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