The WAY to WOW Shows
Choosing the Right Estate Planning Tool for You
August 7, 2023
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[0:12] hello and welcome to trusts and Estates weekly I had to take a beat there to remember which show I'm doing it's it's Monday and it's 10 a.m here on the West Coast and 1 p.m on the east coast and it's uh what 11 A.M and 12 noon at Mountain in 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 the um view of

[0:51] 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 and here's our our handy dandy

[1:29] um 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 long time 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 for you so I'm

[2:05] gonna 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 that the issues that you need to discuss with your clients so as always this is not intended to be direct advice for you this is to give

[2:42] you some information so that you can deal with 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 both a will and a trust I know I do for example and

[3:18] that's because 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 episodes where I've talked about how trusts work how will works what probate is okay and that will give you some idea of of what what these two tools do okay and we're going to cover a little bit about that in in in this uh in this episode

[3:56] um but we're not going to get into a real deep dive into the differences between a will and a trust more the issues that you're 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 separate trust as we'll talk about in a minute however if you have a trust you may still have a will in order

[4:33] that certain other 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 more financial issues okay so um oh and here we have someone joining

[5:09] in hey Dale uh uh 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 way and don't and perhaps don't have a lot of assets so the the there's not a lot of urgency

[5:46] 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 skin that's the natural way things are okay so when you're young don't have a whole lot of assets you're in good health so at that

[6:23] time you know a will may be all that you need to make sure that whatever amount of property you have will go go to your intended heirs okay but as you get older and especially as your health declines where the you know possibility of passing away becomes greater so then at that point a trust may be a better vehicle and the reason is because by doing a trust you are effectively

[7:00] 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 executor or that the corner point the court appoints as your administrator that person is going to have the responsibility to see that your 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

[7:36] any ambiguities in the will so now because you've already died your executor 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 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 uh of of not only the

[8:14] 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 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

[8:51] 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 they're 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 know revising her trust 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 the likelihood of of our

[9:30] 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 status now if we're single okay um then having a will may be all that's necessary okay again it'll get we'll get to some of the financial issues later but if we're married okay

[10:06] 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 a you know another 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 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

[10:41] 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 second or a third issue I should say is are the husband and wife gonna 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

[11:16] 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 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

[11:51] 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 changed now again these are all questions you're going to want to talk to your advisors 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

[12:27] 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 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 a neurodiverse child and then the child by

[13:05] the way may even be an adult okay a neurodiverse includes um people on the autism spectrum people with Down Syndrome so it used to be um that uh you know people with with not so 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 work with the neurodiverse

[13:41] through an organization and part on 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 neurode neurodiverse child let alone a neurodiverse neurodiverse adult um 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

[14:19] 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 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 it would be to you know make a big quest to them through a will and that transfers money to them

[14:56] 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 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 up front 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

[15:31] sure that the goals of the trust are fulfilled even after you pass away and if you do this wall you're still alive you can monitor what the trustee is doing okay and see wow is that trustee really taking care of things properly and frankly if they're not as a trust store 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

[16:06] 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 is saying about how much of it is going to the beneficiary of the trust that the numbers don't add up 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 trustees benefit not for the beneficiaries

[16:42] benefit right um in this case the trust store 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 breach the trustees fiduciary obligation so then the court can relieve that Trustee of the trustee's responsibility and appoint someone else in in in instead and and that trustee then would would have basically two responsibilities one would

[17:17] be to continue the management of the trust um it solely for the benefits 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 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

[17:54] 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 with okay if you have you know a car and maybe um you know a a a a bank account and maybe a retirement account um and there's you know Thirty forty thousand dollars in the retirement account so it a a trust may not make

[18:30] sense because it does cost more to form 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 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 us 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

[19:08] 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 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

[19:45] 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 about this issue of how do we ensure that our heirlooms and personal property go to their intended beneficiaries this is a off-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

[20:21] 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 bibliophiles and I could imagine that you know I don't think there would have been but but you know two bibliophiles we both want these books that my mother has had for a good 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

[20:58] 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 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 executor 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

[21:34] okay the desirability 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 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 it will become cost whereas if

[22:09] you set up the trust and spend the money to do that sometimes as little as as maybe just a you know a couple thousand dollars to maybe three four five thousand dollars um you can avoid all the the cost and 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

[22:47] 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 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 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

[23:24] get very nasty and very costly okay so a lot of estate planning from my perspective a lot of estate planning resolve revolves 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 financial slash legal 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

[24:00] 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 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 you want transferred to them and and so again as as I mentioned a minute ago as the size of your estate increases probably the anxiousness of

[24:37] your heirs to receive that property will also increase and so the desirability of avoiding probate increases and you know you you probably 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

[25:13] 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 having to file a probate but we only had a 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 you want to know more about that I invite you to go to my YouTube channel check out the

[25:48] um the episode on trust that explain the benefits of trust and that's one of the big ones okay and the third uh Financial slash legal issue is using a trust may help you reduce estate taxes okay so for most of us especially right now um our dates 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 dollars

[26:25] 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 or four million dollars 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 that has been the case for for quite some time now okay and given

[27:02] 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 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 dollars 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

[27:37] that's worth let's say a million dollars but you have a six hundred thousand dollar mortgage against it for a state tax purposes they're not looking at the Equity of four hundred thousand dollars they're looking at the gross value of the house the million dollars okay so um these are this is a crucial issue for you to discuss with your advisors if you have any kind of 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

[28:13] to know more details on that I I did a show on gift and estate taxes 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 I had at the 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

[28:50] beneficiaries if your estate tax planning is is not done well okay so that's the third of the sort of financial legal 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 it's something you know personal but if it's a sort of a more general question that other people may benefit from

[29:25] knowing the answer hey just drop it into you know one of our social media um sites and and I will respond to it or if I don't know the answer I will get someone who's you know an expert in that area um to to respond um and and uh 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 can see my my buddy Dell here we've been College we've been uh friends since since college so for morning years

[30:03] it's nice to have you join me Dale thanks thanks for coming on the uh 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 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

[30:38] 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 estate planning tool to use and and so as advisors we need to keep in mind that 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

[31:14] show for today on trust in Estates weekly join me tomorrow at 11 A.M Pacific time for my show business lessons from the military will be continuing our discussion of Marine Corps War fighting 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

[31:50] on Wednesday at 12 30 PM Pacific time is my show people making money and I'm gonna take you through a simple process for eliminating your debts so um you know 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 I had a lot of debt from starting my first couple of businesses

[32:26] um and by the time time I joined the Navy I was essentially um out of debt so um I'm gonna 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 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

[33:02] 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 uh Shameless plugging I guess right the the the interesting guess 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 signing off Marie darling you are my bell all the best folks