The WAY to WOW Shows
Choose the Right Estate Planning Tool for You
April 14, 2025
Automatically generated from YouTube captions; names and wording may contain errors.

[0:12] Hello and welcome to Trust and Estates Weekly. I had to take a beat there to remember what show I'm doing. It's It's Monday and it's 10:00 a.m. here on the West Coast and 100 p.m. on the East Coast and it's uh what 11:00 a.m. and 12 noon at Mountain and Central time. And we are here every week to talk about issues related to estate planning and the management of trusts and estates, dealing with wills and all of those all of those topics. both from a personal financial planning standpoint and from

[0:48] the um view of professionals who are either involved in these areas already or are considering getting involved in them in order to expand their practices and help more people. So today we're going to talk about which is the right um estate planning device for for you, a will or a trust. And I'm going to go ahead and jump right into things. Here we go. And slideshow. There it is. Okay.

[1:26] And and here's our our handy dandy um u uh PowerPoint and for Trust and Estates Weekly. And we'll go ahead here. Of course, the three pillars of fitness. For those of you who are longtime viewers of the show, you're familiar with this. for those of you who are are new to the show. So, this is a way of organizing our lives to do our best to make sure we're paying attention to the various aspects um that that we need to deal with. Okay. So, will versus trust, choosing the right estate planning tool

[2:03] for you. So, I'm going to go through I believe it's uh six issues to consider. Okay. And talk about each one uh a little at least a little bit so you can get an idea of what are the kind of things you need to think about and more importantly discuss with the people who are giving you advice or if you're an advisor the the issues that you need to discuss with your clients. So, as always, this is not intended to

[2:39] be direct advice for you. This is to give you some information so that you can deal with uh your the professionals, your lawyer, your accountant, your if you have a professional fiduciary you're working with, um to to make a more informed decision working with them. Now, let me say that for for most people who have significant assets, they are probably going to have both of these uh both a

[3:14] will and a trust. I know I do, for example. And that's because um they have different purposes. They they work in a different different way. And if you're if you're unfamiliar with that, I invite you to go to our to our YouTube channel and look at some past um episodes where I've talked about how trusts work, how a will works, what probate is, okay? And that will give you some idea of of what what these two tools do. Okay? Okay. And

[3:50] we're going to cover a little bit about that in in in this uh in this episode. Um but we're not going to get into a real deep dive into into the differences between a will and a trust. More the issues that you're want going to want to think about um as you decide which is going to be your primary vehicle. Okay. Now, the reality is if a will is going to be your vehicle, then you probably are not going to have a trust, okay? Um, at least not for yourself. Now, you may set up a a separate trust, as we'll talk

[4:26] about in a minute. Um, however, if you have a trust, you may still have a will in order that certain other um property that for one reason or another um doesn't go into your trust um will still be designated for the beneficiaries that you want. Okay. So, excuse me. All right. Let's talk I'm going to talk about first of all kind of three issues that are sort of personal issues as opposed to the second group which are

[5:02] more financial issues. Okay. So um oh and here we have someone joining in. Hey Dale. Uh oops. Here we go. Um, okay. So, the first thing you want to you want to look at is your age and health. Okay. So, um, if you are if you are young, if you're healthy, the urgency of and and by the

[5:39] way, and don't perhaps don't have a lot of assets. So, the the there's not a lot of urgency necessarily in your estate planning. Okay. Now, of course, any one of us can pass away at any time. Yes, that's true. But, but you know, on an odds basis, if you will, younger people are far less likely to die than people who are older. Okay? So, my daughter is probably, you know, praise God, as they say, probably going to outlive me. And and that's the natural scheme. That's the natural way

[6:15] things are. Okay? So when you're young, don't have a whole lot of assets, you're in good health. So at at that time, you know, a will may be all that you need to make sure that whatever amount of property you have will go to your intended heirs. Okay? But as you get older and especially as your health declines where the you know um possibility of passing away becomes greater. So then at that

[6:51] point a trust may be a better vehicle. And the reason is because by doing a trust you are effectively setting up the transfer mechanism for your property while you're still alive. Okay? Keep in mind that a will does not go into effect until you die. Okay? and the person you appoint as your executive or that the court appoint the court appoints as your administrator, that person is going to have the responsibility to see that your

[7:27] wishes are carried out. Now, hopefully you'll choose someone that's going to do that in in accordance with with really what you want to have happen. But if there's any ambiguities in the will, so now because you've already died, your executive is going to have to do the best he can to resolve those ambiguities according to what he thinks you would have wanted. with a trust, all of that gets worked out while you're alive. Okay? And and so that's

[8:03] one of the big that's one of the important reasons I should say for setting up a trust is a lot of the details of of not only the estate planning but but almost the transference takes place while you're alive. Now, you retain control of the asset. So, I'm not saying it literally goes to other people. However, as part of setting up your trust, you may decide to go ahead and transfer certain assets to other people, okay, in

[8:38] advance. Okay? I know, you know, my mother did that. Um, and like over the last year or two, she's been going through, in her case, her personal property, and she's been distributing it out to my sisters and me and I don't know, whoever else she's distributing it to. I don't know. I know there I I got some some books that she's had for literally decades. They're beautiful, beautiful copies of classic books. And, you know, she knew that I would appreciate them. And so as part of you

[9:13] know revising her trust um she went ahead and made some of those distributions so she could make sure they went where they she wanted them to go. Okay. So as excuse me as um the likelihood of of our dying gets closer. So then we we probably want to look more closely at perhaps creating a trust especially if we have significant property which is something I'll touch on in in the next group of of issues. Okay. Marital

[9:48] status. Now, if we're single, okay, um then having a will may be all that's necessary. Okay, again, that'll get we'll get to some of the financial issues later, but if we're married, okay, wills be just become more complex. So, are we going to have a situation where depending on which spouse dies first, the will is going to transfer one spouse's property to the other and then that spouse will do, you know, another

[10:23] will distributing the property to, you know, their heirs. Okay? Is that the way they're going to do it? Now, if there were if if if the spouses had children um before the let's say they were married before and now they're remarried. So, they have children by their first marriages. How is that going to work? Right? Is that going to cause bad feelings between the surviving spouse and the and the children from the prior marriage? Okay, that's that's another issue. Um a a a second or a third issue I should say is are the

[10:58] husband and wife going to do a joint essentially a joint will or are they going to do separate wills. Okay. So already you can see there's complexity that comes into even something as simple as a will just by virtue of the marital status of the people involved. Okay. And at that point where you're dealing with all these complexities for a will, it might make more sense at that point to then just go ahead and do a trust because again your your your wishes can

[11:34] be worked out while both spouses are alive and and then the mechanisms of what's going to happen when the first spouse dies can be built in and then when the second spouse dies that can also be built in. Okay. certain provisions can um be set up in a way that they, you know, cannot be changed. Um, and in fact, you could do a will um that once it's set up, I'm sorry, not a will, you could do a trust that once it's set up, the terms of it cannot be

[12:09] changed. Now again, these are all questions you're going to want to talk to your adviserss about before making any decisions. There are pluses and minuses to all of these and your specific circumstances need to be looked at before you decide which way to go. However, the main key the main point here is when you're married, that adds a level of complexity to your estate planning. Okay? that that needs to be addressed and and and especially if

[12:44] there are children and children from a prior marriage involved even more complexity. Okay. The third sort of personal issue is if you have special needs beneficiaries. Okay. So let's say you have um a neurodeiverse child. Then the child by the way may even be an adult. Okay. Neurodeiverse includes um people on the autism spectrum, people with Down syndrome. So it used to be um that you know people with with not so

[13:21] much autism but but even Down syndrome and some other conditions didn't live very long. Now medical technology has advanced tremendously and and a lot of folks um live much much longer lives and they can live very productive lives. Right? I in fact I'm I I work with the neurodeiverse through an organization and part and our our mandate is we want to help them to live you know as wonderful lives as possible productive lives right nonetheless for a a a neuro neurodiverse

[13:56] child let alone a neurode nur neurodeiverse adult a lot of times they can live relatively independently but they do need some support. Okay? And so as part of your estate planning, you may want to make sure that the funds are there to take care of that that child, even if the child is an adult, through the rest of the child's life. So you don't, you know, after you're gone, you don't have

[14:31] to worry, gosh, you know, is my child going to end up on the street or are they going to lose um, you know, their whatever it is um twice a week person who comes in and and helps them or or whatever the level of support services are. Okay. Now, one of the ways to do that I w would would be to, you know, make a bequest to them through a will and that transfers money to them. Okay. but they they may not be really able to handle their own finances. And so then what's going to happen if all of a sudden there's this lump sum of money

[15:07] there to help them, but how is it going to actually get set up to help them? Okay. And so in that case, again, it may be better, even though it'll be more work and and more costly upfront to go up and to go ahead and set up what's called a special needs trust. Okay? and that and then you can appoint um a trustee to that trust who can make sure that the goals of the trust are fulfilled even after you pass away. And if you do this while you're still alive, you can monitor what the trustee is

[15:44] doing, okay? And see, wow, is that trustee really taking care of things properly? And frankly, if they're not, as a trust, you you you know, may be able to reserve the right to replace that trustee if they're not doing a proper job, right, while you're still alive. That's one of the big benefits. Okay? So, um, in fact, I have a situation right now where someone set up a special needs trust and the trustee is draining money from the trust and we're trying to find out where is that money going because it's from what the person

[16:21] is saying about how much of it is going to the beneficiary of the trust that the numbers don't add up. It it appears that more than twice the money that the person is saying has been spent on the beneficiary has been taken out of the trust. So the concern is is that the trustee has taken money for the trustee's benefit, not for the beneficiary's benefit, right? Um in this case, the trust has died. Um but but nonetheless, this is something that can be submitted uh for for court review and if the court sees that the trustee has

[16:58] breached the trustes fiduciary obligation. So then the court can relieve that trustee of the trustes responsibility and appoint someone else in in instead and and that trustee then would would have basically two responsibilities. One would be to continue the management of the trust um solely for the bene for the benefit of the beneficiary but then also to do what can be done to recover the money that was taken um that that should not have been taken. Okay. So again you can see

[17:35] once complexity comes in then the the consideration of using a trust as an estate planning tool becomes more important. Okay. All right. So those are the three what I call personal issues. Let's move on to now more of the financial issues. Okay. So again, which is which is better, a will or a trust based on these more sort of financial and you might call them legal issues too. Okay, so number one is what is the size of the estate that you're dealing

[18:11] with. Okay, if if you have, you know, a car and maybe um you know, a a bank account and maybe uh a retirement account um and there's, you know, 30 $40,000 in the retirement account. So, it a a trust may not make sense because it does cost more to form a to create a trust um and also to then to transfer all the assets and all of that, especially if you can't do it yourself. Um, and because there are other ways to transfer assets, so here in California,

[18:48] um, a car can, if a if a car is going to be passed to a spouse, it doesn't have to go through probate, okay? You can just go down to the DMV, show a a copy of the death certificate, and fill out the paperwork, and the and the car will be transferred. And I believe that's also true from a parent to a child. Okay. Now, these these rules may vary from state to state. So, just because California allows something doesn't mean any of the other 49 states do. Of course, that's something to check out. But in that case, you know, you don't even need a will to transfer that asset.

[19:24] Okay? And bank accounts sometimes can be set up so with with someone designated to receive the account upon death of the account holder. So again, you don't even need a will in that case. Okay. And then and then you know for whatever other assets there may be a will may be perfectly fine um for seeing to it that whatever personal property is left is um is uh distributed according to your wishes. Okay. And in fact, my newsletter um that went out this morning, I talked

[20:00] about this issue of how do we ensure that our heirlooms and personal property go to their intended beneficiaries. This is a of time overlooked aspect of estate planning. People think about real estate, they think about, you know, brokerage accounts, bank accounts, that kind of stuff. and they forget that oftentimes we have well okay so for example I mentioned a few minutes ago the books that my mother had so um both my younger sister and I are biblophiles and I could imagine that you

[20:36] know I I don't think there would have been but but you know two biblophiles we both want these books that my mother has had for a good had for a good part of her life right it's it's a potential grounds for dispute so by handling it up front. Um my mother, you know, got rid of any potential conflict there. And so, um you know, your will at if you have a small estate, all the will may essentially just be a list of, you know, my um you know, diamond engagement ring uh with with the white gold setting and

[21:12] the you know, pear-shaped diamond. this I want to go to this specific person and make a very detailed list in your will and so that way the executive knows exactly what goes to whom and there there's you know little if any room for for conflict to arise okay as an estate gets larger okay the desiraability of using a trust becomes greater so you know a rule of thumb and again this is a rule of thumb doesn't apply to everybody

[21:47] necessarily, but a rule of thumb here in California is if you own a house, you should have a trust because you probably have sufficient equity in that house that um go having to go through probate will become, you know, work and and it will become cost. Whereas, if you set up the trust and spend the money to do that, sometimes as little as maybe just, you know, a couple thousand to maybe three, four, $5,000, um you can avoid all the the cost and

[22:23] and and um hassle of going through probate, number one. And number two, if you have a sizable estate, especially if you have multiple beneficiaries. So then the the um trust will allow you, as we said before, to set things up while you're alive. And again, you will avoid uh potential conflict. And and when there's a large estate, you know, that increases the potential for conflict because there's more to fight over. And and there's a

[23:00] tendency to think, "No, you know, my heirs are not going to fight over stuff. They all love each other. They're all giving people." Yeah. I I mean, I'm not I don't mean to disparage, you know, your your relatives or whatever, but sometimes once the parent is gone or the person who owned the property is gone, the gloves come off and those fights can get very nasty and very costly. Okay? So a lot of estate planning from from my perspective a lot of estate planning resolve revolves

[23:37] around doing our best to not let disputes arise. Okay. All right. We're looking at time here. Okay. We're good. All right. So second on the list of financialleal issues is avoiding probate. So a will has to go through probate. um in I as far as I know all jurisdictions, okay? Certainly here in California. Um and I and in Alabama as well. Um so probate can be time consuming as I said before. It can be costly. Um and it

[24:13] also uh it can well time consuming in the sense it takes a lot of time to do the work but also it can be a lengthy process and so it can delay the time when your beneficiaries will get whatever assets um you want transferred to them. And and so again, as as as I mentioned a minute ago, as the size of your estate increases, probably the anxiousness of your heirs to receive that property will also increase. And so the desiraability of avoiding probate increases and you know you you probably

[24:48] want to give greater thought to do I want to form a trust. So one of the big benefits of a trust is in most you can avoid probate or at least with most assets you well the assets I should say with the assets in the trust you can avoid probate. Okay. Now, you may not be able to avoid probate all overall. I had a situation where despite there being a trust and all the assets were transferred to it, there were a few assets that weren't for various reasons. And in the end, because of how the whole situation shaped up, we did end up

[25:24] having to file a probate, but we only had to probate, I think it was three um pieces of property as opposed to, you know, what would have been something like 12 or 15 or whatever the you know, the total number of accounts and such was. Okay. So avoiding probate and again if if if if you want to know more about that I invite you to go to my YouTube channel check out the um the episode on trusts that explain the benefits of trusts and that's one of the big ones. Okay. And the third uh financialleal issue is using a trust may

[26:03] help you reduce estate taxes. Okay. So, for most of us, especially right now, um, our estates are not big enough to be subject to estate taxes. Um, and I did a show on this, uh, not too long ago. I think an estate has to be over, I believe it's 12.6 million before it's subject to estate taxes. But that limit uh drops um at the end of next year. Okay. And I think it drops down to three

[26:40] or4 million if if memory serves. Um, and so assuming for the moment that the the exemption does not get extended, many more people will find themselves paying estate taxes than has been the case for for quite some time now. Okay? And given um how much you know the stock market has has gone up over the years, even though it's kind of wavered over the last couple of years, still overall the market has been way up. Um, real estate values have gone way up. Even values of homes, much higher

[27:17] now than they were a few years ago. So, there's a lot more people who, you know, might have an estate with an overall value of three or four million than there were even a few years ago. And by the way, that's the gross value of the estate. Meaning, if you have a house that's worth, let's say, a million dollar, but you have a $600,000 mortgage against it, for estate tax purposes, they're not looking at the equity of $400,000. They're looking at the gross value of the house, the million dollar.

[27:52] Okay? So um these are this is a crucial issue for you to discuss with your advisors if you have any kind of subst uh substantial assets at all especially in the light in light of the upcoming change that's occurring with estate taxes. And if you again want to know more details on that, I I did a show on gift and estate taxes um a few weeks ago and and there I I give you what the hard numbers currently are and what the dates are. I don't remember exactly what they are off the top of my head at the

[28:27] moment. Um but but you want to research that and be very very uh diligent about dealing with that and getting good advice. Okay. estate tax rates are higher than income tax rates. Okay? Um and so they could substantially reduce what's available to go to your beneficiaries if your estate tax planning is is not done well. Okay. So that's the third of the sort of financial legal

[29:02] issues. And that's that's the show for today. So, if you um if you want any help, you have any questions, um you can see here on the screen where to get them. This information will be in the show notes as well. Feel free to send me an email or if it's a you know, if if it's something, you know, personal, but if it's a a more general question that other people may benefit from knowing the answer, hey, just drop it into, you know, one of our social media um sites and and I will um respond to it. or if I don't know the answer, I will get someone who's, you know, an expert in

[29:38] that area um to to respond um and and um you know, help you sort of clarify the picture for yourself. Okay. And here's all the legal stuff. Of course, going to go ahead and stop sharing my screen. And uh you you can see my my buddy Dell here. We've been call we've been uh friends since since college, so for many years. It's it's nice nice to have you join me Dell. Thanks thanks for coming on the for coming on to the meeting. So that's what I've got for you today. I I hope you found this uh useful. I spoke

[30:15] primarily from the standpoint of someone who's doing their estate plan. But of course if you are someone who helps people with estate planning. So these are the kinds of issues that you're going to want to look at. I did not give a comprehensive list. There's simply not enough time to do that. Number one, and number two, a comprehensive list will be different for each individual. So what I did is I I highlight the six most common issues that come up in deciding which

[30:50] estate planning tool to use. And and so as advisors, we need to keep in mind that we we we need to ask the questions of our clients that apply to their situation and really, you know, dig as deeply as possible to make sure that we serve them well. Okay, so that like I said, that's the show for today on Trust and Estates Weekly. Um, join me tomorrow at 11:00 a.m. Pacific time for my show, Business Lessons from the Military. We'll be continuing our discussion of

[31:27] Marine Corps Warfighting Doctrine. We're talking about um uh um the translation of that doctrine into how we run our businesses. And I think you will find, especially if you are in your own business, you'll find that useful. But if you're working for someone else too, I think you'll find these lesson lessons very worthwhile. And then on Wednesday at 12:30 p.m. Pacific time is my show, People Making Money, and I'm going to take you through a simple process for eliminating your debts. So, um, you

[32:06] know, a a lot of people carry debt, unfortunately, especially credit card debt, and there are simple, effective ways to deal with it and and and get out of it. I know I went through the process myself when I was a younger man. Um, I had a lot of debt from starting my um, first couple of businesses. Um, and by the time I joined the Navy, I was essentially um, out of out of debt. So um I'm I'm going to take you through this uh step by step and I think you will find that very very useful and again if you are advising people I think

[32:43] you will find this useful as well even though it may not apply to you personally. So thanks for tuning in and I appreciate it. Um if you're not a subscriber to our YouTube channel um please do consider subscribing. That way you'll get notified each time there's a new episode and um and that that's uh that way you'll never miss the kind of the the information that we're generating. You'll never miss any of the interviews we do with um what what is uh you know shameless plugging I guess right the the the interesting guests

[33:18] that that I'm able to bring on the show. So, wishing you a wonderful rest of the day and look forward to seeing you tomorrow and Wednesday.