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Is President Trump just using tariffs as a threat? · The Financial Exchange Show

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Speaker 1: Chuck Zada and Paul Lane.
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Speaker 2: As you just heard, it's Chuck, Paul, and Tucker with you.
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Speaker 2: And as we head towards, well, not as we head towards,
1:17
Speaker 2: as we reached the middle of the week, continuing to
1:20
Speaker 2: get some rumblings coming out about, Hey, what the new
1:24
Speaker 2: administration may or may not do when it relates to
1:27
Speaker 2: trade tariffs and things like that. So we'll talk that
1:30
Speaker 2: those topics. We got some earnings last night that we'll
1:33
Speaker 2: talk about. We got Jamie Diamond over in Davos talking
1:37
Speaker 2: about all kinds of stuff. I got my I got
1:41
Speaker 2: some of my favorite quotes from Jamie Diamond. Ready to
1:45
Speaker 2: go here, But we'll kick things off with a piece
1:48
Speaker 2: from the Wall Street Journal. It's titled Trump pushes for
1:51
Speaker 2: early renegotiation of US trade deal with Mexico and Canada.
1:55
Speaker 2: The previous version of the US Mexico Canada Trade Agreement
1:59
Speaker 2: was negotiating during Trump's first term in office. What is
2:03
Speaker 2: he looking to change prior to it being up for
2:07
Speaker 2: statutory review in twenty twenty six.
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Speaker 3: Some of the things that have been mentioned, Chuck, is
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Speaker 3: this idea of putting tariffs on imports from Mexico and
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Speaker 3: Canada in order of about twenty five percent there, he
2:22
Speaker 3: is rushing to do a full review of the whole agreement.
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Speaker 3: There's about two trillion dollars of trade that goes between
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Speaker 3: the US and its continental neighbors of Mexico in Canada.
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Speaker 3: This had significant support when it was initially negotiated back
2:36
Speaker 3: in twenty seventeen twenty eighteen in his first term, where
2:39
Speaker 3: two hundred Democrats in the House and Senate backed this agreement,
2:43
Speaker 3: largely because they had some strict environmental and labor standards
2:47
Speaker 3: built into this agreement. But now a lot of the
2:50
Speaker 3: focus regarding these renegotiations centers around some perhaps more social
2:56
Speaker 3: issues on the idea of stopping the import the movement
3:01
Speaker 3: of Fedenohl into the United States, as well as some
3:05
Speaker 3: focus on just revising the trade agreement in general to
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Speaker 3: balance out the trade between the three nations here.
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Speaker 2: Yeah, the sense that I got in the reading on
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Speaker 2: this is that the chatter about the twenty five percent
3:18
Speaker 2: tariffs is trying to get Mexico and Canada to agree
3:23
Speaker 2: to an early renegotiation on this, not that they would
3:26
Speaker 2: be included necessarily in this agreement, but I think it's
3:32
Speaker 2: something where Look, I've seen kind of how this goes
3:37
Speaker 2: before and ultimately, now that we are into the second
3:42
Speaker 2: Trump term, I think my view on what we are
3:45
Speaker 2: seeing as far as how he's announcing potential tariffs and
3:48
Speaker 2: things like that, I think I'm now kind of back
3:52
Speaker 2: to Okay, you kind of take all this with a
3:53
Speaker 2: grain of salt, because it's unclear that any of this
3:56
Speaker 2: is actually going to be implemented. And look, that is
3:58
Speaker 2: a in about face from where I was a week ago,
4:02
Speaker 2: where the run up to Monday was Hey, there's gonna
4:06
Speaker 2: be tariffs coming into place, like right away, you gotta
4:09
Speaker 2: be ready for this, like this is what we're gonna get.
4:11
Speaker 2: And now it's well, we're gonna get these tariffs in
4:14
Speaker 2: you know, a couple of weeks. We're targeting, we're thinking
4:16
Speaker 2: about this, we're thinking about that, and I see all
4:20
Speaker 2: kinds of other things, you know, on executive orders that
4:22
Speaker 2: the Trump administration is signed in the first couple of days.
4:25
Speaker 2: And so now it's it's kind of feeling to me
4:28
Speaker 2: like the tariffs are a little bit more hey, Like
4:32
Speaker 2: it doesn't feel like they're really serious about implementing them.
4:34
Speaker 2: And I'm not saying that this is good, bad or anything.
4:37
Speaker 2: It's just my view is adjusting based on the actions
4:40
Speaker 2: that they are taking right now, and so I'm wondering
4:44
Speaker 2: if you are going to see any kind of broad
4:45
Speaker 2: based tariff implementation simply because again you've seen a flurry
4:50
Speaker 2: of executive actions over the last you know, two days
4:53
Speaker 2: now two plus days, and none of them are related
4:56
Speaker 2: to anything tariff related at this point, you know, Chuck.
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Speaker 3: I posed a simi question to Mike on yesterday's show
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Speaker 3: where I said, do we really even want to get
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Speaker 3: into the weeds of this? And I guess we will
5:05
Speaker 3: a little bit on the auto manufacturer side of things
5:07
Speaker 3: and the potential implications that tariffs would have on Stilantis
5:12
Speaker 3: and Ford and GM, a lot of them that you know,
5:15
Speaker 3: import a significant amount of vehicles and car parts from
5:19
Speaker 3: some of these countries mentioned, And Mike said, you know,
5:21
Speaker 3: it's so significant, we have to discuss it.
5:23
Speaker 2: I do agree we have to discuss it, but I.
5:25
Speaker 3: Would lean on the point that you made earlier, where
5:28
Speaker 3: the reason I mentioned that question is because.
5:31
Speaker 2: I don't taking it with a grain of salt, like.
5:32
Speaker 3: Should I really dive into all these numbers on the
5:34
Speaker 3: profit margins of some of these companies and the potential
5:37
Speaker 3: impacts on increased car prices. Perhaps it's worth noting, But again,
5:41
Speaker 3: I do tend to side with you a little bit,
5:43
Speaker 3: and that's why I pose that question as to it
5:45
Speaker 3: feels like more of a negotiating measure than it is
5:48
Speaker 3: something actually that is going to go into effect, particularly
5:52
Speaker 3: because it's being paired with these two issues on immigration
5:57
Speaker 3: of you know, Kennedy's citizens and fedanyl movement that are
6:00
Speaker 3: not economic causes necessarily.
6:04
Speaker 2: No, I'm on team Paul here where I just I
6:07
Speaker 2: don't know that we can go through the nitty gritty
6:09
Speaker 2: of like what you know this would mean in a renegotiation,
6:14
Speaker 2: because we need to see how it actually plays out,
6:16
Speaker 2: And I just I can't go through every iteration of well, like,
6:22
Speaker 2: here's you know what it looks like if this happens,
6:25
Speaker 2: and here's what looks Let's see what actually happens, and
6:27
Speaker 2: then we can discuss the impact or if something's getting closer,
6:30
Speaker 2: if if the parties are actually meeting and renegotiating, fine,
6:35
Speaker 2: like if these things are coming up as talking points,
6:37
Speaker 2: but otherwise, again, I just I'm not sure that we
6:43
Speaker 2: can go through every permutation of this, just because I
6:47
Speaker 2: don't know that it's worth it it would be equivalent
6:50
Speaker 2: to you remember back during the Biden term when there
6:55
Speaker 2: was all the noise being made about capital gains tax
6:59
Speaker 2: going up and things like that, and hey, we're going
7:01
Speaker 2: to tax unrealized games. Yes, And I said the same
7:04
Speaker 2: thing at the time. I'm like, guys, like this actually
7:06
Speaker 2: has to like pass. You can't. We're not gonna like
7:09
Speaker 2: take this too seriously because it actually has to pass. Likewise, Okay,
7:14
Speaker 2: this is a trade agreement that was ratified by Congress.
7:16
Speaker 2: It has to actually you know, go through Congress. And
7:18
Speaker 2: so once they get to the point where they're renegotiating it, fine,
7:21
Speaker 2: Like I'm happy to go and dig into that. The tariff,
7:24
Speaker 2: you know threat, Look, it could become something, it might not.
7:28
Speaker 2: But right now we're sitting here on day three, there
7:31
Speaker 2: have been no new tariffs that have been put in place.
7:34
Speaker 2: And those of you listening before you know, Monday, you
7:38
Speaker 2: heard me for the last two months going, guys, I
7:40
Speaker 2: think he's serious. Right now, I really believe that you're
7:43
Speaker 2: gonna have tariffs early on. I'm like, this is what
7:45
Speaker 2: they're saying. They're really talking this up, and quite honestly,
7:49
Speaker 2: like I kind of look like I have egg on
7:50
Speaker 2: my face right now, Like I feel a little bit
7:52
Speaker 2: dumb that I that I you know, it was you know,
7:54
Speaker 2: buying into that. And it's not that I was inherently
7:57
Speaker 2: rooting or not rooting for tariffs, but this is where
7:59
Speaker 2: I thought we were going. And again maybe maybe they're
8:03
Speaker 2: just you know, it's going to be in a week
8:05
Speaker 2: or so. But I don't know, like how many executive
8:08
Speaker 2: orders have been signed right now. There's been at least
8:10
Speaker 2: a few dozens. You know, maybe I haven't been keeping track,
8:13
Speaker 2: like there's too many to keep track of. None of
8:15
Speaker 2: them have been you know, national security related tariffs or
8:19
Speaker 2: you know, there are things along those lines. So I
8:21
Speaker 2: think we'll see where this all goes. The piece to
8:24
Speaker 2: me that is interesting, just in terms of the tariffs
8:25
Speaker 2: that are being discussed right now, is hey, you've got
8:30
Speaker 2: you know that. Again, this is in the last two days.
8:33
Speaker 2: Trump's come out, Hey, you know, I'm considering twenty five
8:35
Speaker 2: percent tariffs on Canada and Mexico, and yesterday says, well,
8:39
Speaker 2: I'm considering imposing ten percent tariffs on China. Now we
8:44
Speaker 2: all have our own like different views and things along
8:46
Speaker 2: these lines, but in terms of countries that are you know,
8:50
Speaker 2: abusing their position on trade relative to others. Are we
8:53
Speaker 2: in general agreement that China is the bigger offender than
8:56
Speaker 2: Canada and Mexico? Absolutely, So I kind of look at
8:59
Speaker 2: this number like, Okay, so maybe this is actually a
9:02
Speaker 2: more serious threat because I I just I can't get
9:08
Speaker 2: over the idea of, yes, we're gonna post tariffs on
9:11
Speaker 2: Mexico and Canada. There are two and a half times
9:13
Speaker 2: what we're imposing on China. So I'm kind of I'm
9:16
Speaker 2: kind of pooh poohing whether the Canada and Mexico stuff
9:18
Speaker 2: will happen. This I actually think is more legit, and
9:22
Speaker 2: I hope I don't have it on my face again
9:24
Speaker 2: because if I if I do on this, like quite honestly,
9:28
Speaker 2: I'm just gonna be like, I don't know anymore. Like
9:31
Speaker 2: if this doesn't end up happening, I'm just gonna go, well,
9:34
Speaker 2: I I don't know, because I I I just don't
9:39
Speaker 2: know what to say then, right, Like, how do we
9:42
Speaker 2: report on something that keeps not happening? If that's the case.
9:45
Speaker 3: And these would be in addition to the tariffs that
9:49
Speaker 3: are already in place on about three hundred billion dollars
9:51
Speaker 3: goods that were you know, instituted during the first Trump administration,
9:56
Speaker 3: and then Biden went in and also assessed more more
10:00
Speaker 3: tariffs on evs, solar cells, semiconductors, and advanced batteries during
10:04
Speaker 3: his terms. So imports and tariffs on Chinese goods, that
10:08
Speaker 3: has been something that has bipartisan support in Washington, d C.
10:12
Speaker 3: And something that you do feel like would be a
10:15
Speaker 3: little bit more realistic in terms of it being instituted.
10:20
Speaker 3: The question will always be with these tariffs, you know,
10:22
Speaker 3: are they broad based, are they specific to some of
10:25
Speaker 3: those items that I mentioned? Are they just a fall
10:27
Speaker 3: up on those Those are all things that are still
10:30
Speaker 3: up for consideration and debate.
10:32
Speaker 2: Yes, So this is where we stand right now on tariffs.
10:35
Speaker 2: Nothing's been imposed yet. We've got a couple sets that
10:37
Speaker 2: are being you know, bandied about, with February one as
10:40
Speaker 2: the potential imposition dates. So the good news, I guess
10:45
Speaker 2: I can't believe I have to say this, because I
10:47
Speaker 2: thought we'd get to Monday and be like, we don't
10:49
Speaker 2: have to speculate anymore. But we're still speculating here on
10:52
Speaker 2: Wednesday a little bit at very first, Chuck, we'll be
10:54
Speaker 2: all set. Don't worry about it. The good news is
10:56
Speaker 2: next Saturday, we'll know whether these are going into place
11:00
Speaker 2: or not. And I just again, if we if we keep,
11:04
Speaker 2: you know, kind of passing these deadlines, I just don't
11:07
Speaker 2: know how I can realistically talk about it without seeming
11:10
Speaker 2: dumb if these things don't happen. So if anyone has
11:13
Speaker 2: any ideas as to how I can do that, please
11:15
Speaker 2: text us at six one seven three six two thirteen
11:17
Speaker 2: eighty five. I'm interested in trying to learn how to
11:20
Speaker 2: be a better radio host talking about these things. But
11:24
Speaker 2: this is where we stand right now. No new tariffs
11:26
Speaker 2: imposed to this point, but potentially some some chatter on
11:29
Speaker 2: this stuff. Uh, what we're going to talk about when
11:32
Speaker 2: we come back. One of the executive orders that the
11:34
Speaker 2: Trump administration did push through relate specifically to EV's subsidies,
11:39
Speaker 2: and so we'll talk about what he did and what
11:42
Speaker 2: the reality on the ground is for that industry.
11:45
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11:49
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13:01
Speaker 2: So one of the executive orders that President Trump has
13:04
Speaker 2: issued is one titled Unleashing American Energy and what it
13:08
Speaker 2: specifies in here is a pause on the disbursement of
13:12
Speaker 2: funds allocated by Congress as part of the Inflation Reduction Act,
13:17
Speaker 2: specifically the tax credits of up to seventy five hundred
13:20
Speaker 2: dollars for new buyers buyers of new evs and four
13:24
Speaker 2: thousand buyers have used evs. Also included in here was
13:28
Speaker 2: some funding for charging stations along highways. And then this
13:33
Speaker 2: order also repeals what was a very dumb executive order
13:41
Speaker 2: calling for the US to be fifty percent EV's by
13:46
Speaker 2: twenty thirty, which again, you can't do that by executive orders.
13:49
Speaker 2: So if you issue an executive order undoing an executive
13:53
Speaker 2: order that did nothing, what have we really done? I
13:55
Speaker 2: don't know, other than use some paper. But the real
13:58
Speaker 2: question on this is, look, at the time of the
14:01
Speaker 2: signing of the Inflation Reduction Act, Mark Fandetti and I
14:03
Speaker 2: had a number of conversations about this where we said, look,
14:07
Speaker 2: is a seventy five hundred dollars tax credit for evs
14:10
Speaker 2: the best way to, you know, do what you want
14:14
Speaker 2: to do, Like, do we know that evs are going
14:16
Speaker 2: to be the best thing for the environment in the
14:19
Speaker 2: long run? How do you know that you're not disadvantaging
14:21
Speaker 2: other technologies that you might actually want. Mike also raised
14:26
Speaker 2: the point a number of times of hey, we can understand,
14:29
Speaker 2: you know, wanting to build semiconductors in the US because
14:31
Speaker 2: of national security concerns, Why do you need to build
14:35
Speaker 2: evs here? Like, ultimately, if you can't buy them from
14:38
Speaker 2: American manufacturers, is that a real problem? You still have
14:41
Speaker 2: alternatives that you can buy, you know, that are manufactured domestically, Like,
14:46
Speaker 2: we weren't really sure if this was the best way
14:49
Speaker 2: to go about it. Having said that, the funds were
14:52
Speaker 2: allocated through a legislative act of Congress, and historical precedent
14:57
Speaker 2: is pretty strong in saying, hey, the president can just
15:00
Speaker 2: the process is called impoundment. You can't just impound funds
15:04
Speaker 2: that you don't want to spend. And so this is
15:07
Speaker 2: likely gonna be something that gets to the Supreme Court
15:10
Speaker 2: in the next few months, and we're gonna find out
15:13
Speaker 2: one way or another whether that still holds up as
15:16
Speaker 2: an argument, because the general like legislative the general theory
15:23
Speaker 2: in terms of hey, why don't you want presidents to
15:26
Speaker 2: you know, be able to impound funds? Number One, Congress
15:28
Speaker 2: controls the power of the purse. So if they say
15:31
Speaker 2: allocate funds in X y or Z. You don't want
15:34
Speaker 2: the president to come in and be like, no, I'm
15:36
Speaker 2: just not gonna, you know, spend the funds Congress allociate
15:39
Speaker 2: that's kind of disregarding the will of the people because
15:42
Speaker 2: of how money is actually allocated through the US you know,
15:47
Speaker 2: governmental system, And so I think this is something where
15:52
Speaker 2: it's going to face all kinds of challenges. The historical
15:55
Speaker 2: precedent would say that this executive order probably gets struck down,
15:59
Speaker 2: but you never know that. There certainly is the possibility
16:02
Speaker 2: that the current Supreme Court sees things differently. But this
16:06
Speaker 2: is an area where the President is clearly coming out
16:09
Speaker 2: and saying, look, I don't want this money to be
16:11
Speaker 2: spent here, and I do wonder and part of me,
16:14
Speaker 2: you know it looks at this and says, hey, are
16:16
Speaker 2: there enough votes out there to maybe overturn some of
16:20
Speaker 2: these provisions. Because if you're talking about, hey, we want
16:23
Speaker 2: to do things to you know, put additional tax cuts
16:26
Speaker 2: in place, but find ways to make the budget you know,
16:29
Speaker 2: a little bit more balanced. Do you try to call
16:32
Speaker 2: back some of the subsidies via legislative action. That's something
16:36
Speaker 2: that I think could make a ton of sense and
16:38
Speaker 2: potentially gives you a clear path because Congress is explicitly
16:41
Speaker 2: allowed to do just that.
16:43
Speaker 3: Right and to kind of go further on the point
16:46
Speaker 3: in terms of the potential for you know, Biparson approval
16:51
Speaker 3: on this. You do have a lot of the money
16:53
Speaker 3: that's flown into Ohio, South Carolina, Tennessee, where Republicans dominate
16:58
Speaker 3: local politics.
16:59
Speaker 2: So this is part of the problem and repealing it
17:01
Speaker 2: is do you have the votes and you're Congress. People
17:05
Speaker 2: don't like to give up money going to their own districts.
17:07
Speaker 3: Exactly exactly, so that makes it challenging. I do wonder
17:12
Speaker 3: on just the broader question in general, you know, the
17:15
Speaker 3: investment in the infrastructure for electric vehicles, is that the
17:18
Speaker 3: best way to spend our capital. I'm always more of
17:22
Speaker 3: a proponent if private markets just kind of figuring it
17:25
Speaker 3: out by trying to drive down costs, and that will
17:28
Speaker 3: usually lead to adoption. But I guess the argument can
17:31
Speaker 3: be made it's it's extremely costly to build out the infrastructure,
17:34
Speaker 3: so perhaps government assistance is needed to make these vehicles
17:39
Speaker 3: more of a mass adoption. I don't know, it's a
17:41
Speaker 3: question that you know is up for debate. Certainly, what
17:46
Speaker 3: you're seeing with China basically subsidizing the EV industry in general.
17:50
Speaker 3: That's way too far reaching. But you hope that just
17:53
Speaker 3: the the market forces would really dictate this change rather
17:56
Speaker 3: than the government.
17:58
Speaker 2: The piece from the Wall Street Journal Tech leaders up
18:00
Speaker 2: to five hundred billion dollars in AI investment in the
18:02
Speaker 2: United States. So this was its open AI Oracle and
18:06
Speaker 2: soft Bank that are behind this. They're calling it Stargate
18:10
Speaker 2: is the joint venture? Either of you big fans of
18:13
Speaker 2: the Stargate movie?
18:14
Speaker 3: No, not aware of it?
18:17
Speaker 2: No, you're not aware of it. I thought it was
18:19
Speaker 2: a show.
18:19
Speaker 4: I didn't know it was a movie.
18:20
Speaker 2: It was a movie before the show. So Stargate was
18:23
Speaker 2: the movie that came out in nineteen ninety four. I
18:26
Speaker 2: believe it was Roland Emmerick who directed it. Kurt Russell,
18:30
Speaker 2: James Spader, we're in it, and then it became not
18:32
Speaker 2: became Stargate. SG one was the series, which I'll admit
18:36
Speaker 2: I have not watched. But the movie is like good
18:38
Speaker 2: mid nineties, you know, kind of weird sci fi, Like
18:41
Speaker 2: it turns out the Pyramids were built by aliens and
18:43
Speaker 2: there's you know, something that takes you to the alien world.
18:45
Speaker 2: Blah blah blah, stargate. In any case, here's my quick
18:50
Speaker 2: view on this proposed investment. First, soft Bank is led
18:56
Speaker 2: by Mussioshi San, who is somewhat Charlotte Tannic. You know,
19:04
Speaker 2: he's kind of a Charlottean, like he was one of
19:06
Speaker 2: the big backers. If we work back in the first
19:08
Speaker 2: Trump term and we work, as we know, like kind
19:10
Speaker 2: of went splat and Soft Bank didn't really you know,
19:14
Speaker 2: look too good after that, and they kind of go
19:16
Speaker 2: through these boom bus cycles where he throws a bunch
19:18
Speaker 2: of money at stuff and recently like a lot of
19:22
Speaker 2: it hasn't really worked out really well worked out, real
19:24
Speaker 2: well armed it. But you know, it's something where Sun's
19:28
Speaker 2: credibility I think is kind of Iffian Altman who runs
19:31
Speaker 2: open ai is. You know, he's proposed some similarly crazy
19:36
Speaker 2: things recently. So we'll see what happens. Quick break Wall
19:38
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19:45
Speaker 1: Breaking business news is always first right here on the
19:49
Speaker 1: Financial Exchange Radio Network. Time now for Wall Street. Watch
19:55
Speaker 1: a complete look at what's moving markets so far today
19:58
Speaker 1: right here on the Financial exchan Change Radio Network.
20:01
Speaker 4: Well, markets are extending their gains, with the SMP five
20:04
Speaker 4: hundred approaching a new all time hi as traders react
20:08
Speaker 4: to impressive fourth quarter earnings from Netflix, Proctern Gamble and others.
20:13
Speaker 4: Right now, the Dow up by eighty eight points, SMP
20:17
Speaker 4: five hundred is up over two thirds of a percent,
20:19
Speaker 4: and the Nasdaq is up over one in a third percent,
20:23
Speaker 4: or two hundred and sixty seven points. Russell two thousand
20:25
Speaker 4: is flat, dipping into negative territory, a ten year treasure
20:29
Speaker 4: reeled up by one basis point at four point five
20:32
Speaker 4: to eight percent, and crude oil off about a third
20:35
Speaker 4: of a percent, trading at seventy five dollars and fifty
20:38
Speaker 4: six cents a barrel. Netflix shares surging by twelve percent
20:43
Speaker 4: after the streaming giant beat on top and bottom lines
20:46
Speaker 4: in the fourth quarter. Netflix added nearly nineteen million subscribers
20:49
Speaker 4: in the quarter and also raised its twenty twenty five
20:52
Speaker 4: revenue forecast. Furthermore, the company said it plans to raise
20:56
Speaker 4: US prices across the board. Meanwhile, Proctern Gamble over port
21:00
Speaker 4: quarterly earning xand revenue that beat Street forecast, where the
21:03
Speaker 4: consumer products company cided growing demand for household staples that
21:08
Speaker 4: stock up over two percent. Elsewhere, Oracle up nearly seven
21:12
Speaker 4: percent after President Trump announced Project Stargate yesterday, which is
21:16
Speaker 4: a joint venture with OpenAI, Oracle, and soft Bank to
21:20
Speaker 4: invest up to five hundred billion dollars in USAI infrastructure.
21:25
Speaker 4: Johnson and Johnson down by three percent after the drugmaker
21:28
Speaker 4: narrowly beat fourth quarter expectations driven by strong sales of
21:33
Speaker 4: its cancer treatment. However, the company sales forecast for this
21:36
Speaker 4: year was slightly lower than analysts were anticipating. In United
21:41
Speaker 4: Airlines projected stronger profit this year due to robust demand
21:45
Speaker 4: for premium and international travel. However, that stock is actually
21:50
Speaker 4: down by about half a percent. I'm Tucker Silvan. That's
21:53
Speaker 4: Wall Street Watch.
21:56
Speaker 1: This is Asked Todd on the Financial Exchange Radio Network.
22:00
Speaker 1: If you have an existing estate plan or in the
22:02
Speaker 1: market for one, Todd Lutsky is here to answer your
22:04
Speaker 1: questions and help you plan for a later life. Ask
22:07
Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
22:10
Speaker 1: New England for more than thirty five years, helping families
22:13
Speaker 1: with a state and tax planning, Medicaid planning, and probate law.
22:17
Speaker 1: Visit Cushingdolan dot com now here's Todd Lutzky.
22:22
Speaker 2: As promised, Todd Lutsky is with us now for ask Todd.
22:25
Speaker 2: This is your chance to ask Todd your estate planning questions.
22:30
Speaker 2: Studio line is open at eight eight eight two zero
22:34
Speaker 2: five two two six three, So get dialing. I know
22:37
Speaker 2: it's new year, so this is your chance to ask
22:39
Speaker 2: Todd your questions to get your estate plans squared away
22:42
Speaker 2: in twenty twenty five. Again eight eight eight two zero
22:45
Speaker 2: five two two six three. Usually have time for two
22:48
Speaker 2: or three questions, so get dialin to make sure that
22:51
Speaker 2: you are in the front of the line. Again, that
22:54
Speaker 2: number is eight eight eight to zero five two two
22:58
Speaker 2: six three. Mister Lutzky, how are you doing today?
23:02
Speaker 5: I am great.
23:04
Speaker 2: Uh, A little confused, Yeah, it happens. Was out yesterday
23:08
Speaker 2: doing a little bit of running. You're jogging on the track,
23:11
Speaker 2: uh huh. And I saw that there was a clam
23:14
Speaker 2: over on the side of it. A clam pulled a muscle. Yeah,
23:17
Speaker 2: that that happens. Real problem. It is a problem, real
23:20
Speaker 2: problem in this weather. Todd. I want to talk to
23:22
Speaker 2: you a little bit about the age at which it's
23:25
Speaker 2: appropriate to consider long term care planning and trying to
23:31
Speaker 2: protect assets from the cost of long term care? Specifically,
23:35
Speaker 2: is there ever an age that that someone gets to
23:37
Speaker 2: where you say, hey, like you might be too old
23:41
Speaker 2: to consider this kind of planning? Is that a thing?
23:44
Speaker 5: I think we should talk about the high end and
23:47
Speaker 5: the low end.
23:47
Speaker 2: Let's do that.
23:48
Speaker 5: Sure, so, so on the low end, right when clients
23:52
Speaker 5: come in and they wonder, you know, what, what do
23:54
Speaker 5: I You know, I want to do a state planning.
23:56
Speaker 5: But you know, then our job is to guide them,
23:58
Speaker 5: you know, as to what kind of eight plan makes sense,
24:01
Speaker 5: and so we'll generally, you know, age as one factor
24:04
Speaker 5: that we look at. So if you come in in
24:06
Speaker 5: your and this is just my own number. By the way,
24:08
Speaker 5: there's no book telling us this. You know, sixty and up,
24:13
Speaker 5: I'm going to ask, you know, sixteen up. I'm probably
24:16
Speaker 5: going to say, you know, are we concerned about the
24:18
Speaker 5: future and potential long term care planning? Because we all
24:22
Speaker 5: know it takes five years to protect it. So if
24:25
Speaker 5: I can have this in my rear view mirror by
24:26
Speaker 5: sixty five or by seventy, I want to do that.
24:30
Speaker 5: If you come in and you are, you know, fifty,
24:32
Speaker 5: but you tell me, you know what I got, you know,
24:34
Speaker 5: diagnosed with Parkinson's or I have you know, MS, or
24:38
Speaker 5: something that might affect mobility. Well, then you might you
24:42
Speaker 5: might want to get the clock started sooner rather than later.
24:44
Speaker 5: But those are you know, the exceptions to the rule.
24:47
Speaker 5: To your point. What about the other end, Well, you know,
24:52
Speaker 5: I hate to put a cap on the other end
24:55
Speaker 5: because you know, I'm always betting on you living, not
24:59
Speaker 5: on you dying.
25:00
Speaker 2: So nice of you.
25:01
Speaker 5: Yeah, that's what I do. So you know, if you
25:05
Speaker 5: came into me and you're eighty five and you say, geez,
25:07
Speaker 5: I want to start my medicaid clock running, well you
25:09
Speaker 5: know what, that's okay, I'm going to say do it.
25:12
Speaker 5: You know, I hope you make ninety And if you
25:14
Speaker 5: do then and something happens, then it'll be you'll be protected,
25:18
Speaker 5: and that's important. Plus there's never a downside to having
25:22
Speaker 5: the clock running. Right If you have the clock running
25:26
Speaker 5: and somebody gets sick, you know, four years into the clock,
25:32
Speaker 5: well I might want to just private pay for one
25:35
Speaker 5: year if I can guarantee the protection of the you know,
25:38
Speaker 5: dollars or assets that I've transferred, and I only have
25:42
Speaker 5: to pay one one year, say one hundred and ten
25:45
Speaker 5: hundred and twenty thousand dollars. I might do that if
25:48
Speaker 5: I'm protecting half a million or a million dollar home
25:50
Speaker 5: or whatever it is I've done. Planning for sure makes
25:53
Speaker 5: makes sense, so getting the clock running never hurts. And
25:56
Speaker 5: of course I'll share with you the story that I
25:58
Speaker 5: did do of ninety five four ninety five year old
26:01
Speaker 5: came in and they needed trust planning anyway, just from
26:03
Speaker 5: an estate planning standpoint, so I said, well then why
26:06
Speaker 5: not just make them irrevocable and then you get the
26:08
Speaker 5: best of both worlds. Sure enough, it worked, and they
26:11
Speaker 5: didn't get sick until they beat the five year o'clock.
26:14
Speaker 5: So never hurts to get it done. I guess there's
26:16
Speaker 5: not an age. I guess that's too old to do
26:19
Speaker 5: the planning.
26:19
Speaker 2: How's that? There? You go talking with Todd Lolotsky from
26:22
Speaker 2: Kushing and Dolan still got a little bit of room
26:24
Speaker 2: on the phone lines. I know we already got a
26:25
Speaker 2: couple people that called in, but uh again, eight eight
26:28
Speaker 2: eight two zero five two two sixty three is the
26:32
Speaker 2: number again? Eight eight eight to zero five two two
26:36
Speaker 2: six three. We're gonna take a quick break right now.
26:39
Speaker 2: But then it is your calls with Todd right after
26:42
Speaker 2: this that number one more time is eight eight eight
26:45
Speaker 2: to zero five two two sixty three.
26:48
Speaker 1: Ask Todd with Todd Lunsky every Wednesday at ten thirty
26:52
Speaker 1: only here on the Financial Exchange Radio Network. You're listening
26:57
Speaker 1: to Ask Todd with Todd Lunzky on the Financial Exchange
27:01
Speaker 1: Radio Network.
27:06
Speaker 2: Let's get right to your calls with Todd. Let's you here.
27:09
Speaker 2: First in the queue is Philip on Cape Cod. Philip,
27:12
Speaker 2: what's your question for Todd Cod?
27:15
Speaker 6: You did an irrevocable trust for me about six years ago.
27:19
Speaker 6: I have rental property. If I sell the rental property,
27:23
Speaker 6: can I take some of that money out? Because I've
27:25
Speaker 6: not enjoyed any of the rental income to this state.
27:29
Speaker 5: Well, let me ask you why you have not enjoyed
27:31
Speaker 5: the rental income. First and foremost, Well.
27:36
Speaker 6: I at this point I thought it'd be better just
27:39
Speaker 6: to keep it in the trust in case we needed
27:41
Speaker 6: some money for repairs on the property.
27:44
Speaker 5: Okay, so first and foremost, and I get it. Not
27:48
Speaker 5: everybody remembers everything you talk about in meetings, But that
27:51
Speaker 5: trust is an income only trust, and all the rent
27:54
Speaker 5: belongs to you every single year, and you've been picking
27:58
Speaker 5: it up, I'm sure on your income tax return and
28:01
Speaker 5: it and it belongs to you and your family, so
28:03
Speaker 5: that rent is yours. Now. Having said that, my next
28:07
Speaker 5: comment would be, how long you said, six years you've
28:09
Speaker 5: been renting this, right, Well.
28:12
Speaker 6: We've been renting it longer, but it's been in the
28:14
Speaker 6: trust for since we met.
28:16
Speaker 5: With you, and so right, right, So the good news
28:21
Speaker 5: is that in our trust we have language that says
28:24
Speaker 5: all the income shall be distributed to you. But I
28:28
Speaker 5: get it. Some people don't physically take the income out
28:33
Speaker 5: and put it into your personal bank account, although you're
28:36
Speaker 5: certainly entitled to it, and so we have language in
28:40
Speaker 5: the trust that says that doesn't go to principle. If
28:44
Speaker 5: you don't take it, it doesn't revert to principle. It's
28:48
Speaker 5: basically an account receivable, okay. So if you are earning,
28:53
Speaker 5: if this thing generated, you know, sixty thousand dollars a
28:56
Speaker 5: year in rent, okay, then you have six years of
29:02
Speaker 5: sixty thousand dollars a year, so sixty times six of
29:07
Speaker 5: technically an account receivable. Now, I get it. You might
29:10
Speaker 5: have used some of the money to pay for real
29:11
Speaker 5: estate taxes or some upkeeper maintenance. I get it. All
29:16
Speaker 5: that money might not be there, but you're getting the drill, right,
29:18
Speaker 5: you're getting the feel. So you need to find out
29:21
Speaker 5: how much income and you can just look on your
29:25
Speaker 5: tax returns it'll be there. Find out how much income
29:27
Speaker 5: got deposited in that trust over six years. And that's
29:30
Speaker 5: one big account receivable, right, So six times six is
29:33
Speaker 5: three hundred and sixty thousand dollars of money. So you're
29:38
Speaker 5: allowed to take that because it's still income. It's not
29:42
Speaker 5: considered principle. So that's how I would go about taking
29:46
Speaker 5: it out. How much you're looking to take out.
29:50
Speaker 6: Believe it or not, I'm like, one hundred thousand will
29:52
Speaker 6: get me over the hump.
29:54
Speaker 5: All right, So there you go. I think even before
29:57
Speaker 5: you go to go to sell it, there's probably money
30:01
Speaker 5: sitting in that trust bank account.
30:02
Speaker 6: Correct, Yeah, yes, there is.
30:05
Speaker 5: Yeah, So probably a lot of money because you haven't
30:07
Speaker 5: taken it. So I suspect that you now have the
30:09
Speaker 5: ability that if you did that, and I said there's
30:12
Speaker 5: three hundred and sixty thousand dollars of income, certainly one
30:14
Speaker 5: hundred is not going to be a problem to take out.
30:17
Speaker 5: And that's how I would go about it. It is
30:18
Speaker 5: an account receivable for you. Then when you sell the property. Again,
30:23
Speaker 5: it's completely a grant toward trust, so you have the
30:25
Speaker 5: ability to sell it. It's flexible, you're going to have
30:27
Speaker 5: no adverse income tax consequences, although I recommend you use
30:32
Speaker 5: our firm to help you with the closing so that
30:34
Speaker 5: you don't screw up the five year waiting period, which
30:37
Speaker 5: you will not. Right as long as the money gets
30:39
Speaker 5: put in the trust and therefore that money you probably
30:42
Speaker 5: can just leave there and let continue to be protected
30:44
Speaker 5: and not have to worry about grabbing the principle because
30:47
Speaker 5: we figured out how to do it. So hopefully that
30:50
Speaker 5: helps a little. And you can see and everybody can
30:52
Speaker 5: see the flexibility built in to these irrevocable trusts, so
30:57
Speaker 5: hopefully that's helpful Philip.
30:58
Speaker 2: Folks.
30:59
Speaker 5: Some times people that do their planning like Philip and
31:02
Speaker 5: others who don't find themselves faced with nursing home care. Nevertheless,
31:07
Speaker 5: and so for either group, whether you've done your planning
31:10
Speaker 5: or not, if you find yourself faced with a nursing home,
31:13
Speaker 5: there's gonna be assets outside the trust if you've done
31:16
Speaker 5: your planning that are at risk, and there's gonna be
31:19
Speaker 5: folks who didn't do their planning and all their assets
31:22
Speaker 5: are at risk. Get this guide. It's getting close to
31:24
Speaker 5: the end of the month long term care planning for procrastinators,
31:28
Speaker 5: and it will teach you how to make countable assets
31:31
Speaker 5: non countable last minute. And each asset is differently treated
31:35
Speaker 5: for married versus single people, whether it's a home, a rental,
31:39
Speaker 5: or money itself. So get the guide eight six six
31:44
Speaker 5: eight four eight five six ninety nine or Legal Exchange
31:48
Speaker 5: Show dot com. So don't just write the check to
31:50
Speaker 5: the nursing home eight six six eight four eight five
31:55
Speaker 5: six nine nine or Legal Exchange Show dot com.
31:59
Speaker 2: Todd, we go yet another caller for you. Here, let's
32:02
Speaker 2: go to Gail in Worcester. Gale. You are on with
32:05
Speaker 2: Todd Lutski. Hi, Todd, I have a question.
32:09
Speaker 3: I understand that in the state of Massachusetts a TOD
32:14
Speaker 3: for real estate is not balanced.
32:16
Speaker 1: Is that true? Yeah?
32:17
Speaker 5: I don't realize. So, folks, what you need to understand
32:20
Speaker 5: about a TOD is it's a transfer on death and
32:23
Speaker 5: you normally see that at the bank account level, not
32:29
Speaker 5: even so much at an investment account level. You see
32:31
Speaker 5: at a bank account level where you it's similar to
32:35
Speaker 5: a designated beneficiary on a bank account that says when
32:38
Speaker 5: I die, I transfer this account on death too, and
32:41
Speaker 5: you put a name down. But that is for a
32:44
Speaker 5: bank account and perhaps an investment account, but not that
32:49
Speaker 5: I'm aware of anyway for real estate. So to avoid
32:53
Speaker 5: the probate on the real estate, whereas a TOD will
32:55
Speaker 5: avoid the probate on a bank account, for real estate,
32:58
Speaker 5: I think you need to really do some trust planning
33:01
Speaker 5: and figure out how best to avoid the probate, protect
33:04
Speaker 5: the asset and get it to your family. So hopefully
33:07
Speaker 5: that was helpful.
33:08
Speaker 2: Todd, I got one more for you here. Let's go
33:10
Speaker 2: to Jim in haver Old. Jim, you are on with
33:13
Speaker 2: Todd Letsky. What's your question?
33:15
Speaker 5: Hi? How you doing?
33:16
Speaker 3: Gentlemen?
33:18
Speaker 1: My question is pretty simple. Can you put a house
33:21
Speaker 1: that he has a mortgage on it, or maybe even
33:23
Speaker 1: a house that has a reverse mortgage on it into
33:24
Speaker 1: a trust?
33:26
Speaker 6: Well?
33:26
Speaker 5: What kind of trust? Revocable or irrevocable?
33:30
Speaker 3: Either one? Probably the irrevocal.
33:31
Speaker 4: Seems like you lean towards those more than the revocable.
33:34
Speaker 5: Well, and I think it's fair that you would say that.
33:36
Speaker 5: I don't want to say that I leaned towards one
33:38
Speaker 5: or the other. It's strictly a function of what makes
33:40
Speaker 5: sense for the particular client and their situation, so we
33:44
Speaker 5: can try to address both if we have the time.
33:46
Speaker 5: But you know, revocable trusts are less problematic when you're
33:50
Speaker 5: transferring encumbered property because pretty much you're still the owner,
33:54
Speaker 5: right and so you don't have to worry about triggering
33:56
Speaker 5: a du on sale clause. So you could transfer it
33:59
Speaker 5: in and even refinancing inside a revocable trust. I mean,
34:04
Speaker 5: banks sometimes give you a little headache, but ultimately what
34:07
Speaker 5: will happen is the bank might say, Okay, take the
34:10
Speaker 5: house out of the revocable trust, put it in your name,
34:13
Speaker 5: get the refinancing done, and then put the house back
34:16
Speaker 5: in their revocable trust, and that's fine. They don't care.
34:20
Speaker 5: So from a revocable trust standpoint, with a mortgage on it,
34:25
Speaker 5: I don't see any issues the irrevocable trust. If it's
34:30
Speaker 5: incumbered property, then yes, you have to take a couple
34:34
Speaker 5: of steps. So if it's your primary residence, what we do,
34:39
Speaker 5: and we talk about life estates a lot. We've talked
34:41
Speaker 5: about them over the years. A life estate is something
34:45
Speaker 5: I use infrequently, but would use it. And I'm going
34:49
Speaker 5: to say to really everyone else that planners and the
34:53
Speaker 5: like should use it when you're transferring an encumbered primary
34:58
Speaker 5: residence to an irrevocable trust. Okay, so if you do that.
35:04
Speaker 5: If you don't do that, and you don't reserve the
35:07
Speaker 5: life of state and put the remainder interest into the
35:10
Speaker 5: irrevocable trust, you could if the bank ever checked, trigger
35:17
Speaker 5: the du on sale clause. Okay, unlikely the banks ever
35:22
Speaker 5: check on these transfers as long as you pay, but nevertheless, Uh,
35:26
Speaker 5: it's an issue. So there's also the Guard Saint Germain
35:29
Speaker 5: Act that says you might not trigger it. But the
35:31
Speaker 5: easier thing to do is say, you know what, if
35:34
Speaker 5: I reserve a life estate and the deed, then I
35:37
Speaker 5: have the right to live there the rest of my life,
35:39
Speaker 5: the right to collect the income and so, and the
35:42
Speaker 5: right to pay the bills.
35:43
Speaker 2: Hooray.
35:44
Speaker 5: So that's the nugget of ownership that I kept. Means
35:49
Speaker 5: I cannot trigger the due on sale clause. Okay. So
35:54
Speaker 5: I cannot trigger it, and I can keep my existing
35:57
Speaker 5: mortgage by transferring it to the trust and reserving a
36:01
Speaker 5: life estate and I don't have to worry about it. Now.
36:04
Speaker 5: The issue that becomes with that is, well, you can
36:08
Speaker 5: keep your existing mortgage you're not likely going to be
36:12
Speaker 5: able to refinance it. Right. If you try to refinance it,
36:17
Speaker 5: the bank is likely going to make you take the
36:19
Speaker 5: whole thing out of the trust and reset the five
36:23
Speaker 5: year waiting period. Now, I can tell you that a
36:26
Speaker 5: lot of my clients that have done this, of course
36:28
Speaker 5: in the past, have what very low rates, and today
36:32
Speaker 5: rates are really high. So one, we don't want to
36:34
Speaker 5: trigger the Dwan sale clause, so we reserve a life state.
36:37
Speaker 5: And two they're really not going to be refinancing, so
36:40
Speaker 5: and mostly I can tell you folks that that people
36:44
Speaker 5: that do irrevocable trust planning don't have mortgages on it.
36:47
Speaker 5: But we can solve that problem for you. And if
36:50
Speaker 5: it happened to be on a rental property, you just
36:52
Speaker 5: got to keep a ninety nine year lease. I can
36:54
Speaker 5: explain that in detail and that will prevent the triggering.
36:57
Speaker 5: So long winded answer, sorry for that, but I I
37:00
Speaker 5: hope it's addressed the question.
37:03
Speaker 2: Mister Lutski. Thank you so much for joining us today.
37:05
Speaker 5: Always a pleasure.
37:07
Speaker 1: This has been asked Todd on the Financial Exchange Radio
37:10
Speaker 1: network Ask Todd with Todd. Lutsky has been presented by
37:13
Speaker 1: Cushing and Dolan, serving Massachusetts and New England for more
37:16
Speaker 1: than thirty years, helping families with the state and tax planning,
37:19
Speaker 1: Medicaid planning, and probate law. Call eight hundred and three
37:22
Speaker 1: nine three four thousand and one or visit Cushingdolan dot com.
37:26
Speaker 1: The views expressed in this segment are solely those of
37:28
Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
37:30
Speaker 1: or tax advice. Please consult with your legal or tax
37:33
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37:35
Speaker 1: each other and are not affiliated