#214 Trusts 101: When Do You Need a Trust?

Hey, everyone. On this week's episode, we're going to be talking about a topic that I'm surprised more people don't know about or don't really understand, and that's the concept of a trust. It's not something we obviously learn in school, so it took them a while for me to understand this concept, the difference between a trust and a will, what it's about, why I need it, and why you might need it, too. So let's talk about all of that today. So stay tuned. Welcome to the Passive Income MD Podcast, where we talk about creating your ideal life through multiple streams of income. If you enjoy hearing about this stuff, make sure to hit subscribe. Now let's get on with the show, y'. All. So every time we bring up this concept of trusts or wills or the concept of what to do with your estate after you pass away, we always get a ton of questions on our Facebook group and our communities. It's something that many of us don't think about until we have significant other or we have children. Then we start thinking about what's going to happen to my estate, my income, my investments, if and when I pass on. Because it's not a matter of if, it's a matter of when. I know it's not a topic that we all love talking about. It can be a little sobering to think about this, but let's face reality. We all work in a field where we see things happen all the time, things out of our control, things that we don't expect to happen, and we all know how precious life is and how we got to enjoy our time and how something could happen at any time. So I think it's important for all of us to figure out how to take care of our families after we pass and whether trust is right for you and your situation. So I'm going to go over a few questions here. Again, this is not exhaustive list, but it should help you get started. So here's a question. What is a trust and how does it work? I'm going to go ahead and read a definition here. A trust is a legal arrangement where assets are held by a trustee for the benefit of beneficiaries. It's like a protective container for your assets, managed according to your instructions by a trusted individual or entity, the trustee. Okay, let me decipher that a bit. Basically, it's a legal document that says where all of your assets are going to go after you pass, who's going to be the beneficiary of it, and who's going to take care of it. And what are those instructions around how those are going to get passed on? Now, what's the difference between a trust and a will? A will is just a simple legal document that does provide those instructions on how to distribute your property, your assets to your beneficiaries after death. But a trust is a lot more complex than that. It's actually a legal contract that allows you to transfer your property again to someone else or to another account managed by another person. And the beauty of this lies in the ability of the trust to help you bypass probate, maintain privacy, and really provide precise control over the distribution of your assets. Now, probate is the process that's completed when somebody who passes away leaves assets such as bank accounts, real estate, financial investments, and it gets proved in a court of law where it's supposed to go. When you have a trust in place, it's so well defined that, that you don't need to worry about probate. However, when it comes to will, you may still have to go through the probate process. I think this might be a good time for me to note that I'm not an asset protection lawyer. I just study a lot about it and I'm trying to pass along the information that I've learned and I've curated from them. But of course, you want to consult with a true asset protection lawyer to help you and navigate you through this process.

Hey, what's up everyone? Just want to ask you a quick question. Are you ready to take your medical.

Career beyond the traditional boundaries of medicine.

And amplify your impact?

Well, I want to tell you about.

The Leverage and growth accelerator community. Just so you know, we created this exclusive community just for physicians like you who want to expand their identities without giving up their doctor identities. It's an add on, it's not a replacement. When we hosted our first Leverage of Growth summit, I know many of you have been part of that. We realized that so many doctors were inspired by the what and why of entrepreneurship, but needed help with the how and and when. And that's why we created this community called Leverage and Growth Accelerator to help doctors learn how to start, grow or scale a thriving business and connect with like minded individuals who also want to make a positive contribution to the world. Within this community, you can experience a life of greater fulfillment. It's really a powerful antidote to burnout where you can leverage your medical degree for new opportunities and take command of your time and schedule so you can invest in your family's future while enjoying today. In the Leverage and Growth Accelerator, you can have access to educational materials, you can have insights from expert speakers, small group coaching, and most importantly, you can have community support to help you realize your untapped potential in 2024 and beyond. And we're so confident in the transformative power of this members only community that we're offering the first 30 days for free. If you're interested, I want you to take advantage of this. This window of opportunity is not going to last forever. So go now to lgacommunity.com again that's lgacommunity.com if you're ready to take your medical career to the next level, make a profound impact in the world and do it together with other like minded people. It's time to join us.

We can't wait to see you inside. Now there are a bunch of different types of trusts in various forms and they each serve their specific purpose. There are two main categories that you need to know about. One's revocable versus irrevocable. Now just so you know, a revocable trust allows you to make changes to the details. It's subject to taxes. And again, it's excluded from probate court that we mentioned about, which makes it really non public. And that's why people talk about anonymity when it comes to probate. All of your dirty laundry, all of your assets don't need to be put out there in public. Now when it comes to irrevocable trusts, changes cannot be made once it's created and it's typically not subject to taxes. And again, it is excluded from probate court and it's also non public. Now there are pros and cons to each. We'll talk about that in another session some other day. But just understand that you need to understand the difference to decide which one makes sense for you. Now just so you know, there are trusts for different financial goals. There are marital ones, charitable, spendthrift, business, special needs, education trusts, life insurance trusts. So many of these different types of trusts that are available for you to create different depending on the specific topic. And that's something I didn't even know about. Now I always get this question, who should consider setting up a trust? Now to all of you listening out there, you're either a physician or you're an entrepreneur, or both. Now my hope is that you have diverse income streams and you've got a diversified portfolio. You've got different assets in there, stocks, real estate, alternative assets. And a trust in that situation will not only help you with Asset protection. It'll also help in the wealth transfer process to the next generation and make it seamless. I think all of us want that when we pass on. We don't want it to be complex for the next generation. Many of us are really concerned with generational health and passing things along or to our spouse or partner. And we want that process to be as easy as possible when it comes time. Now, if you have substantial assets, I hope that many of you listening do have that, or you've got some really interesting family dynamics that aren't super easy to tease out. And perhaps you have some special wishes about your asset management and inheritance, like timing of that. If you were to pass early, would you want all of it to be passed down to your family and kids right away or would you like a cooling off period or they have to hit a certain age to get some of that. Now these are considerations to think about, but if you have any of that, you want to have a trust in place. Now I talked a little bit about this already, but somebody asked what are the benefits of trust? Number one, you're able to avoid that probate situation so you get a faster payout, doesn't need to get put through court, have somebody preside over it and then figure it out. It's all set up for you and predetermined. There's more specificity. You can actually get to the point where it really spells out who receives what, how they receive it and when. There's also less conflict when you pass away. It really can't be contested in court. It is a legal document that's all set up. There's also more privacy. Since you don't go to probate, which is public record, all your assets in your trust get passed on without having to worry about that. If you set up the right type of trust, it might get protected from creditors and lawyers, which is always a good thing in our specialty. And again, in certain situations, it can help reduce taxes. Certain trusts can reduce your estate or gift or income taxes. So depending on what you're looking for, the question is just how do you make it happen with a trust? Now how about this question? How can physicians and entrepreneurs use trust in their financial planning? This is definitely something to talk about again with your asset protection and estate attorney as well as your financial advisor. Because if you integrating trusts into this whole financial strategy, just like everything else, can help you take advantage of all of the benefits. You can safeguard your personal and business assets again, you can minimize your estate taxes for passing on. You really want to get that smooth transition of wealth to your future generations. Trust me, they'll be happy that you've created a trust to make it easy for your family when you move on. Here's the last question. How do you set up a trust? Well, first you got to determine what kind you want. So let's do some education around that. Then you should come to the table considering different ideas and options. What happens to your heirs? Who do you want to pass it along to? What does your current portfolio look like with your assets? You got to put all that together. Are there any charitable considerations that you might have timing of all of this? Please talk to a trust attorney. You don't want to do this online through a simple online platform. You want to explain your needs, have them go back and forth with you, talk about different options, talk about different provisions and things, about taxes and assets, talk about all of those details. You're going to need to name a trustee, whether it's a corporate entity or a friend or relative, the person that you will appoint to take care of your estate when you're gone, and basically just follow the instructions of the trust. And of course, the key is to figure out how to move your assets into the trust, because you can create that container, but you have to put assets into it. We talk about that all the time when it comes to real estate and LLCs. How to go ahead and put that in your trust so that it all gets passed on to the next generation the way you want it. Now, as you can tell, there are a lot of questions around this topic. We're only talking about it for a short period, but I wanted to get you thinking about this topic, especially again, if you have a partner, you have kids, you have a home and different assets that you want to get taken care of if and when you pass. I think taking a preemptive approach and proactive approach is absolutely essential in this type of case. You should think about it before you need it. Obviously, when I think about finances, I think about all aspects of finances, from investments to income to insurance. Estate planning is definitely one of those big topics and it's something if you haven't thought about it, my encouragement is to go talk to someone and start planning this out. It'll be well worth your time and effort. Then hopefully you don't have to think about it again. In our community, we want to help people create multiple streams of income, grow wealth, but we also want you to be able to protect it and pass it on smoothly when it's time. Hope that was helpful. In some way. Have an amazing week. Let's talk again soon. Enjoy the show. Let me know by dropping a review in the podcast app you're listening to us in. And if you haven't already, make sure to hit subscribe. Join thousands of physicians who are also on this journey to creating their ideal lives through multiple streams of income. Learn more at our website, passive income md.com thanks again for allowing me to be a part of your journey. See you next time.