10 Ways to Screw Up Your Trust

Okay, so the number one way you can screw up your trust and let's put a visual on this to answer. Some of you are like, what the hell is a trust, Mark? Okay, your trust is a revocable living trust. You can change while you're alive, change the provisions. And your trust RLT owns everything you have. And we want to make it the beneficiary. We want it to own your home, which Kyle was just asking about. How do I transfer it into my trust? So this is your primary home. We want it to own any LLCs that may own rental property or investments or bitcoin or whatever. So we want your trust to own these LLCs. We want your trust to own your side hustle S corp or llc. We want your businesses to be owned by your trust and you still can be an S corp. It's fine. And we're going to get great tax planning, but we want your trust to be the owner. We also want the trust to be the beneficiary of your life insurance, any investment accounts, and especially IRAs, 401ks and you financial advisors that are freaking out out there, it's okay. You are using a see through trust. With the new provisions under federal law, you can still make all the elections necessary to transfer IRAs to spouses or children in the proper manner with inherited IRAs, yada yada. But the trust can put provisions on there to protect the kids from themselves. Okay, so this is a trust. It's going to own all these things. And the trust is, works in conjunction with your will. And then you have an estate plan that brings this whole thing together. And an estate plan might have powers of attorney, pull the plug. If I'm a vegetable, where do I go? If there's do I want to be cremated? Where am I buried? Where do all my little assets go? And it's a binder. And this is all included in an estate plan. You shouldn't spend again more than a couple grand getting it done properly. And we're in that fifteen hundred dollars range. And right now with a special links down below. Okay, so this is what a trust is about. A revocable living trust. Now here's 10 ways you can jack it up. It is a trust, meaning you are creating a trust and you're going to appoint a trustee to run the trust when you're gone. So one of the ways you can screw this up is choosing the wrong trustee. And a lot of times people think, well, I trust my dad or I trust my mom or I trust so and so to be the trustee of my trust. Now, if you're married, usually your surviving spouse is going to be the trustee of your joint trust. But you also might be remarried and found that true love. And you're going to each have your own trust and then they're coordinate them and new things you're going to build together. But you might have a trustee for your trust and he or she has a trustee for their trust and then combined trust, yada yada, yada. But, but the point is you want to choose the right person. And when you choose this person, they might be wonderful and kind and happy, but they may not be the best with money and making financial decisions and being tough. The trustee is going to run the show of your assets when you're gone. You don't need the person that's the best, you know, cook in the kitchen for the funeral, or the best person to come through and clean your house after you're dead, or the best person to write your eulogy and say all these good things about you. You need a trustee that's going to kick some ass and get your assets where they need to go and make some good, smart financial decisions. You're going to want a backup. You might even choose three people. Kind of a financial person, a legal person, a family member, two family members, a professional advisor. I don't know. You can have three people do it. Don't have two people do it because if they get deadlocked, it's a mess. So choosing two people is wrong. Choosing the wrong person that is again a wonderful, nice, kind person, but bad with money. That's one of the first mistakes is choosing the wrong trustee for your trust. Okay, now I'm going to hit these 10 real quick. By the way, I'm going to give away some books by the end of this. If you can stick with me here at the end, I'm going to give away one of each of my books, what your CPA isn't telling you. I'll give away one of Matt Sorensen's book, I'll sign it for you. The self directed IRA Handbook, the Tax and Legal Playbook, Financial Freedom, and also my 8 steps workbook and a calendar. So I'm going to give away five or six things here, but I'm going to do it at the end so you don't need to say, mark, I want a free book. I'm going to make sure my studio people have choose six random winners here at the end. So got to stick around for that. Must be present. All right, now Number two, the next screw up with a trust is you don't fund it. You set up the trust, but you don't fund it. It's only you could sign a trust that's 200 pages long and gold leafed and notarized three times and 10 witnesses. If you don't put anything in it, it's worthless. So see this picture here where I said the trust is the owner of all these things? Well, you got to transfer the home into the trust. You need to change the beneficiary of the IRAs or 401ks, change the beneficiary of the life insurance. Make sure the member of the LLC is the trust, the shareholder of the S corp, the member of the side hustle. So you've got to fund it and maintain it. Now, a trust doesn't have to do tax returns. It doesn't have to have a bank account. There's no annual fee with my firm. There's no annual fee with the state or the irs. But you got to keep your crap in it. You got to make sure when you go out and form a new llc, you go, oh, I have a trust. Let my trust own the llc. Boom. You're going to love it. Okay, number two, you've got. This is good. This is a funny one. I'm going to kind of tell you a quick story here is people screw up their trust all the time without updating it. Now, I've told this story of some live events. If you've had the pleasure to come to one of my live events that are super fun. Got a few more this fall. You'll be hearing about them. But this is a story. It's just crazy. So this was a guy died in California about 10, 15 years ago. And I went to the Supreme Court of the state of California. Now, he was out golfing. I don't know why guys die on golf courses. Maybe because they're in their special place, I don't know. So he's hitting his golf ball and boom, guys, maybe he's getting hit by lightning in a storm next to Bill Murray is your caddy. You know what I'm talking about? Little caddy shack there. Anyway, so this guy dies on a golf course, has a million dollar life insurance policy. Well, his wife, they go through the funeral, da, da, da, da. And then she calls up the life insurance company and says, hey, hey, I need to get the, you know, million dollars. Can you send me the check? And they go, oh, okay, sure. What's your name? And they're like, okay. You know, Judy, well, your name's not here. You're not the beneficiary. Like, I'm his wife. We've been married like 40 years. What are you talking about? He goes, no, so and so's the beneficiary. And it was his wife from 40 years ago where he was married for about two days and got divorced and never changed the beneficiary, never updated it. And she's like, eh, no big deal. I'll just, I'll give this woman a call and I'm sure she'll understand and she'll sign a piece of paper and let me have my million dollars. Imagine how that went. So two years later, at the Supreme Court of the state of California, the court said, we don't know what Tom really wanted. He's dead. He never changed the beneficiary or updated it. So, first wife, you get the money. Ouch. Now, that's a sad story. Even though I joke about it here, and forgive me, but the, the reality is, is when you do a trust and all of a sudden there's changes in your life, you know, maybe a change in your marriage, change with your children and their success or failures and your health. Their health. Some of the people that you were going to leave money to or the people that you had decided to be trustees, if you don't update your trust, it's going to be a mess. So updating your estate plan or your trust is absolutely critical. Now, I know my example was life insurance, but it's the same concept because I want your trust to be the beneficiary of your life insurance, because if you have a change in your life, you don't have to go change beneficiaries on all these different things. All you have to do is change the trust because the trust is a beneficiary of all these different things. So all your changes occur here without having to go around and do all these other little things. So, all right, so we've got our one and two here. One, two, three. Updating. Oh, okay. The next one that I'm going to throw out is some people will make it irrevocable. See, I called it a revocable living trust, but some people say, no, I'm going to go with an irrevocable trust because I want asset protection. So an irrevocable trust provides asset protection, but they are no fun for tax reporting. Let me see. Irrevocable provides asset protection. Sorry, I'm getting my mouth ahead of my pen here. Irrevocable Provides asset protection, but they are not a good move for an estate plan. An irrevocable trust is good for an asset. Like you want to have an asset specific trust, maybe a ranch, a second home, a beach house, a cabin, blah, blah, blah. That's where an irrevocable trust comes into play. But it's not for an estate plan. And so a lot of people get sucked into this asset protection sales pitch and they're going to get charged a lot more to. Don't do it. If you want to add an irrevocable trust somewhere in the mix, okay, do that. Let's make this little black box here your irrevocable trust. But. But you still have your foundational, revocable living trust. So don't get sucked into an irrevocable trust. Okay? Number five way to jack up your trust is you put the person that's your trustee also in charge of raising your kids. Now, some of you that your kids are older and they don't need, you know, raising. They're 18 or older and they're off on their own, hopefully providing for themselves, yada, yada. But the same person that's the money person is raising the kids. That's like giving the key to the cookie jar to the person that gets the cookies. And you put in the document, you only get money for this, this, and this. But here's the keys to the cookie jar. There you go. I really need a cookie. No one's watching. I'm going to go get a cookie. You want to have some checks and balances here, people? So I really like to have a guardian for your children that's different than your trustee. Let the person that's handling the money be the money. And they dish out cash to the guardian every month, every year. Help kids go through school, buy a car, get, go to get, go to the doctor, buy their first home, start a business, get money in stages. Da, da, da. We're going to come to that. But just don't have the same person getting the cookies and controlling the lid and not a good thing. All right, number six. And while we're on that, I think one of the ones that's really a mess is giving money to kids or any beneficiary outright where they can't handle money. And it's sad. I just, I meet with parents that are like, oh, my kids are so smart. They're great. I'm like, how old are they? Oh, they're 15. They're just great kids. When I die, they can have all the Money. I'm like, okay, you've got equity in your home, a 401K. You've got some retirement, you know, some life insurance. That means your kid's going to get 1.5 million. You're going to drop them their lap at 8 at age 18, and just hope it works out. Right, That's. That's your plan? Oh, my gosh. You know, you want to really watch that. I just. I like to give kids money in stages. No matter how responsible you think they are. Let him practice on a first third. And you want to try to keep it in a. In a format that it's educational and giving outright is a mistake. I really like to see it in stages where they're learning as they go. So maybe a third, a third, a third. And you can choose ages, you know, an appointment moment. I had a woman come to my office. She was in her. She was in her late 60s, and we were doing her estate plan. She had, like, two or three kids. And she's like, okay, everything I have, which isn't much. I just wanted to go to my three kids. And I was like, all right. I mean, these kids are, like, in their 40s, you know, whatever. And I'm like, okay, third, third, third. And we're getting ready to design it and get the trust done. And she goes, no, no, no, no. They don't get the money to. They're 65. I'm like, oh, okay. Are they jacked up? What, are they all in rehab? What's going on? You know, 65. They might be able to use that money. What are you talking about? And she goes. And it was really. I guess I don't want to get too emotional here, but she started to cry, and she's like, mark, I'm more scared about money in my life now than I've ever been in my life. These kids need that money when they turn 65 and they don't even know it. And she goes, anything I have, they can have it then, and they're going to need it, and they're going to appreciate it. And I was like, give me a hug and see. You know, we got to think through this. We just can't take our trust and just give money to kids or beneficiaries, no matter what age. Maybe we know better. It's okay. Control it from the grave. People screw up their lives. Actually help their lives. All right, number seven. Another thing that I just think is Nutty is missing out on provisions. This is where. Which I'll come to. I'm going to put number eight here too. And the diy, do it yourself people, if, if you want to do a will. And I, we don't even charge people to do a will. We don't do wills because they just go with the trust. They're simple, they're easy. They need to go with the trust. But if you want to handwrite a will, go download one, sign it, that's great. Go do that. That's cool. But if you're going to design your own trust, which could be easily 30 to 40 pages, and not miss any of these mistakes, you're doing the wrong thing. This trust is going to last you the rest of your life if you do it right. So don't try to DIY it. Which brings me to number seven, which is missing provisions. And some of the provisions that I see people miss that are most common is the PAT provision. I just wrote an article, it's in my blog, and I had to research the pet issue. Over 65% of households in America now have either a cat or a dog. And 95% of the people surveyed as pet owners in this thousands and thousands survey links. In my article, 95% of those pet owners said the pet was equivalent to a family member. Now, so kind of a cool deal. But how many people take time to say, who's going to raise my pet? Am I going to give them a little money on my life insurance to raise the pet? I can cross check those, the census figures of how many people die a year and how many are pet owners. And then the surveys of euthanasia, meaning pets that get dropped off at the shelter because the owner dies and the family doesn't want them. And you put two and two together, they're kind of sad, right? So you want to not miss out on these provisions like pets and guns and personal property, pianos, wedding rings. There are so many other little provisions we talk about in our questionnaire to make sure clients don't miss out on different sections. Who's going to inherit these, these really important assets and should they? You may have said to your third child, hey, when we go deer hunting every year, you're going to have this gun. If you don't put it in your trust, they're probably not going to get that gun. And then sometimes kids that shouldn't have a gun end up inheriting guns. Right? And I know it's a, it's a touchy topic, but it's out there and that's cool, you know. So anyway, you got to make sure these provisions Aren't messed up, not missed. And hereby you mess up your trust. Okay, two more and then I'm just going to do some Q and A here. All right? Number nine is not disinheriting someone properly. Now, I know this sounds harsh, but I have a lot of trust in estate plans where people say I, this, I'm. What do they say? Oh, my gosh, the word. My studio's got to help me out. When you're, I want to say disenfranchised, but you're distanced from your children. You're. You're not. They're not in a relationship with you anymore. And come on, help me out, guys. And so everybody else there knows what I'm talking about. But so if you. Estranged. That's the word, Dr. Strange. Okay. If you're estranged from your kids, meaning that relationship's gone and you don't want to leave them anything, if you specifically don't say that in your trust, they're going to get something and it's going to be a fight. So if you're going to disinherit, you have to do it right. So not properly disinheriting specific people. So you want to make sure you get that right. And then number 10, excuse me, is putting your own name on your trust. I think that's a mistake. We are trying to be at the forefront in privacy planning and how you can hide your assets more from identity theft and, oh, gosh, all the white collar crime that's out there. I mean, just scary stuff. And so the more privacy you can have with the ownership of your assets, the better. So putting your own name on your trust is a mistake. We do not want to do that. And excuse me. So we're going to use, you know, Blue Sky Trust, more unique names and try to provide some anonymity. Now, I know in the county recording, when you go to record real estate, we have other strategies to maybe hide your ownership of your home or rental property. But putting your trust on property, you're going to have to usually reveal you're the trustee. So there's some hangups when it comes to real property. But you can use that trust name that's unique to and a lot of other ways without disclosing who the trustee is. So, my friends, those are 10 ways to screw up your trust. And I hope that's helpful so that as you're doing your estate planning, you think of, okay, I can, I can do this better. I can do this right. And again, I mentioned below, you can talk to one of our lawyers on Zoom right there from any state in the country. And our attorneys can help you design your estate plan. And your trust a little specialist down below.