馃攳
Will vs. Trust: Which is Better and Why? - YouTube
Channel: Toby Mathis Esq. | Tax & Asset Protection
[0]
- Hi, I'm Michael Bowman,
[1]
one of the partners at
Anderson Business Advisors.
[3]
Since the pandemic, we've
been really inundated
[5]
with questions about estate planning.
[8]
People are starting to realize that,
[9]
hey, you know what, maybe
I'm not gonna live forever
[12]
and I need to get a plan in place.
[13]
One of the questions that
really comes up a lot
[16]
when we start diving
into estate planning is,
[18]
do I need a will or a trust?
[20]
Which is better, and which one do I need?
[22]
And so, you know what,
let's go ahead and dive
[23]
into the information and let's find out.
[25]
The first thing that I run into
[27]
when people get into estate planning,
[28]
when they start talking
about estate planning,
[30]
is they're finally realizing
[31]
that they put this on Someday Island,
[34]
and basically it's now
it's time to address it.
[38]
It's kind of been a interest of mine
[40]
or kind of a question of,
[41]
why do people keep putting
this on Someday Island,
[43]
until either, A, it's
too late, or B, you know,
[48]
something tragic happens in their life?
[50]
One of the, you know, things
I've found is people just think
[53]
there's plenty of time.
[54]
The pandemic made us realize that, hey,
[56]
there is finality to life,
[58]
and so that excuse isn't
really applying anymore,
[62]
and people are actually
starting to take hold of it
[64]
and say, hey, listen, you know,
[65]
life is finite and I need to address this.
[68]
The other answer that I get at times is,
[71]
hey, it's really uncomfortable
to think about me passing,
[74]
me not being there for my children.
[77]
You know, what's gonna happen, you know,
[79]
and how are my assets gonna be handled?
[81]
It's just very uncomfortable,
[83]
and then when they start
thinking of their assets,
[84]
they think, wow, this is
gonna get complicated fast.
[87]
It's kind of fun to work with
clients and show them that,
[91]
hey, you know what?
[92]
It might be a little
complicated on the surface,
[94]
but once we start looking at
the tools that we can use,
[97]
it's really, there's
tools that are designed
[99]
to make it less complicated.
[101]
And so it's less complicated for you,
[103]
but the important part
is it's less complicated
[105]
for your heirs, too,
[106]
and that's something
that's really important.
[108]
And that gives a lot of my
clients a lot of peace of mind,
[110]
knowing that they have
everything set up in a way
[113]
that's efficient and also takes
a lot of the hassle out of,
[117]
you know, the worry,
the hassle, the worry,
[119]
and a lot of the work out for their heirs.
[123]
One of the other things
[125]
that when you start looking
at the process of courts,
[127]
it's kind of becoming intimidating.
[130]
One of the things I'm gonna
share with you guys today
[132]
is that we don't need
to go through probate.
[134]
The probate court system
is set up for those
[137]
who don't have a plan
or have a simple will.
[140]
And, you know, again,
[142]
when we start avoiding
that probate process,
[144]
the high attorney costs go out the window.
[146]
In fact, what's really, really neat
[148]
is a lot of times with my clients,
[149]
what I'll do is I'll show
them that, hey you know what?
[152]
You might be able to save money up front
[154]
with a simple will, but in
the end, in the long run,
[158]
after what probate costs,
[160]
then you will actually pay more
[162]
using a simple wheel than a trust.
[165]
Trusts also have the reputation
of being very expensive.
[168]
When we look at trusts,
[169]
they used to be about
10 to 12,000 dollars.
[171]
And now, you know, they're
down around 2,500, 3,500,
[175]
depending on the type
of trust that you need,
[177]
and so that the costs have come way down.
[179]
Why is estate planning important?
[181]
First of all, it's important
[182]
because we need to design
the plan ourselves,
[186]
and we need to make sure
that it gets implemented.
[188]
The one thing that I talk
to my clients about is,
[192]
hey, you've worked really hard
[194]
and have acquired a lot of assets.
[195]
You've sacrificed a lot for those assets
[198]
or sacrificed for a better future.
[201]
Don't you want to control it?
[202]
Don't you want to be able to pass it down
[204]
to your heirs and then have it come down
[206]
to who you want and when you
want it to come out to them?
[210]
The other reason why you
really want to make sure
[212]
you have a proper plan in
place is the simple fact
[215]
that if you don't have a plan,
[217]
then the state that
comes in and decides it.
[220]
The state has a bunch of rules
[221]
regarding people who, we
call it die intestate.
[225]
And so, you know, the
perception problem that we have
[228]
also is I don't have anything,
[229]
I don't have enough to actually
warrant a trust or a will.
[236]
You know, people's perception
of what they own is,
[240]
oftentimes when I speak to a client
[242]
is different from when we start
getting into their assets.
[245]
Because we start looking at it.
[246]
They got their home.
[247]
In the last few years,
[248]
we've seen an incredible amount of equity
[250]
built in homes and real estate.
[252]
They've got their cars,
[255]
the collections and the family heirlooms.
[258]
Now, this is one of the things
that I have to point out.
[261]
While the family heirlooms
and the collections
[264]
may not be, have a ton of
value or perceived value,
[269]
they've got a lot of sentimental value,
[271]
and this is really important.
[272]
It's really important
to plan for these items.
[275]
I've seen many families destroyed
[277]
and the relationships
destroyed within a family
[279]
over simple collections of figurines
[282]
or of, you know, things
that have perceived value.
[286]
And it's really disheartening to see.
[288]
You know, in particular,
one of the situations,
[290]
some sisters who, you know,
they've been best of friends
[293]
for decades and all of a sudden,
[295]
that family relationship got pulled apart
[297]
by a physical item.
[299]
The other thing that the real estate,
[301]
like I mentioned, in the
last few years, you know,
[304]
property values have really increased.
[306]
And so we really have to make sure
[307]
that we design a plan
around our real estate,
[310]
what happens to the real
estate, how it's dealt with,
[314]
and then we want to make sure
[315]
that we capture any of
the value that we can.
[319]
And that, again, it goes
to benefit people's lives
[321]
as opposed to pulling away from them.
[324]
Our checking accounts,
our savings accounts,
[326]
life insurance, our retirement assets,
[329]
we still need to plan for these,
[331]
even though there's a
designated beneficiary.
[334]
Because sometimes we
have family situations
[336]
that we don't want the person
getting the money right away
[338]
and we need to design a plan
[339]
that's actually gonna take care of that.
[341]
And then just simple business interests.
[343]
A lot of my clients are business owners,
[346]
and they've built
businesses over the years.
[348]
We need to make sure
[349]
that there's a succession
plan put in place.
[351]
And so all of these, when
you start thinking about it,
[353]
wow, maybe I do have a lot of assets.
[355]
And so we need to make
a proper plan for those
[357]
because without it, the
state's gonna decide,
[360]
and it's gonna go through probate.
[362]
And let me just kind of
go through what probate is
[364]
really quickly, because I
think a lot of people wonder,
[367]
hey, well, I keep hearing probate,
[368]
and it's always in a bad connotation.
[370]
A probate, the probate process
is basically a court process
[373]
set out to basically
get the creditors paid,
[377]
and then whatever assets
you have left over,
[379]
a judge is gonna decide
where there that's gonna go,
[382]
where it's gonna be split, or
a will's gonna decide that.
[384]
But the probate process is
basically a proving process,
[388]
getting creditors paid, and
then whatever's instrument
[391]
and needs to be proven
in the probate process.
[394]
The problem with the probate process,
[396]
as opposed to things
that are kept private,
[398]
and that's a lot of my clients,
[399]
they like to keep their wealth private,
[401]
this all gets exposed because
it's a court proceeding,
[403]
it's a public process.
[405]
Because the court is
actually deciding things,
[408]
and so it needs to be held in the record.
[410]
And so those are attainable
[412]
by people who do a little snooping.
[414]
The other problem with the probate process
[416]
is the length of time that it's taken.
[418]
Before the pandemic,
it was about 18 months
[420]
was the national average.
[422]
Since the pandemic, I
believe that's crept up
[425]
to about more like 20 months to 24 months.
[428]
The problem with that is
while the probate's going on,
[431]
the family has to wait for those assets,
[433]
and foreclosures or repossessions,
things like that happen.
[437]
Tying in the real estate
[438]
that people have acquired over the years,
[440]
if properties are held
in more than one state,
[442]
you have to open a probate
in each of those states.
[445]
You think one attorney's expensive.
[447]
Get a couple of us in the room,
[448]
it gets really expensive fast,
[450]
and thousands of dollars on
legal fees will be spent.
[452]
All right, let's get a breakdown
of a will versus a trust.
[456]
Basically, a will is a simple instrument.
[459]
800 to a 1,000 dollars is
what they're gonna charge you.
[462]
We don't even do wills anymore
because it's too simple.
[468]
It, one, it doesn't control enough.
[472]
We want to be able to control
things from the grave.
[475]
Basically, a simple
will is just gonna go in
[477]
and direct who gets what,
[478]
and the court's gonna
say, yep, that works,
[481]
and then makes the distribution
[482]
or has the executor
making the distribution.
[486]
Like I said before, a
will has to be proven,
[488]
and so therefore it has to go
through the probate system,
[490]
and the probate system, again,
[492]
costs thousands of dollars of fees.
[494]
Basically, what we also
want to look at is a trust.
[497]
On a trust, the trust is basically,
[500]
just think of it, it's
a living trust you hear,
[502]
while it lives on.
[503]
While you may pass away,
your trust lives on.
[506]
A trust is gonna name the person
[508]
to control your estate and how it works.
[511]
It was so fun to actually
learn about trusts
[515]
almost 20-something years ago.
[517]
Well, that makes me sound old,
[518]
but when you look at a
trust, it's this vehicle,
[522]
in the eyes of the law,
it's a separate being
[524]
from the actual individual.
[526]
but inside the trust document,
[528]
it's gonna name the
individuals who are in control.
[531]
Because it lives on, we don't,
[533]
it doesn't need to go through probate
[535]
because it's still living.
[537]
The trust is gonna direct when
things get distributed out,
[542]
how they get to distributed out,
[543]
and who they get distributed out to.
[546]
And so since there's
not attorneys involved,
[548]
since there's not a big
probate process involved,
[551]
it saves thousands of
dollars in legal fees.
[553]
So you're already seeing
where I'm going with this.
[556]
Back in the seventies,
eighties and nineties,
[558]
I believe that, hey, wills
had a place in the system.
[564]
Nowadays, with the costs coming down,
[566]
with the ability to control more,
[568]
and keeping attorneys and
the public out of our lives,
[572]
we go towards a living trust.
[574]
Now, to break down, when
people hear the word trust,
[579]
I feel like a wall comes up.
[580]
I feel like a barrier comes up,
[581]
because when they think of trust,
[583]
they think of the
Rockefellers, the Kennedys,
[585]
and it's not for them.
[587]
Well, there's two types of trusts.
[588]
There's the irrevocable trust
and the revocable trust.
[591]
A lot of the trusts you hear about,
[593]
they're irrevocable trusts.
[594]
And the living trust is a revocable trust,
[598]
meaning there's a lot of flexibility.
[599]
We can put assets in, we
can take 'em back out.
[602]
If things change or
circumstances change in life,
[605]
we can go ahead and make
those changes right away.
[608]
We can, that document,
that trust and the rules
[611]
will evolve over time until you pass away,
[614]
and then it becomes locked in.
[615]
The other thing that confuses people
[617]
or maybe intimidates people
[618]
is the different parties who are trust.
[621]
When you put an asset into the trust,
[623]
you're called the grantor.
[624]
When you're controlling the trust,
[626]
you're called the trustee.
[627]
And then when you're
benefiting from the trust,
[630]
you are the beneficiary.
[631]
That should be the simplest one.
[633]
When you pass, you will list
inside the trust document
[636]
a successor trustee, and
they'll take control.
[639]
You're still in control through them,
[641]
because you've written down a
bunch of rules to the trust.
[643]
Well, who gets what, when they get it,
[646]
and then you deal with any circumstances
[649]
on the behalf of the beneficiaries.
[652]
And it's really neat, because
why I like a trust so much
[655]
as opposed to a simple will
is the level of control
[658]
you can have with a living trust.
[661]
Something that's really
important to me, I'm a father.
[663]
My wife and I, we have two kids.
[665]
We have a eight-month-old
and we have a four-year-old.
[668]
Very different type of individuals.
[671]
We're really not sure how my daughter,
[673]
who's eight months, how she's
gonna, you know, turn out.
[677]
One thing that is
congruent with both my son
[679]
and my daughter, or son and
daughter, is the simple fact
[683]
that we don't want them to get the money
[684]
right at eight age 18.
[686]
We've seen too many problems occur
[689]
when a child gets the money at age of 18.
[692]
You hear a lot of times
about the drug problems,
[694]
things like that, that they're
being taken advantage of.
[696]
I really think of it from
a motivation to go ahead
[700]
and have them achieve their
own desires and goals.
[704]
You know, if my, you know,
maybe my son or my daughter
[706]
gets the money all at 18,
[708]
maybe they won't be so inclined to achieve
[711]
their own purpose or their own goals,
[714]
achievements, things like that.
[716]
And so the way we have our trust set up
[718]
is basically we have a
periodic distribution schedule.
[721]
This is probably the most
popular among my clients,
[725]
is they want the money
distributed over time.
[728]
In the way that you're looking at it here,
[730]
10% at age 25.
[731]
Why I like that so much is that generally
[734]
they will have to have
gone through college.
[736]
Maybe that 10% is gonna be
used to pay off some debt
[740]
or start their investing.
[741]
They can invest with
the 10% and build on it.
[745]
It's not all the money in the world.
[746]
It's not all the money in the trust,
[748]
and so it still motivates them to go ahead
[750]
and achieve their own goals and desires
[752]
and their achievements.
[753]
And so it is really something
that's important to me.
[756]
I've gone to school with many of kids
[757]
who had a trust fund,
and the problem with that
[760]
was they thought it was
all the money in the world.
[762]
Well, decades later, they
went through all that money
[765]
in the world, and now they
have no real life skills.
[768]
They have, they don't have
professions, things like that,
[770]
and I've seen it be a real
detriment to children.
[774]
The next distribution comes out at 30,
[776]
and then 35 and 40.
[777]
If you notice, it's a back-loaded
distribution schedule.
[780]
The reason why, in our
case is we really, again,
[783]
want them to achieve
their own goals, desires.
[786]
It also acts as a prenup,
[787]
because while they might take inheritance
[789]
and split it with their spouse,
[791]
a divorce, you know, that money,
[795]
whatever's been distributed
out and co-mingled
[796]
could be subject to the
future ex spouse's claims.
[800]
And so what we want to
do is want to make sure
[801]
that that inheritance is protected,
[804]
and so by back-loading it,
[807]
they can get their lives
in order and make sure
[808]
that congruity in life is
something that they can achieve,
[813]
and that we're not having to
split one half of everything
[816]
that we've worked so hard
for with a future ex spouse
[819]
of one of our children.
[820]
Like I mentioned, as our
children's life evolves,
[824]
then they can go ahead and
we can change the trust.
[827]
I can alter all these ages
[829]
the distributions get made out at,
[830]
and that's something that's
really important to me,
[832]
because maybe I've got a very, you know,
[834]
one of my children
become very financially,
[836]
you know, great financial stewards.
[838]
The great thing about that
is maybe I wanna go ahead
[840]
and make distributions
out to them earlier.
[843]
I can do that.
[843]
And the neat thing about trusts
[845]
is you can love your kids the same,
[846]
but treat them differently.
[847]
And so if there's problems
that I need to address,
[849]
I can go ahead and do that
inside the trust document
[851]
up until I pass, and then
it becomes locked in.
[854]
For special needs beneficiaries,
[856]
we can go ahead and create provisions
[857]
that protect their benefits.
[859]
And then also one of the
things that has been something
[862]
that has been really on my client's minds
[866]
is protecting the
beneficiaries from themselves.
[869]
And what I mean by that is making sure
[871]
that the money is not used for drugs.
[873]
We've had problems with, you know,
[876]
certain clients who have
kids that have drug problems,
[879]
and we've seen deaths occur
because they got the inheritance
[882]
and spent it on drugs and overdosed.
[884]
You know, we can put provisions in there
[886]
to make sure that they are clean,
[888]
and if they are having
problems with drugs,
[890]
and the money can be used to go ahead
[892]
and get them into real
rehabilitation training,
[895]
and kind of the best of both worlds.
[897]
If they test clean, they get the money.
[899]
If the test dirty, then
they get into rehab
[901]
and hopefully change their lives a bit.
[905]
The other thing we can do
is we can have a provision
[908]
in there that can set the money aside
[910]
into a separate property trust
[911]
and protect it from divorces,
creditors, things like that.
[914]
And so there's a lot of flexibility,
[916]
a lot of benefits to using a trust.
[917]
That's why we don't go over
and use a will anymore.
[920]
That's why we've evolved
to society, you know,
[922]
using wills now into trusts,
[925]
and it's simply for the control.
[927]
And the control is something
that I really want to make sure
[930]
that whatever my wife and I put together,
[933]
that it benefits our children
[934]
as opposed to take away from them.
[936]
Now, when I talk about a trust,
[938]
I feel a little bit like
we're not addressing
[941]
the entire problem,
because a living trust,
[942]
while it can control your estate,
[944]
there are other documents
that you must have,
[947]
and this is overlooked
by a lot of attorneys.
[950]
They might create the
trust, but then they forget
[952]
about the other things in
life that we need to deal with
[955]
when we're talking about an estate.
[956]
The first thing we need to do
[957]
is we need to have a backup provision.
[959]
What we use in our case,
we use a pour over will.
[962]
Basically, we understand
our clients' lives get busy,
[965]
and they might set up the trust,
[966]
fund the trust by putting
assets in the trust,
[968]
signing the trust like I mentioned before,
[970]
but then when they acquire new assets,
[972]
they forget to go ahead
and put 'em in the trust.
[974]
Well, what we do is, if that happens,
[977]
what we have in there is a pour over will.
[979]
And the pour over will's gonna go ahead
[980]
and take those assets,
put 'em into the trust,
[982]
distribute according to
the rules of the trust.
[984]
The other things that are very important,
[985]
we've seen this in COVID,
[987]
is we need medical care power of attorneys
[988]
and financial power of attorneys.
[991]
We've got calls by family members,
[993]
and their other family members
[994]
were in the hospital incapacitated,
[997]
and they needed to be able to control
[999]
their lives with medically
and also financially.
[1002]
And once you're
incapacitated, it's too late.
[1004]
You have to have a court order.
[1006]
So we need medical care
power of attorneys,
[1007]
financial power of attorneys.
[1009]
Position directives.
[1010]
Do we wanna be kept pain-free,
artificial hydration,
[1013]
nourishment, things like that.
[1015]
Very important to make those decisions,
[1016]
called a living will.
[1018]
This needs to be part of your estate plan.
[1020]
And then if you have children
underneath the age of 18,
[1022]
you need to have a
declaration of guardian,
[1024]
making sure that you're choosing those
[1025]
who are gonna be taking
care of your children.
[1028]
Some of your family members
want to take care of them.
[1030]
Some of them don't.
[1031]
Some of them fight.
[1032]
At a time where they
should be coming together,
[1034]
they're fighting to who's, you know,
[1036]
angling to be able to
take care of the kids.
[1038]
Everyone thinks they're the
best to take care of them,
[1040]
and so fights do incur at a time, again,
[1042]
where families should be coming
together for the children,
[1045]
they're pulling apart.
[1046]
The other thing, like I
mentioned, is the heirlooms.
[1048]
We need to have a document
[1049]
that actually states and sets forth
[1052]
who's gonna get the
heirloom or the collection
[1055]
so that there's no
family fighting involved.
[1057]
Again, grieving and greed goes together.
[1059]
There other thing we
can do for our families
[1061]
is the simple fact that we
can go ahead and outline
[1062]
whatever ceremony, whatever
memorial instructions we have,
[1066]
we can to go in and outline
[1068]
and take that burden off of our families.
[1071]
So that is very, very important.
[1072]
All of these need to
be in your estate plan,
[1076]
and make sure that it's complete.
[1078]
Not just a living trust,
[1079]
but it needs the supporting documents.
[1081]
Now when changes in life go
on, so we need to make changes.
[1085]
We need to go ahead and update
[1086]
our medical care power of attorneys.
[1088]
If we've adopted children
or had new births,
[1090]
we need to go ahead and
address those provisions,
[1092]
make sure they're included.
[1093]
Now, if you don't do that, we
do have catchall provisions
[1097]
that will go ahead and address it.
[1099]
But what we do is, you know,
every three to five years,
[1101]
take a look at changes in your life
[1102]
and go ahead and make
updates to your estate plan.
[1106]
What to do if you already
have an estate plan?
[1108]
I would go ahead and pull it out
[1110]
and take a look at everything I have here.
[1111]
Your beneficiary designations,
[1112]
your power of attorneys,
schedule of gifts,
[1115]
living wills, and your final instructions.
[1117]
Make sure that it's kept up to date.
[1120]
Again, I would go ahead and do
it every three to five years.
[1123]
You really don't need an
attorney involved in this.
[1126]
It's all of your personal decisions,
[1128]
and so you can do this, and again,
[1130]
just make sure that the
documents are kept up to date.
[1132]
If you move states, we need to go
[1134]
and update your medical
care power of attorneys
[1136]
and your financial power of attorneys.
[1138]
And so those are the things
I wanted to cover today.
[1140]
Again, wills used to be good,
[1142]
and now we want to use a living trust.
[1144]
If you have any questions,
[1146]
please look at the in the comments below,
[1148]
and you can go ahead and click a link
[1150]
and get a consultation
scheduled with our firm.
[1152]
We'd love to speak to you
about your estate planning,
[1154]
and I wish you guys the best of success.
[1155]
(uplifting music)
Most Recent Videos:
You can go back to the homepage right here: Homepage