Welcome to the prosperity gap where we discuss the financial gap that exists between where we are and where we should be. It's time to bridge that gap.
Hey, prosperity nation. Welcome back to the prosperity gap. My name's Dave hall. I'm the host, so excited for today's show today. I've got one of my good friends with me today, Curtis Olson. He's an estate planner with all about trust. Curtis, how are you today?
Doing really well. Thank you.
Very excited about this show. We've known each other for a long time. You've always been a great supporter of mine. You've always been willing to share a lot of information that whether you know it or not, many times it's going back to many of our listeners and people that I work with excited today to talk about trust, wills, all those fun things that you get to do on a daily basis.
Excellent. I'm looking forward to it. It's been a lot of fun for me. So let's go to work.
Chris , just so the listeners get a little better understanding about you. Tell us a little bit about how you got into the industry and what it is exactly that you do on a daily basis.
Oh, that's a long story. I got into the financial planning game years ago and , and uh , after learning how finances work, I was always asking someone else to do all the estate planning for me. When that opportunity presented itself to me to get into that game as well, I decided that was, it's been a great career move for me. It's given me multiple opportunities to meet families and help them with things together for them. It's a great opportunity. I've been in for about 10 years.
I've done well over a thousand estate .
You've been busy. Sounds like , uh , you , you've had a lot going on.
Yeah, it's , it's been a great business. It really is.
So, so let's talk a little bit, let's get started here by talking a little bit about the living trust itself. What is it, why do people need it? Maybe you start off initially by what is the living trust?
Well, I think the best way to explain that, as probably kind of explained to you the options there are for estate money . So basically there are three different options. The first option is don't do anything. If you don't do anything, you're going to go through this process called probate and that's an ugly, that's , that's like a four letter word at my house. But probate is a system where the government or the County or the state settles your affairs. It's kind of expensive.
It takes a long time and there's a lot of fees. Your section option is just to do a will. So a will is a document that does three things. This is all of them. It says who's in charge, who takes care of any minor children and who gets what . And that that's the only three things that a will does your , what a will doesn't do is it doesn't transfer assets to beneficiary . So think about this. When you were to sell your house, you would have to sign on the need to transfer it to the buyer, correct?
Right. Okay . So it requires a signature to transfer assets. The same as if you were going to live with eight bank accounts. Liquidate assets requires a signature. A will goes into effect when your death . So it's really hard to get your signature once you're gone. So someone says someone has to represent you and that becomes the judge in the probate process. So think of a will is it doesn't do very much and it also initiates probate. Even if you have a will, you have to go through probate.
Your third option is to create a trust. Now a trust is an entity just like a business where you are the president, you and your wife would be the presidents of your company, like a company like a trust, your called trustee , and you appoint someone to be your vice-president , which is all the successor interests . Now when you, the wheel goes into effect while when you're alive, after right after you sign it, take all of your assets and your transfer those into your trust.
Remember entity like a business. So now the trust owns your assets. When you weigh your vice president or your successor trustee as the signature authority to some and transfer the assets to the beneficiaries. Now the judge doesn't have to be involved. No one has to represent you. It's already , so think about the trust is an entity holds your assets that can be transferred to your beneficiaries without the need to go through. Is that a long answer for a short question?
Yeah, no, that's a great answer. And for listeners, very well explained because there's one of the questions that I know I've even had many times throughout my life trying to understand and I know people come up to me all the time is what's the difference? You know, obviously option number one is one that nobody wants to do, but then you get into option number two and three. It's like, okay, is there ever a point that people could just do a will and that would be okay.
Is there a point that that would be ,
yeah, there is probably when you just have children, you're young and you don't have a lot of assets just to settle it. You know, having a will is better than having nothing at all. I think about it, more importantly is about your children. If something were to happen to you, who's going to take care of your kids, you need a whip inside that willingness of the guardian.
Well I think both of us have seen horror stories where nothing's been done, you know , and now it's left up to the judge has lumped up. The two attorneys generally unfortunately left up to that family member that you didn't want to have the assets or the kids, but is a very aggressive and is going to pursue both of them in hopes of being able to get access to the money. So yeah, I completely agree with you that having something there is definitely way better than doing nothing at all.
So, so you talk a lot about the trust being, basically it's the separate entity that's got assets. Is there a process that's required to actually fund that trust to make sure it's operating the way that it should be?
There is actually. So when you take your assets and put them in your trust, what you're doing is you're making the beneficiary of your assets. So think about if you went to the bank, there's a beneficiary listed as the paid on death beneficiary for your checking and savings accounts . You want to list those as your trust.
So should something happen to you, the bank knows where to send the check and they send it to the trust, which now your successor trustee to cash the check and the positive you account for the trust. So yes, there's a process and it has to do with changing the beneficiary or listing the ownership of the asset to be the trust.
And what happens if you don't do that? What's going to happen if few percent of the trust but never fund the thing?
You know ? And that's what happens a lot of the time. Um, in fact, I , that's kinda my pet peeve. I struggle with that because I want everyone's assets in the trust. Um , if it's not in the trust, it can be subject to probate, so even if you have a trust that becomes a very expensive rebate when you don't put the assets in the trust.
So Curtis, let's talk about the process of keeping it updated. So I would guess there's two processes. One, making sure if you get new assets that you're always putting in them in the name of the trust that be correct that anytime you buy a new home, you buy a new piece of property and you've talked a little bit about what should be done and when that process happens.
Yeah, when, when I help families with the trust, I give them a workbook and the workbook is a detailed list of their assets and what we do is we go through that list and we identify all of the assets they have so that we can know that they're in. Essentially it becomes a check. Now every year you want to go through and review that workbook and go through those assets again to make sure if there's any new or additional assets and also works. This workbook works as a directory for your kids.
So think about this. When you're, when you're gone, your kids are going to say, well, where's all mom and dad's stuff? Well, if it's organized and detailed in a workbook where they can just pull it up on in the trust documents or in the work or in the binder that I give them, they can see where all the assets are, who to contact and the bang for their investments wouldn't mind all of their different assets . So that workbook is how we keep things updated.
And you can't imagine how helpful that is until you have to go through it. I unfortunately, I've had to go through it with my own family. Both of my parents had passed away and my stepmother, so we've gone through basically having our parents die and it was quite a process. Luckily my parents did have a trust. Unfortunately they had excluded some my brothers and sisters years before and never got them added back into the trust. I'd like to talk about that a little bit here and amended as well.
They had the trust, but they didn't have things organized. So I remember spending almost two days just going through file cabinets and paper and unfortunately my stepmother was the last to pass away. She was a hoarder. So if you can imagine there's just stuff everywhere. Two days I'm digging through, just trying to figure out what they actually had because I was a trustee and I was the one responsible to deal with all this stuff.
Yeah. I always say put your , well it depends. Um, if they just have a will, I always say put your least favorite child in charge of your will . That's always paybacks for cause they have to go through probate or all those terrible things they did is when you were raising them. But y'all put your favorite child in charge of your trust because that makes it really simple and easy. The organization of your trust is critical. I would say that's the hardest part and the easiest part.
Um , most families don't have any direction what to do after their trust is done. So having a workbook or an organizer to do that really makes all the difference.
And is , should there be some discussion had before death? I mean is it helpful for families to actually talk about this stuff and if you are assigning kids to be the trustee or there's assets out there, is it wise to have discussions about it prior to passing away?
Absolutely. Um, when choosing the different fiduciaries involved with your trust, cause there are several different documents that are prepared in a safe, not only a trust but a power of attorney or directive. There's a will final disposition, final instructions. There's several things that shouldn't happen. And so with each one of the families that I work with, I give them a breakdown of those different roles and responsibilities. So as they have those discussions, they know what they can do.
There's nothing worse than finding out that you're in charge of something when you can't get out of it or finding out they don't want to do it when they're already in charge of it.
It was very interesting. I actually had that experience here about three months ago and now I'm a little, it makes me not feel so important. I actually, even when you talk about putting the worst son in charge of the will, I actually had been assigned as the person to oversee a will for a guy that I knew.
I'd bought a convenience store frog him 15 years ago and I guess our friendship was such that he believed in of his kids or any family member that I should be the one that should be put in charge of everything. I get this phone call saying, Hey, unfortunately this gentleman's died and guess what, you're in charge now. Luckily some attorneys and some other people and they were able to remove me very quickly cause I I that no involvement in his life for probably 10 years.
But yeah, it was very shocking to me to wake up and find out that somehow he either thought something of me or something and you know, figured he'd give me a mass once he passed on to say, here Dave, take this stuff .
I can imagine what that's like , um, ever suggest that people go through every five years and have an update, have a review done with your estate planner. Look at the assets annually, but at least every five years look at things that could have been resolved.
Yeah, and I mentioned that a little bit before on my own side. You know , my family had this falling out after my mom passed away, my dad had gotten, gotten remarried, and with the fallout dad had gone in and had everything redone on the trust, kicked out, basically disinherited three of my brothers and sisters. And then over time they were able to get everything ended , but he didn't go back in and change it. And unfortunately it caused all kinds of pain inside of our family.
Once he passed on and these family members realize that dad had never changed the trust again, one that he changed it to start with, but two that never changed the bag and they say they were disowned, not, and it wasn't. There was a lot of money. Maybe they had was a very poor guy, but it's just the concept and the thought, that thing that dad really did this to us and really had this strong feelings against us.
One of the things that I ask families, if you've ever known a family that doesn't speak to each other after mom and dad died , I rarely if the answer of, Oh, I never heard of that, but most families have that in there . I have to deal with that for sure.
Yeah, it happens all the time, unfortunately, and especially if you get a lot large money involved, if it's not clearly spelled out.
I remember when I first started in the accounting industry, one of the first accounts I worked on was a an estate for a gentleman that passed away and he had millions of dollars of life insurance and it was enough money to truly take care of the family for a number of years, if not for the rest of their lives that they would have handled it correctly and instead read , got in and within about five or 10 years, the money had run out and all of these family members were doing this fighting.
It was such an eye opener to me as a young accountant to say, Hey, I need to set this up correctly. I need to make sure I've got things done right on my end so my family's not going to have to go through this process.
I've experienced several of those , uh , experience I've had that sort of several times. It's sad. It really is sad if you don't prepare and things can really change and money changes people.
Yeah. Unfortunately it really does. Curtis, if you look at the trust by itself. So now, you know, we've set up the trust, we fund the trust and I , one of the questions many people have is, are there restrictions now to what I can do with the money and the assets that I put in there as long as I'm living.
That really depends on the type of trust that you need. So there's, think of it as a , um , some restrictions and no restrictions. We do a revokable living trust. The , uh, the government and everyone else looks at you and your trust is the same, but it does still protect you from probate and transfer your assets to your beneficiaries. So that type of trust, you basically can do anything you want with it . It's very, very open. You can transfer things in and out simply and easily.
But if you get into the irrevocable or the unchangeable dress products, then you have , you're going to have some challenges of what to do. So you work with a trustee and a , this is a little bit more challenging, a little bit more involved.
Let's talk more about the living trust here before we jump into like talk about some details [inaudible] the irrevocable trust we have time, but if you look at the revocable or the living trust and we talk about these accounts that are getting set up, you know, the , the, the ability to people have, is there a separate tax ID number again, is this as simple as just being able to provide trust documents to open accounts? What do people have to do? Say they're trying to open a bank account.
That's a , that's a really good question. Um, while you're alive, your trust and you are the same. So you know that normally it operates just on the attack , on your social security number. It's not till you pass away when your social security number is no longer valid. You have to get a tax, I need them. So typically we just run it with your social security number. So that's how it's all just as normal.
You'd go down to the bank and just let them know you have a trust in the , in our trust package we put together, we provide you with the documents needed to verify and undocumented in the trust .
And there's no additional tax filings, is that correct? Everything basically.
That's correct. You run a business out of your trust and wouldn't have a tax ID number. So there's no additional tax findings at all.
So as far as operationally that a revokable living trust grant or trust, a pretty simple process, you know , again, once I get a set up, as long as they're funding it correctly, they're getting their assets in their arms, they're comfortable with the beneficiaries or having it reviewed on a regular basis, not a lot of additional work that needs to go into the process sounds like and really have all the freedom that they had before.
It's just if they pass away now, there's some direction on what's going to happen to the assets.
That's correct. Absolutely. It's very, very simple to operate. Um, there's not a lot of documentation just making sure that your assets are funded properly and that's basically all you need to do.
Is there any asset protection involved with a living revocable trust?
No. There really isn't any , um , legal protection or asset protection with a real living dress . There are options when you're passed away because that's becomes an irritable trust. But basically irritable trust is designed to protect the probate and that's why we have all the other different types of trusts that you can do to protect your assets and so forth. It really just depends on the situation, but for basic, 90% of the population revocable living trust is everything they needed to do.
I think it is important that our listeners understand that there are various types. I mean, we talk here, the lecture we really talked about is a revocable and irrevocable, but I mean, if you're getting into the trust world and especially complex tax planning, there are all kinds of trusts from asset protection trusts , offshore trusts. I mean, the, the trust options go on and on and on. Uh , very important to understand that.
And I think for listeners, it very important to understand that each of them has a different purpose. And just as a courtesy saying here, for most of you that have just standard family making standard income, living trust is going to provide you with everything that you need.
You're going to have to use insurance if you want to asset protection, either use LLCs or insurance of some form and provide you that protection, but it is going to provide you some great peace of mind with the ability to transfer the assets and make sure things are going to happen the way you want them to pass on . And you no longer really have a say in what's going to happen.
Absolutely. 100%
so briefly, let's talk about every vocable trust. What makes them so different from a living or revokable trust?
Well, the irrevocable trust is designed to protect your assets. So think about if you could take a home that you currently own and transfer that home into belongs to someone else. Then if you were to get sued or something like that were to happen, you no longer own that home is not yours, so they couldn't attach a lead or when a judgment or something. That's how the asset and it removes it from your name and puts it the name of a trust, which is a separate entity.
So that's how it protection basically not yours and someone else controls that asset and that's the trustee that you work with
and the irreversible nature is basically such that, I mean very hard to change. Is that right? Is that where the revokable side comes from? Because you truly are trying to protect herself or make an actual transfer of assets.
When you look at and think about an arm's length transaction where it's no longer yours, you know, you can always put a home in your wife's name. That's still you disclose legally because it's still a , you and your guys are married, but if you were to take that home and put it in my name now, we're completely different. There's no attachment between you , you and I. So it's an arms length transaction. Now I would control and control your home or you wouldn't.
Therefore, that's how it protects you is there's no nothing they believe they can attach to. It's still yours. You are still the beneficiary of the trust and the vulnerable because it's no longer yours. It's mine that creates a separation.
Very good explanation, very good way to explain it. Prosperity nation. Hopefully you're getting the understanding of everything that's being taught here and helping you understand how to make better financial decisions. And it's so many times it seems like we're making decisions that are only based upon today. And if you look at a trust that's really not why you're making it a decision to set up a trust or a will, you're not looking at what's going to affect you today.
You're not going to see really any current tax benefits. And I can see any asset protection benefits, but let me tell you, when you pass it on, it's going to make all the difference in the world. So your beneficiaries and those people that you really, truly love and care about.
Yeah. You, you , uh, like I said, you put your favorite child in charge of your trust and that's what makes it easy for them. You want to take care of them. So that's very, very true.
I remember early on that , uh , we had a client who hated the IRS, hated attorneys even more. And so throughout his life he basically did everything he could to pay as little tax and few legal pieces he ever had to. I mean, it was such a cheap scape to some level. Everything he did.
Like I remember one time that he went out to breakfast with one of my other clients and the wife happened to order something on the menu that was $10 and they had something that was $3 and he chewed the man out saying, what the heck? Why are you allowing your wife to spend so much money? You know, and they're both multimillionaires. They all had all the money they needed, but it was so conservative.
But the ironic thing was, is when he died and we talked to him about multiple times, you'd never set up a trust. And so you ended up paying the attorneys and the IRS way, way more money than they ever would have had to and and to some level, probably all the money they saved during his life just ended up going to him when he passed.
When you know that , that brings up a very important point. The cost of doing a trust compared to the cost of going through probate, the trust has a whole lot less and over your lifetime. Now you may think that the cost of doing a trust is expensive. Oh, it's an exorbitant fee. It's not that expensive. When you compare the cost of going through probate is very expensive. Think about just doing a will. You still have to go through proving , compare the difference. Trust is much less expensive.
Yeah , very good point and I'm glad you brought that up. Which also leads into another question that often is asked is do I have to have an attorney to actually file those trust documents or are there other options out there?
Well , that's, that's a great question. An attorney is not required. In fact, anyone can actually do a trust themselves. They don't need anyone to do it for them. I'm sure that you can find a program or some kind of service that would allow you to fill in the blank and create a trust. Hard part with that is when you, there's no direction, there's no guidance. What if you did a wrong, you wouldn't even know.
So having an estate planner put something together that makes it simple, makes it easy and an S or direction makes all the difference in the world. Plus there's different laws and requirements in each state. Each state has different ones. So knowing what those are and being prepared, a little guidance would be helpful. Um, but no, having an attorney, right , your trust is not required.
It's always funny to me is a professional. How many times you hear people come up and tell you what their friends doing and they can't understand why they're not able to do that. And yet it's because they live in a different state. They don't have all the facts. There's certain things that don't apply to them. And I think you're making it very important point there, Curtis, is that when we're dealing with trust , your story's not going to be the same as everyone else's story.
Although the trust in general may look the same. You're gonna live in a different state, you're going to have different assets, you're going to have different beneficiaries that you want to be able to take advantage of any leftover assets that you may have. You know, all of these things are going to be different. So for you to just go get a cookie cutter program and put that in there.
And the sad thing is you're never going to know until, you know, 40 years from now or 60 years now or a hundred years from now when you pass on and then somebody else has to clean up the mess and deal with the fact that you didn't do your homework and put in the time to make sure you got the right documents .
Yeah, I would , I would look at it like this. Um, if you were to mess up on a couple of things, just simple things and they , they throw the trust out and make you go through probate. Not only the money they were, the time and energy you spent putting together your documents is wasted , but now you have your probing because you didn't do it correctly. There is something to be said about using attorneys because they're, you know, they're held liable. Is it , does it, is it required? Absolutely .
And the other thing people need to really be aware of is the fact that it's not, when you're looking at trust and you're looking at updating it, it's not just family situations. I mean, you and I have talked about, you know , my family had situations that happen there, but there's lots that change. You know , 2017 we had a major tax change when Trump put in many of his new laws and some of those affected estate planning. It is back to trust.
And I think it's very important that people realize that too, that not only on a federal level, but sometimes on state level. There's things changing, thus very important that you're having it reviewed and updated on a regular basis.
I agree. Absolutely. There's things that could affect you that you don't even know well,
yeah, it's a, it's amazing in our lives, you know, there's so much information online, it seems many times there are certain things, obviously we can do online, are easy to do, very easy to set up, but there are definitely other aspects of our lives and prosperity nation. I would say this is one of those.
You definitely want to make sure you have a professional involved because just as Curtis is saying, I mean when you consider the minimal costs that it takes to set that up and to make sure the trust is operating correctly over your lifetime. I mean, probate can get upwards to 10% of your assets. You know , if you're have half a million dollars worth of assets, I mean that's $50,000 that you're basically throwing down the drain.
That if you'd done a little bit of homework and put everything together you like for my family and there was no hardener that many assets. Alls I had to do is pull out the trust document, go to the bank, go to the various places, say Hey, I'm the trustee and you know , just like that I had everything settled and money distributed out to the various beneficiaries. We're able to move forward.
Well you're absolutely right. Um, having the documents in place, really it's more of a having things in writing about this is what you want to happen. Think about this. What if the family contested ? And if they say, I don't like it that way, I want more. Um , now you're going to go through the probate process contested. And that's when the real legal fees started. I see families to lose millions going through just the process, the arguing and the findings really could cause a lot more problems.
Yeah. And heaven forbid you get someone that's just so emotionally tied that they can't give it up and yeah, you're just going to waste all the money by the time you're done. Something we haven't talked about at all yet really is beneficiaries. Curtis, is there a standard process? Are there things that people should be aware of when they're picking their beneficiaries?
Well, this is where like when we get down to find out who's the favorite and least favorite child, the typical thing is they split things evenly amongst their children. But there are times when you have , um, certain children have done more, certain children who have done less. Maybe there's a situation where you have special needs kids . You've got to make sure some think decisions about how you want things. Distributed.
Trust allows you to say what thing, what happens when I'm gone and how this money needs to be distributed. Whether it's proportionately or whether it's equally or even with some restrictions. Like, you know, maybe there's missions or college or education that you want to pay for and this is how I want this dress set up. Um , you have control over what happens with your assets even after you're gone.
And that's, it's great that people understand that and rate the people know how this works because I know it can get messy too when you're dealing with the previous marriages, kids that may not be living with you. So my recommendation would be to just make sure you give it some thought, make sure you're thorough and as things change, make sure you're getting that updated.
Are there any requirements, I mean, if someone is married, is there a requirement at all that a , the spouse has to be the first beneficiary or their connect go to anyone? I mean go
that there are some legal requirements , um, but essentially as whatever you and your spouse decide you want to do with those assets, that's how things are distributed. You also have options for some tax planning with AB trust where you, your trust divides into two trusts of your over the estate planning, the estate tax guidelines. You, you've been saved some taxes that way.
There's, there's some basic things that you can do to make sure that things are done that protect you the most way possible. Is that fair answer? Yeah,
absolutely. That was very interesting and other day. Anyway , I guess it goes back probably a year, year and a half ago, but we were talking about these various topics and my family, you know, my kids are always joking around about , uh , what they're going to inherit and what they're going to get. My 10 year old pipe pipes up and says, dad, I don't care if I get anything else, but I want your car.
I thought, well, I hope I don't die Quicken hugs , but that car is of any value to you, but I guess if that's what you want, you could have to call her.
You must drive a nice car.
Yeah . I'm not sure it's that nice, but for them they think it is. That's what you ought to be in his inheritance. The other kids can have the money. He'll take the car.
That's perfect.
Curtis , we've covered a lot topics today. We've talked about a lot of very important things to our listeners and it's been a very informative show. Anything else that you can think of that we really didn't cover that you think would be helpful for our listeners to better understand regarding trust, wills, or making sure they're prepared? So for, for an unfortunate death, if I were to happen,
I think the biggest thing that I help clients with is just to have a peace of mind that they've done things correctly. Um , the most important part of your trust is the funding of your trust. Making sure the assets are in the trust, cause if they're not, they can be subject to probate and you've wasted a lot of time and money. So having that process of updating your trust on a continual basis and making sure correctly is the key.
Um , that's , that's probably I'm the biggest stickler with my clients to make sure the trust is funded correctly and it's updated on a regular basis. That's a , that's where I go. That's what's important.
Well, thanks Curtis and you're absolutely right in what you're doing. I know. That's why I like working with you. I know. That's why I love our relationship is because they know you're forcing the right thing to happen. I can't tell you how many times as a CPA, I've seen it where clients get super excited, they go out to a professional, they get their trust set up and then nothing happens. You know, in three, four or five, 10 years down the road.
I'm saying, guys, you need to get this thing funded and it just never seems to come together and that's what I love about what you do is you're very thorough and making sure those things happen and know when you've worked with me and helping set up trusts , the clients have been very happy to know that it's not only set up correctly, but that things are funded correctly so that they're going to have a good experience not only for themselves in which working with you is a great experience, but
also a further beneficiaries when that time comes and they can just keep it very simple and make sure everything's taken .
Yeah ,
it just takes a little time every year to make sure that things are done correctly and we have that communication. On an annual or even semiannual basis to follow through, make sure that things are done correctly. I also think having a coach financial coach there to walk them through the steps where they can ask questions. I give every one of my clients my cell phone.
No , I think that's very important. You know , especially in this day and age is very important. We have access to people as that we can get the right information. Curtis , thank you so much for being on our show today.
You're welcome. Hey, it was a pleasure. Thank you. Dan ,
you had been listening to the prosperity gap, the show where we help you bridge your financial gap to get you where you want to be. My name's Dave hall. I've been your host. I'd been here today with Curtis Olson .