Is Your Home at Risk Without a Trust?

Transcription

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Pete

Thank you so much for joining this week's podcast. This week I have Paul Salisbury. He helps you build your trust and this conversation is all about trust.If you want to know what a trust is and why they're important, I highly, highly recommend you watch this episode because in my opinion, after hearing this conversation and being a part of it, I recommend anyone that does own a home that has assets to definitely get their trust set up. If you have questions, definitely watch this podcast. It'll be really, really good for you and your family.If you have any questions, reach out to me, please. If you can like and subscribe to this channel, that really, really helps me out. And also everyone else that's participating.Thank you so much and enjoy the episode. We have Paul Salisbury here, we're going to have a conversation about trusts. And what a trust is, how to set them up, what the benefits are.So I'm just going to go ahead and kind of introduce you to the audience and share who you are. So we have Paul Salisbury. You're an estate planning coordinator, consultant and raised first half of your life place called Palmer, Alaska, traveled to five different continents.What continents?

Paul

Africa, Australia, Europe, North America, South America.

Pete

Wow.

Paul

So I just got Asia and Antarctica.

Pete

Wow.

Paul

Surprisingly, Antarctica is.

Pete

Antarctica. You've been to Antarctica.

Paul

I want to go. That's that's the next place I want to go. So.

Pete

Proud father of two amazing kids, enjoys the outdoors, meeting people from all around the world, helping people understand complex issues with patience and ease. Career highlights. You got your bachelor's degree in communication and public affairs, recently a master's in psychology counseling.Nice. That's cool. Where'd you get your degree?Simpson. Oh, very cool. Current projects.Learning more about gun trusts. That's interesting. And setting up foundations for clients who want to leave their legacy beyond a trust.Yeah, I like it. OK, cool. Yeah, I want to talk more about the gun trust here a little bit.Personal passions and interests. Travel, hiking, kayaking, food and culture. I love traveling as well.It's super fun. Topics of interest. How having a bookable living trust protects your home.So we're going to talk about that, what the difference is between a revocable and non revocable. I think that's a big question and how it can protect your home. We're going to get into that.Yeah. So I brought Paul in because he's been helping me with my trust and you've been going through what it takes and getting me all set up. So that's super awesome.I thought I'd have you come on and talk about trust and why they're important.

Paul

Yeah, absolutely.

Pete

What what got you interested in in trusts?

Paul

Well, about five, six years ago, I was working with some other people here in town. They were running an investment, managing retirement accounts, stuff like that. And this was just kind of a tool that we were offering clients.And at some point they said, you know, you want to ever go out on your own, you can. And so right around Covid, I decided I'm going to do this on my own, not knowing Covid was going to happen.

Pete

Yeah.

Paul

And the world kind of came to a standstill and slowly by word of mouth, I just won one person after another. And five years later, I have an office, multiple clientele, high net worth clients doing expos and doing the Chico Home Garden Show Expo this weekend.

Pete

Oh, nice. Yeah.

Paul

So if you're down in the Chico area, come see me at Chico and yeah, go from there.

Pete

Yeah, I know that trusts, a lot of people don't have them, a lot of people don't have them and don't know the importance of having a trust. Yeah. And so I've had personal experience with having clients that are getting financing or maybe they purchased a home and they didn't have a trust set up.I've had it to where, you know, the home had to go into probate. We'll talk about that.

Paul

Right.

Pete

And also I've had on the other side where customers have actually tried to buy homes where there was no trust involved and they had to buy a home that was in probate. So maybe I thought we would just start by explaining what a trust is and why it's important to have one.

Paul

Yeah. So basically the basics of a trust is it's essentially a legal entity or a legal written document that is recognized in the court system that a judge has to honor and uphold the way it's written because it's a legal binding contract, whereas with a will, it is essentially a wish. It is.I would like this to happen, but there is no guarantee. Whereas with the trust, it is written firm foundation. That's just how it is.And you can set up however you need to, however you want to, in a way with a legal written language to protect the people's assets and make your decisions permanent, you know.

Pete

And this is set up for individuals that want to, if they own a house, if they have assets, if they have bank accounts, large amounts of money, they definitely should have a trust.

Paul

You know, really, I mean, yeah, obviously, you know, people who have house, car, boat, if you have children or any kind of asset that's got a title to it, essentially, you're going to want to have a trust. But more importantly, especially in California, you know, you're going to want to have a trust just in general because it encompasses so many more benefits than what a will does. And so a lot of people have this misconception that, oh, well, I don't own much.I just own, you know, I have a mortgage on my house and I have a car, a few thousand dollars or a few hundred dollars in my bank account and I'm raising kids. I don't really need a trust. Well, I'd like to get more into that about the benefits of having a trust over a will.

Pete

Yeah. So so a will and I'm very ignorant on this. So a will basically is a document that anyone can write and basically you stick it in a drawer somewhere or in a safe and say, this is my will.This is what I would like to happen if I was to pass.

Paul

Right. Yeah. Essentially, people have just written wills over the years, either hand written something up and maybe had a few people sign their name to witness it or whatever.It's really just to let, you know, it's for your loved ones, for when you pass away to know what your wishes are, what you would like to have happen. Whereas with a trust, by getting a trust set up, especially if you have children, you know, you can even express your wishes. But in the moment when you pass away, family members are, you know, emotions are on high and people don't always make the right decisions.And unfortunately, as much as people want families to get along after a person passes away, family does not always get along. And so that's where having a trust comes in. It is very beneficial because then you'd get to decide as the initial trustee who gets what or if somebody even gets anything.Whereas with a will, it's, you know, people can come to court and contest it.

Pete

And what kind of trusts are there? So in your bio, there was a, I think you called it a non-revocable trust.

Paul

Yeah.

Pete

So what's the difference between a non-revocable and a revocable trust?

Paul

Yeah. So revocable is basically essentially what it says in this name. It's the ability to be revoked, to be canceled out, to change, change or canceled out.So I've had clients where they had a single grantor trust or they had a dual grantor trust and then their spouse passed away and then they actually just wanted a whole new trust with just their name on it. And so we ended up revoking the dual grantor trust and creating a single grantor trust. But more specifically with revocable, irrevocable, essentially revocable, you can make changes or you can cancel it out.Irrevocable, the moment you place an asset into the irrevocable trust, such as a house or a bank account, you no longer own it.

Pete

And it can no longer be changed.

Paul

And it no longer can be changed. It's like concrete, can't be taken out or anything like that.

Pete

Can it be sold?

Paul

No, it can't sell anything. Yeah. So you put a bank account into an irrevocable trust, no matter how hard you try, it is not coming out.So it is there. It is no longer your money. It is now waiting until you pass away.And then it goes to whoever you listed as a beneficiary.

Pete

Got it. And so I imagine there's circumstances where so most of the time, most people will want to get a revocable trust.

Paul

Correct. Yeah.

Pete

Not a non-revocable trust.

Paul

Yeah. There is one other exception where an irrevocable trust could be beneficial is if you are ultra high net worth worth individual and you want to place a certain amount of money aside and have it not touched for legality reasons whatsoever. You can put money aside in an irrevocable trust and no one can get to it.No. Including from what I've researched online, specifically people who are on Medicaid or maybe Medicare, when they want to recover assets after a person has passed away to pay off what they've paid for health care purposes. The only way you can avoid someone like Medicare coming in and taking ownership of a home or assets is to place those assets in an irrevocable trust.

Pete

Got it. So if I heard you correctly, I'm just going to kind of repeat what you just said so I understand it. So what you just said is certain circumstances when someone should do a non-revocable trust is when potentially you have a family member that's older and you're helping provide care for this person and this person will set up a non-revocable trust to get reimbursed for what they've had to spend.And that way, if the government or Medicare wants to get any kind of money out of those proceeds, they are not able to, that that money can then go back to the person that it was meant to go back to in the trust.

Paul

If they're listed as a beneficiary, essentially.

Pete

Yeah. What what happens if you don't have a trust? Let's say let's say someone passes away.Let's say I'm an owner of a house and the house is in my name and I pass away. What happens if it's not in a trust?

Paul

So essentially what happens is the house would have to go through what's known as probate process. That length of time varies. It can be anywhere from on average six months up to a year and a half.Sometimes two years. It really depends on the state and the county in which the probate has to go through. I know a really good example is a year or two ago, I was looking at purchasing a home and I contacted the realtor, said, hey, I'm really interested in this home.And they reached back out and they said, hey, actually, that home has to go through a probate. And about a year later, I got notified that that home was finally out of probate and able to be sold, took a full year.

Pete

So what I'm hearing you say is that probate is essentially the government deciding where the asset goes.

Paul

They have to make sure. So when you don't set up a trust, you don't set up a legal representative to act on your behalf. Really, what a trust is doing is you're setting up.So first, there's two things. One, you're in charge of your trust. The trust that I set up with people, they're the initial trustee.Then they assign what's known as a successor trustee.

Pete

Successor trustee.

Paul

That trustee, that successor trustee becomes also known as the executor and kind of manages everything, pays off any outstanding debts, closes out accounts, distributes assets or acquires assets or whatever. When you don't set up a trust and you only set up a will or even if you don't set up even a will, then the government or probate process, they step in because they're acting now on your behalf.

Pete

So they're essentially the trustee. They are. The successor trustee is basically the government or the court, the court system.

Paul

A person that you've honestly probably never, ever met and you've never been able to really sit down and say, this is what I want. They then have the task to make the decision of what they think is your best interest. At that point, one, two or more people can come to court and petition the court and say, hey, you know, Pete passed away and he told me that he was going to give me his 64 Mustang or whatever, you know, and here's a note that he wrote me saying that he was going to give it to me.And then somebody else comes along and says, no, he said he was going to give it to me.

Pete

I had this conversation a while ago, we talked and yeah, wow.

Paul

And so at that point, then a judge has to hear both sides of the story. They have to set a court date, set a hearing, and then they have to hear it out and then they have to make that decision. So you work your entire life to earn all these assets that you wanted to maybe give to your children or to family members or whatever.And in a blink of an eye, it can essentially go to somebody that you never intended to have it go to. Whereas putting a trust, getting a trust set up, you get to decide. So I tell people, you know, you don't get to decide when you pass away or how necessarily, but you do get to decide what you do with what you have.

Pete

Makes total sense. And I had a trust a while ago, but it's been so long. I was married and then went through a divorce and kind of, you know, that trust was done.I don't think we did anything with it. I think it was just still there. But I don't know that all the assets that were in there are now sold or, you know, gone.So we're setting up a new trust.

Paul

Correct. Yeah.

Pete

So that's that's an interesting question. So you should basically revisit the trust often.

Paul

Yeah. So on average, a person should review the trust probably every three to five years, depending on the complexities of what you have going on. I have a client.He asked me to come visit with him once a year. He's one of my high ultra net worth clients, and he's actually paying me additional just to meet with him once a year for a couple hours just to make sure everything's good to go. And I just met with him just a few weeks ago.And so.

Pete

So it's definitely good to revisit because things change. Yeah. Relationships change.Yeah. I'm going to kind of go through. I made some additional questions here just to ask.I thought that might be interesting. So what do you think are some of the common misconceptions people have about trust on why they actually don't set one out?

Paul

I think the first and the most common misconception is they think that trusts are only for millionaires, billionaires, people who have a lot of assets to give. You mentioned before people who, you know, buy a house and they have a mortgage. I've had a few clients tell me, oh, yeah, well, we have a house, but we don't own it.You know, we're just making payments on it. So we can't put that into the house or into the trust. Right.That's when I let them know, like, actually, no, you can.

Pete

That's a that's interesting. So. So some people think that because they have a mortgage, they don't technically own it.And so they are not able to control it. If they pass, I think maybe it goes back to the bank. Right.

Paul

Yeah. And so that's not necessarily the case, depending on, you know, how the terms are. So if you're a first time homebuyer, if you set up a trust as you're going through the process, it's very well possible that you can get your house put right into a trust immediately upon closing.But then furthermore, or just shortly thereafter, you can get everything set up in a way where it's streamlined, you know. So, yeah, absolutely.

Pete

Yeah, makes sense. Yeah. And to answer your question, yes, a first time homebuyer absolutely can get that trust set up.They can put it right into the trust immediately when they close. We give them the option to where they can we can close it in a trust. It's totally fine.It has to be a revocable trust. Can't be a non revocable trust for the reasons that you said earlier in the conversation. Yeah, they can set it up and then we can record right right in the trust or they can get it set up after and then they can have you would be able to get it switched from their name into the trust.Is that correct?

Paul

Yeah, absolutely. They work with an organization that deeds houses into the trust all the time. And I've worked with clients here in Shasta County, but then also I have clients in other states and other counties because the great thing about the organization I work with is we have a network of attorneys that work in all 50 U.S. states. So some of the benefits is really just being able to set up a trust wherever you're at. So I have a client who has a home here, but then they have another condo in Hawaii. We were able to get that condo drafted up to put into their California trust here.I was just recorded in Hawaii, the local recorder's office. But then furthermore, let's say you buy a home here in California and then you're like, you know what? California is not for me.I'm out of here. I'm going to Texas or I'm going to Colorado or Montana. You contact us and say, hey, I'm moving.We'll restate that trust for you at no additional cost other than just the cost of the notary. And then next thing you know, your new address and your new home is put into the trust where you're at versus having to find an attorney or pay more legal fees.

Pete

Yeah. I imagine that another misconception would be that people don't have trust or don't get trust because they think the cost is astronomical or they think they have to hire an attorney to do this. And really what it's sounding like, you find an expert in trust like yourself that does this day in and day out and you can definitely help them complete their trust.

Paul

Yeah, absolutely. So even though I'm not an attorney, I work with attorneys. And so I am, as they put it, I am an independent subject matter expert.So I've been doing this for about five years. And so I know the ins and outs of how it all goes and everything. So I find and acquire the clients.I gather the information. I submit the documentation to the network. And then in return, I get the documents back that are legally drafted up in the written legal language for the state in which the client lives in.And then oftentimes I'll oversee the signing and the notarization of the documents. But then furthermore, I'll take those documents, get them scanned and uploaded onto our online platform. We have this very secure, state-of-the-art online platform where clients' trust can be uploaded so that if it ever gets lost or damaged in a fire or a flood or anything like that, essentially you can reprint out your trust documents without having to pay.

Pete

This is my next question. So let's say there wasn't that portal and let's say you lost your trust documents. What happens then?Is it recorded somewhere?

Paul

Unless the attorney that a person goes to has a copy of it, you pretty much have to pay to get a hold of it.

Pete

You don't have a trust. Yeah.

Paul

You have to get it done all over again.

Pete

Interesting. So if you do have a trust, you want to really make sure you know where that trust is at all times and also have your family members know or the person that helped you get the trust knows where that trust is located and stored.

Paul

Yeah, absolutely. And we have the ability where you can email documents to family members that maybe live in other states or cities so that they have a copy and know exactly what's to be done and what happens next. Got it.

Pete

Is there any state where trust is better in one state or is it all pretty much the same federally with trust? Like a California trust, is it different than a Nevada trust or Oregon trust where it's located?

Paul

Yeah, I just had this question asked me earlier. As far as I know, there is no benefit of having a trust in, say, Delaware versus California. A trust is essentially it goes with you.It's a legal binding document. It's just however you want to set it up. But the benefits of California trust is that you're going to avoid that probate tax.So I was just looking up before our session here. So in California, our probate tax is structured. So the first hundred thousand dollars, you're taxed at four percent.

Pete

Oh, wow. I did not know this. So let's say you don't have a trust.

Paul

Yeah.

Pete

And something happens. You pass away. The state becomes the trustee.They decide who gets what and they get a fee for that.

Paul

Correct. Yeah. So in addition to having to wait this entire time just to sell mom's house or dad's house or whatever, not only are you having to deal with that, but you're now having to pay off a tax to the state of California.Fee.

Pete

A tax.

Paul

Yeah. And so California is not just a flat rate tax. It's structured.

Pete

It's a it's a fee. So you could have 10 properties and it's four percent of, let's say, four million bucks. That's a lot of money.

Paul

Right. And here's the other thing. It's not on what's owed on the property.It's what the property is valued at.

Pete

So you could literally have not much equity and you have properties, assets, cars, whatever. It's the value of the asset that they take the fee on, not necessarily the net equity.

Paul

Right. So really good example, Bay Area client has a million dollar home, first hundred thousand dollars for four percent. So it's four thousand dollars.Wow. Second, hundred thousand dollars, three percent, three thousand dollars. It's a little bit easier, but still not as not as good.Next hundred, next hundred thousand or next nine hundred thousand, I think it's two percent. The last one percent is on the next nine million. So I did the math before our session here, a million dollar house.You're going to pay 18, I think, eighteen thousand dollars just in taxes that are going to have to go to the state of California for not setting up and not setting up a trust.

Pete

That's huge, because if I have any, I mean, I'm going to I'm going to be telling a lot. Every customer that buys a house, hey, do you have a trust set up, especially the ones? I did not know this because I can tell them, say, hey, you know, did you know probate cost this much money?

Paul

Right.

Pete

You know, to manage.

Paul

And so oftentimes the kids, when mom or dad dies, instead of being able to keep the house and acquire it, they have to sell the house off to pay the probate, probate, cover the taxes.

Pete

Even if they wanted to keep it, maybe they don't have the money and there's not equity, let's say they would have to either get a loan or get some money to actually pay that that tax. How many people do you think are in this category where they have multiple assets that don't have a trust set up?

Paul

I'd say, in my opinion, I'd say over 70 percent.

Pete

Seventy percent of the population that are homeowners have assets, don't have a trust.

Paul

Yeah.

Pete

Go ahead.

Paul

Yeah. So I do these expos at the Home Garden Show, did the Reading Home Garden Show Expo. I'm going to do the next one next March and stuff.And all those people are homeowners coming in. And that's one of the first things that they mention is like, yeah, we're a homeowner, but we don't have a trust set up. So get their information and follow up with them.

Pete

So another question I had, let's say a business owner. Should a business owner have their. Can you put a business in a trust?

Paul

You can. So just recently did that for a client of mine. And so it takes a little bit more finesse, but there's some great benefits to putting the business into the trust.Obviously, you know, just like a business, you go from a sole proprietorship to an LLC. One of the main reasons people do that is for liability purposes to shift the liability off of them as an individual and more onto the trust. When you take a business and you put it into the trust, you create even more protection for not only you, but then just for the business in general, because then when people go, if there's any kind of litigation of any kind, they can't really go after the business because the trust now owns the business.The trust owns the business and the trust runs the business. You are still the managing trustee of the business. You still write the checks.You still manage the day to day. But when it all comes down to it, the trust, the owner of everything.

Pete

For a business, let's say someone owns a business, it's an LLC and something happens there. It's a good business. Let's say they own heavy equipment operating business and, you know, do really well.Something happens to them. You have this really good business. And all of a sudden the owner's gone.The state actually decides how to split up that business.

Paul

Yeah. Essentially, the business has to get dissolved, go through the probate process.

Pete

So the business would go through probate. So it wouldn't be like a son is in the business. He's working in the business.He helps dad out and dad passes away. Now the son says, oh, yeah, I'm going to take over. But it has to go through probate in order for that LLC or whoever, if he was the owner, it has to go through probate to actually get to the son.

Paul

Right. Yeah. And all of the business assets that are incorporated within the business, all that has to be kind of processed, just as if it was your own personal assets, your cars, your trucks, your boats, your RVs, all that kind of stuff has to go through the probate process.But putting a business into the trust, it kind of it doesn't really skip probate in a sense. It really just does it in advance. You know, there's even when I've talked to the clerk for the probate for Shasta County here, she's mentioned that people have come in and said, hey, we want to do probate in advance.What can we do in advance?

Pete

What do you mean by that?

Paul

Well, essentially, they want to get everything set up so that everything's done and over with for the probate. Yeah.

Pete

Before they pass.

Paul

Correct.

Pete

Why not just set up a trust?

Paul

Well, that's essentially what the clerk told him and said, well, yeah, you need to set up a trust. The county has to be neutral in that point. So they can't prefer any one particular person.So they just say, well, just go find an attorney, go find somebody. And there's a lot of great attorneys here in town. A lot of them, some do specific estate planning, but most of them do something else.They do family law or they do defense attorney or something like that. They'll do estate planning, but that's not really what they do day in and day out. So a lot of times you'll go in, you'll maybe make a deposit or you'll pay for something.And then three or six weeks later, you know, they're maybe get around to it. Whereas with me, that's all I do all day long. So, you know, my turnaround time is pretty quick.

Pete

I hear what you're saying. So what I heard you say is county is going to say, hey, go talk to an attorney and then they're going to try to reach out to some attorneys. And I've tried that in my good luck getting a call back or, you know, days, weeks before you're able to actually meet with somebody.And what you're saying is this is what you do day in and day out. And you actually can can help right away, get that done right away for that family. Yeah, absolutely.That's a quick question that came up. Let's say I'm a sole proprietor and I own a business. Can I put the sole proprietor business in a trust?

Paul

So you wouldn't necessarily put a sole proprietorship business into a trust because everything that the business is right is just in your name.

Pete

Bank account maybe could be in that trust, but that's about it.

Paul

So essentially it's just for LLCs and above.

Pete

And you can put more than one LLC or S corp into a trust, which would be another benefit of actually having a corporation or an LLC for your business is that you can have it in a trust, whereas a sole proprietor is not as safe.

Paul

Right. Yeah, because sole proprietorship, it's you're at your you're the yeah, you're at risk. Think of it this way.A trust is really doing two main things. One, it's avoiding or doing probate in advance and avoiding that taxation. But then secondly, it's keeping everything private.Once you put something into a trust, essentially you technically don't own it on paper. You know, the trust owns it. You may manage it, but when it comes down to it, your house, your car, it's in the the John Smith Trust, you know, or the Smith or the Frank, you know, whatever trust.And I've had people set up trust names that are their last name. I've had them set it up as just the initials makes it that much more ambiguous.

Pete

I think I understand what you're saying. And so let's say I'm a high net worth person and I have a lot of assets. Well, if I don't have a trust, let's say I have four or five homes.They can go and see, oh, this person has six homes and they're all free and clear because that's public record. Right. And so they're like, yeah, we need to sue them because they hit the they ran into us, you know, at a stoplight or something.

Paul

And so if you put your home into a trust and someone's going after you for litigation purposes, there may be they find an attorney and the attorney finds out that, oh, this person doesn't own anything, you know, and maybe you get everything into a trust or maybe they somehow find out that you do have a trust and you do things, have things in the trust. Most attorneys are not going to want to take on a case that have stuff at assets into a trust because it's a lot more difficult to go over assets if they're in a trust.

Pete

Why is that?

Paul

It's just it's just the legality purposes. I mean, I don't know the ins and outs of it. I just know that oftentimes when an attorney finds out that something's in a trust, it just I mean, you're paying for the time for that.Yeah. So an uphill battle. So a lot of people are going to.Yeah, it's not worth it. Yeah.

Pete

If a homeowner still has a mortgage, how does that impact the process of putting their home in a trust?

Paul

Yeah. So we mentioned that a little bit earlier, but just to reiterate on that. So the main thing is, is just, you know, you contact, you know, you get a trust set up and we get a copy of your deed.And then I work with the deed preparer contact that I have. We get it redrafted up so that you're not you're selling your home to yourself. Really?You're just transferring ownership. So you still get to live in the home. You still get to utilize the home.You can sell the home in a trust. You know, I'm sure you've managed.

Pete

Yeah.

Paul

You've had a handful of clients where the client was selling a home, but the home was in a trust and there's just a little extra step to get it out of the trust. Maybe a few extra signatures to get out of the trust to be able to sell it. Stuff like that.Sometimes mortgage lenders will ask a client in order to refinance. They'll have to take it out of a trust. But you just want to make sure that you can put it back in.Yeah.

Pete

Typically, well, we could refine if it's in a trust. We'll just keep it right in the trust.

Paul

Yeah. And that's really smart. If you can keep keep a house into a trust in the midst of refinancing, the smartest thing possible.And from what I've heard, it is doable. It's just a matter of the terms of.

Pete

Yeah. And the only thing that we ask for in that process, if there's if it's a home is currently in a trust, they want to refinance. Then we'll just say, hey, we just need a copy of the trust.And because we want to make sure that it's a revocable trust so that it can change because they don't want to put the home in a non revocable trust, because then it's going to be very difficult to maybe foreclose on that house.

Paul

Yeah, absolutely. And there's been reading up a little bit more about just some aspects of mortgage companies kind of wanting to be aware if a home is going into a trust. Some, depending on the mortgage lender, they can impose what's called a due on clause.And so that's really just them just, you know, demanding payment upfront. And so as long as, you know, you get permission in advance and the lender is aware of it and it's a revocable trust, I think you're good. You're good to go.

Pete

Yeah. Fannie Mae and Freddie, they both say it's fine. You can put your home in a trust.There won't be any due on clause. That's going to be most mortgages out there. They just want a copy of the trust.The due on sale clause would come if it went into a non revocable trust.

Paul

Right. And then I believe there's another one that I read up on. If I'm saying this term correctly, a step up basis.And this is where if a home was purchased before 1972, there's some tax advantages. And so there's just a little bit more special care that's needed for putting that particular home into a trust. But those are just questions that I just ask clients, you know, like, how long have you had the home?And if they've had it, you know, if they've had it, you know, for a long period of time and it meets that criteria, then we want to make sure that they are able to retain those benefits. Oh, the benefits.

Pete

That makes sense.

Paul

Yeah.

Pete

I was going to ask you any tax benefits with having a trust, assets in a trust?

Paul

You know, I'm not a tax person, unfortunately, but I'm sure there are advantages. I've been reading a little bit more up on just some advantages of putting assets into a trust and then managing the trust and putting a business into the trust and the write offs available and how you can write off more things and more aspects of maybe a business or an individual. The main advantage is not paying the tax to the state of California or any state for that matter.You know, it's just, you know, and it keeps keeps the family, you know, the home in the family generations for a period of time. You know, I really want to work towards not just getting people set up with a trust, but really setting it up to where if they want to have this home, maybe they have a family cabin, a property or something where they want to continue. It continues on and it transfers from their kids to their grandkids to their great grandkids and go on and so forth.

Pete

So that's interesting. So if I have some assets that I want to continue to be in the family, in the trust, I could make instructions that said this home will never be sold outside of the trust. In other words, I could say I want this home to continuously be for my kids and their kids, kids and their kids, kids.

Paul

Right. I mean, there's there's aspects of that. One typical way you do that is you set up a business like an LLC and then the business or the LLC is in the trust and then the home is in the trust.And then it's no longer you. When you pass away, the successor trustee becomes the manager of the of the of the asset of the business so that it continues on because trusts are an infinite entity. So typically when you're funding the trust aspect, you want to put the trust either as a primary or contingent beneficiary because people pass away, but trusts live on for an infinite period of time.

Pete

So you have the trust be a beneficiary of the estate.

Paul

Yeah. And then there's just learning the ways that you can put up a business and a trust together to where I have this one client, he has like five acres and he wants to set up, he set up a business and he wants to get a trust set up, put the business into the trust so that essentially when he passes away, the house is never sold. It's continued on and it creates this kind of foundation where people can come up to the property, do retreats and things like that.And so I really want to get more into down the road about how to set up that legacy aspect of things. When you pass away, you know, you're setting up these these foundations or this this legacy aspect where things continue on and it helps people for an unknown period of time.

Pete

Yeah. And that's a that's a very different mindset than I think most have regarding their finances, regarding their assets. They're just thinking, I mean, I'm just thinking five, 10 years down the road.But you're talking about 100, 200 years down the road, having these assets continually be in the family line and and affecting the legacy of my family.

Paul

Yeah. Well, you think about like the McConnell Foundation, you know, and these other organizations and you look at some of these ultra high net worth people like Bradley or Grant Cardone, you know, you Google them and then Google the word trust on top of that. You'll find videos on TikTok and they talk about how they don't own anything and they just they have everything into a trust and that just continues, you know, onto everything.

Pete

So if someone wanted to, let's say a homeowner, they wanted to get a trust, what can they expect for a cost, you know, to a typical cost to get a trust going?

Paul

Yeah. So right now, basically, I am I'm charging about twenty five hundred dollars and that encompasses a full package deal. Essentially, you get your revocable trust, your living and last will.You also get a financial power of attorney. You get a health care power of attorney, an organ donation and advanced health care directives.

Pete

I did want to talk about that as well.

Paul

Yeah.

Pete

OK, so about twenty five hundred dollars and they can have everything set.

Paul

Yeah, it can be a little bit higher. You know, if you're a client, if you have more houses, you have businesses, it's going to require a little bit more time. But a standard married couple or single individual is going to be about twenty five hundred dollars.The benefit of that is that even though that seems like it might be a little bit high for some people, if they just are renting or they only own a home and they don't have much is we can make those unlimited updates and changes. So if they are freshly married and they want to have children, then every time that they have a child, they can update their trust and there's no additional legal cost aspects. But then also if they want to move out of state, that's really not very much.

Pete

And I imagine that cost goes up with time. Yeah, there's been some inflation and stuff, inflation and, you know, the cost to actually do the workings to get all the assets into the trust. I mean, there's expenses there.And so the sooner they do it, the better. I mean, it's just going to get more expensive.

Paul

Yeah. And I wanted to circle back and just talk to talk on one more thing you mentioned about writing something up specifically. One of the things that has been pointed out to me in the organization that I work with is that oftentimes, you know, a lot of people come in and they give the generals of the trust of what they want to do.And the attorney says, oh, it's very complex and, you know, it's going to be four or five thousand dollars or whatever. You know, this is a pretty standard trust. But the great thing is, is you can set up the standard trust and then for an additional small few hundred dollars, we can do what's basically called an amendment to the trust.So instead of paying maybe a thousand dollars extra for having an attorney to write up something very specific, because again, you're paying for their time, you can do an amendment for, you know, three, four hundred dollars with us. And we're getting that written up legally specific on that one thing that you want. And you're essentially saving time and money in the long run just by, you know, carving out that one area that you're wanting very specific.You know, maybe I want this person to have this or at one client talk about how they wanted after they passed away. They wanted a certain person to live in the home until that person passed away. And then then the house could be sold.So things like that.

Pete

If they have special requests, they can have that and constantly update that if they needed to.

Paul

Yeah, absolutely.

Pete

You talked about health care directive. Tell me more about that and why that's important.

Paul

So health care directive. I mean, you know, it's one of those things like I maybe mentioned the beginning or before we got started is it's so there's this idea of, you know, based on maybe my DNA of when I think I should live to. Like, I think for the most part, I should probably live to like 80, 85 years old.Now, whether I live that long is a completely different story. So it's the difference between should versus will. And so we don't get to really decide, you know, gosh, you know, I want to tell this real quick story.

Pete

And it's a local one.

Paul

So a woman in Anderson, she's riding her bike with her two kids down at Anderson River Park. It's a nice afternoon. And out of the middle of nowhere, this branch from this tree falls and lands on top of her.On top of the mom. And a moment's notice, she's knocked unconscious. Every rib in her bone is broken.You know, she's rushed to the hospital. She has emergency surgery. She survived.But it was in that moment's notice where she was just completely like, that's it, you know. And so, you know, I happen to know the individual. And so it's one of those things where she wasn't doing anything dangerous with her life.She was just living. But more importantly, I mean, you go back years ago, for those of us that are a bit older, you know, you can look up the Terry Shivo case down in Florida. You know, that was a matter of that went on for a long period of time.It was a matter of, I believe it was a husband and the family. Her family were arguing over whether or not she should live or not stay on life support or essentially remove her from life support. And it became nationwide news and it became a litigated aspect where a judge had to make a decision.

Pete

Whether whether she stay on life support or not.

Paul

Yeah. And it was all because she didn't have anything set up, you know. And so you can have your spouse be the one that wants to make the decision.But if there's nothing set up legally, somebody else can come along and say, well, and again, I don't know the legal aspects of how the hospitals are going to handle that. But oftentimes, if you start getting more than one person in there wanting to make decisions that are different than what one person's making, it gets really, really difficult, really quick. And so with us, we go through a very comprehensive series of questions where we ask, you know, do you want to be on life support or do you want to even be transported or do you want to have pain management?If you're pregnant and something happens to you, do you want the doctors to provide life sustaining treatment to the point of birth of the child? You know, and then there's organ donation and aspects of that as well.

Pete

So basically, the health care directive explains to the court or to the hospital saying, hey, if something was to happen and I can't make a decision, I'm putting this person in charge to make the decision or I'm making the decision right now before I actually get to that spot.

Paul

Right. Because if you're induced into a coma, you can't talk to the doctor and say this is what I want to have happen. So they're at that point, they're at the mercy of another individual coming along and making the decision for them.

Pete

So it's kind of like probate, but it's the hospital saying they're making the decision.

Paul

Yeah.

Pete

And it may or may not be the right decision.

Paul

Yeah. Or even there's even an aspect of conservatorship. If a person doesn't have family members nearby, then if a person becomes conserved or gets conserved and then health decisions have to be made, it can be very difficult because at that point, if family is involved or not involved, you know, it's a matter of who has legal authority over this.

Pete

Yeah, that makes sense.

Paul

And if a person's conserved, then at that point.

Pete

How does the hospital know or the doctor know? How does they know if there is a health directive?

Paul

You would want to notify the hospital. You'd want to have it placed on file with their records department.

Pete

Got it.

Paul

And then that's part of the process. Yeah. So I just encourage and let them know.And then and then go from there and then let your loved ones know, you know, because, you know, things things happen. Things change in a moment's notice where, you know, as we get older, we realize, you know, maybe you wanted life sustaining treatment and then 10, 20 years later, you're realizing, you know what, I think I want to change things and so make those decisions. But again, if you don't have it written down on a legal binding document that's signed and notarized with two witnesses, you get a trust, you get that to get to help you.

Pete

Not only do you get the assets, but you also are determining, you know, the aspect of, you know, God forbid something happened. You're able to have that decision made in a time where you can't make that decision.

Paul

Absolutely. Yeah, it's it's huge. Yeah, it really is.

Pete

That's awesome. I I learned a lot from this conversation. And it's if anything, it's putting more I should have gotten a trust a lot longer, updated my trust a lot, you know, a lot sooner than what I have.I'm glad I'm getting it done now. Also, it's putting more conviction that I need to also ask my clients more about having a trust.

Paul

Yeah. And I love if there's anybody out there that that is similar into your profession or a similar profession, you know, I love to work with them and their clients as well to really help them out. I mean, you know, it is it is me.As an individual at the moment, but I'd like to grow, you know, and expand myself in a way where, you know, I become the the guy in the area known.

Pete

Yeah.

Paul

You know, I love to help people out as much as possible. I like to create win win situations as much as possible.

Pete

I love that.

Paul

Yeah.

Pete

Cool. Yeah. So how can people get a hold of you?

Paul

Yeah. So they can email me, Paul at strategic consulting pro dot com, or they can call me or text me. Absolutely.And I have a website as well. Strategic consulting pro dot com. They can reach out to me that way as well.But I'd love to sit down with you and offer a free consultation and see how I can help you.

Pete

Yeah. So if anyone listening, if they're curious, they want some help, they need some directive. You'll sit down with them for free, go over their situation, and then you could you could help them with the trust if they decide.

Paul

Yeah. And if they're not here in California, again, if they're out of town or out of state and you're hearing this message or someone sent this to you, I'd be happy to help you. Well, whatever state or town you're in.

Pete

Well, thanks a lot, Paul. This is amazing. I think that every every homeowner should watch this episode about trust.And it's very, very enlightening. Thank you very much.

Paul

Yeah, I appreciate you having me on. Thanks.