You NEED a living trust right now, and Tim Berry and Matt Theriault are here to tell you why! On this week’s episode of Tax Hacker Tuesday, learn what a living trust is and why you need one, the difference between a trust and a will, and the danger of relying on your power of attorney.
What You Will Learn About Why YOU NEED a Living Trust… Right Now:
- What a living trust is
- Why you need a living trust
- The big difference between a will and a trust
- The danger of relying on your power of attorney
- The importance of estate planning
- The best way to structure your trust so the bad guys don’t get any of your money
- Why making your kids the trustees of your trust is superior to giving them anything outright
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Speaker 1: This is Theriault Media.
Did you know that up to 50% of your lifetime income will be wiped out by taxes? What if you could stop this madness? Isn’t it about time you play on a level playing field with the wealthiest 1%? Now you can. Tim Berry, Attorney at Law, shares here each and every week current tactics and strategies that anyone can implement to hack the tax code, protect your assets, and keep what’s rightfully yours. It’s time for Tax Hacker Tuesday.
Matt Theriault: Hello and welcome to The Epic Real Estate Investing Show. It is Tax Hacker Tuesday with my attorney and friend Mr. Tim Berry. Hello, Tim.
Tim Berry: Hey, Matt. How you doing?
Matt: Doing well. Yeah, on Mondays here at Epic, we show you new and creative ways as well as time-honored ways of making money using real estate, conventionally and creatively and all kinds of stuff in between. And then on Tuesdays, we show you how to keep it. If you have any questions for Tim that you’d like answered here live on the show, you can go to taxhacker.com/questions, post your question there, and we will read it here on the air. So, Tim, you said you wanted to talk about living trusts. You mentioned trust a lot. And so, I guess we can just kind of go through what is it and well, let’s start there. What is it? What is a living trust?
Tim: A living trust is a real downer of a subject. It’s a really depressing subject. What it is, it’s basically a tool to set up your assets so that A, whenever you pass away, they go to the people you want them to go to. But then B, and this is the super important part really for most people. If you’re disabled, if you’re incapacitated, there’s guidelines on who’s going to take things over in a very simple easy manner to carry on even though you’re disabled or incapacitated. So, that’s the beauty of the living trust. In my mind, yeah, the probate thing’s pretty cool. Everyone talks about it and all that other stuff. But the biggest benefit of this living trust is whenever you’re incapacitated or you can’t make decisions, the living trust is going to lay it out black and white who can take control.
Matt: Got it? Is that what the big differentiator is between a trust and a will?
Tim: Yeah. Here is the big differentiator between a trust and a will. A trust covers those assets throughout your whole life. So, you set up a trust and then something bad happens to you, the trust is still handling things. The will, you got to be committed to the badness. You got to die right then and there for that will to be the slightest bit effective. So, the will only come into play whenever you kick the bucket. But the living trust will handle everything, it’s called a living trust, throughout your lifetime.
Another thing. Some people say, “Well, gosh, I can use the power of attorney. I can give someone that power of attorney and now they can handle my financial affairs if something goes south.” You got to be careful with that because many times, the institutions that you want to give that power of attorney to, the banks, the title companies, et cetera, so forth, they’re going to say, “Oh, we don’t recognize the power of attorneys unless they’re our form.” Now they’re not allowed to do that, but they do that anyway make you go to court to enforce yours. Another big one is a lot of banks, they’re going to say, “Oh, this power of attorney is four years old, it’s stale.” They use this phrase stale. There is no legal concept, but they call it a stale power of attorney if it’s over six months old, and they refused to follow it. So, a will with a power of attorney, in theory, might work the same way. But realistically, it doesn’t.
Matt: Got it. All right. So, that’s what it is. And then the operative word there being living trust.
Tim: Matt, let chime in real fast too. Let me tell you why I’m on this kick on these things right now. And this is a total downer, [inaudible 00:03:53] say so. If you’re depressed right now, pour yourself a bottle of wine or something. It’s going to get a little bit more.
Matt: It’s going to get worse.
Tim: Yeah, it is. You know I just came back from my vacation. I was on the beach of some place having a great time and everything. About two weeks ago, actually just yesterday, I was going to say two weeks after my vacation, but it was just yesterday, there was a Facebook post about that beach. And it was somebody’s daughter saying, “Hey, everybody, my father was swimming, he got dragged out. If anyone sees him in the hospital, let us know. If anyone sees his body, let us know.” And this guy was 40 years old. A lot of people say, “Well, I’m going to do my estate planning, my living trust, my will later on. I don’t really need to worry about it. I’m 35, 40. I’m in good health and all that stuff.”
These poor souls, I can’t even begin to imagine the anguish that’s going on in their lives right now. They’re all at this location having a great time at a beach and then all of a sudden dad’s dragged out and doesn’t come back. You just never know. It’s kind of like with the lawsuits too. You just never know if some weirdness is going to happen. With living trusts and such, you just never know when something weird is going to happen, and you’re going to need this sort of stuff put in place.
Matt: Right. Well, that kind of goes to my next question. Maybe you just answered it there. I was going to ask, who needs it and why? And maybe you just answered it, because everybody needs it because you just never know.
Tim: You just never know. If you got kids, you especially need it. Because you want to say what’s going to happen with the kids? Giving you way too much information. Years ago, probably about, gosh, 30 years ago. I hate to think it was 30 years ago. An insurance agent came over and was pitching us insurance. I thought, “Who are they to tell me about …” Anything they were saying it was estate planning. I thought, “Who are they to talk to me about estate planning? I’m a fancy dancey attorney, I know everything about estate planning.” I was being the grumpy old man thing.
And my wife says, “No, no, no. Let’s just sit and listen.” And so, this insurance agent, she started off by saying, “Okay, let’s talk about estate planning. First off, who’s going to take care of your kids whenever you guys go?” And man, was that a kick right in my face? I thought I was Mr. Whoopty Doopty estate planning man. We had never discussed that or planned on that whatsoever. And so, after that wonderful little meeting with an insurance agent, we had our friendly discussion about how her family was awful, and it was going to be my family that was going to take over the kids. So, that was just something that you got to sit down and discuss as well.
Matt: Right. With that said, the living trust, it has its intent of what it’s supposed to do. And we covered that, right? What happens if you lose control and the trust kind of runs your life if you’re unable to make those decisions for yourself. And also, more if you pass away, then it kind of takes the form of the will and says what’s going to happen after you’re gone. But we’ve talked about a lot here as far as the creative structuring of deals and implementing into wealth creation strategies and stuff like that. So, there’s a lot more than a trust can do and it all has to really do of how it’s prepared. It almost sounds as long as I’ve known you now, which hasn’t been too long? A couple of years. But I’ve heard you just almost every answer has the word trust in it. You say you need to trust for this, you need to trust for that. It seems like there’s countless ways that it can be used, and it can be taken advantage of and has a lot of ancillary benefits.
I don’t know. Because it has countless ways, and I’ve heard you say it so many different times. I don’t even know what question to ask. So, maybe you can just speak on it and make me look like I asked something intelligent.
Tim: That’s a fantastic point, Matt.
Matt: Thank you.
Tim: Let’s go to that. The living trust, it’s really actually a fairly simple document. A, it can be revoked at any time, it can be changed at any time. So, that’s pretty cool. B, you can do whatever you want to with your own assets during your lifetime. Okay, that’s cool. It’s a really simple aspect there. The really interesting stuff happens though whenever A, you’re incapacitated, and that’s where you say exactly who takes over the assets. So, now if you are incapacitated, that successor trustee would be the fancy phrase form, they just take the documents down to the bank or to the title company say, “Hey look, Tim is incapacitated. I’m successor trustee. I’m taking over.” Okay, cool. That’s easy.
But then the really fascinating neat part, and this is how you really separate the wheat from the chaff on who’s doing a good living trust, is whenever it comes time to make distributions. If your living trust documents say the assets go outright to the kids, and or go to the kids 25% whenever they’re 18, 50% at age 25, the other 25% at age 35, you’re doing it wrong. The living trust and say the kids never get anything outright. Because if they get the assets outright, the bad guys can gain access to the assets outright. So, the better solution is you structure the trust so that all the assets go to the kids in the form of a trust, our good buddy the trust.
The kids can be the trustees of the trust. They’re running it and managing it, and they still get the benefits. So, it’s pretty much the same thing as getting the things outright. But if anybody ever goes to attack it, boom, it’s protected, they can’t. So, that’s the super big provision you want to make sure is inside there. It’s amazing to me that 90, 95% of estate planning attorneys, they set these things up where the kids get them outright. It’s just a mind blower to me.
Matt: Got it. I would imagine though, that answer is going to be very different for everybody, right?
Tim: Yeah. But in my mind, for most people, I’m going to say for 99% of people, the answer should be, don’t give the kids anything outright.
Matt: Got it.
Tim: Just don’t do it. Make sure it’s wrapped up in trust. They can control the trust, they get the benefit of the trust but don’t give it to them outright because it’s up for grabs.
Matt: Got it? Okay. Sweet. I don’t know. We were talking about the proper structure was the third thing we’re going to talk about today. Was that kind of it then?
Tim: That’s kind of it. The living trust is a fairly simple basic concept. Just set one up, don’t risk it.
Matt: Got it. And everyone needs one. And the reason why is because you just never ever know.
Tim: You never ever know. I seriously get depressed thinking of the post that I saw of that poor girl. It was his daughter saying if you find a body. Good God, how heart-wrenching would that be to type out into a post to send out to a few hundred people? That’s just … That’s devastating.
Matt: Yeah. You don’t know how to respond.
Matt: The discussion of a living trust as part of the Tax Hacker blueprint, right? That’s all included.
Matt: Great. Whenever you’re ready, and it sounds like based on Tim, if you don’t have one now, you’re ready right now whether you feel like it or not. But whenever you’re ready to have Tim customize a Tax Hacker blueprint for you, including the living trust, go to taxhacker.com, answer a few questions about your situation, tell Tim what you’d like to have happened, and then his team will take it from there. And then they’ll give you a copy of his free book of how to navigate Trump’s tax plan. How to navigate that. There’s loopholes in there, and he’s got a little book that shows you how to navigate those. There.
Tim: Get free money now.
Matt: Get free money now. I got that out. Perfect. All right. Tim, any last bit of advice? We good to go on trust?
Tim: We are good to go on trust. Thank you much, sir.
Matt: Super. All righty. That’s it for Tim and myself. We’ll see you next week for another episode of Tax Hacker Tuesday on The Epic Real Estate Investing show.
Speaker 1: That’s it for today, as we dream of a tax system that works just for you. But until then, you have Tim Berry. See you next Tuesday for another episode of Tax Hacker Tuesday.