Hey what's up guys. It's Coons here.
And in this video, I'm going to explain to you
the benefits of a living trust, how it works for you today, why you're alive,
and what it can do for you after you passed.
All right. Let's get started.
Okay.
So people ask us all the time, why do I need a living trust?
Why would I want to set one of those entities up?
Well, here's why.
You need a living trust, because a living trust avoids probate.
You probably heard me
talk about this in some other videos, but the benefit of having a living trust
is that you don't have to go through probate and probate is expensive
because every asset you own in your own name
when you pass in order to transfer title.
So let's say I have my house, I have my vehicles right there.
I have my bank account in order to get all of those assets to your beneficiaries
after you've passed away, you have to go through a probate process.
And what does that mean?
It means this.
You're going to hire an attorney like me to represent Will.
You won't, but your beneficiaries will.
In order to move these assets over to your intended
beneficiaries, let's say your spouse is a surviving beneficiary.
All right. So how does your spouse receive?
Same thing.
We're going to have to start a probate process
in order to get these assets cleared, means your name taken off
and your spouse named listed as the sole member.
I've seen this happen many, many times in my career
where the first spouse passes away.
There is never a probate done.
The survivor then passes away 1015 years later in this house,
still remains in both of their names, and then it's supposed to go to the kids.
And so it just makes the probate process that more complex and that more expensive.
So the purpose of having a living trust, what is it?
How does it work for me?
Well, what it does for you is it takes all of these assets right here
and it puts them into a box.
And the thing is, is that when you put them into this box
that I've just drawn out here, this is my living trust, what you're doing
by putting them into this box.
And when I say put them in the box, you're transferring title out of your name.
So your house no longer in your individual name.
Now it's in the name of your trust.
So if my trust was called the Black Box Trust
and you'd come up with any name you want for your living trust,
I would just change the house from Clint Coons to the black box trust.
Now the trust owns the assets.
So when the trust owns the assets
or my assets, then when I pass away.
Okay, so. So you got the spouse. She's passed away here.
The trust doesn't die.
My name.
My name was never on title of these assets because I took them out of my name.
So all of these assets that are held in this trust, it is it's
got a set of instructions with it in it, set to go to operate when you passed away.
All of these assets then will be held for your beneficiary.
So there's a set of instructions that come with your living trust, that describe
what's happens when you know both
spouses are no longer here, okay?
What happens to these assets?
And so that brings up a good point, too, about the living trusts that people often
wonder, well, hey, if I put my assets into the living trust,
am I going to lose control?
You'll never lose control
when you put your assets into a living trust
because you and your spouse will be the trustees.
So both of you will be over here as the trustees
and I keep saying your spouse, but it could just be you as an individual
if you are single people create these all the time.
So you get them out of your name, you get them in here.
You're the trustees.
You control all of these assets.
In fact, this trust is what we call a revocable trust.
What does that mean?
That means you can cancel it at any time.
You're not locked into using this trust your entire life.
If you decide, Hey,
I don't want this anymore, I've got a divorce, you can cancel it out.
Not a problem.
But the main benefit of having a living trust.
The number one benefit is that avoiding probate.
So when you pass away because the assets are no longer in your name,
there's nothing to probate.
This is why we recommend this document to people all the time saying, Hey,
why do you want your family to have to go through the probate process?
Why do you want your spouse to have to go through
the probate process, potentially have your assets tied up?
So that's a major reason why you're going to set this up.
Now, how else does it work?
Well, as I stated, it has a set of instructions with it.
And the instructions describe
how the assets are going to be distributed to your children.
And most people thinking in terms of distributing the assets,
they think of their kids being older and they say,
I will just give them to them outright.
Well, maybe that is the right case. Maybe it's not.
But what happens if your children are younger?
Do you want younger children to have assets outright at age 18?
I think not because they're prone to make mistakes with those assets.
So with a living trust, how it works is that you can specify in their
when they're to receive these assets and under what circumstance senses.
So, for example, if your child was going through a divorce
or if your child's in a lawsuit, do you want to give them money?
I think not,
because a creditor or an ex-spouse could potentially get access to those assets.
So you could put it into the trust.
They don't get anything until all those problems have resolved themselves.
So we're preserving the state for our loved ones.
Now, here's something else you may want to consider
when it comes to creating your estate plan.
In setting up a living trust.
If your children are young, their minor children,
then the question becomes What happens to them?
Who's going to raise them and what does that look like?
So I was recently speaking with someone.
They said, Hey,
when we pass away, we have three children and right now they're younger.
We would like them to be raised
by some good friends of ours who live in this house,
these two people here, and they have two kids of their own.
Okay, great.
So when you're gone, if both of you were to pass away,
you and your spouse, you want your three minor children
to be raised by these two individuals here that have two kids.
They said that's exactly what we want.
All right, great.
What size of house do they have?
And they said, why does that matter?
I said, Just do you know?
They said, Oh, yeah, they have a three, two.
Okay, so three bedroom, two bath house.
And I said, and you want them to take all three of these kids
and put five kids and two adults into a three by two?
How do you think that's going to work out at the end of the day?
You said, oh, wow, that's interesting.
And then, you know, what about education?
Do you still do you want them to go into that school district?
You want to keep them in the private school
if they're currently in private school, what about family vacations?
Now, maybe they're accustomed to going on family vacations to Hawaii,
but now they have three other people to take with them.
So that stops.
So those are things that you can incorporate into a trust.
And in this example, what we did is we said
this couple with those kids, they can move in to this
couple's house, that they could bring their whole family move in here
because this was a large house.
This is a 7000 square foot home here.
Right.
Six bedrooms. Right.
Eight baths. So they can move into that house.
Their raise the kids until everyone's out of college.
And then at that point in time,
the house is still owned by the trust, allowing them to live there rent free.
So there's kind of an incentive they get to keep their house.
But then when the kids are all grown up
and they're out of college, that is your children.
Then at that point in time they would move out
and that becomes an asset for your kids.
So these are things that a lot of times people don't think about
when they're putting together an estate plan,
all the minor details that that can come up.
And if let's say you have a bunch of rental real estate, for example.
Right, is dealing with someone the other day on this
this particular issue as well.
They have a bunch of rent or real estate.
I said, okay, great, who's going to run it?
Who's going to manage it?
And they think your successor trustee.
Okay, your successor trustee.
Let's talk about this person you name as your successor trustee.
So when you're no longer here, the way the living trust works
is that when you've passed away
and your spouse has passed away, if you're married, if it's a joint trust,
then you nominate someone to step in
to control all the assets for your beneficiaries.
Now, I have other videos talking about this as well.
It's important to watch those because I talk about not naming your kids
as successor trustees of your living trust if you don't want them
to have the assets outright, because it's kind of like this, you know,
here I'm going to
leave my assets in trust for my kids and
they can only take out 10% a year
for the next ten years out of the trust.
And they're going to be the trustees.
I've seen so many people make that mistake.
And I said, well, that's kind of like saying this to the fat kid.
Hey, you like a fat kid?
You like cookies, right?
So here's a cookie jar.
You get one cookie a year
for the next ten years, and we're not coming back to check on you.
But don't put your hand in the cookie jar more than one time of year.
What is the kid going to do right?
If he likes cookies,
the kid's going to reach in there and eat all the cookies right away.
So you have to be careful.
That's why you consider naming people to be your successor trustees, right?
That will control these assets for them.
And there's no conflict there.
But with a living trust, you can get more granular.
You have to think about these issues.
So if you have rental real estate, for instance,
and you've named a successor trustee, my question to you
is, does that successor trustee know anything about rent or real estate?
Because if you're trying to build a legacy, a wealth
or maybe it's a business that you own, whatever it is,
the person that you put in charge of your trust
for the benefit of your kids, you want them to maximize that value.
You want to make sure that your kids get what they
that you've built up or whatever that means to you.
That income stream, you don't want someone to mismanage it.
And successor trustees can mismanage the assets, not intentionally,
but because they don't have the skill set.
So what I like to explain to people, when you're setting up
a living trust, hey, maybe you have a couple successor trustee.
So I have one trustee here to manage the house and the cars and the cash.
But then I bring in this other trustee over here and this guy
here, he's managing the real estate because he has a real estate background.
He understands it.
So this person manages a real estate.
This successor trustee manages everything else.
This is just an idea of what you can do or what
you should be thinking about when you're creating estate plan.
This idea of I'll just leave it in a will and it'll just hopefully
work out in the wash.
I've seen them.
So many mistakes happen where families have been destroyed over
not having a well drafted estate plan.
The kids burn up all the money right away.
And that legacy that you're hoping that would be there disappears.
All right.
So that's what a living trust does while after you've passed away.
But here's something that's often missed.
A living trust actually protects you while you're alive.
Now, how does a living trust protect you while you're alive?
What's the fact that you've taken these assets out of your name?
And I've got them now in this box over here.
Should I become incapacitated? Right.
So let's say I'm in a hospital.
I'm incapacitated right now.
I'm sitting in that hospital bed.
I got this oxygen tank pump in here keeping me going.
And so what happens to my bank accounts, my real estate,
my personal residence and my vehicles and everything that I have accumulated?
Wolf, it's inside of the trust.
Then my successor trustee, has complete control.
So they my successor trustee can work with my bank.
They can work with my retirement account administrator.
They can work with my property managers, and they can ensure
that things keep working for my behalf.
Right.
Because what you I doubt you would like is let's say
you're in a coma for six months because you're in a hit and run
and you're the one that got hit, not the one that ran.
And so you come out of it only to find that
your house has been sold, your accounts have been liquidated,
and your kids are now living in the Bahamas. Right.
You wouldn't want that, but it could happen if you name someone,
a financial power of attorney, you gave them power of attorney overused
so that if you're ever
in your ever incapacitated, they can make all your financial decisions.
They can make financial decisions that you may not agree with.
They could sell your assets, do things with those funds that you set back.
You wake up and go, What happened to my real estate?
What happened to my brokerage account?
Well, we thought it was best if we'd liquidated it
because we didn't know if you were going to come out of this with a living trust.
It protects you while you're alive by conserving your assets,
making sure that they stay the way they are for your benefit.
No one else other than your spouse
or you will benefit from those assets while you were alive.
I think that's really important.
That gives us a sense of peace of mine,
knowing that we've put together a state plan that not only takes
care of the people
that we want to take care of after we've passed away, the people that we love
but also have some should happen to me and I'm not God.
I want to make sure that my assets are effectively manage a well drafted trust.
We'll do that for you.
And so that's why when you come to thinking about setting up a state plan,
I would highly encourage you to create a living trust.
Now, if you want to know more about how a living trust works,
we teach a tax and asset protection event every other Saturday.
I've got a link in the description below.
You can register for it. It's completely free.
Not only we teach you about limited liability
companies and land trust and how they work for your real estate.
But my partner, Toby Mathis, when he blows you away
and all the tax savings that can come from running a business and owning
real estate, he'll also teach you in depth how to create a legacy plan.
Thanks, guys.