May 15, 2024 • 20 mins
In this enlightening episode of the Best Advice Podcast, our knowledgeable hosts Rob Lovaglio, Dave Allen, Frank Lovaglio, and Mitch Walk offer a balanced mix of insightful financial market analysis and philosophical conversations. The discussion delves into recent market trends, the intrinsic power of positive thinking, and provides crucial financial tips, particularly on the anticipated changes in tax law.
Regardless of minor fluctuations, the conversation affirms the market's resilience, reaffirming the value of long-term investing and the harmful impact of reacting emotionally to daily market news. The hosts share their faith in the power of positive thinking, underscoring its impact on an individual's life.
The episode features a segment called 'Give Me Something Good,' in which Dave cites a quote about the influence of our time, hearts, and behavior on life. This prompts a philosophical exchange about the significance and inherent lessons we can derive from all relationships in our lives.
The discussion then transitions to practical financial advice and strategies for preparing for changes in the real estate tax code set to expire in 2025. The hosts identify several ways to make the most of personal finances, suggesting methods such as maximizing the gifting limit, utilizing a 529 plan for educational savings, and understanding the effects of city and state taxes.
Delving further into financial matters, the hosts unpack the complexities of estate planning and the Spousal Lifetime Access Trust (SLAT). They highlight potential reductions in estate taxes and emphasize the necessity of sound financial planning to navigate these changes. Techniques to maximize tax efficiency and mechanisms to safeguard one's wealth are discussed, supplying listeners with vital insight into the possible future tax brackets. They also focus on the potential ramifications of having property in an SLAT.
Closing the episode with a swift market update, the experts draw attention to the resurgence of meme stocks. They leave listeners with a powerful reminder: the secret to wealth lies not merely in earnings but in astutely preserving what one has. Whether a finance aficionado or searching for a positivity boost, this episode of the Best Advice Podcast offers a blend of thought-provoking observations and practical financial wisdom.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
You're listening to the Best Advice Podcast, guys.
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(00:21):
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financial game, SFM offers a free initial consultation after each episode.
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line complimentary consultation to book yours today.
Welcome back. Best Advice Podcast Guys. I'm your host, Rob Lavalio.
(00:44):
Here as always with Dave Allen, Frank Lavalio, and Mitch Awok.
Gentlemen, let's crack a lock in.
Let's crack a lock in. We're still going.
It's all good. You know what's crack a lock in? things
in the market are doing they're doing well knock on
wood we had that little april issue and and
it's rallying again and it's almost close to the high again so
(01:06):
managing that soft land soft managing that soft land and that's good news so
far about that one and then until tomorrow some other inflation report comes
out and you know it comes in so nice and if that comes in like they're still
in place bam all of a sudden we're we're back on the roller coaster right Right.
That's it. Long-term and don't follow the daily news like that.
(01:29):
Just listen to The Minute with Mitch. That's all you need. Just listen to this.
That's all you need. So we like to start each episode with a powerful practice of positive thinking.
And we like to call this segment, Give Me Something Good. So Dave, give me something good.
I'm just going to do a quick quote. You know, we've been doing these big, long things lately.
(01:49):
Just a quick one, and I absolutely have no idea who said this.
Take authorship of it. But I said it. Okay, it's Dave.
Time decides who you meet in your life.
Your heart decides who you want in your life.
And your behavior decides who stays in your life. Now he's a philosopher.
That's true. That's good. That's true. That's got a lot of truth to it, right?
(02:12):
You can ruin a lot of relationships or make a lot of good relationships just
by the way you behave. Sure. Right. Your actions.
That's good, Dave. That's good. I like it. That's good.
That's interesting, dad. We, our family was talking about like,
everyone was put in your life at different. Oh yeah. We were just talking.
One's there to like give you. Yeah. One's there for like the long term, like really likes you.
(02:34):
The other one's there for different reasons, but they go throughout your life,
but everyone's there like for a reason. And sometimes.
You're there for someone else's reason. That's right. And you're kind of getting
the shit in of it. They're helping them do something.
So God might put you to be the helper or the helpee, if those are words.
Sometimes you're helping others. Sometimes people are helping you.
Somebody enters your life. Have you ever had somebody that enters your life
(02:56):
that all at once just becomes like almost your best friend? Yeah, there's a feeling.
For some reason, they're there. And it's like you wonder, is it a higher...
Help you get through. Just go with it. And there's no one person that gets in
your life that you wish never entered your life.
And then you learned a real lesson from it. But those are warning.
(03:16):
I think that, you know, again, I'm going to go with faith because I'm a faithful guy.
I think God puts people in your life.
And I think a lot of times it is not by mistake.
I think that people come in, even the ones that aren't so good.
I think that's God's way of saying, hey, you know what? I'm going to give you
a little warning shot here. Be careful of these type of folks.
(03:37):
They're kind of toxic. And then it's your job, just like you said,
to decide not to make them part of your life and to get them out of there.
So anyway, that's where the old saying comes.
Fool me once, shame on you. Fool me twice, shame on me. That's right.
And that's that lesson. Yeah. I'm glad you got it right. Cause some of the old
days didn't get that right. Remember that's right. 20 years ago.
(03:59):
What's our question? I love it. I love it. Let's get to the question of the
day. Today's question comes from Mitch from Destin.
Mitch, what you got for us? You want to say something? I've got a tax question for you guys.
With sunsetting provisions of the real estate tax code coming up in 2025,
are there any planning strategies to get ahead of this?
(04:20):
Thank you, Mitch. I got nothing for you guys today. Who wants to start this
one off? I'll start because I'm going to let these guys talk about that fun slat provision.
I'll start it off. One of the things that I wanted to chat about is the gifting.
A lot of people don't realize that each year you can give away to as many people
as you want $18,000 in 2024.
(04:42):
It looks like it's going to go to $19,000 next year. But let's say,
for example, I'm in a really great mood and I just want to give $18,000 to all
my partners. So Mitch gets $18,000.
Dave gets $18,000. Rob gets $18,000. I'm still feeling generous.
I'm looking for some other folks now, but people need to understand if you're
a spouse, husband and wife, that's 18 a piece, that's $36,000 you can give to each child.
(05:08):
So if you got five kids, you can real. So the key to that, does that mean they
get a tax free Frank or do they? Yeah.
Great question. And that's the reason you go up to in 2024, 18,000 is the max
because you can give $18,000 away to as many people as you choose each person without taxes.
There's no gift tax return. There's no paperwork.
(05:28):
It's a tax-free gift to the recipient, which is a big deal.
The other thing I wanted to mention before you guys get into a little more meat
on some of those provisions or planning strategies is that part of the Tax Cuts
and Jobs Act, which Trump put in in 2017,
that's going to expire in 2025, but part of that whole TCJA,
(05:50):
Tax Cuts and Job Act, was city and state taxes.
A lot of people don't realize if you live in the Northeast.
And you're in Long Island or you're in Connecticut or California,
California was targeted to $10,000 is the maximum you can, you can deduct on
your tax return for city state city taxes.
(06:11):
So if you've got a piece of property in, in Malibu, California,
and that's a $5 million piece of property, let's just say you're paying a hundred
thousand dollars in, in, in taxes on that real estate tax.
You could only deduct 10,000. the other
90 you're on your own so that's going
to go back a lot of people in northeast and california in
(06:32):
new york and california were kind of the two big targeted states they're
going to be happy it's a lot of things that aren't going to be right so now
when that happens the 10 000 is going to go back to what it was before there
was no deduction right no minimum so whatever it is and it's and people may
not they may have heard it's called salt salt that's right that's state and local taxes.
(06:52):
So you may have heard of it. You spilled the salt.
Spilling the salt is very bad luck. I'm not sure what it is.
That's the only silver lining.
That's the only silver. One or the other one. That's why I brought it up.
We got to help you guys out.
Frank, I just wanted to mention one other thing based on your 18,000.
If you have kids or grandchildren and you want to give money away,
(07:15):
you can accelerate it by putting it into a 529.
So you can actually years can you i believe it's
five years up front in one shot okay you can't
keep giving it every year but you can take five of your 18 five front 518s up
front a little less than a hundred thousand dollars up front and fund that 529
so that money's actually working five years earlier or a big bundle of it and
(07:39):
a lot of it comes out of your estate tax-free and remember Remember on the 529,
that's right, there's no tax, it's tax-free. So put 18 times 5.
So 20 times 5 is 100. What's 18 times 5? 92? 92.
Where's financial advice? Yeah, financial 92. 92, she put 92,000 in. Great, great point.
That means all 92 is going to work and growing tax-free.
(08:03):
And it's out of your estate, and husband and wife can both give it.
So the kid's going to get about $184,000 out of the estate.
They're completely still in charge of it. They're still in charge of it,
yes. Tell us that. You can put a string on it. The mom and dad own it.
Right. You want to own it. And if it's grandpa doing it for a grandkid,
(08:23):
he can own it. He can own it. Question for you guys then.
You put in the 92, both parents do. So now you've got $184,000.
That's a pretty good chunk of money.
They're in a great place for probably let that compound.
You've got college done plus room and board and other things.
What happens if a grandchild, let's call him Joey, little Joey, he just hates school.
(08:43):
He's just a great electrician. What happens to that money? You charge that money yourself.
How do you get it back? You give it to another grandkid. But also,
so you know, this year, the law just changed.
The tax law changed on that. A percentage of that money, if the child does not
go to college, can roll into an IRA for that child. Oh, that's great. Roth IRA.
All right. So there's a rule on that now. They've got- A lot of rules.
(09:06):
It has to be in effect for 15 years.
Right. And then, so I mean, let's say that kid's not going to school and you-
He just hates school. He's not going.
Right. And maybe you're five years into this thing. You can't pull it right away to a Roth.
No. You just let it sit there. It's doing what a Roth's doing. It's tax-free.
And then when you hit 15 years, you can do.
You can do $35,000, but you can't do it all at one time. That's nice to have that option.
(09:31):
Okay, let's just say, just for purpose of the discussion, all those options
are off the table. It hasn't won an IRA.
There's no other kids that you can transfer to. Is there some penalty to get it back?
Yeah, you pay tax. Pay tax on it. Like annuity kind of rates,
right? Is it ordinary income? Ordinary income, okay.
On the gain, please. On the gain, just on the gain. Okay. On a direct basis.
Highly unlikely, though. Normally, there's one other child or sibling.
(09:55):
Well, use it yourself. You can use it yourself.
There's a lot of options on that. Yeah.
Lots of options. 60s, want to go back and. Yeah.
There's a lot of options. So, again, so you can get a lot of money out of your
estate for the estate tax issues and take care of your grandkids or take care
of yourself or anybody because it can go in for anybody.
(10:16):
And it's a big, Mitch, speak a little bit about, and then we'll get into the
slats a minute. And a little bit about the big reduction.
I mean, that's $13.6 million, right? You can pass per person?
Right, right. How does it go to?
Well, they haven't made it positive on what it's going to drop to,
but probably somewhere around what it was before.
Five or six. Yeah, about $5.5 to $6 million. Yeah, they adjusted for inflation.
(10:41):
So some people are saying now it could be about $6.5 million.
Now, again, $6.5 million is still $13 million out of your estate. With good planning.
With good planning, right. It's going to have per person, yeah.
Yeah, because, again, if you do have – fortunate enough to have that kind of number –.
There's a lot of planning, to your point, Dave. This is just not magical. It just happens.
(11:03):
There's a lot of planning between your financial advisor, your attorney, and even your CPA.
So what we like to do is have the financial advisor kind of be the quarterback
and work with your CPA and your attorney to get this done.
Because we're not attorneys. We're not attorneys. We're not CPAs.
But we know what your goals are.
(11:25):
So we help manage where you're going forward. And we understand the rules.
And we do the rules. That's right.
Yeah, because we don't have the law degree to sign the documents and give you
that tax advice or that legal advice.
But we quarterback that and work with your other two professionals.
To make sure it all gets done. Just set up those meetings and be part of them.
Yeah. And make sure, and you know, the attorneys know what they're doing,
(11:47):
but there's a lot of complications.
There are many, many issues. And it's called the Spousal Lifetime Access Trust. What's that?
It's called a SLAT. Your favorite, their favorite word, the slap. Okay.
But anyway, you need to talk to your attorneys about that if you're in the higher tax brackets.
(12:07):
And we think sooner than later, because what's going to happen,
while it is a lot of money, in the United States, there are a lot of wealthy
people, that this is going to save them a big chunk of money.
And attorneys only have enough time. Some people without making fun of the name.
Name yeah it's what is what's it for what it
(12:28):
does is as we said earlier right now husband and
wife about 13.6 million
say 13 million a piece get tax-free money to pass on in their estate you could
put you could right now you could take 27 20 almost 27 million tax without any
tax and you know you didn't need two of them husband and wife two of them right
(12:48):
so what the slat does is it It takes the money out of your estate,
but then there's some very, very important factors here that you make sure you
know what you're doing because once the money comes out of your estate and goes to your spouse,
you really lose that because it's not in your estate.
You can have use of it. Your spouse has control of it. It could skip a generation.
(13:11):
There's a lot of different issues out there. So it's very complicated,
but extremely important.
I believe the estate tax rate on anything over, say, $6.5 million apiece when
it goes back is going to be about 45%. You're going to lose about half your money.
And again, we're fortunate we're in Florida, so we don't have state income tax.
(13:32):
That's why a lot of people move here.
Mainly, I think there's only five states that don't have state income tax. One of them, Texas.
Texas. I think Tennessee is one as well. People are coming this way,
right? They like to avoid that. Let me give a couple of caveats.
Yeah, talk about that, Dave.
May not want to do that. First one is you need to have a strong marriage.
Because if you're doing this for you and your spouse,
(13:55):
you want to make sure that you stay married because if, let's say the lady,
let's go the other direction, is the wealthy one and she sets up a slack and
it's for the benefit of the spouse.
She has access to what he has, but if they get divorced, guess what?
It's going to the ultimate beneficiaries and no longer of her use anymore.
So you're getting rid, in a sense, that money's gone. It's out of your estate.
(14:19):
So you can't really just- You have full use of it. You're married.
It's all easy, but it is out of your estate. You lose control.
And it's going to grow outside of your estate too. So that's a beauty.
Let's say you got $8 million out there, $6 million, whatever.
That $6 million is now growing outside of your estate.
So when you ultimately pass to your beneficiaries, your kids,
whoever it may be, there is not an estate tax on that number.
(14:42):
So there's a real good use of it, but you need to make sure your marriage is strong.
You got to make sure you do it right. You got to have the proper assets in there.
There can't be joint assets that moved into this.
So that's where the attorney will guide you to make. That's why you get a good
qualified attorney to really identify the assets. Let's see.
You got to know that you've got to use this money for health,
(15:03):
education, maintenance, support. It can't just come out because I need a new Mercedes.
You know, it's got to come out because maybe I need for health care reasons.
And for beneficiary purposes, this is kind of a big one. You got to be real
careful about this is, you know, when you die. let's say you got a house that you paid $10,
$300,000 for, and you've lived in Florida for 30 years, and now it's worth $3 million?
(15:25):
Well, when your kids inherit that now, they get to step up the cost basis.
That $3 million goes to them clear.
But if that asset- And then if they sell it for $3.1 million,
they have $100,000 tax, not $3 million. Right. But if they put that house inside
a slat, then they pay $300,000. They have the original cost basis.
So they're going to pay full federal income tax on the game.
(15:47):
So there's the negative there if it's inside the slot.
You know, I always just kind of to wrap up the discussion just for time purposes,
it always bothered me a little bit when you think about estate taxes, just as they are.
I mean, think about you work really hard. We all know you pay income tax.
We all know you got FICA, FUTA, all federal income tax.
And then you save that money. Then you, if you're fortunate enough to make enough
(16:08):
money after all your bills, you then start investing and invest every year, every month.
And all of a sudden you, let's just Just make it fun. You accumulate a million
dollars. It's a nice round number. That's all after tax.
And now with these laws, depending on what that exemption is,
all of a sudden the government says, hey, I know that's all after tax.
You've saved that money. But that wealth we're talking about,
(16:28):
we're going to get it again. Another 40%. Wait a minute.
Didn't I work 30 years and this is all I have? You still have $13 million to
do it with. Right. It doesn't matter. It's no fun.
People have $15, $20 million. Another 40%. You've got $15 million right now.
Now, there's basically – You're going to get $2 million, $3 million.
You're going to pay tax on an additional $5 million. 40% on five,
(16:50):
45. You pay $2 to $2.5 million.
Thanks so much, but here's another $2.5 million tax bill.
But also, what I don't want to forget about the sunset, because we're talking
about some really big numbers, and it doesn't affect the vast majority of the country.
However, what affects pretty much everybody is the tax rates are going up.
(17:12):
You know, I think we're at 10, 12, 22.
Those rates are going up. So it's going to affect everybody right now.
So everybody needs to take a look at it. And all bets are off.
This is all congressional, right? So depending, and again, we never get on politics
on the show, but depending on who wins, Democrat or Republican,
they can sweep this. Someone could grab it and say, you know what?
(17:34):
We're going to keep it at 13.6. Or they can say, I don't really like that five
and a half number. I mean, that's where it's heading, but any congressional
change, this could be all over the map until the end of 2025 because we've got new elections, right?
The reality, there'll probably be something that happens in between now and
then, but if everybody ignores it and that date rolls around,
(17:56):
it will automatically set back.
And that's what everybody needs to check, the tax bracketing,
because those tax brackets are set to go up.
If nothing happens they automatically go up yeah that will affect everybody
who all right boys we're getting to 15 minutes right now as usual let's get a quick update.
(18:17):
From the market this week with a minute with Mitch. One minute,
one minute, one minute with Mitch.
Well, this week we are going to see some more numbers come out,
which hopefully, as Frank said earlier, are not going to be too scary.
Hopefully the CPI inflation will be in check.
The job numbers were great last week. They were, you know, 303 in February and
(18:43):
then March numbers came out.
They were only 175,000. So that's had the market spark the market again.
You know, we did see three weeks of a pullback of about 5.5% in April after
a very, very big first quarter. One of the best we've had in many years.
But now, May so far, here we are right around May 14th or so.
(19:06):
The market has really had a good month of May. The numbers are good. It's almost flat.
It's close to that 5.5% drop. It's very close.
So it's really come back strong in the first two weeks. So we expect that to hopefully continue.
And the end of the week, we'll get some big numbers and that's going to see where we go again.
(19:27):
So next week, we'll report on what would happen. The CPI, there's some stuff
coming out tomorrow, right?
Tomorrow and then usually Wednesday, Thursday. And then a little bit of the
underlying hype is, you know, NVIDIA reports tomorrow.
Again, we're long-term strategy kind of institutional investors.
But still, it impacts the market.
I was reading something this morning that said NVIDIA reports and does really well.
(19:49):
That gets the AI thing hot again, and everybody gets excited. Sweet. It all matters.
It all matters. This is for another show, but I don't know if everybody caught
the meme stocks are back.
Yeah, I saw GameStock. GameStock blew up. GameStock was up about 78%.
Did you see what it said today? I didn't. Yeah, 78, 89. It was crazy.
And the same thing, AMC. So the memes may be back again as well.
(20:11):
No, that does not mean go out and buy today.
No, no. Those things you'll get in late and bam, you get hurt.
You will get hurt on those.
All right. Thank you, Mitch. Thank you, Mitch. Remember folks,
the secret to wealth is not what you earn. It's what you keep. Happy days, everybody.
This podcast is for entertainment and educational purposes only,
and it's not intended as personal financial advice.
(20:33):
Before making any financial decision, please do your own research and consult
a financial advisor as needed. If you have a question for the guys,
email podcast at bestadvicepodcastguys.com.
You're listening to the Best Advice Podcast, guys.
If you haven't already, give us a five-star review and help spread the word.
And if you have a question for the guys, email a voice recording to podcast
at bestadvicepodcastguys.com.
That's podcast at bestadvicepodcastguys.com.
Today's episode is brought to you by Security Financial Management.
(00:21):
If you're ready to level up your
financial game, SFM offers a free initial consultation after each episode.
So just send an email to podcast at bestadvicepodcastguys.com with the subject
line complimentary consultation to book yours today.
Welcome back. Best Advice Podcast Guys. I'm your host, Rob Lavalio.
(00:44):
Here as always with Dave Allen, Frank Lavalio, and Mitch Awok.
Gentlemen, let's crack a lock in.
Let's crack a lock in. We're still going.
It's all good. You know what's crack a lock in? things
in the market are doing they're doing well knock on
wood we had that little april issue and and
it's rallying again and it's almost close to the high again so
(01:06):
managing that soft land soft managing that soft land and that's good news so
far about that one and then until tomorrow some other inflation report comes
out and you know it comes in so nice and if that comes in like they're still
in place bam all of a sudden we're we're back on the roller coaster right Right.
That's it. Long-term and don't follow the daily news like that.
(01:29):
Just listen to The Minute with Mitch. That's all you need. Just listen to this.
That's all you need. So we like to start each episode with a powerful practice of positive thinking.
And we like to call this segment, Give Me Something Good. So Dave, give me something good.
I'm just going to do a quick quote. You know, we've been doing these big, long things lately.
(01:49):
Just a quick one, and I absolutely have no idea who said this.
Take authorship of it. But I said it. Okay, it's Dave.
Time decides who you meet in your life.
Your heart decides who you want in your life.
And your behavior decides who stays in your life. Now he's a philosopher.
That's true. That's good. That's true. That's got a lot of truth to it, right?
(02:12):
You can ruin a lot of relationships or make a lot of good relationships just
by the way you behave. Sure. Right. Your actions.
That's good, Dave. That's good. I like it. That's good.
That's interesting, dad. We, our family was talking about like,
everyone was put in your life at different. Oh yeah. We were just talking.
One's there to like give you. Yeah. One's there for like the long term, like really likes you.
(02:34):
The other one's there for different reasons, but they go throughout your life,
but everyone's there like for a reason. And sometimes.
You're there for someone else's reason. That's right. And you're kind of getting
the shit in of it. They're helping them do something.
So God might put you to be the helper or the helpee, if those are words.
Sometimes you're helping others. Sometimes people are helping you.
Somebody enters your life. Have you ever had somebody that enters your life
(02:56):
that all at once just becomes like almost your best friend? Yeah, there's a feeling.
For some reason, they're there. And it's like you wonder, is it a higher...
Help you get through. Just go with it. And there's no one person that gets in
your life that you wish never entered your life.
And then you learned a real lesson from it. But those are warning.
(03:16):
I think that, you know, again, I'm going to go with faith because I'm a faithful guy.
I think God puts people in your life.
And I think a lot of times it is not by mistake.
I think that people come in, even the ones that aren't so good.
I think that's God's way of saying, hey, you know what? I'm going to give you
a little warning shot here. Be careful of these type of folks.
(03:37):
They're kind of toxic. And then it's your job, just like you said,
to decide not to make them part of your life and to get them out of there.
So anyway, that's where the old saying comes.
Fool me once, shame on you. Fool me twice, shame on me. That's right.
And that's that lesson. Yeah. I'm glad you got it right. Cause some of the old
days didn't get that right. Remember that's right. 20 years ago.
(03:59):
What's our question? I love it. I love it. Let's get to the question of the
day. Today's question comes from Mitch from Destin.
Mitch, what you got for us? You want to say something? I've got a tax question for you guys.
With sunsetting provisions of the real estate tax code coming up in 2025,
are there any planning strategies to get ahead of this?
(04:20):
Thank you, Mitch. I got nothing for you guys today. Who wants to start this
one off? I'll start because I'm going to let these guys talk about that fun slat provision.
I'll start it off. One of the things that I wanted to chat about is the gifting.
A lot of people don't realize that each year you can give away to as many people
as you want $18,000 in 2024.
(04:42):
It looks like it's going to go to $19,000 next year. But let's say,
for example, I'm in a really great mood and I just want to give $18,000 to all
my partners. So Mitch gets $18,000.
Dave gets $18,000. Rob gets $18,000. I'm still feeling generous.
I'm looking for some other folks now, but people need to understand if you're
a spouse, husband and wife, that's 18 a piece, that's $36,000 you can give to each child.
(05:08):
So if you got five kids, you can real. So the key to that, does that mean they
get a tax free Frank or do they? Yeah.
Great question. And that's the reason you go up to in 2024, 18,000 is the max
because you can give $18,000 away to as many people as you choose each person without taxes.
There's no gift tax return. There's no paperwork.
(05:28):
It's a tax-free gift to the recipient, which is a big deal.
The other thing I wanted to mention before you guys get into a little more meat
on some of those provisions or planning strategies is that part of the Tax Cuts
and Jobs Act, which Trump put in in 2017,
that's going to expire in 2025, but part of that whole TCJA,
(05:50):
Tax Cuts and Job Act, was city and state taxes.
A lot of people don't realize if you live in the Northeast.
And you're in Long Island or you're in Connecticut or California,
California was targeted to $10,000 is the maximum you can, you can deduct on
your tax return for city state city taxes.
(06:11):
So if you've got a piece of property in, in Malibu, California,
and that's a $5 million piece of property, let's just say you're paying a hundred
thousand dollars in, in, in taxes on that real estate tax.
You could only deduct 10,000. the other
90 you're on your own so that's going
to go back a lot of people in northeast and california in
(06:32):
new york and california were kind of the two big targeted states they're
going to be happy it's a lot of things that aren't going to be right so now
when that happens the 10 000 is going to go back to what it was before there
was no deduction right no minimum so whatever it is and it's and people may
not they may have heard it's called salt salt that's right that's state and local taxes.
(06:52):
So you may have heard of it. You spilled the salt.
Spilling the salt is very bad luck. I'm not sure what it is.
That's the only silver lining.
That's the only silver. One or the other one. That's why I brought it up.
We got to help you guys out.
Frank, I just wanted to mention one other thing based on your 18,000.
If you have kids or grandchildren and you want to give money away,
(07:15):
you can accelerate it by putting it into a 529.
So you can actually years can you i believe it's
five years up front in one shot okay you can't
keep giving it every year but you can take five of your 18 five front 518s up
front a little less than a hundred thousand dollars up front and fund that 529
so that money's actually working five years earlier or a big bundle of it and
(07:39):
a lot of it comes out of your estate tax-free and remember Remember on the 529,
that's right, there's no tax, it's tax-free. So put 18 times 5.
So 20 times 5 is 100. What's 18 times 5? 92? 92.
Where's financial advice? Yeah, financial 92. 92, she put 92,000 in. Great, great point.
That means all 92 is going to work and growing tax-free.
(08:03):
And it's out of your estate, and husband and wife can both give it.
So the kid's going to get about $184,000 out of the estate.
They're completely still in charge of it. They're still in charge of it,
yes. Tell us that. You can put a string on it. The mom and dad own it.
Right. You want to own it. And if it's grandpa doing it for a grandkid,
(08:23):
he can own it. He can own it. Question for you guys then.
You put in the 92, both parents do. So now you've got $184,000.
That's a pretty good chunk of money.
They're in a great place for probably let that compound.
You've got college done plus room and board and other things.
What happens if a grandchild, let's call him Joey, little Joey, he just hates school.
(08:43):
He's just a great electrician. What happens to that money? You charge that money yourself.
How do you get it back? You give it to another grandkid. But also,
so you know, this year, the law just changed.
The tax law changed on that. A percentage of that money, if the child does not
go to college, can roll into an IRA for that child. Oh, that's great. Roth IRA.
All right. So there's a rule on that now. They've got- A lot of rules.
(09:06):
It has to be in effect for 15 years.
Right. And then, so I mean, let's say that kid's not going to school and you-
He just hates school. He's not going.
Right. And maybe you're five years into this thing. You can't pull it right away to a Roth.
No. You just let it sit there. It's doing what a Roth's doing. It's tax-free.
And then when you hit 15 years, you can do.
You can do $35,000, but you can't do it all at one time. That's nice to have that option.
(09:31):
Okay, let's just say, just for purpose of the discussion, all those options
are off the table. It hasn't won an IRA.
There's no other kids that you can transfer to. Is there some penalty to get it back?
Yeah, you pay tax. Pay tax on it. Like annuity kind of rates,
right? Is it ordinary income? Ordinary income, okay.
On the gain, please. On the gain, just on the gain. Okay. On a direct basis.
Highly unlikely, though. Normally, there's one other child or sibling.
(09:55):
Well, use it yourself. You can use it yourself.
There's a lot of options on that. Yeah.
Lots of options. 60s, want to go back and. Yeah.
There's a lot of options. So, again, so you can get a lot of money out of your
estate for the estate tax issues and take care of your grandkids or take care
of yourself or anybody because it can go in for anybody.
(10:16):
And it's a big, Mitch, speak a little bit about, and then we'll get into the
slats a minute. And a little bit about the big reduction.
I mean, that's $13.6 million, right? You can pass per person?
Right, right. How does it go to?
Well, they haven't made it positive on what it's going to drop to,
but probably somewhere around what it was before.
Five or six. Yeah, about $5.5 to $6 million. Yeah, they adjusted for inflation.
(10:41):
So some people are saying now it could be about $6.5 million.
Now, again, $6.5 million is still $13 million out of your estate. With good planning.
With good planning, right. It's going to have per person, yeah.
Yeah, because, again, if you do have – fortunate enough to have that kind of number –.
There's a lot of planning, to your point, Dave. This is just not magical. It just happens.
(11:03):
There's a lot of planning between your financial advisor, your attorney, and even your CPA.
So what we like to do is have the financial advisor kind of be the quarterback
and work with your CPA and your attorney to get this done.
Because we're not attorneys. We're not attorneys. We're not CPAs.
But we know what your goals are.
(11:25):
So we help manage where you're going forward. And we understand the rules.
And we do the rules. That's right.
Yeah, because we don't have the law degree to sign the documents and give you
that tax advice or that legal advice.
But we quarterback that and work with your other two professionals.
To make sure it all gets done. Just set up those meetings and be part of them.
Yeah. And make sure, and you know, the attorneys know what they're doing,
(11:47):
but there's a lot of complications.
There are many, many issues. And it's called the Spousal Lifetime Access Trust. What's that?
It's called a SLAT. Your favorite, their favorite word, the slap. Okay.
But anyway, you need to talk to your attorneys about that if you're in the higher tax brackets.
(12:07):
And we think sooner than later, because what's going to happen,
while it is a lot of money, in the United States, there are a lot of wealthy
people, that this is going to save them a big chunk of money.
And attorneys only have enough time. Some people without making fun of the name.
Name yeah it's what is what's it for what it
(12:28):
does is as we said earlier right now husband and
wife about 13.6 million
say 13 million a piece get tax-free money to pass on in their estate you could
put you could right now you could take 27 20 almost 27 million tax without any
tax and you know you didn't need two of them husband and wife two of them right
(12:48):
so what the slat does is it It takes the money out of your estate,
but then there's some very, very important factors here that you make sure you
know what you're doing because once the money comes out of your estate and goes to your spouse,
you really lose that because it's not in your estate.
You can have use of it. Your spouse has control of it. It could skip a generation.
(13:11):
There's a lot of different issues out there. So it's very complicated,
but extremely important.
I believe the estate tax rate on anything over, say, $6.5 million apiece when
it goes back is going to be about 45%. You're going to lose about half your money.
And again, we're fortunate we're in Florida, so we don't have state income tax.
(13:32):
That's why a lot of people move here.
Mainly, I think there's only five states that don't have state income tax. One of them, Texas.
Texas. I think Tennessee is one as well. People are coming this way,
right? They like to avoid that. Let me give a couple of caveats.
Yeah, talk about that, Dave.
May not want to do that. First one is you need to have a strong marriage.
Because if you're doing this for you and your spouse,
(13:55):
you want to make sure that you stay married because if, let's say the lady,
let's go the other direction, is the wealthy one and she sets up a slack and
it's for the benefit of the spouse.
She has access to what he has, but if they get divorced, guess what?
It's going to the ultimate beneficiaries and no longer of her use anymore.
So you're getting rid, in a sense, that money's gone. It's out of your estate.
(14:19):
So you can't really just- You have full use of it. You're married.
It's all easy, but it is out of your estate. You lose control.
And it's going to grow outside of your estate too. So that's a beauty.
Let's say you got $8 million out there, $6 million, whatever.
That $6 million is now growing outside of your estate.
So when you ultimately pass to your beneficiaries, your kids,
whoever it may be, there is not an estate tax on that number.
(14:42):
So there's a real good use of it, but you need to make sure your marriage is strong.
You got to make sure you do it right. You got to have the proper assets in there.
There can't be joint assets that moved into this.
So that's where the attorney will guide you to make. That's why you get a good
qualified attorney to really identify the assets. Let's see.
You got to know that you've got to use this money for health,
(15:03):
education, maintenance, support. It can't just come out because I need a new Mercedes.
You know, it's got to come out because maybe I need for health care reasons.
And for beneficiary purposes, this is kind of a big one. You got to be real
careful about this is, you know, when you die. let's say you got a house that you paid $10,
$300,000 for, and you've lived in Florida for 30 years, and now it's worth $3 million?
(15:25):
Well, when your kids inherit that now, they get to step up the cost basis.
That $3 million goes to them clear.
But if that asset- And then if they sell it for $3.1 million,
they have $100,000 tax, not $3 million. Right. But if they put that house inside
a slat, then they pay $300,000. They have the original cost basis.
So they're going to pay full federal income tax on the game.
(15:47):
So there's the negative there if it's inside the slot.
You know, I always just kind of to wrap up the discussion just for time purposes,
it always bothered me a little bit when you think about estate taxes, just as they are.
I mean, think about you work really hard. We all know you pay income tax.
We all know you got FICA, FUTA, all federal income tax.
And then you save that money. Then you, if you're fortunate enough to make enough
(16:08):
money after all your bills, you then start investing and invest every year, every month.
And all of a sudden you, let's just Just make it fun. You accumulate a million
dollars. It's a nice round number. That's all after tax.
And now with these laws, depending on what that exemption is,
all of a sudden the government says, hey, I know that's all after tax.
You've saved that money. But that wealth we're talking about,
(16:28):
we're going to get it again. Another 40%. Wait a minute.
Didn't I work 30 years and this is all I have? You still have $13 million to
do it with. Right. It doesn't matter. It's no fun.
People have $15, $20 million. Another 40%. You've got $15 million right now.
Now, there's basically – You're going to get $2 million, $3 million.
You're going to pay tax on an additional $5 million. 40% on five,
(16:50):
45. You pay $2 to $2.5 million.
Thanks so much, but here's another $2.5 million tax bill.
But also, what I don't want to forget about the sunset, because we're talking
about some really big numbers, and it doesn't affect the vast majority of the country.
However, what affects pretty much everybody is the tax rates are going up.
(17:12):
You know, I think we're at 10, 12, 22.
Those rates are going up. So it's going to affect everybody right now.
So everybody needs to take a look at it. And all bets are off.
This is all congressional, right? So depending, and again, we never get on politics
on the show, but depending on who wins, Democrat or Republican,
they can sweep this. Someone could grab it and say, you know what?
(17:34):
We're going to keep it at 13.6. Or they can say, I don't really like that five
and a half number. I mean, that's where it's heading, but any congressional
change, this could be all over the map until the end of 2025 because we've got new elections, right?
The reality, there'll probably be something that happens in between now and
then, but if everybody ignores it and that date rolls around,
(17:56):
it will automatically set back.
And that's what everybody needs to check, the tax bracketing,
because those tax brackets are set to go up.
If nothing happens they automatically go up yeah that will affect everybody
who all right boys we're getting to 15 minutes right now as usual let's get a quick update.
(18:17):
From the market this week with a minute with Mitch. One minute,
one minute, one minute with Mitch.
Well, this week we are going to see some more numbers come out,
which hopefully, as Frank said earlier, are not going to be too scary.
Hopefully the CPI inflation will be in check.
The job numbers were great last week. They were, you know, 303 in February and
(18:43):
then March numbers came out.
They were only 175,000. So that's had the market spark the market again.
You know, we did see three weeks of a pullback of about 5.5% in April after
a very, very big first quarter. One of the best we've had in many years.
But now, May so far, here we are right around May 14th or so.
(19:06):
The market has really had a good month of May. The numbers are good. It's almost flat.
It's close to that 5.5% drop. It's very close.
So it's really come back strong in the first two weeks. So we expect that to hopefully continue.
And the end of the week, we'll get some big numbers and that's going to see where we go again.
(19:27):
So next week, we'll report on what would happen. The CPI, there's some stuff
coming out tomorrow, right?
Tomorrow and then usually Wednesday, Thursday. And then a little bit of the
underlying hype is, you know, NVIDIA reports tomorrow.
Again, we're long-term strategy kind of institutional investors.
But still, it impacts the market.
I was reading something this morning that said NVIDIA reports and does really well.
(19:49):
That gets the AI thing hot again, and everybody gets excited. Sweet. It all matters.
It all matters. This is for another show, but I don't know if everybody caught
the meme stocks are back.
Yeah, I saw GameStock. GameStock blew up. GameStock was up about 78%.
Did you see what it said today? I didn't. Yeah, 78, 89. It was crazy.
And the same thing, AMC. So the memes may be back again as well.
(20:11):
No, that does not mean go out and buy today.
No, no. Those things you'll get in late and bam, you get hurt.
You will get hurt on those.
All right. Thank you, Mitch. Thank you, Mitch. Remember folks,
the secret to wealth is not what you earn. It's what you keep. Happy days, everybody.
This podcast is for entertainment and educational purposes only,
and it's not intended as personal financial advice.
(20:33):
Before making any financial decision, please do your own research and consult
a financial advisor as needed. If you have a question for the guys,
email podcast at bestadvicepodcastguys.com.
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