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Wills Versus A Living Trust For Estate Planning - YouTube
Channel: Clint Coons Esq. | Real Estate Asset Protection
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what's up guys hey it's clint coons here and聽
in this video i wanted to break down what is聽聽
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the difference between a standard will and a聽
revocable living trust okay let's get started聽聽
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all right so here's the thing everyone knows聽
what a will is if you've had any loved one that's聽聽
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passed away odds are that they had a will but i聽
put 100 on that they had a will unless they didn't聽聽
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create any type of estate plan and they died聽
what's called intestate and then the government聽聽
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took took over and determined how the assets were聽
going to be distributed so what is it about these聽聽
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two estate planning tools that tends to cause聽
so much confusion when it comes to setting up an聽聽
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estate well i think a lot of it is with the legal聽
profession itself is that there's so much money聽聽
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wrapped up in the probate process that聽
most individuals are convinced or told聽聽
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or there's you know just marketing out there聽
that the will is the way to go for most people聽聽
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that unless you have a huge estate you shouldn't聽
consider any other options well see this is where聽聽
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the misconception lies and where the mistake is in聽
most people when it comes to planning their estate聽聽
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is that they buy into this now i know this from of聽
course firsthand experience being an attorney but聽聽
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my grandfather was an attorney and in his聽
practice it was comprised of estate planning聽聽
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which was predominantly will based okay and聽
then a few other little things as well and聽聽
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how did that work out for him well when it comes聽
to wills the things that make it so attractive聽聽
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for attorneys to set up a will versus a living聽
trust and i'll explain these as i go along聽聽
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right is that in will you have to go through聽
probate all right with a living trust there's聽聽
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no probate now what is probate well a lot of聽
people think that if i put everything down聽聽
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in a will where you know when i pass away i'm聽
going to leave everything to my wife and then聽聽
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she has a will and she says whenever she passes聽
away she's going to leave it to her two kids聽聽
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that if you have that set of instructions when聽
you pass on then you can just move your assets聽聽
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to those beneficiaries but in point of fact you聽
can't because when you pass away any assets that聽聽
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are titled in your individual name say it's聽
a house vehicle bank account stock account聽聽
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in order to transfer those assets to another part聽
person a beneficiary you have to open a probate聽聽
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because when you open the probate you receive聽
what are referred to as letters of testamentary聽聽
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which means it gives the executor of your聽
estate the power now to transfer assets to聽聽
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whoever the beneficiaries are under that will聽
and so when i open up a probate the court will聽聽
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give me letters of testamentary maybe i get聽
30 of them because my client happened to have聽聽
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a lot of titable assets and then when i contact a聽
financial institution they're going to say give us聽聽
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your letters of testamentary so we know that you聽
have the power by the court to move this asset now聽聽
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here's where the play comes in for attorneys聽
meaning the financial play when they set up a will聽聽
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every will must go through probate well who's聽
going to be handling that probate or it's going to聽聽
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be your executor okay so this is my executor that聽
is the person appointed under the will to handle聽聽
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the probate and it's going to be the attorney that聽
the executor hires to assist with that process聽聽
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this what does all this mean right聽
here money to both of these parties聽聽
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so when you open up a probate the attorney is聽
going to charge now depending on where you live聽聽
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uh probate fees can be a percentage of the estate聽
so in california can be as high as four percent聽聽
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of the gross value of the estate so if you have an聽
estate that's valued at five million dollars with聽聽
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three million dollars in debt on it what's four聽
percent of five million dollars it's two hundred聽聽
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thousand dollars so this is how much the attorney聽
can charge to probate the estate let's say that聽聽
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five million dollars with the three million聽
dollars in debt it's comprised of one house in聽聽
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one bank account two assets that's all you gotta聽
probate how long could that take i mean if you聽聽
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wanted didn't want to drag your feet less than six聽
months and you can charge 200 000 for that service聽聽
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because in california you're allowed to charge聽
a percentage now other states they have what are聽聽
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called i'm going to use some air quotes reasonable聽
attorneys fees now as an attorney i know that my聽聽
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fees are reasonable why because i see myself as聽
a reasonable person therefore whatever fee i set聽聽
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it's got to be reasonable but i guarantee you a聽
lot of sometimes there are people who say i don't聽聽
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think that's reasonable but it's not about you聽
it's about me so i can charge my reasonable fee to聽聽
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probate in the state this is what my grandfather聽
used to do he would charge his reasonable fee聽聽
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to handle the probate and so on average a聽
probate will generate for attorney minimum 6k聽聽
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average is probably going to be about 20 000 to聽
handle a probate so the idea here in drafting聽聽
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wills is we want to get as many people as we can聽
into this funnel because that's truly what it is聽聽
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probate is a marketing funnel for attorneys聽
they bring in a lot of people into the process聽聽
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and they can get creative with how they handle聽
their their estate plans or with the wills that聽聽
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they draft and what do i mean by that when they聽
draft your will they don't give you the original聽聽
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they tell you hey i'm going to hold on to your聽
original for safekeeping you just get a copy聽聽
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and you think oh i can't believe this you're聽
going to do this for free yeah no problem聽聽
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well why are they doing that so when you聽
pass away your family pulls out the will聽聽
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and they look at the will and guess聽
whose name is down here in the bottom聽聽
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well yeah the person that passed away but聽
also the law firm's name and address and聽聽
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phone number how to contact them so this聽
family member now will go to the attorney聽聽
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requesting the original the attorney now has that聽
client coming back in they pick up the probate聽聽
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and then they start making the money from there in聽
fact when my grandfather sold his practice he had聽聽
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all these wills he'd created people were still聽
alive in he fires a file cabinet he sold that聽聽
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to his associate attorney said hey there's 300聽
wills here we get a return on that of about 75聽聽
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percent and the average estate is 20k well we'll聽
do some numbers and we'll come up with what it's聽聽
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going to cost for you to buy this practice so聽
probate is a great way for attorneys to make money聽聽
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now i don't want you to think that probate is all聽
bad it's all about financials because there is聽聽
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one benefit to going through the probate process聽
and that is when you follow a will for probate聽聽
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it's public notice you're putting the world聽
on notice that this person has passed away聽聽
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and more importantly what you're putting the聽
world on notice about is your creditor so you聽聽
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publish notice in a newspaper you say john has聽
passed away a probate's been open in king county聽聽
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superior court and if you have any claims you need聽
to submit those claims if you don't do it within a聽聽
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period of time six months then you're forever聽
barred so one benefit of probate is it stops聽聽
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creditors from coming out of the woodwork two聽
years later and saying hey your parents owed me聽聽
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five hundred thousand dollars they never paid聽
here's the promissory note i just found out that聽聽
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they died and you owe me money well if you open聽
to probate they're barred and they cannot seek聽聽
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recovery there because all you do typically what聽
people do is they publish notice in an obscure聽聽
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trade journal and that's all they have to do and聽
they've met the statutory process for probate so聽聽
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that is one benefit but this cost factor is what聽
gets a lot of people now the other thing about聽聽
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probate is that it's a public record all right so聽
you've probably seen real estate investors uh tell聽聽
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you hey you know probate is a great way to buy聽
property what do they do they monitor people that聽聽
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have passed away through the probate filings they聽
find out that the beneficiaries don't live in that聽聽
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state then they start making offers to buy the聽
real estate to save them the time and hassle of聽聽
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having to deal with that remotely so that's that's聽
that probate strategy from an investor standpoint聽聽
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why is that because it's a public record so your聽
will what you own all that's available to the聽聽
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public when you pass away when you go through聽
the probate process now a living trust does not聽聽
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go through that process with a living trust when聽
you pass away hopefully what you've done is you've聽聽
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placed all your assets under the trust name so聽
all your assets are in the name of your trust聽聽
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that means you've changed title on them as long as聽
they're not in your individual name you don't have聽聽
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to go through probate but occasionally everyone聽
screws up and we leave something out of our trust聽聽
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that's why most living trust will have in the聽
estate plan is what's called a pour over will聽聽
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and a pour over will is simply a will that says聽
hey i forgot to transfer all my assets into the聽聽
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trust whatever you figure out that i screwed up聽
on you still got to go through the probate process聽聽
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but it's going to end up here for my overall聽
estate distribution so the main difference聽聽
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between a will and a living trust when it comes to聽
planning is that a will has to go through probate聽聽
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a living trust does not now keep in mind what聽
did i tell you one of the benefits of the聽聽
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will was is that it stops creditors so on the聽
living trust side since you don't open a probate聽聽
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you're not forestalling any creditors from聽
coming back two years later and demanding money聽聽
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so many times what we'll do is a strategy here is聽
that when we create a living trust for a client聽聽
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when someone's passed away we will open up a聽
small probate no assets really just open up a聽聽
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probate to publish notice to prevent any creditors聽
from coming back against the estate so that's uh聽聽
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from the probate side now what other benefits do聽
we have here with the will versus living trust聽聽
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it's in the how they're set up now one of the聽
things about the the wheel that you find many聽聽
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times is i call them simple right that we set up聽
the wheel so that they're going to all the assets聽聽
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will be distributed to this individual when i pass聽
away or to these kids going to be split evenly聽聽
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and there's not a lot of thought put into how we聽
want those assets to go to them and the problem聽聽
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with the simple strategy let's say that you know聽
it goes from you down to these three kids here聽聽
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well what happens if this child right here is in聽
the midst of a divorce from this person right here聽聽
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who's none too happy about this whole proceedings聽
and they're suing this child well all of a sudden聽聽
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they receive 800 000 what is this person聽
going to do they're going to go from that聽聽
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to that oh i'm much happier now look at all that聽
extra money that we just found so probate when you聽聽
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use a will and you go through the probate process聽
of a simple one you're just distributing the聽聽
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assets out right to your beneficiaries the issues聽
you could face is that hey maybe an ex-spouse is聽聽
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going to take part of that estate or maybe this聽
person right here is being sued because of some聽聽
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of their real estate investments now so attorneys聽
coming after them they're going to be able to聽聽
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go after and possibly seize those assets so the聽
simple will is not the preferred way of handling聽聽
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it with a living trust what you'll do typically is聽
you have more flexibility it's automatically built聽聽
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into it that when you're making your distributions聽
you can choose to set it up that when i pass聽聽
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my assets that come down to my kids here they're聽
going to come down in their own separate trusts聽聽
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i'm not going to give it to them outright i'm聽
going to move it into a trust for each of them聽聽
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and that's going to determine when they receive聽
the funds so i can put in their things like hey聽聽
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if you're involved in a divorce you're not聽
getting any money or if you're involved in a聽聽
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lawsuit you're not getting any money until that's聽
all settled so it protects the assets up here聽聽
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from whatever is happening down here until聽
this area is freed up and these people are聽聽
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no longer in that scenario you can keep聽
the assets in stasis whereas over here聽聽
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you can give the creditors access to those聽
potential assets if you make it a simple will聽聽
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now many attorneys will tell you hey whatever聽
you do in a living trust we can do in a will聽聽
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and they're 100 accurate when they tell you聽
that because you can actually set up a will聽聽
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that does something similar to what i just showed聽
you here so what you end up doing is you start聽聽
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with your will right here so i've got my will it聽
goes through probate so i send it through that big聽聽
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old grinder mix and give the attorney 75 000 and聽
i give the executor 25 000 which is a key point聽聽
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here whenever you're putting together an estate聽
plan i always do it in the living trust make sure聽聽
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you say hey my whoever serving as my trustee of聽
my living trust when i'm no longer here that's聽聽
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like the executor of the will you're only entitled聽
to so much compensation the last thing you want to聽聽
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do is get somebody in there that's administering聽
your estate and they think heck i'm going to drag聽聽
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this out for a long period of time because i'm聽
making money off this so the way you prevent聽聽
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someone from dragging it out is you limit how聽
much money they can make you can only collect two聽聽
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thousand dollars a year not to exceed six thousand聽
dollars for handling this estate write that in聽聽
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there or you can put in you can pay nothing you聽
do it out of love and affection for your family聽聽
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so the the issues that come down here uh聽
what it's going back to is that you can聽聽
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set up your will it goes through the probate聽
grinder comes through here and then when it聽聽
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when this gets all spit out then it gets spit out聽
into three separate truss that looks like this聽聽
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right here in fact it operates the exact same way聽
these are called testamentary trusts and so that聽聽
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is one of the biggest jokes that i find in the聽
industry that people utilize against unsuspecting聽聽
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individuals is they tell you oh yeah we got聽
your trust it's going to come through your will聽聽
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okay so what you're telling me is this you're聽
going to charge me to create my will you're going聽聽
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to charge me to probate my assets and they're聽
going to charge me to set up trust this is the聽聽
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ultimate triple play for someone because you're聽
going to get build build and build all along the聽聽
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way here yeah you can create the trust but it聽
has to go through the probate process first in聽聽
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order to get to the trust wouldn't it be simpler聽
to do it this way start with your living trust聽聽
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fund your living trust and then you can create聽
the sub trust out of this one trust and you're聽聽
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not going to get billed multiple times because all聽
this is baked in to the initial structure so when聽聽
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you're considering a living trust versus a will聽
the things you got to be looking at when you go聽聽
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with a will you're guaranteed there's going to聽
be internet involvement there's going to be the聽聽
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probate process that you have to go through and聽
depending on how you create your will you may have聽聽
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issues with your beneficiaries receiving their聽
assets you got to be careful about the executor聽聽
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on what they're going to do whereas the living聽
trust you can nail all these things down it's by聽聽
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default you say hey i don't i'm not going to go聽
through the probate process i'm going to keep it聽聽
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fully funded my trustee is going to administer聽
it they're not going to receive any funds for it聽聽
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and then it's going to be distributed my kids聽
in the following manner and yeah it's going to聽聽
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be held so if they're getting sued or involved聽
in a divorce they're not going to get any assets聽聽
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so that's just a high level of the differences聽
between these two assets or options to plan for聽聽
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your estate you're probably wondering again聽
when do we consider one versus the other聽聽
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here's what i tell people if you have no聽
titable assets or better yet no real estate okay聽聽
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no kids that you like um they that are set up聽
there then i would look at a will all right聽聽
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because you could have bank accounts and um and聽
if you want to distribute the assets out right you聽聽
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can do payable on death you can completely avoid聽
the probate process but if you have real estate聽聽
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if you have minor children okay great for a living聽
trust will control who how the minor children are聽聽
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going to receive money when you're no longer here聽
the person that takes care of them what type of聽聽
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funds you can build into their hey yeah i want uh聽
this couple to take our two kids but we realize聽聽
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they may need to put a little more into their聽
house so we'll give them a hundred thousand聽聽
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dollars to expand their house because i don't聽
want my kids sleeping in the closet um i've聽聽
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done all kinds of different things before with聽
this so if you have minor killed children you聽聽
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have real estate you want more control uh when聽
you've passed on to make sure the assets are聽聽
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preserved for for those individuals聽
definitely i would go with the living trust聽聽
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value does not matter to me聽
that's not a concern it's about聽聽
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do you want your wishes carried out and you聽
want to ensure that when you're no longer here聽聽
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that all of this stuff is being preserved for聽
your beneficiaries and you're going to want to聽聽
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go with the living trust guys i hope this made聽
some sense for you if you've been having those聽聽
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questions about the difference between a will聽
versus a living trust and there are many more聽聽
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differences as well that i didn't have time to go聽
into that are more nuanced but i can just tell you聽聽
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this is the preferred method when it comes to聽
planning for an estate all right guys take care
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bye
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