What Are The Disadvantages Of A Living Trust? - YouTube

There are 7 disadvantages to a living  trust. Depending. In this episode,  

I'm going to address the question what  are the disadvantages of a living trust.  

Get ready. This is going to entertain  you but also educate and inform you.

So, my name's Doug Andrew and I've actually helped  people optimize their financial assets, minimize  

taxes, empower their authentic wealth, and also  help them with their estate planning for 4 and a  

half decades. So, even though I'm not an attorney,  I actually have taught thousands of hours of  

advanced continuing education to estate planning  attorneys. And so, when I talk about living trusts  

and wills, many times these attorneys who have  been to law school to learn how to do this go,  

"Oh, my heavens. I didn't understand that."  Or "Doug, you seem to be able to simplify this  

better than most people." So, in this episode,  I'm going to go through what I feel are the seven  

big disadvantages of having a living trust.  And you may go those are disadvantages. Well,  

I'm going to twist it to show you what I mean by  this. So, get ready to gain insights, and if this  

intrigues you and you know somebody who's won  green, "Golly, should I set up a living trust?"  

Or "Should I write a will", recommend a  share this, subscribe and look at some  

of the other videos that I've done about  wills and trusts and what is probate. So,  

I'm going to highlight a few things. Get ready and  then I'm going to go through the 7 disadvantages  

of a living trust. So, you have probably heard  the statement "Where there's a will, there's a  

probate." So, what is probate? Probate is the  process of when somebody passes away, taking their  

properties --what they own and distributing those  assets to the rightful heirs. But it's done under  

the jurisdiction of a court. That's called  probate. When you have a will, if you want the  

will followed, you must do it through a probate.  So, where there's a will, there's a probate. Now,  

probate isn't all bad. But most people would like  to avoid it because it's very costly and timely.  

Basically, when you probate a will, you have to  cover seven other parties before your heirs get  

their share. So, what has to happen is under the  jurisdiction of a court, you have to make sure  

all federal taxes are satisfied from the deceased  person's estate then state taxes than local taxes.  

Then the court fees have to be taken care of. And  then you have the attorney's fees, you have the  

executor fees. You actually get down to the actual  administrator and then you have to satisfy the  

creditors. And then finally, after all of those  have been satisfied, (and it could take 2 or three  

years to make sure that all happens) the heirs  finally get what's left over. A lot of people want  

to avoid that. They want to avoid probate so they  set up a living trust. So, the first disadvantage  

of a living trust is if you want to go through  probate, that's a disadvantage to have a living  

trust because you won't go through probate.  That's why people set up living trust to avoid  

probate. Having said that, there's actually an  advantage because when you probate an estate,  

you have to file a legal notice. And any creditors  have like six months to come forward to make claim  

on the estate. If they don't do that within 6  months, they can never make a claim against the  

estate again. But I've seen many dentists doctors  professionals who do not probate their estate.  

And 15 years down the road, somebody  comes out of the woodwork and says, "Oh,  

your deceased father owed me money." And they can  sue the estate. And if you didn't file a probate,  

you have to defend yourself. If you file  a probate, they have 6 months to come to  

make claims. Other than, that it's like, "No.  Here's the probate. You had your chance. Bye!"  

So, a probate actually is an advantage. And so, a  lot of people will keep a small asset like an old  

tractor or an old motorcycle that's worthless out  of the estate and probate it. A disadvantage of a  

living trust is it avoids probate. If you want to  go through probate then I wouldn't have a living  

trust. Number 2, when we talk about a living  trust, most people do it because they want to  

keep things private. If you want to have all your  assets or your family's assets to be aware to make  

it public information then don't have a living  trust because that's a disadvantage. Because  

when you have a will, it's public information.  The court can say what all your assets are and  

everything. So, the second disadvantage of a  living trust is you do not get to have the public  

see all the things that you owned. But if you want  to keep it private then you have a living trust.  

Okay, what's the third disadvantage? Well, if  you want to destroy the love of your family,  

then I would recommend you don't have a living  trust. Because a living trust seems to preserve  

the love of the family better because they're not  fighting over who gets what. Because a trust is  

very clear on who gets what and it's managed by  a trustee. So, a big disadvantage if you want to  

destroy the love of your family and see them fight  among each other after you pass away, I wouldn't  

set up a living trust. So, that would be a  disadvantage. If you want to preserve the love of  

your family, I guess you get a living trust. And  that's what it does. What about liability? See,  

when people set up a living trust, they usually  cut their liability exposure at least in half. So,  

a lot of times people will set up an a/b trust or  a husband's trust and a wife's trust. In my case,  

I have all of my business assets in my trust. All  of the domestic assets the house and so forth and  

my wife's trust. So, if somebody gets hurt or  there's negligence or what have you... Because  

I've had many clients. I had young women, leaders  in church organizations. I've had scout masters  

who have been sued because they didn't file a  tour permit and they're sued for a million bucks.  

They can come after 100% of what you own in joint  tenancy. See, joint tenancy avoids probate. If  

you die, everything you have in joint tenancy,  there's no probate. It goes to that person. But  

what happens is you both own it all. So, if you  are negligent, if somebody slips on your porch and  

the house is in your name under joint tenancy,  they can sue you for the entire value of the  

house because you own all of the house and  your spouse owns all of the house. And so,  

people set up trust to cut it in half so  that only half of the house is exposed to  

liability lawsuits and so forth in this who  happy society. And so, it cuts the liability  

in half. They can only sue you or wipe you out  for half of your assets because you split it up.  

So, what's a disadvantage of a living trust?  --Is if you want to have full liability exposure,  

don't set up a living trust. People go, "I  thought this video was about disadvantages?" Well,  

I'm telling you the disadvantages. But frankly,  most people want the advantages of a trust. So,  

I'm just reversing it here if you can't tell. So,  what's another disadvantage of a living trust?  

Well, if you are one that has a lot of assets and  when you die you just love the government coming  

in and taxing you on all of that. At different  times, the estate tax is due. This is not income  

tax. This is a state tax. This is where 9 months  after the death of both the husband and the wife,  

you have to file (I think it's called a 706 form)  with the IRS. And it used to be back in the late  

1990's, you had to do that and any net worth  over $600,000 started out at 37% estate tax  

and it topped out at 55%. Then the exclusion went  up to a million bucks. And now, as I'm recording  

this episode, it's like 10 or 11 million. But  they can do away with that. Tax revenuers,  

they love to tax people 30, 40, 55 percent that  are 6 feet under because they can't complain.  

The heirs can't do anything about it. So, tax  revenuers love to get tax revenue with estate tax.  

A disadvantage to a living trust is it's actually  will cause you to pay less in a state tax.  

People go, "Well, isn't that what you would  want to save unnecessary estate tax?" Well,  

yeah but if you love to give as much as you can  to the government, that would be a disadvantage.  

What it does is it takes the estate tax liability  in half. If the estate tax limit is 1 million,  

5 million, it doubles to 10 million or 20  million when you have a trust because you  

divide up the estate into 2. What's another  disadvantage of a living trust? If you detest your  

children you want to disinherit them, don't set  up a living trust. Because this is what happens:  

Usually with a husband and wife, one of them will  pass away first. And the other one gets lonely.  

And so, eventually they remarry. This has happened  many, many times. And I can think of a client  

right now who they thought they were going to ride  off into the sunset of retirement for 20-25 years.  

And within 90 days after the wife retired, she  died of a massive heart attack. He was so lonely  

and so he got remarried and she said, "Prove to  me your love. Put everything in my name." And he  

wanted to prove that and so he put everything  in his trust in her name and he was very angry  

because I was the successor trustee on his wife's  trust and he begged me to do it. Like, "I can't  

do that. The trust is now set in concrete. That  is your previous wife's trust." He was very mad  

that I wouldn't do that. Well, he was grateful  because as soon as she got everything in her name,  

she went bye-bye! And she took off with all of  his assets. He was destitute except he had his  

previous wife's trust that he could draw from.  And he has thanked me many times for not giving  

in. Because frankly, I could have been sued by the  3 children. Now, this is what normally happens,  

if you don't have a living trust and that  happens. And let's say your mother passes away,  

your dad remarries and then he passes away, guess  who gets all the assets? Usually all of the new  

wife's kids. And your kids are disinherited.  So, the disadvantage to a living trust is  

if you want to disinherit your kids and  have all your assets go to somebody else's  

kids, don't set up a living trust, okay? The last  big disadvantage is if you own life insurance,  

when you die, life insurance is one of the very  few assets that is not probated. It's cut and  

dried. Whoever you name as beneficiary gets the  money tax-free. And that money is not subject to  

the claims of the creditors of the deceased. So,  if all you own is life insurance, don't waste your  

time with a living trust. It's a disadvantage to  have a living trust. But most people have other  

assets. If you haven't understood the question  that I'm answering in this episode is "What are  

the disadvantages of a trust?" Hello? Hopefully,  you realize the advantages of a living trust. It  

avoids probate, it keeps things private instead of  public. Okay, it settles the same one day. There's  

no probate. You avoid unnecessary estate tax.  It preserves the love of the family it avoids  

the liability exposure and losing everything  you've owned. The second spouse syndrome and  

disinheriting your kids and also it includes  everything. And if you have life insurance,  

it's not going to be probated anyway. So, I would  probably surmise that you would prefer to have a  

living trust. Because any disadvantages are far  outweighed by the advantages of a living trust.  

So, I've helped many, many people do that. And if  you'd like to learn more be sure and click on this  

episode. Search my channel because I address  this question what are the advantages of a  

living trust and what's a probate and so forth.  But I'll tell you what, I mentioned life insurance  

avoids probate. If you have life insurance,  you don't even have to worry about a trust.  

And so, my favorite vehicle for estate planning is  what I call The Laser Fund. It's a maximum-funded,  

tax-advantaged life insurance contract. And most  people I consult, they leave behind when they die  

1 million, 5 million, 10 million dollars totally  tax-free. Whether they have a will or a trust or  

not, doesn't make any difference because  it avoids probate. It's tax-free. And the  

creditors of the deceased cannot make claim on  this unless they pledged it as collateral. It is  

one very powerful tool to maximize what you leave  behind. If you'd like to learn more about this,  

I'll tell you what, this is my 11th book. I will  pay for this book. It retails for $20. This isn't  

about selling you a book. I will gift this to you  free if you go to laserfund.com, LASERfund.com and  

contribute a nominal amount towards the shipping  and handling. I'll cover the rest of that cost  

and then I'll pay for the book. It's 300 pages of  charts, graphs, and explanations. It's actually  

2 books in 1. The other book has 62 actual client  stories about how this is used for estate planning  

and you'll gain insights into opportunities and  questions like this one in this episode that  

will allow you to go, "Wow! I didn't know what I  didn't know until I learned something." And now,  

you will want something that you didn't  know you wanted until you got educated.