities don't work short of that, if you're if
35:36
you're married, and this is an important part of the
35:38
pool trust, if you're married, you likely will never do
35:43
the pool trust. Why because if you're married, you're likely
35:46
going to have that one spouse at home. And if
35:50
that spouse is at home, now we have options because
35:54
that spouse can have all the excess resources. So if
35:58
you're faced with nursing home planning and you have a
36:01
spouse at home, you can take all the excess money
36:05
over one hundred and forty eight thousand in change for
36:09
the healthy spouse and two thousand for the six spouse.
36:12
So the first one hundred and fifty thousand dollars of
36:16
assets you can reach in, take out and give to
36:19
the healthy spouse. The excess regardless of how much it
36:24
is is allowed to come over to that spouse, we
36:28
wouldn't need the pooled trust. We instead would buy a
36:31
medicaid annuity for the healthy spouse, converts those assets into
36:37
an income stream for the spouse, thereby taking what once
36:42
was a countable asset and making it non countable by
36:48
converting it into a stream of payments, a stream of
36:52
income that they get, and that technique would allow the
36:57
six spouse to become eligible for medicaid right away. So
37:01
that's when you use a pool trust and when you
37:03
would not use one.
37:05
Speaker 2: Mister Lutsky, thank you so much for joining us today.
37:07
Speaker 5: Always pleasure, Thank you.
37:09
Speaker 1: This has been Aske Todd on the Financial Exchange Radio network.
37:13
Ask Todd with Todd Lutsky has been presented by Cushing
37:16
and Dolan, serving Massachusetts and New England for more than
37:18
thirty years, helping families with the state and tax planning,
37:21
Medicaid planning, and probate law. Call eight hundred three nine
37:24
three four thousand and one or visit Cushingdolan dot com.
37:28
The views expressed in this segment are solely those of
37:30
Cushing and Dolan. Armstrong Advisory does not provide any legal
37:32
or tax advice. Please consult with your illegal or tax
37:35
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