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Trusts vs. Wills: The Ultimate Guide to Protecting Your Legacy · Earn Your Leisure

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Speaker 2: So you talked about a state plan with trust and will,
1:54
Speaker 2: So can you explain that a lot a little bit
1:57
Speaker 2: because sometimes people get confused what's the difference between the
2:00
Speaker 2: trust and the will? And do you even need a
2:03
Speaker 2: will or what's it trust? That's another thing that has
2:06
Speaker 2: been very popularized on social media, talk about like can
2:12
Speaker 2: you just kind of break down the will and trust situation?
2:15
Speaker 3: Yeah, you do that, and now I'll talk about difference
2:16
Speaker 3: between you revocable and irrevocable. Trust is a testandpoint Yeah
2:19
Speaker 3: yeah cool.
2:20
Speaker 4: So from a will standpoint at the end of the day,
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Speaker 4: you simply want to dictate who is going to get what,
2:25
Speaker 4: who's entitled to whatever you.
2:27
Speaker 5: Want to leave behind when you're not all here. Right.
2:29
Speaker 4: The reason why people like the idea of a trust
2:31
Speaker 4: is because you can have a little more control to
2:33
Speaker 4: determine when and how those assets get disseminated once you're
2:37
Speaker 4: gone right, Because obviously, if you have a will right
2:39
Speaker 4: once you once you're gone right, it pretty much dies
2:42
Speaker 4: with you. Right, But that could be good in certain situations.
2:44
Speaker 4: I don't think everybody necessarily needs a trust, but if
2:47
Speaker 4: you want to ensure that your heirs, maybe at eighteen,
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Speaker 4: my son has to do this thing before he gets,
2:52
Speaker 4: you know, fifteen thousand dollars for a down payment on
2:54
Speaker 4: the house, or whatever the case may be, the trust
2:56
Speaker 4: can be established in a way to control how that
2:59
Speaker 4: much needs disseminated, right, Especially if you have my children
3:03
Speaker 4: that are miners and things of that nature, you want
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Speaker 4: to really make sure that they get what they're supposed
3:06
Speaker 4: to get when they are supposed to get it right.
3:09
Speaker 4: So that's the kind of the fundamental difference between trust
3:12
Speaker 4: and wills. I think what happens is people like the
3:15
Speaker 4: idea of a trust because of the control piece, but
3:18
Speaker 4: at the same token, like you don't want to over
3:21
Speaker 4: complicate your finances, right, because sometimes with a trust like
3:23
Speaker 4: the upkeep right, you know, if you do too much
3:26
Speaker 4: like it can be a little bit overwharman. Like I
3:27
Speaker 4: know my mother in law before she met me, she
3:29
Speaker 4: had a very complicated trust and just decided not to
3:32
Speaker 4: do it anymore because it was just too much. Right,
3:34
Speaker 4: So making sure that it makes sense relative to your situation,
3:38
Speaker 4: what is it that you actually want to achieve, And
3:39
Speaker 4: then I will determine if I just need a basic
3:41
Speaker 4: will or do I need a trust to make sure
3:43
Speaker 4: that I can pass all my assets in a way
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Speaker 4: that's a little bit more strategic relative to who I'm
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Speaker 4: passing them on to.
3:49
Speaker 6: Yeah, And I think the difference between a revocable trust
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Speaker 6: and the irrevocable trust is huge, and I don't think
3:54
Speaker 6: enough people know the difference. So a revocable living trust,
3:57
Speaker 6: which I think everybody should have at some point in
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Speaker 6: their life, is like a safe that you have the
4:02
Speaker 6: combination too. You can put assets in there, you can
4:04
Speaker 6: take assets out. It's you can change. You can change
4:07
Speaker 6: the assets in there, you can change the beneficiaries it
4:09
Speaker 6: has a lot of flexibility, and the purpose of a
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Speaker 6: vocable living trust is so that when you pass away,
4:14
Speaker 6: none of your assets go to probate court. Because we
4:17
Speaker 6: saw with Chad with Boseman, he didn't have a true
4:19
Speaker 6: he didn't have a revocable living trust, so he lost
4:21
Speaker 6: almost a million dollars of his estate to probate court.
4:24
Speaker 6: Because just because you say that your family should get
4:26
Speaker 6: something in their wheel doesn't mean they're going to agree
4:29
Speaker 6: on it. And the more time they spend arguing in
4:31
Speaker 6: probate court, the more money that the lawyers make and
4:33
Speaker 6: the more money of the court system makes.
4:34
Speaker 3: With the revocable living.
4:35
Speaker 6: Trust, it says like it's stamp saying that all my
4:38
Speaker 6: assets go to these people.
4:40
Speaker 3: This is how they get it, this is when they
4:41
Speaker 3: get it.
4:42
Speaker 6: So a vocable living trust is huge for voting avoiding
4:45
Speaker 6: probate court. Another reason that you want to have a
4:48
Speaker 6: revocable living trust is because it helps us with taxes.
4:51
Speaker 3: So here's an example.
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Speaker 6: If I bought a property at two hundred thousand dollars
4:55
Speaker 6: and that was worth a million dollars, and I put
4:58
Speaker 6: it in my vocable living trust. When my kids get it,
5:02
Speaker 6: they get something called a step up in basis. So
5:06
Speaker 6: in my example, I have eight hundred thousand dollars in gains.
5:08
Speaker 6: I pay two hundred thousand dollars for it. Now it's
5:10
Speaker 6: worth a million, so it's eight hundred thousand dollars built
5:13
Speaker 6: in gain that if I was to give it to
5:14
Speaker 6: them when I was alive, they would have to pay
5:16
Speaker 6: that eight hundred thousand.
5:17
Speaker 3: Dollars in capital gains taxes.
5:19
Speaker 6: When we put it in our vocable living trust and
5:21
Speaker 6: I passed away and passed to my kids, they get
5:22
Speaker 6: it what's called a step up in basis, So they
5:24
Speaker 6: receive the property with a million dollar fare market value
5:27
Speaker 6: and they can sell it the next day and pay
5:29
Speaker 6: no capital gains taxes. So by putting the property in
5:33
Speaker 6: a revocable living trust, you help your kids avoid unnecessary
5:36
Speaker 6: taxes on assets that you're trying to pass down, and
5:39
Speaker 6: that's how we build true generational wealth.
5:41
Speaker 3: We don't want to just pass down assets. We want
5:43
Speaker 3: to pass down.
5:44
Speaker 6: Tax free assets, which is very important and irrevocable trust
5:49
Speaker 6: is in my opinion, it's only used for estate planning purposes,
5:53
Speaker 6: and unless your estate is over thirteen million dollars, you
5:56
Speaker 6: probably don't need irrevocable living trust because you don't pay.
5:59
Speaker 3: It state taxes until your state reach is that high.
6:01
Speaker 6: So you don't want to put things in an irrevocable
6:04
Speaker 6: trust before that is because you can't benefit from it
6:09
Speaker 6: in your lifetime. If you put a property in an
6:11
Speaker 6: irrevocable trust's worth a million dollars and it generates one
6:13
Speaker 6: hundred thousand dollars a year in cash flow, you can't
6:16
Speaker 6: take that because it's irrevocable. You can't benefit from it.
6:19
Speaker 6: So it's just understanding what people need personally. I think
6:21
Speaker 6: most people need a revocable living trust until they resett
6:24
Speaker 6: thirteen million dollar mark.
6:25
Speaker 1: Yeah.
6:25
Speaker 7: I was reading an article maybe last week about Rupert Murdoch. Yeah,
6:28
Speaker 7: and he's in there in Courtnell because he has an
6:30
Speaker 7: irrevocable trust and he I think he is based on
6:33
Speaker 7: succession that he doesn't want to pass it down to
6:35
Speaker 7: this air.
6:36
Speaker 3: Yeah. So like cannot change.
6:38
Speaker 6: Cannot change, can change lock, it's a safe throw away
6:41
Speaker 6: the key put in a bottom.
6:42
Speaker 2: Of the What about an eyelid right where it's a
6:45
Speaker 2: life insurance policy inside the trust?
6:47
Speaker 5: Is that a good idea?
6:49
Speaker 3: It can be?
6:50
Speaker 6: I don't I haven't studied eyelists that much, but I
6:52
Speaker 6: have heard about him. None of our clients have have
6:55
Speaker 6: needed it thus far. But I think it can be
6:57
Speaker 6: a powerful policy. See, but it has to be structured
7:01
Speaker 6: the right way, and it's going to cost a little
7:04
Speaker 6: bit of money to get that set up.
7:05
Speaker 5: Yeah, yeah, yeah.
7:07
Speaker 7: We were talking about this the other day on Market
7:11
Speaker 7: Monday's actually about buying life insurance policies on family members.
7:16
Speaker 7: Want thoughts around that and in terms of planning, I
7:19
Speaker 7: guess for the future and also wealth creation because we've
7:22
Speaker 7: seen this happen in other communities, not so much in ours.
7:24
Speaker 5: What's your thoughts, Yeah, I mean.
7:26
Speaker 4: I think at the end of the day, if we
7:27
Speaker 4: remove a motion from it, right, at the end of
7:29
Speaker 4: the day, we know that our loved ones are going
7:32
Speaker 4: to pass away, right.
7:33
Speaker 5: And if you have if your desires to.
7:37
Speaker 4: Create generational wealth right for your family, it's like, hey,
7:39
Speaker 4: let's just have a conversation about like what does that
7:41
Speaker 4: look like?
7:42
Speaker 5: Right?
7:42
Speaker 4: So for example, if you have a parent that's aging, right,
7:46
Speaker 4: you have life insurance on them. Maybe they didn't have opportunity,
7:48
Speaker 4: they didn't have a market mondays they didn't have or
7:50
Speaker 4: your leaders didn't have melon and money they didn't have
7:52
Speaker 4: opportunity to accumulate a lot of wealth, right. One of
7:55
Speaker 4: the great things about life insurance is that it can
7:57
Speaker 4: close that gap for putting these on a dollar obviously
7:59
Speaker 4: assuming you know you have our in decent health.
8:01
Speaker 5: So I think it can be a great strategy.
8:04
Speaker 4: Some people even go as far as you know, having
8:06
Speaker 4: the family trust right and then the trust being the
8:09
Speaker 4: beneficiary of the life insurance and then when you pass away,
8:11
Speaker 4: the money goes into the trust and then now that
8:14
Speaker 4: can kind of keep the trend going. But I think
8:16
Speaker 4: it's I think person is a great stretch. I think
8:17
Speaker 4: we're just so emotional about it and we feel like, oh,
8:20
Speaker 4: that's blood money waiting for me to die, right, your life,
8:23
Speaker 4: But we removed the emotion from it, and we're like, yo,
8:26
Speaker 4: like this is what we want our family to look
8:29
Speaker 4: like for generations to come. What is the most efficient
8:32
Speaker 4: way for us to do that. I think life insurance
8:34
Speaker 4: can be a great vehicle to facilitate that.
8:35
Speaker 2: You spoke about something earlier that we haven't spoken about
8:37
Speaker 2: a lot on disability insurance.
8:39
Speaker 3: Yeah, why just talk about that?
8:42
Speaker 5: Like why is that important?
8:43
Speaker 2: And like what's some details that people should know about
8:45
Speaker 2: disability insurance.
8:46
Speaker 5: Yeah, so I can speak of personal experience.
8:47
Speaker 4: So when I was twenty eight, I got married and
8:52
Speaker 4: I was having this crazy random backpain.
8:54
Speaker 5: I thought I was like maybe deadlifted too much weight
8:56
Speaker 5: or something.
8:57
Speaker 4: And then come to find out I had a benign
8:59
Speaker 4: tumor and ninth vertebrae right that fractured my spine.
9:02
Speaker 5: I had to relearn how to walk. It was a
9:04
Speaker 5: whole whole.
9:04
Speaker 4: Situation, right, wife had to like lock into the valves
9:07
Speaker 4: very early sixty days. You know what I'm saying, and
9:11
Speaker 4: people don't realize is that you are three times more
9:14
Speaker 4: likely to become temporarily disabled than you are adoptrey maturely.
9:18
Speaker 5: Right.
9:18
Speaker 4: And so what disability insurance does. It's an insurance coverage
9:22
Speaker 4: on your income. Like we have insurance on everything. We
9:24
Speaker 4: have insurance on our cell phones, we do have hope
9:26
Speaker 4: some of us have insurance on our lives. But what's
9:28
Speaker 4: the insurance if you get hurt or sick and can't work,
9:31
Speaker 4: what's the insurance on that?
9:32
Speaker 5: Right? And so disability insurance bridges that gap.
9:34
Speaker 4: Sometimes, if you're employed, you might have insurance and it
9:37
Speaker 4: might cover fifty to sixty percent, right, but that's also
9:40
Speaker 4: going to be a taxable benefit.
9:41
Speaker 5: So always ask.
9:41
Speaker 4: People, are you if I cut your check and half
9:43
Speaker 4: right now? Because you live off fifty or sixty percent
9:45
Speaker 4: of the income, They probably like, no, I can't, right.
9:47
Speaker 4: And so having disability insurance and or supplemental disability insurance
9:51
Speaker 4: can kind of close that gap so that if you
9:53
Speaker 4: get hurt or you get sick, you have the ability
9:56
Speaker 4: to still meet your knees. Because you can't call American Express,
9:58
Speaker 4: you can't call a mortgage company saying hey, I can't
10:00
Speaker 4: work right now?
10:00
Speaker 5: Can I defer these bills? They're going to say, and
10:02
Speaker 5: know what we can do for you?
10:03
Speaker 4: Right, So disability insurance bridges that gap to ensure that
10:07
Speaker 4: if anything happens to you, you're okay.
10:10
Speaker 5: Now.
10:11
Speaker 4: Some of the features and benefits of disability insurance that
10:13
Speaker 4: you want to think about are like, there are certain
10:15
Speaker 4: policy benefits that they call writers, right, And basically the
10:19
Speaker 4: way they work is like, for example, let's say that
10:21
Speaker 4: you are a surgeon, right, and you make your money
10:25
Speaker 4: with your hands, right, So what you probably want to
10:27
Speaker 4: do is you want to get special provisions in the
10:29
Speaker 4: disability policy to ensure that hey, look.
10:31
Speaker 5: I can still go be a professor, right, And teach
10:34
Speaker 5: what I do.
10:34
Speaker 4: But because I can't use my hands, right, I need
10:37
Speaker 4: to be able to still receive income because that was
10:39
Speaker 4: my primary source of income. Because with disability insurance it
10:41
Speaker 4: does create a little bit of a moral hazard. The
10:44
Speaker 4: reason why they don't like, let you get ninety percent,
10:46
Speaker 4: like we'll shoot you know, people don't game the system,
10:47
Speaker 4: and like I'm not going to work an injury, right,
10:50
Speaker 4: So you just got to be mindful of the writers
10:53
Speaker 4: and the clauses that allow you to take advantage of it,
10:56
Speaker 4: like if you have like a special skill set to
10:58
Speaker 4: be able to still benefit from benefit from but potentially
11:00
Speaker 4: still are an income in other ways, like you know,
11:02
Speaker 4: being a teacher or a professor, even own occupation, Yes, yes, you.
11:08
Speaker 3: Still got it.
11:09
Speaker 6: Brother, got it underwrite y'all, I need that.
11:16
Speaker 3: I don't know about that.
11:17
Speaker 7: But as business partners, right, what about having insurance on
11:21
Speaker 7: each other?
11:22
Speaker 3: Right or buy sell agreements? People don't talk about that.
11:24
Speaker 7: Yeah, but if something happens to Carter yep, you know,
11:28
Speaker 7: what what happens to the business, what happens to the income.
11:31
Speaker 5: These things need to be discussed one hundred percent.
11:34
Speaker 3: Let's talk about it.
11:34
Speaker 6: We're talking with our h our lawyers about that in
11:38
Speaker 6: the making right now, because and like one thing I
11:40
Speaker 6: love about our relationship, we have.
11:41
Speaker 3: The tough conversations on the front end.
11:42
Speaker 6: Yeah, like bro, like if you do something crazy or
11:45
Speaker 6: you're not you're not around like every like you know,
11:48
Speaker 6: love is cool, but everything needs to be in writing.
11:50
Speaker 6: So we are working with our lawyers on our by
11:53
Speaker 6: selling agreements and things like that because it's so important
11:56
Speaker 6: because we want this business to be generational and we
11:59
Speaker 6: don't want to lose it just one generation with us.
12:01
Speaker 6: So we are putting those things in place literally as
12:04
Speaker 6: we speak, to make sure we protect our business and
12:06
Speaker 6: protect ourselves.
12:07
Speaker 4: Yeah, and from about just for those for the benefit
12:09
Speaker 4: of the listeners. Like when it comes to about sell agreement,
12:11
Speaker 4: the reason why you want to have that is because,
12:12
Speaker 4: let's say something does happen to me, right, like if
12:14
Speaker 4: I own fifty percent of the business, right and technically
12:17
Speaker 4: that you know my wife in here is that my
12:19
Speaker 4: wife is great, I don't.
12:20
Speaker 5: I don't think.
12:22
Speaker 4: Like yo, all right, so I'm gonna start managing these portfolio.
12:24
Speaker 3: Yeah, yeah, the same thing. She might not be the
12:28
Speaker 3: best person.
12:29
Speaker 5: It might not be the best person to do that, right.
12:31
Speaker 4: So and one thing you can also do is you
12:33
Speaker 4: can get by sell agreements funded with life insurance. Right,
12:35
Speaker 4: so that way it's like, all right, well, something happens
12:37
Speaker 4: to you, right my wife, I mean I would trust
12:39
Speaker 4: and believe that's happened to my wife will be good
12:40
Speaker 4: at Yeah.
12:41
Speaker 3: Yeah, you'd be good. But I got you man, I gotcha.
12:43
Speaker 1: Man.
12:44
Speaker 3: He's been documented right on it's own record.
12:48
Speaker 4: But being able to say, okay, cool, the buy sell
12:49
Speaker 4: agreement is funded by life insurance. Something happens to you
12:52
Speaker 4: that I buy you out and then your wife gets
12:54
Speaker 4: those proceeds.
12:55
Speaker 3: Right.
12:55
Speaker 4: So but it's important, right, like from day one when
12:58
Speaker 4: we formally locked in, like we made sure that everything
13:01
Speaker 4: was solidified, all the documentation was squared away because I
13:03
Speaker 4: had started the brand first. He was and I was like,
13:06
Speaker 4: I said, I think it's time for us to you know,
13:08
Speaker 4: go further with this. He's like, Bell, let's do it.
13:09
Speaker 5: I was like, okay, cool, and then yeah, it's sit
13:11
Speaker 5: up some paperwork.
13:12
Speaker 3: But we did it.
13:13
Speaker 4: But we did it on the front end so we
13:14
Speaker 4: could just documentation beats conversation. Those things have to be
13:17
Speaker 4: in place if you want to make sure that your
13:19
Speaker 4: business is little ye, And I think business structure is
13:21
Speaker 4: really important as well. I don't think enough people talk
13:24
Speaker 4: about because.
13:26
Speaker 6: The way our business is structured, we could have just
13:28
Speaker 6: been a traditional partnership, which is which is fine, but
13:31
Speaker 6: there are some tax limitations by having a traditional partnership,
13:34
Speaker 6: because if he wants to go to a conference and
13:38
Speaker 6: deduct and the and deduct the expense in our taxes,
13:41
Speaker 6: I'm like, well, I don't want to go to that conference.
13:43
Speaker 6: I don't want to I don't want the business to have.
13:44
Speaker 3: To pay for that right.
13:45
Speaker 6: And so if you and your if you have a
13:47
Speaker 6: traditional partnership and you and your partner are not agreeing
13:50
Speaker 6: on a specific deduction, then you can't take it right.
13:54
Speaker 6: So the way we set it up is that we
13:55
Speaker 6: have our LLC, which is our melon of money, and
13:58
Speaker 6: then we have our s corpse fifty percent owner of
14:01
Speaker 6: that company. So now I can take all the deductions
14:04
Speaker 6: I want to take in my escort. He can take
14:06
Speaker 6: all the deductions that he wants his escort, and we
14:08
Speaker 6: can only we only take group biss deductions in our
14:12
Speaker 6: LLC for melon and money. And I see a lot
14:15
Speaker 6: of new partnership business owners lose out on tens of
14:19
Speaker 6: thousands of dollars in deductions because their financial structure is
14:23
Speaker 6: not the way it should be to maximize their tax savings.
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