Money Talk with Carl Stuart

Carl Stuart takes on some more nuanced topics like staying (a little) aggressive with your nest egg in retirement, tax strategies behind 1031 exchange real estate transactions, and survivor benefits when one spouse’s employer paid into Social Security and the other, a teacher, only paying into a pension (TRS).

The full transcript of this episode of Money Talk with Carl Stuart is available on the KUT & KUTX Studio website. The transcript is also available as subtitles or captions on some podcast apps.

[KUT Announcer Laurie Gallardo] [00:00:02] This is Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

[Carl] [00:00:22] Good afternoon, and welcome to Money Talk. You’re listening to KUT News 90.5 and on the KUT app. Welcome to Money talk. This is a broadcast about the world of financial and investment planning where you determined our agenda by calling or texting 512-921-5888.

As you may know, if you’re a regular listener. We’re now in our 31st year here together, and our first year on KUT News 90.5. I take today’s callers first, and then today’s texts, and then previous texts. Although I’m going to bend that rule a bit today, because I had some texts with some very specific questions, very technical. I’ve done some homework. I will share with you the answer to that. 512-921-5888.

Troy, you’re on the air. How may I help?

[Troy] [00:01:20] Hi Carl, thanks very much. Listen, I want to sell some gold coins and I’m getting mixed messages related to if you sell under $10,000 worth, it’s not a taxable event. Once it goes over about $10,000, then it is.

[Carl] [00:01:40] Yeah, that’s not my experience. I would be surprised if that’s the case, simply because if you sell an asset, a capital asset, and you sell it for a gain, that is a taxable event. I mean, you know, if you sold $5,000 of a mutual fund for which you paid $2,500, that would be a taxable event. I can’t imagine why it would be different with gold. I do know that there can be different tax rates for commodities when sold, but I believe that’s not the case, Troy. I believe it would be a taxable event, either a gain or a loss. That’s my experience.

[Troy] [00:02:21] Okay, Carl. Well, I appreciate your time and information.

[Carl] [00:02:24] Okay I hope I’m right, thanks.

You’re listening to Money Talk on KUT News 90.5 in on the KUT app. Call or text 512-921-5888.

I’m going to go to some of these previous texts because they’re really specific and I really want to get at this. This is one that came in.

[Text] We have funds in a 1031 and that would be a 1031 exchange. And we’re looking for new real estate investments to use our capital gains funds. My sister is wanting to buy a house. Can my husband and I buy the house for her as an investment property and then sell the house to her in two years for the same amount we paid for it and avoid paying new capital gains tax since we’re selling it for the same price we bought it for? Any red flags and doing something like this?

Obviously a really technical question. So, I talked with my CPA, and here’s what he said. I might, for the rest of us who are not familiar with this, a 1031 exchange is when you sell a property, real estate property, for a gain, and you buy another property, if it’s done through this so-called 1031 Exchange, you avoid the capital gains on the sale of the first property.

And here’s he said, in order to execute a 1031 exchange, you have to prove investment or business use intent on both the property sold and the replacement property. You cannot sell or buy a personal use property via a 1031 exchange.

The way the question was proposed makes me think that there’s not an investment or a business use intent of the purchase property. So, my answer there would be no. And he said this, however, they could structure the transaction to show the investment intent. But need to plan that out ahead of time so the sister could rent the property for two years before she buys it.

They would need a good CPA and lawyer to work through this process. Assuming they fulfill the investment intent, yes, they could defer the gain for two year in that situation. So the answer is a qualified yes, but you would have to make that an investment property for that period of time.

You’re listening to Money Talk on KUT News 90.5. And on the KUT app. Call with your questions or text me at 512-921-5888. Let me go to the next text. Let’s see, here we are.

[Text] Any financial advice for a 65-year-old woman whose husband left her a year ago? She works full-time, has a mortgage, $10,000 in savings, and $5,000 and a 403B.

The answer is that you’ve got to put first things first, that it’s not really an investment question because I don’t know enough here, but if your job is sufficient, that it meets your expenses and you’re 65 years old and you have a 403B, that’s the nonprofit equivalent of a 401K.

That’s gonna be the best thing for you to continue to contribute. It’s likely or at least plausible that you’re employer makes a matching or some type of contribution on your behalf. You’re also given a range of mutual funds from which to choose and you don’t pay taxes on those investments. And when you take the money out after you retire since you’re already over age 59 and a half you just pay income tax on that. There’s no penalty for that.

So, since you do have an employer-sponsored retirement plan. Provided that your income is meeting your expenses and you have confidence that your job is safe, then contributing to the 403B plan would be the thing to do.

If you’re worried about the future of your employment, then putting some money aside and a money market fund, that’s not a money-market account at a bank or a savings loan, a money mark fund would be a thing to because you can get the money on a daily basis. It will generate interest at whatever short-term interest rates are now above four percent.

And you would get, in my view, something called a government money market fund. You can go to the big providers like Vanguard and Fidelity and Schwab and do that. And that would be to have some rainy day money if you need that. Otherwise, participating in the employer-sponsored plan, it seems to me, is the best thing to do.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text with your questions at 512-921-5888 and you can catch past shows at kut.org slash Money Talk. All right, let’s just see what the next text was. I’ve got these here.

[Text] Hi, Carl, this is Jim in Round Rock, a first-time listener and caller.

Well, welcome.

[Text] My wife works for Round Rock ISD and participates in the TRS pension fund. That’s the Teacher’s Retirement System pension fund, I have heard that this could limit her survivor social security benefits from my earnings. Could you please explain this?

What Jim’s talking about is school districts in Texas have the option to participate in the social security system or not. And so those systems, the idea is they already had their own pension system. This was true years ago for railroad workers as well.

So, the pension system requires the employer, in this case, the school district to put in money, and it requires the planned participant, that’s the teacher, to put it in money. These are not voluntary. And then when the teacher meets a certain number of years of service, and perhaps age, then. There’s a lifetime income, either for the life of the retired teacher or there are other options that include spousal benefits as well.

So, Jim has worked in the economy with a social security benefit. So, I asked my CPA that, and his answer was, survivor’s benefits are generally based on the amount the deceased spouse was receiving. So, her not participating in social security shouldn’t cause an issue there. The only thing that affects the amount that she would receive is the surviving spouse’s age when she steps up, steps into the survivor’s shoes, but not anything other than that. So, Jim, that’s good news.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. And let’s see, I did get, here’s a question. Let me just see, maybe I can learn something.

[Text] Carl, when I sold metal, the buyer tells me that if they pay you 10,000 or more, they must file a 1099. If it’s less, it would be up to the seller to report.

Well, that’s right. But I’m good– It’s good to know that. But it is a, how should we say it? It’s a voluntary– not voluntary– but it’s up to honesty of the seller. Thank you.

[Text] This info, he said, is several years old on the 1031. The tax on the gain is only deferred and would have to be paid when the replacement part is sold, your exchange company. And he uses something called 1031 Texas. Give you solid advice. Thanks, Phil.

You’re listening to Money Talk on KUT dues 90.5 and on the KUT app. Call or text 512-921-5888. Here’s a text that came in today.

[Text] Hello, Carl. I found you again on my favorite radio station.

Terrific.

I moved recently and bought another house. At 63 years old, I have the funds to pay cash for a modest price house. I bought with conventionally with acquired down payment and a $350,000 mortgage at 6.875%. Do you recommend that I divest some of all or the funds necessary and use some of my nest egg? In this state is the cash account as opposed to a retirement account. If it matters, this house is not forever, maybe two to five years. Thank you for this answer and your radio show.

You’re welcome. Putting more money into the house when you’re going to be in it for a relatively brief time may not necessarily be a good idea. If I just use, for example, the median price of homes as of last month in the Austin metro market, they’re down about two to 3% from the year before. How long will this last? Gosh, I don’t know. But you run the risk of. Putting more money in and then selling your house for less than you paid for it, and that money you put in obviously disappears. I think since you have a short-term phenomenon and you do have the cash, I would do the same thing that I just recommended to the other person who texts. If you’re unwilling to take the risk of stocks and bond mutual funds and exchange-traded funds, then I think I would put the money in a money market fund.

At 63, you have long life expectancy. And if all you have are cash investments and your house, that’s not a good thing. Hopefully you’ll have a social security benefit, but you might consider at the very least putting some money in some conservative bond funds because the odds are over the next two to five years that interest rates will come down and the bond funds will be a superior place to have that safe money than having it in a money market fund. Thanks for the text.

It’s time for me to take a break. It’s a great time for you to call or text 512-921-5888. I’ll be back.

[KUT Announcer Jimmy Maas] [00:13:05] Money Talk airs every Saturday at 5 o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTX Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a non-profit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org

[KUT Announcer Laurie Gallardo] [00:13:35] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

[Carl] [00:13:49] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. When you have a question, call or text 512-921-5888. Bruce, you’re on the air. How may I help?

[Bruce] [00:14:08] Hello, Carl, I’m a 40-year real estate and tax lawyer and I’ve done over I’ve done over a hundred 1031s, might be as many as 200.

[Carl] [00:14:17] Well, I’m glad you’re listening today to straighten me out then, Bruce. Please proceed. All right.

[Bruce] [00:14:24] The question in the text was, I sell a property, I exchange it into a house I would like my sister to have. What I would do is I would be deferring the gain on the property that I originally sold, but the gain would be carried forward in the form of a lower basis into the house that I buy to replace.

So, the first part of the transaction is tax-deferred, but it is not tax-free. People talk about a tax- free exchange. There’s no such thing.

It’s the taxes only deferred such that such that when you then sell the house to your sister two years later at the same price you paid for that replacement house, it is true that there is no additional gain on the sale of the second property when you sell it to your sister.

HOWEVER. The problem is that the game that you had on the first property that you sold is carried forward and you would trigger that gain when you make the sale to the sister. So, if you bought a house, if you sold a property for a hundred thousand, sold it for 200, you’ve got a $100,000 of deferred gain. So now you buy a $200,000 house with that money. You still only have a hundred $100,000 basis in that house, ignoring depreciation and other things. So, when you sell the house to the sister at $200,000, you still have that original $100,000 gain, and it is taxable, and it does not get out of it. It sounded like the person wanted to avoid the tax completely. That is not possible unless you die holding the asset.

[Carl] [00:16:09] And what about the business purpose that the CPA said when you buy that second property, as opposed to just letting your sister live there for free?

[Bruce] [00:16:18] You can’t let your sister live there for free because that does away with the intent of being a business. Good. You would have to rent to the sister at a more or less fair market rental, and that would give you an investment intent, whereupon you sell then to the Sister, but it does not get out of the tax that you had on the first property. It does not meet the purpose that the color or the texture had requested.

[Carl] [00:16:54] This is really helpful because this is not something I do in my daily life, so this is just terrific. Bruce, thanks so much for your education. Thank you. I love this broadcast. I’ve learned more stuff over the last 30 years.

We have expert listeners and you are listening to Money Talk on KUT News 90.5 and on the KUT app, call or text 521, I beg your pardon, 512-921. Five eight, eight, 8.

Kevin, you’re on the air. How may I help?

[Kevin] [00:17:31] Hi, this is Kevin Roberts in Maynard, Texas. I got my property tax appraisal and it was 331% higher. Wow. And I’m just wondering if that’s legal in Texas law.

[Carl] [00:17:50] Yeah, I think that what you may be hearing is there’s a limit as to how much they can raise the tax rate every year, but there’s no limit to how they can raise the appraisal. I mean, let’s just say that I owned a home and even better, I owned the piece of rural property and the city decided to buy up land close to mine to build an airport. All of a sudden my property is worth a whole lot more than it was the year before. So, there’s, to my knowledge, Kevin, there is no rule or law about how much they can increase the price of your house. I know you live in Maynard, but at least here in Austin, prices went up 40% one year in residential real estate, not 330 like yours.

There are, you may get these things in the mail, I do. There are people. Who sell their services to help you protest that amount. I don’t know anything about how to find those people and how, you know, which ones are the best ones or the ones with the highest integrity. But given that big jump, you might talk to neighbors and talk to people you know in your circle of friends, and then you may wanna go hire somebody to help represent you, Kevin. But there’s no rule to my knowledge that says they can not raise it that much, I’m sorry to tell you.

[Kevin] [00:19:15] Well, I’m I think what’s happening is like I just turned 65, right?

[Carl] Mm-hmm

[Kevin] They can’t in Texas. They can raise your Property value after you turn 65

[Carl] [00:19:30] I bet property value, that’s not my experience at all. My property value– I’m over 65– has gone up dramatically. That’s not understanding and it’s not experience.

[Kevin] [00:19:41] Yeah, yeah

[Carl] [00:19:42] Okay.

[Kevin] [00:19:44] Good luck.

[Carl] [00:19:45] You bet. Good luck, sir. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app, which you can hear going off here. Call or text 512-921-5888. All right, here we go.

[Text] Hello, I have recently gotten access to financial benefits from my employer through Fidelity. I’m 23 years old and currently making $80,000. Congratulations. I have low expenses, so I’m currently able to put around 10% into my 401k and 10% in to a Roth IRA. But I’m not sure how or where to invest that money. Do you have any recommendations for investments I should select are pointers on how to diversify my age. I understand I can afford to be more risky in my investments at this point. Thanks for that.

Yes, fortunately, That’s a good salary for someone at your age. I have to believe that means that you’ve got skills that are gonna be in demand. And so what you really are looking for is you’d like to start your path to financial independence so that they’ll come a time in your life when you get up, you do whatever you would wanna do that day because you want to and not because you have to. And so you want the money to grow.

And frankly, your big enemy is the cost of living, which we call inflation, that $80,000 today buys more goods and services than $80,000 does five years from now. Secondly, when you retire, you’re not gonna stop living and having living expenses. So, you wanna have investments that have the ability to grow faster than inflation. And the two that do that are income producing real estate, which I would not recommend for you to do at this early stage of your career. The stock market, because the stock is really a bet on human ingenuity. And so, the long-term returns on the stock market, depending on which start year you use, the big use, the one that’s popular is 1926, comes in between 8% and 10% a year. The problem is it might do 20% one year and down 10% the next year, and you never know. But the good news for you is that you’re just getting started, so you don’t have $100,000 or a million dollars to invest.

So, it’s a good thing to have that Roth and it’s good thing to have your employer sponsored plan. And your employer plan, you’re gonna put money in every pay period. Your Roth, you can do the same until you reach the maximum amount.

You wanna invest in human ingenuity. And the way I would start is the cheapest, and even though these are tax deferred, they’re also tax efficient, exchange traded funds. They’re probably available in your for all, in your plan at work. And you set up a Roth IRA with a custodian that offers these. And you can use any of the big custodians like Fidelity or Schwab or Vanguard.

You can talk to your friends about advisors if you want to. And these will match the return of the underlying index. I would start, my two favorites would be a total stock market index, and the second would be a total international stock market. This gives you the broadest exposure to the global financial markets. And I would probably have 25 to 30% in the international and the balance and the domestic.

Something’s happening right now and we never know if it’s a momentary effect, but US stocks have outperformed foreign stocks for many, many years, and this year the opposite is the case. We don’t know if this is a turning point or if this will go back to the way it was, but the total stock market index that I’m familiar with and this through yesterday, this year’s up 1.31% and the total international is up an amazing 10.58%. So, you can see the difference there is pretty substantial. So that’s how I was get started. I would try to replicate that both in my retirement plan and also in my personal investments. Thanks for the question.

You’re listening to Money Talk on KUT News 90.5. And on the KUT app. Call or text 512-921-5888. Okay, here we go.

[Text] Hi, Carl. What is the significance of the Moody’s downgrade Friday afternoon? Thanks, I’ve been listening since the mid-90s.

Good for you. So what we’re talking about is Moody has downgraded the credit rating of the federal government from AAA to AA.

Frankly that this this makes no difference. I remember when it happened the first time, I think it was Standard& Poor’s, but it was a large rating agency, downgraded it, and that really upset people and made people wonder about the safety of treasury securities.

This is frankly just the other shoe dropping, and it’s no secret that we spend a lot more money at the federal level than we take in. And that it doesn’t look like anybody in public office is prepared to stand up and say, I’m for cutting social security, Medicare and raising taxes. And so it looks like we’re just gonna get and sit down in worse and worse and worst position. Will this eventually come to a head? Of course it will. When will that happen? I have no idea.

But this downgrade, if you’ll notice, we had a terrific week in the US stock market. And it was because of the agreement that the Trump administration made with the Chinese to put on hold for 90 days those tariffs that Trump administration was going to do. And there was a big celebration in the stock market and the stock markets just frankly ignored the downgrade from the rating agency. And I think that tells you everything right there.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app, call or text. Five one two nine two one five eight eight eight and oh by the way you can listen to past shows at kut.org/moneytalk. All right let’s go to the next text

[Text] I’m a single person. I will retire next year at 65 and a half. I will have a comfortable income with my pension and social security. I have about $200,000 in CDs, which have been making money at the high interest rate. I don’t want to add to my tax income when I’m retired. I don’ have much of a 401k at work. Do you have any recommendations on a safe plan for that money? I’m looking at IRA versus Roth IRA versus a conservative money market fund.

Well, once you are retired, you can’t put new money in an IRA or Roth IRA. Even– in other words, what you’ll have is your pension income and social security. That doesn’t count when you wanna put new money into a Roth or an IRA. So that’s out of the question.

When you retire, you can take the money that’s in your 401K. And you can roll it over to your IRA, then you decide you wanna leave it there or you can do something called a conversion and you open an IRA account, take the money from your 401k and put it in there and you have this next door to it, you have the Roth IRA and you then convert or transfer the money to the Roth. That is a taxable event.

So, you may wanna wait until you’ve been retired in a new taxable year. But it’s also possible that since you have a pension and social security, I don’t know that if you’ll be in the lower tax bracket or not.

What to do with the $200,000? You’re asking something where you want it safe and I’m just gonna kind of argue with you in a pleasant way, I hope. The risk that you have is because you are a single person with a long-life expectancy. That the cost of living is going to go up. I don’t have to be a guru to suggest that. You can’t call up social security and say you’d like a little increase this month, okay? And you can’t called up the pension, whether it’s TRS or ERS or your company, and say, you want an increase, okay. And so, whatever your income is, we’ll have less buying power three years from now and five years from and seven years from now than it does today.

What we know from history is, that short-term interest rates go up and down and CD rates follow those. And based on history, CDs have a negative return after inflation and after taxes. So, it’s safe in the sense that the 200 sits there, doesn’t go down to 190. On the other hand, it buys less every year than it did the year before.

So, I’m gonna suggest that because you have two guaranteed streams of income– I’ll give you a personal example. I have a friend. Retired many years ago from 3M, he had a pension, he had Social Security, and he said he understood what I’m talking about, and so he invested in good quality stock mutual funds.

Why? Because they’re gonna grow in value over time. Are they safe? If the safe means going down in value, no, they’re not safe, but you’re not gonna need this money, and you ought to start by getting some exposure to human ingenuity. People who have done that over the last 75 years have been able to outpace inflation.

Will there be bad times? Absolutely.

Should you put all your money in that? Absolutely not.

But if you say, I’m gonna put a target, I’m going to keep $100,000 in a money market fund or a CD and over the next year, I’m wanna put money every month, the same amount, every month and the same day more or less into stock index funds. Use exchange-traded funds, they pay no capital gains, and you only pay income tax on the dividends, which are very, very modest, and then when those dividends occur, you reinvest them, so you’re compounding your growth.

And if you had done this over the last many years, you would have a really nice return, and I believe you will, into the future. You could, now I’m gonna answer your question the way you probably hoped I would, and that is you could buy. A mutual fund or an exchange-traded fund that invests in high-quality, short-term and intermediate-term municipal bonds. They will pay dividends, which will not be subject to income tax. They will go up and down in value, not a whole lot, not like the stock market, but they will not generate and create the type of return that the stock-market does. So, think hard on that before you decide to just keep it in cash alternatives.

You’re listening to Money Talk on KUT News at 90.5 and on the KUT app. Call or text 512-921-5888. Kyle, you’re on the air, how may I help?

[Not Kyle] This is Powers.

[Carl] Well, I’m sorry, it says it was Kyle, I apologize. Go right ahead, you’re on the air, please proceed.

[Powers] [00:31:17] Okay, I’m just turned 73.

[Carl] Yes, sir.

[Powers] In April, and I know that I have to take money out of my IRA. I’ve got approximately 300,000 in my IRA and do you know the amount that I must take annually?

[Carl] [00:31:37] So here’s the deal, the custodian that has your IRA in the first week of January is going to get what your required minimum distribution is. And it varies, it’s determined by the value of your portfolio, 300,000, and then every year your custodians gets the value on December 31st and that determines the value of your age and the value your IRA determines required minimum distribution.

So, two things occur. One, you grow older. And two, if your portfolio is invested, let’s say in financial assets, you’ll have, use the last three calendar years. In 2022, stocks and bonds declined. So in January of 2023, when you learned your required minimum distribution, it was a number that was lower. Then in 2023 and 2024, your stocks did better. And so, your required minimum distribution grew modestly. Because the value at the end of the previous year was higher.

The idea is they want you to take all the money out before you die to pay taxes on it because you haven’t paid taxes on. My experience is that I’ve never seen that occur, that unless you choose to take more than your required minimum distribution, if it’s invested conservatively in growth type things, it will continue to grow.

But there’s no way to know what it’s going to be. Until the year in which you’re eligible and you’re required to take the required minimum distribution, your custodian will know exactly how much money that is.

[Powers] [00:33:14] Okay, appreciate it. Thank you very much.

[Carl] [00:33:17] You’re listening to Money Talk. It’s time for me to take a break. It’s a great time for you to call or text five, one, two, nine, two one, five, eight, eight.

[KUT Announcer Laurie Gallardo] [00:33:44] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

[Carl] [00:33:58] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here’s the text.

[Text] Hi Carl, Liz here.

Hi Liz.

[Text] I have two paid off condos and a small amount of cash and need some kind of estate planning. I have two kids and I’m 56 with no planning whatsoever. Maybe you can refer me to someone to help me understand what I should do that is best for my family.

I’m going to answer the question and I’m not because I’m not going to give a referral, frankly, over the air.

But I would tell you that you have a very straightforward situation. And the fact that you don’t have any debt and that you are a young woman, what you do want to have is you want to make sure that you have a will and you want to make sure that in that will.

You have a minimum of someone who’s going to have your power of attorney in case you were in a car accident and somebody needed to make decisions on your behalf, have access to your securities accounts, have to access to your bank account. Also that can be the same person or another person would have some people call it a healthcare power of an attorney, other people call a directive to physicians, which basically says if I’m. In a permanent vegetative state, I don’t want my life sustained, if that’s how you feel about it, which also means that if you’re in surgery and they have to make a decision that this person is qualified to do that.

And then an executor, who may be the person who has your power of attorney, someone who will close up your affairs may well be one of your kids. And then, of course, what most people think about when it comes to a will, that is, who gets what assets, and that’s where if you chose that it would be your children, that you would name them 50-50, however or however you want to do that.

And the other thing that a lot of people forget is bequests, and I’ll just give you an example. We have three children, and we were talking about this type of thing with our kids, and our daughter said, I want that table. That was the kitchen table, because we grew up having dinner together and talking there. This table has no financial value whatsoever, but it had a lot of emotional value for her. You may have assets that have emotional value, for your children or for other people, whether they have financial value or not. Rather than have people have to disagree over who gets what from mom, you can put that in your will, and then if you have philanthropic intent, that you’d like when you pass away to give some money to your church or synagogue or mosque or alma mater or the Girl Scouts or the Boy Scouts, or whomever, you put that in as well.

You have a very straightforward situation, so you don’t need to spend a lot of money with an attorney based on what you’ve told me, but you do want those basic things in your will. Thanks for the text.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. This says,

[Text] hi, Carl. Looks like these two are together, so I apologize. The Texas legislature has limited increase in tax, 20% per year. I believe this ends in 2026.

Okay, thanks.

[Text] Hi, Carl, another longtime listener from the 90s. See, TCAD about property tax increases is under five million dollars. Non-homestead properties. Okay, TCAD about property tax increases under $5 million.

Good to know. I’m really glad that I got that because I may have been mistaken. 512-921-5888.

[Text] Hello, my name is Corey. I love your show, long-term listener.

Thank you.

[Text] Just wanted to correct your statement that the Moody’s downgrade was ignored in the market. Downgrade happened after the market closed.

Oh, okay.

[Text] The S&P and NASDAQ were booked down plus 1% and after hours trading. Thanks and keep up the great content.

That’s very interesting because it really, I read Barron’s today and I read the Wall Street Journal and they were just silent on it. So, the market may have reacted to it or we never know. Could be other factors along. But it certainly didn’t affect. You know, you would expect it to affect the treasury market more than the stock market, because if there’s true risk in the treasuries, you would think that would be where it would show up. But good point.

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Gary, you’re on the air. How may I help?

[Gary] [00:39:16] Carl, I just want to make a quick comment regarding the difference between the medical power of attorney and the directed to physician.

Good.

[Gary] I was talking to a doctor at my church some years ago a couple or three years ago I guess and I had just been studying those two and I was talking to him about the medical power power of the attorney. And he said, yes, but also make sure you fill out the directive to physician. I said, Yes, I realized that I had studied that the medical power of attorney gives some family member or friend or something the rights to make certain decisions. But the directive physician tells the doctor, this is what I personally want you to do. Okay. Where is? The person who has your medical power of attorney may say, Oh, I just can’t do it. I can’t pull the plug. So anyway, that’s what this doctor told me. And that’s usually one of the things I think a lawyer will put together in the pack. Yes.

[Carl] [00:40:16] Yes, I agree that you know that makes a lot of sense that one is a directive specifically to the position So that’s great great information. Well, i’m sure glad you’re listening and cleared that up for me. Thank you gary

[Gary] Thank you, carl.

[Carl] You’re welcome. Like I say we have the best we have The smartest most informed listeners today We’ve learned about the details of a 1031 exchange and the distinctions between A medical power of attorney and directive to the physician

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-588.

Sandra, you’re on the air. How may I help?

[Sandra] [00:40:58] Yes, my mother passed away last year and she left a will stating my brother gets this much, I get this much. And my dad passed away several years ago and did not leave a will. My brother and I would like to sell her home, but we’re just like deer in headlights Um, we think we have to spend tons and tons of money to go to an attorney and there’s, there’s no property. The will is very clear. Um, I’m the executrix. Um,

[Carl] [00:41:38] Mm-hmm

[Sandra] [00:41:38] …and I’m not sure where to go from here.

[Carl] [00:41:43] Well, we’re really on the edge of my knowledge as well. So, have you gone and gotten copies of the death certificate?

[Sandra] Yes.

[Carl] Okay.

[Sandra] [00:41:54] And I have the house title and a copy of mom’s will.

[Carl] [00:41:59] So I, it’s very interesting. There’s no other asset.

[Sandra] No.

Carl] Okay, because I was thinking we, I just had this happen this week where I had a client pass away and her son brought a copy of the death certificate and will allow us to distribute the securities. So, I don’t know, the fundamental question, I guess, is, what triggers the necessity for going through probate. I’ve been told by attorneys that probate is a very straightforward process. I have friends who’ve gone through probates without an attorney. I’m thinking of a regular listener, Nancy, who sounds like you, a smart person. She went through the probate process on her own, and that would be probably the first thing I would do is you’ve got the death certificate.

I would look into what are the any steps you have to take. I’m not an attorney, but I believe that even if you have to go through probate, you do not have to have an attorney Sandra. I think you can handle it, because it’s a straightforward process.

[Sandra] It is, yeah.

[Carl] Yeah, there’s no contest. You know, it’s not like you and your brother are fighting over it. You gotta hire an attorney and all that sort of stuff.

[Sandra] [00:43:20] We just want to be able to sell the house and we want to make sure that before we tell a realtor that because we’re going to sell a house as is and there’s like 19,000 of back taxes that will have to be paid out but other than that, it’s just split between Yes. I believe in I.

[Carl] [00:43:46] I think, I think you just, I would look into just going through the probate process by yourself because it’s so simple. So I don’t have more information than that, but I do not think you have to have an expensive attorney. Good luck and thanks for calling. You’re listening to Money Talk on KUT News 90.5, we’ve had lots of stumping to chump this afternoon. KUT News 90.5 and the KUT app, call or text 512-921-5888.

Chris, you’re on the air, how may I help?

[Chris]  [00:44:19] Hey, good afternoon. First of all, thank you for doing this and keep up the great content. Thank you. Yeah, and my question is about 1031 exchange and rental property management. So I have a rental property in a different state and it does have a pretty good cash flow and we originally put down like small amount of money. And so it’s a cash flowing property and the only downside is that the property is located in a flush um flood zone and so the flood insurance is going up every year yes and so it carries with it some risks and yes so because of that we are looking to get out of it and But because of our tax bracket is pretty high and we’re wondering, you know, we probably should do like a 1031 exchange to transfer that proceeds to a new rental property. But right now it just seems like, you there is not a good market for rental properties. Um, and so, yeah, we’re just looking away to. Get out of that rental property and figure out a way to deal with the proceeds if there is a way of avoiding paying high taxes.

[Carl] [00:45:56] Well, let’s just work through, just kind of just guess it. So you say we, so you’re a taxpayer, you’re married, filing jointly, is that correct? Yes. And then before you sell this property, what would be your taxable income in a year? What more or less would be your taxible income, Chris?

[Chris]  [00:46:21] Yeah, so join the it’s about like north of 300 for the family.

[Carl] [00:46:28] All right, so, here’s the deal. And how much, I should ask this too, how much would be the gain on the sale, would you estimate how much would be gain on sale of the property?

[Chris]  [00:46:40] Yeah, so we haven’t put it on the market yet, but the guess is about, I would say north of like a hundred thousand.

[Carl] [00:46:49] Okay, so the way it’s calculated is you would take your taxable income plus that hundred, and if your taxible income is between $96,000 but not over $600,000 this year, it says you’re in the 15% tax bracket. That’s the long-term capital gain rate. You’ve married finally jointly, and the income is more than $96000, but not over 600,000, you’re in the 15% bracket. Well if that’s, I’m just reading this off the 2025 tax rates and of course I’m not a CPA, but if you have $100,000 gain and you’re only gonna pay $15,000 in taxes, I think if I’m in your shoes, I’ve got $100000 now, I’d pay the tax and move on rather than try to jump through a bunch of hoops and do a 1031 exchange because I don’t think that’s a big deal frankly.

[Chris]  [00:47:45] Now, is it only 15% because, you know, I was doing my taxes before the deadline and it was, I think the bracket was like the marginal tax bracket was more like 20%.

[Carl] [00:47:58] It is, you’re right, but that’s the income tax rate. I’m talking about the capital gains tax rate

[Chris]  [00:48:07] Oh, okay. So like the the sale of rental properties, like the proceeds, they’re turning to a different

[Carl] [00:48:13] Sure, as long as you’ve owned the property for longer than a year, it’s a long-term capital gain. And if the total income to sale of the property plus your regular income is under $600,000, according to what I’m reading here, then you’re in the 15% long- term capital gains tax rate.

[Chris]  [00:48:35] Um, yeah, that sounds great. I was not aware of that and thank you for that.

[Carl] [00:48:39] Well, you’re welcome. And again, you know, you want to take, you know, your this is I’m not a CPA, but I’m just reading it off the tax rate schedules. You can go Google that yourself and see what you see what you think. But that’s the way it looks to me, Chris.

[Chris]  [00:48:52] Yeah, that helps. And you know, if you may, if I can get your thoughts on whether I should keep this rental property or sell it to look at some other opportunities, right? So this property is, like I said, we put not too much money down and we got a very good interest rate. Uh… On the on the mortgage so it it’s a very good cash flowing property the only thing you’ve got

[Carl] [00:49:25] And you say the property is out of state, is that correct, Chris?

[Chris]  [00:49:29] Yeah, it’s out of state and I’ve been maintaining that property out of stay By myself for two three years, so it’s not a lot of work on my end but it’s just You know the flood zone risk and also It requires Maintenance, I guess down the road, right?

[Carl] [00:49:52] So I’m gonna answer it quickly because we’re running out of time. I would just tell you, you’re not gonna get that kind of cash flow probably again, but owning a property out of state and in the floodplain, I mean, if I were in your shoes, I would like to simplify my life. And if it’s a saleable property, I think if you sold it, you’ll look back on it and be glad that you did because the insurance is not gonna go down, it’s gonna go up. You’re not there to do daily maintenance, things can happen. If you have to pay a property tax manager, which you’re not down, then that’s going to reduce your returns as well. So if it were me, everybody’s different, but if I were in your shoes, I believe I would probably sell the property.

[Chris]  [00:50:37] Okay, yeah, that makes sense. Yeah, thank you so much.

[Carl] [00:50:40] You bet you’re very welcome you bet thanks for calling.

Well, I’ve got a couple of texts in but we’re running out of time i want to thank mark for doing his usual terrific job i’ll take these texts next week because it’s Saturday next week– Saturday after the news at five be sure and tune in to Money Talk.

[KUT Announcer Laurie Gallardo] [00:51:08] You’ve been listening to Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. And this is KUT and KUT HD1 Austin.

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This transcript was transcribed by AI, and lightly edited by a human. Accuracy may vary. This text may be revised in the future.