There are six advantages to a trust over a will. In this episode, I'm going to address the question
"What's the difference between a will and a living trust?" And you're going to understand at least 6
distinct advantages of a trust. But why I would recommend you have a will and a trust.
So, on this YouTube channel, 3-Dimensional Wealth, I post a lot of answers to questions like this. I
would invite you to subscribe. I post an answer to a financial question. If you put the little
the bell, the notification every single day. But I want you to understand the dynamics behind
being educated because that is power. Now, when people ask what is the difference
between a will and a trust, first of all, I say, "Well, with a will,
where there's a will there's a..." And they say, "Way." I go, "No, there's a probate."
And so, let me explain what a will does and then what a living trust does and why a living trust
has 6 advantages over just a will. But you should have both of them working in coordination with
each other which is a topic of another YouTube video in this series. So, I'm Doug Andrew and I've
taught a lot of advanced continuing education to estate planning attorneys. I'm not an attorney but
I train them on how to set up equal opportunity living trust instead of equal distribution trusts
which is another topic. But generally speaking, when we talk about the difference between just a
will and a trust, what does a will do? If I super simplify it, a will does 2 major things.
It names the guardian of your minor children if you pass away and you have minor children who is
going to be the guardian. You can name it because if you die without a will that's called Dying
Intestate. The state where you live has a will for you and most people don't like the state's
will. The state may say, "You know what? We're going to divide up your kids. You have 4 kids,
we're going to divide up 2 over to this sibling and 2 over this one." Maybe that's not what you
wanted. But you're stuck if you die intestate without a will. Now, when you have a will, it
also decides how your assets will be distributed to your heirs. But with a will, you have to be
probated. Now, probate isn't necessarily bad. But what is probate? Probate is making sure your will
is followed under the jurisdiction of a court. But what happens is that can be costly and it
can take a year, year and a half to go through probate. Now, certain things, it may behoove you
to go through probate. The example i use is that if you have some little asset that is worthless
--a motorcycle, an old tractor, something; I will tell my clients, "Leave that out of the trust (if
they set up a trust) and probate that." Because one advantage of probate is that when you die
and you post the legal notice in the newspaper saying, "This estate is going to be probated",
basically, creditors have 6 months to come forward and make claims. After that, forever hold your
peace. They can't come and do that. If you don't probate your estate, they could come 2, 3, 4, 5,
10, 15 years later. I've seen doctors and dentists where people come back and try to sue them 15
years later. If you probated the estate, no, they had their chance within 6 months. So, you want to
have some worthless asset that's probated. But the rest of it, I think ought to be over in the trust.
Where there's a will, there's a probate. So, what happens is first of all the court has to decide is
there any federal tax-owed? Any state tax-owed? Any local tax? Those are the first 3 in line.
Then you have to take care of the court costs, the attorney fees and the executor fees on the estate.
And then number 7 are the creditors. You got to make sure all the creditors are taken care of that
they're not going to come out of the word work saying, "Hey, your father owed me some money."
Once those 7 are taken care of, then it's the heirs turn to get what's left. That's called
probate. And that process can take months and even years on large estates. So, to avoid probate,
many people will set up a living trust. But a living trust does more than just avoid probate.
If you die with a trust, basically your estate is settled instantly in one day.
That's one advantage. It avoids probate. Now number 2, people set up trust because they want
to keep things private. So, privacy. If you have a will and it's probated, it's public information.
Anybody can go down to the courthouse and look up what you owned. And if you like to keep
things private, set up a trust because now it's private. So, privacy is number 2, what's number 3?
When you have a trust, it tends to preserve the love of the family better. In other words,
sometimes when you die without a will or even a will, there's fighting among siblings on, "Well,
who really gets an Effie's base? Who gets dad's watch? Who gets this? Well, that painting on the
wall?" And a lot of times parents will write down on the back of the painting or whatever. But see,
a will will designate who gets those things. And if you don't do that, I have seen families,
just never speak to each other again. I would rather my children get zip than to have them
stop speaking to each other and destroy the love of my family. So, a trust is cut and dried. The
successor trustees have to do exactly with the assets what the trust says. So, pretty
much there's no argument. And it tends to hold together the families better than just a will or
dying intestate using the state's will. So, we have got avoidance of probate, you have privacy.
It preserves the love of the family. You also, if you have estate tax. Now certain times,
you may not have to worry about estate tax at the time of the record of this video. My heavens, you
could leave behind about 11 million dollars... 22 million total between the husband and wife before
you would trigger an estate tax. But I remember that in the 1990s for example, any part of your
estate if your estate was valued at more than $600,000 or at the year 2000 more than a million,
anything above that was taxed at 37 and topped out at 55% as it passed down to the children.
And so, when you have a trust that generally doubles the exclusion that you would have.
If we sunset in the year 2026 back to what the tax laws before before Trump changed them, then that
means a husband could have up to 5 point something million and the wife could have up to that.
If you don't have a trust, it's only 5 million between the 2 of you. So, it saves unnecessary
estate tax on large estates. And frankly, many democrats want to do away with that and
move it clear back to a million dollars because they love to tax people who are 6 feet under.
They can't complain, okay? So, it is a place where tax revenues like to go after tax. So, it can save
unnecessary estate tax. The other advantage is liability protection. When you have a trust,
generally between the husband and wife, you have like an A/B trust where maybe the house is is half
in the husband's trust half and the wives. Or in my case, I keep the domestic assets in my wife's
trust. I keep the business assets in my trust. If I get sued, they can't come after anything that I
don't own. The house and so forth that's owned by my wife. If my wife gets sued, they can't wipe me
out halfway in my business. But a trust will sort of limit to the amount of liability exposure in
this so happy society to where somebody could only wipe you out maybe halfway if you or your spouse
was responsible for an accident or somebody got hurt when you were driving the car or what have
you. So, liability protection. But the last benefit of a trust most people don't think
about it's what I call the second spouse syndrome. I'll give you a little story here. At a client,
he was an electrician and he worked his entire career, couldn't wait until he could retire with
his wife. 90 days after she retired she had a massive heart attack. He was lonely. He married
another woman and she was after everything he had. I was named as a successor trustee on
his trust and his wife's trust. The new wife said, "Prove to me your love. Put everything
in my name." He was angry that I did not take the assets out of his deceased wife's trust and put it
over into his trust or with his new wife. He was actually livid. And I said, "I can't do that."
Well, as soon as she got everything she could in her name out of his trust, she said bye-bye! And
she took off. He was destitute on his assets. He was so grateful. He came back and thanked me
for not doing what he originally wanted me to do and that's to move the assets overall into his
trust. I couldn't do that without violating it. The beneficiaries the kids would have sued me. And
so, that is the only thing he had the remainder of his life to maintain integrity and not outlive his
money. But see, what happens is sometimes when you have a second marriage, if you don't have a trust,
then many times the original person passes away and the new spouse and their kids
get all of the assets and your kids don't get anything. They've been disinherited because
people get remarried. They don't name their children as the successor of trustees. They want
to take care of their new spouse. But after they die, it should go back to your kids, not somebody
else's kids that you don't even know right now. That's what I call the second spouse syndrome
and it happens more often than you would think. So, a trust has those 6 benefits that a will does
not have. You still have a will that if you forget to put something in the trust, when you die, those
assets go through probate which may not be bad if they're not worth very much. And then they're put
into the trust. But anything in the trust avoids probate. It preserves the love the family, it
protects you from liability, lawsuits wiping you completely out. It keeps things private. And the
biggest thing is the second spouse syndrome and it saves unnecessary estate tax. So, if you want
to learn more, type in questions search my channel here. I do address a lot of questions relating to
wills and trusts. And I want you to be empowered with the right information. And then there's
also opportunities to be able to go in and get a copy of one of my books. You just pay the $5.95
shipping and handling. I'll pay for the book and ship it out to you free. You'll learn all kinds of
dynamic strategies that will protect your assets that you've worked hard for your entire life.