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