0:06 hello and welcome to this the second episode of trusts and Estates weekly I'm your host Kevin bemel and we are here every Monday morning starting off the day or starting off the week I should say I guess starting off the day two uh it's it's uh 10 a.m here in the Pacific uh time zone and we're here like I said every Monday 10 a.m Pacific Time 1 p.m eastern time and we spend half an hour talking about matters related to Estates and trusts so that you have the opportunity to add this uh type the to
0:44 add to your business services that deal with these um somewhat complex um legal I'll call them situations um we're actually going to get into the basics of of what they are today so if you're not not at all familiar with trade with traits with States trusts probate executors trustees and all that sort of thing I'm going to go through all of that in the next 30 minutes or so so that you can get a handle on it and
1:19 see and understand how you your business could benefit by working with trusts and Estates so I'm going to jump right into it by sharing my screen you know I like to use PowerPoints some people I think just just talk but I I find um it's it's easier to understand things um when uh you know when when there's something in front of you is as well so this is the show here trust and Estates
1:54 weekly hosted by Kevin bemel I I just have to point out here's like a really cool pen this looks like my keyboard I think pretty much yeah right anyway um so let's get right into it uh there we go okay so today I'm going to talk about three basic I'll call them Concepts State trust and probate these three make up really the heart of dealing with these kind of situations
2:29 um okay I just got a message from my daughter so always makes it a good day okay so estate trusts and probate all right so we when we hear the word estate I think most of us think about some big huge house in the countryside in England um for those of you like me who are fans of Downton Abbey um you might think of uh shoot I can't think oh of Downton Abbey right that was uh that was the name of the home that
3:04 Lord Grantham and his family lived in it was surrounded by Lands that were used for farming he owned the land under the the nearby Village and we think of like a state like you know some super wealthy person who has all kinds of uh real estate basically so while that these the term estate is applied to a situation like that the reason it's called an estate is because it represents the pro property owned by that individual so not
3:43 only is his estate the land and the buildings on it but it's also all the personal property the movable property that he owns so there are two types of property under the law There's real property and personal property so real property is land buildings or things attached to the land and what are called a pertinences so a pertinances are things that automatically are sold when the land is
4:20 sold so for example unless they have been sold off separately the mineral rights to a piece of real estate isn't a pertinence meaning let's say for example um there was oil located underneath your house and you say oh come on that that's ridiculous that's crazy actually where I live many of the houses have oil underneath them and maybe six seven blocks away is this sort of non-descript
4:55 it looks like a building it's really just kind of a a wall with a well go all the cover I guess that's a building but it's it's really just like and inside it are pumps for pumping out the oil under the homes in this area now the homeowners um get royalties from the oil that's pumped out in Seoul so those those mineral rights and you may not think of oil as a mineral but it it it's included in the term mineral rights so that is an impertinence it is something that automatically is sold with the house
5:30 okay so so those are the three things that make up real property personal property is is basically anything that's not real property so any otherwise known as movable property so let me give you an example let's say that you have a big tree growing on your on on the land that that you know your house is on okay so as long as that tree is attached to the ground it is real property okay it's it's anything it's it's anything
6:07 attached to the land okay so now let's say that you cut the tree down and had it cut into logs or you cut it into logs yourself so you've turned that tree into personal property now it's no longer attached to the ground and now it's just wood basically maybe you're gonna you know turn it into some kind of Creative Furniture maybe you're going to burn it in a fireplace maybe you're just gonna have a hauled away because the tree was undermining the foundation you had to get rid of it in any event that tree that was once attached to the ground was
6:43 part of the real estate is now um now part is now personal property because it's been detached and it's laying on the ground now let's say you took that wood and you cut it up and turned it into um steaks that you could use as fence posts and and cross cross pieces to put up between the stakes and you used it to build a fence and you dug holes and you you set caught you set the posts in concrete in the ground or or you may
7:19 have just pounded the posts into the ground and you've reattached the wood to the ground now you have taken that personal property and turned it back into real property because that fence is attached to the ground and it's become real property again okay so an estate is actually all real or personal property owned by a person okay and you have your estate when you're still alive okay and and the property that you own it may be changing
7:54 and so your estate what's in your estate is changing okay at some point when you die okay in in essence the property that you own is now Frozen at least until until at least until something is done with it and so all that property is now your estate and and and that is what's available to be distributed to your heirs the people who are going to inherit it from you now someone could have an estate
8:29 comprised solely of let's say you know their car and maybe that's the only property they own or their car maybe some clothes maybe they have a few hundred dollars in a checking account that could be the total amount of their estate that's still in a state okay uh but you could have uh you know a huge estate worth you know billions of dollars and it has real estate stocks bonds interests in business other Investments okay so the size is not does it is immaterial to
9:05 whether it is in a state or not that size makes no difference okay this the estate is all the property that you own now at the time or once once you die okay now the estate has to be settled okay and that means the property needs to be collected the debts any outstanding debts including taxes need to be paid and then what's left gets distributed to your heirs okay and it and it is often
9:43 oftentimes the management of the estate while the person is alive and then the settling of the estate after the person has died that's where there's an opportunity to help people and to expand your business okay so if you're in I mentioned some of these last week the real estate business the insurance business the um Financial Services business um the management business all of those businesses can help people with their estate now if
10:19 someone has a small estate a car some clothes and a few hundred dollars candidly there's probably not much uh available there to help them with number one there's not much to take care of and number two they don't really have any funds to pay someone to help them deal with it so generally speaking that's not someone that we're going to be looking for in terms of a client now by the way we may help someone if they have a problem with their estate just you know just to help them out just in order to you know be a nice person or or maybe
10:55 the person is a friend of ours or a family member I do that all the time okay of a law very long-standing friend of mine from college um he uh recently retired from his job and and he got a big payout and and but he doesn't need me to do anything what I've done is I I referred him to an attorney who can help him set up a trust and and that kind of thing so my father philosophy is if someone has an issue with their property I'm going to help them out if it's just giving them a
11:31 referral then that's what I'll do if it's being engaged by them to handle something for them then I'm happy to do that as well and and I I do recommend that you you adopt this philosophy because you you'll become known for as a professional and as a professional who puts the the needs of a client or potential client or just someone who has a need above your own okay some people look they don't have a lot of assets they don't have a very big estate but they still need something taken care of
12:06 and so gosh help them out if you can okay maybe hopefully you don't just spend a lot of time just help them out and and you know they'll spread the word it's good you know Karma if you will okay so that's what an estate is next is a trust so a trust is essentially a separate entity from a human being okay and they're set up for a variety of reasons and I'm not going to get into all the reasons that there's that they're set up but one of the most
12:43 common reasons is to avoid a process known as probate which is the what we're going to talk about um in in a few minutes okay so when a trust is set up and and a persons or people's estate is transferred to the trust okay so that trust survives the death of the people who set it up and that way it Evol it it it it evolves it avoids this process known as
13:21 probate and and like I said we'll talk about probate in a minute but you'll see why it's it's a process that many if not all people want want to avoid okay now in order to set up a trust a legal document is created and it's just called the trust document okay oftentimes there's more than one document it depends on the complexity of the situation okay I'm not again I'm not going to get into the you know legal details of this um we'll have some experts on that'll talk about this in coming weeks but a trust has a minimum
13:59 of three parties to it now or I should see well yeah three parties now by the way there could be one person holding all three of these positions okay or all three of them could be different or two could be the same and one could be different okay that doesn't that doesn't matter that's going to depend on the specifics of the particular trust and the needs of the people setting it up okay so the first position we're going to talk about is the trust store or the grantor I put the plurals there you know because there could be and in all of
14:34 these cases there could be more than one person in these roles so the trust store or the grantor it's it's the same position it's just different names for the same position that is the person setting up the trust okay the trustee is the person who manages the trust once it's set up and the beneficiary beneficiary is the person who benefits from the trust okay so let me give you an example let's
15:11 say there's a married couple and they they own a house um a couple of cars and and maybe they have um you know some some stocks and bonds in a portfolio and maybe all together uh ex you know once you subtract out the debt they're what's called their net worth which is their assets minus their liabilities that gives you net worth their net worth let's say it's 250 000 okay so they decide that they're going to set up a trust and transfer all of their
15:48 property into it so the husband and wife are the trust stores or the grantors again it's just a different name for the same position they're the people who set up the trust now they're probably also going to be the trustees meaning they're going to retain Management Authority of those assets okay now they don't have to they may appoint another trustee or they may be the trustees but they may have a um a secondary trustee who will
16:24 take over in the event that they become incapacitated or something like that okay so they may have both those positions and in fact they may Remain the bit or they may also be the beneficiaries of the property I mean of the trust so that they still get the benefits of owning the property okay that would be a very common use of a trust okay and you can see right away that if this married couple were to do that first of all they need someone to draft the legal documents probably in a
17:00 state uh planning attorney they might need accounting advice okay as to what assets specifically should go into the trust and what shouldn't so for example maybe they have a life insurance policy that has equity in it now a lot of people I know say you know never buy anything other than term life again we'll we'll talk about those kind of things um separately but let's just say for whatever reason they have a life insurance policy that has a cash value you in it should that be transferred into the trust or not well so that's a
17:35 question to ask you know your accountant okay I'm not giving tax or legal advice accounting or legal advice here tax advice I'm not doing anything I'm just posing the questions should should any particular asset go into the trust should the cars go into the trust okay so here in California if a spouse dies their car automatically transfers to a surviving spouse without having to go through probate you just go down to the DMV and make that transfer okay so should the cars go into the
18:10 trust again I'm not going to give any advice here okay I'm just telling you what the circumstances are okay now a trust could be set up for their children so let's let's say um they wanna let's say maybe they have their their child has special needs maybe the child is um has has autism okay and while the child can be somewhat self-sufficient um the child you know won't be able to be self-sufficient even when he's an
18:45 adult okay and the parents want to make sure that there's always resources available to pay for those special needs for that child okay so in that case they'll they'll be the trust doors of the grantors okay they probably will also be the trustees at least initially but they will probably also appoint a successor trustee so that when they die or if they I should say if they pre-decease their child meaning they die before their
19:20 child they'll still be somebody there to manage the Trust on behalf of the beneficiary who in this case is not them it's their child okay so here's a case where the part there are different parties to the trust okay so those those are just two fairly simple examples there are very very complicated trusts that exists okay now I put down here the last thing revocable versus irrevocable now some trusts are revocable meaning the trust stores who
19:55 set it up and in offense infants can in effect uh um destroy the trust or get rid of it I I basically revoke it that's where the term comes from okay in other cases the trust is irrevocable meaning once it's set up it cannot be uh destroyed or gotten rid of it it continues to to exist okay so one of the reasons why this is important is if a trust if a
20:31 trust is revocable I'm not sure why I'm making so many missed words today if a trust is revocable then any taxes due on income that the trust generates is paid by and is a responsibility of the trust stores if a trust is irrevocable that trust is now a separate legal entity and it's responsible for paying its own taxes and because of the different taxation
21:06 rates for people versus trusts that may or may not be a good thing so again this is somewhere where you're going to want to get tax and legal advice do I want to make my trust revocable or irrevocable okay and those again those are important decisions there's you can't make any blanket statements about whether they should or should not okay so those are trusts okay and and and you can see again there's lots of opportunity to help people with them okay now let's okay finally probate so
21:45 probate is a court process okay in order to so when a person dies if they didn't leave a trust their estate will have to go through probate in a process no I mean the process is known as probate those those and they may have a will which is a document that says who is going to get their various assets if they don't have a will and there's no trust they're said to have died intestate
22:20 the intestate is I think Latin it means without a will okay so whether there's a will or no will at all their estate is going to have to be probated meaning it's going to have to go through this court process and what happens is if there's a will the will will appoint an Executor which is the person charged with overseeing the probate process okay by the way there used to be executor and executrix executor man executive tricks female I I
22:55 don't think they're using the term executrix anymore although I I do see it in documents on occasion okay but the executor is the person appointed in the will to see the process of probating the estate now if maybe the executor died before the person whose will needs to be probated died and so is not available to uh oversee the probate process so then the court will appoint an administrator and the administrator does the same thing that the executor does it's just
23:32 the administrator wasn't appointed in the will appointed by the will I should say the administrator is appointed by the Probate Court okay and by the way he used to have administrator man administratrix woman isn't that a mouthful of a word right um but now again I I I I don't think courts are using those two different terms so it doesn't matter okay now in the the process of probate basically all of the Assets in the estate are collected or or identified is probably a better word as are all the debts
24:10 and then the executor sees to it that the deaths are paid including any taxes okay and then after that and then after that the remaining property is doled out to The Heirs either as they're designated in the will or if there is no will according to the law of the state in which the probate is being held so there are laws when someone dies in test State there are laws that determine who is a close enough relative to receive the property
24:47 okay now I I'm I've just really been very simple in talking about this of course probates can be very complicated okay now let me just give you one more twist because we're almost out of time let's say peop that married couple they set up their trust um and either didn't transfer their property into the trust or they transferred some of their property into the trust but not the rest in that case whatever is in the trust will not have to go through probate but anything that wasn't transferred into
25:24 the trust may have to go through probate okay so in that case you could have a situation where a trust needs to be administrated but also a probate needs to be done as well okay so the idea of the trust typically in a situation like this is to avoid probate altogether but that doesn't always happen for various reasons okay so you could have both of these things needing to happen with the same situation and again you can see there are a lot of areas where people need help so they may need help having a
26:00 will drawn up they they may need help um understanding how to trans or you know how to set all that stuff up who should be their executor etc etc also just because someone is appointed an Executor in a will doesn't mean that person knows anything about how to do the probate process so and and even if so they very they may not be a lawyer so they're gonna need a lawyer to help them in filing the
26:35 probate action in in in in handling various aspects of it okay so again lots and lots of opportunity for professionals to be involved in helping people uh who have to who have to probate an estate either as an executor or as an administrator okay so those are the basics um you know go go through them one more time estate trust probate those are the basic terms that we'll be dealing with um throughout these shows you'll just
27:10 end up with uh you know the legal stuff here or the copyright and all that kind of stuff if you have any questions at all feel free to drop a comment into either our social media sites or on you YouTube where this video will post in just a couple of minutes okay or feel free to reach out to me via email all of the social media and email will be listed in the show notes always happy to answer any questions if there's a particular topic that you would like to learn about as well let me know would would be happy to put together a show on
27:47 on on your specific topic so that's what we have this week on trusts and estate weekly uh do want to just take a moment and mention my other two shows tomorrow at uh 10 a uh sorry at 11 A.M Pacific Time 2 p.m eastern time is business lessons from the military we spend a half an hour talking about um currently we're working with Marine Corps War fighting Doctrine and how we can use that to develop a sound Doctrine for uh starting and operating our
28:22 businesses and then on Wednesday you is people making money that's at 12 30 PM Pacific Time 3 30 p.m eastern time and on on on that show it's it's a very broad-based show we talk to people who have interesting ways of making a living that they really enjoy and we talk about uh how to build your career how to uh how to build wealth how to deal with your finances and and so all of those topics get included there so I hope you will make plans to join me all three times each week or even just once a week
28:58 that would be terrific as well you can always go to our Eventbrite page just look for Kevin bamaline Eventbrite and you'll see the different uh shows that are there you can get a free ticket join me live ask me questions that would be terrific so thanks very much for tuning in today and look forward to seeing you tomorrow and next week have a great rest of your day and Marie darling you are still my bell all the best folks