Wealthy & Wise: You Need a Revocable Living Trust!

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About the Video: Wealthy & Wise: You Need a Revocable Living Trust!

Revocable living trusts offer numerous benefits for individuals and families seeking to manage their assets and estate planning. Firstly, these trusts provide privacy by avoiding probate, ensuring that the distribution of assets remains confidential. Additionally, revocable living trusts enable flexibility, allowing the grantor to make changes or amendments to the trust during their lifetime. They also offer seamless management of assets in case of incapacity, as a designated successor trustee can step in and manage the trust’s affairs without court intervention. This feature helps avoid costly and time-consuming guardianship proceedings. Furthermore, revocable living trusts provide a clear plan for the distribution of assets after the grantor’s passing, allowing for an orderly transfer of wealth to beneficiaries while minimizing potential disputes and challenges.

Prefer to read? A full transcript is provided below.

Cort:

Hello and welcome to another edition of Wealthy and Wise. I’m your host, Cort Christie, CEO and founder of NCH. Today we’re going to be talking about the most common mistakes that individuals make with revocable living trusts. Now, revocable living trust is designed for you and your family to basically pass on your inheritance, your wealth to the next generation. And it’s also there to avoid probate court, which we’ll get into here in a minute. But I brought in an expert. We have Kip from NCH that’s with us today and welcome to the program, Kip.

Kip:

Thank you for having me, sir. It’s a pleasure.

Cort:

Absolutely. And you’re part of our great Legal Services team. You’re also there supporting our clients day in and day out on the phone, answering questions, helping them navigate the proper way from our instructions that we’ve given them on how to set up a revocable living trust properly. So, let’s just kick it off with you know, what are some of the most common mistakes that you see in setting up a revocable living trust?

Kip:

That’s a great question, sir. Thank you very much for asking. So, one of the most common mistakes that I see, first thing that comes to mind is that they want to transfer the entirety of themselves before the trust has been executed into the revocable living trust. So, the answer to that question is that we here at Nevada Corporate Headquarters have accounted for nearly everything in setting up that estate plan with its ancillary documents, and that we’ve set it up in such a way that the ease and transfer of ones assets following the execution of the revocable living trust can be done, oh, I’d like to say within a week or so. So, between recording deeds, taking title of real property and placing it into the revocable living trust, updating the payable on death beneficiaries of these accounts, all of that has to happen after the documents have been executed.

Cort:

Okay. And a lot of people are just trying to get ahead of it.

Kip:

Yeah, I’d say so. So, when it comes to specific distributions, that’s definitely something that we could be naming in the revocable living trust, such as, you know, if you have two properties and say two beneficiaries that you want to divide them up amongst each other, but you want another beneficiary to receive the net distribution from your estate, but the other one say is an acquaintance and you just want them to receive that one property. You would do so within that questionnaire.

Cort:

Got it. Okay, that makes sense. What are some of the common like misconceptions about a revocable living trust that you have to kind of realign you know, our clients about?

Kip:

That’s a great question. I would say the naming conventions behind the revocable living trust. So, in most estate planning, the professional companies or estate planning attorneys generally have our clients before they come to us name their existing revocable living trusts after their family name. Or, encourage their new clients to do so.

Cort:

Okay.

Kip:

But when we’re dealing in an asset protection structure, such as the one that we set up here, we would often advise against that. Because when you transfer title of your personal residence into the revocable living trust, it wouldn’t make it any more difficult to find that property and associate it with you, if it had your last name. So, why not name it something else? For example, my revocable living trust big fan of Middle-Earth, Lord of the ring token. I have it as one of the places of Middle Earth.

Cort:

Fantastic. So, it’s something private, something you know, something that the whole world doesn’t necessarily know who is associated with it.

Kip:

Exactly. You could even take it a step further with naming conventions in finding common names, the name of a trust can be anything. You just have to include the word trust.

Cort:

So, if you’re a fan of Lord of the Rings, you might have a great name right in there for your revocable living trust,

Kip:

Yes sir.

Cort:

All right, so how about you’re on the phone literally, what, 7 hours a day, answering questions, talking to people. Do you ever get some really ‘out there’ kind of questions that you have to say no or we’re not really going to deal with the dog or the cat in your revocable living trust? Right. I mean, I don’t know what kind of questions you’re getting.

Kip:

The most common example of like the out-of-left-field question would be, what do I do with my investment property? Right? So, a lot of the time the client will want to ensure that everything is being passed through the revocable living trust, then upon their passing, distributed to their beneficiaries. But in an asset protection structure, we don’t want to tie that investment property that’s risky or say a personal vehicle, something that has risk associated with it directly to that estate plan. We want to create that arm’s length transaction by using something such as a real estate privacy trust or an entity like an LLC.

Cort:

So put in the right assets, in the right type of structure, not directly in your revocable living trust.

Kip:

Exactly.

Cort:

And I think broadly, it’s good for our listeners to understand, you know, what is the primary purpose behind a revocable living trust? Could you kind of identify that for us?

Kip:

Absolutely. So, as I mentioned a little bit earlier, the purpose of the revocable living trust is to transfer one’s assets, one whole being business interests, real property interest in real estate privacy trusts, land trusts, other investments like life insurances, personal checking, savings accounts, money market accounts, things like that, And ensuring that you have a named beneficiary, you’ve named your successor, somebody who’s going to administer the estate after your passing. The executor who’s going to handle the affairs outside of the estate, that you might have forgotten to put into it and then distribute and account for those assets all the way down to your beneficiary.

Cort:

Thank you for that. And I think it’s so important to understand, you know, this is a way to really make life easier for your heirs.

Kip:

Yeah. Definitely.

Cort:

You know, who are having or put in a position to really unwind your estate. Every state’s laws are a little bit different. And then they also avoid the court system. Another huge reason that you want to have a revocable living trust for your family, for your parents if they are still with us, so that you keep the court system out of your affairs or your parent’s affairs. And that makes sure that everything that you own makes it to the people that you want it to, without having to pay attorney’s fees or court costs. All of that can be quite complicated and tie up your assets for months, if not years. You know, I know there are contested estates there from people like, famous people like Prince, who had a massive estate, a very wealthy individual. And I don’t know how many years, maybe five or ten years for them to end up settling how that estate was going to get distributed.

Kip:

Yeah. And, you know, just coming from personal experience and having to deal with my father’s estate after his passing, it was very difficult to find everything that he had had, to account for, to get you know, initiate probate with not just Minnesota, but Hawaii as well, where he’d owned real property. And that’s something that a lot of folks don’t realize is that if you own property in another state, depending on its value, you may have to initiate that probate in the state in which that asset resides.

Cort:

So, if you want to make the lives of your kids horrible someday, don’t get a revocable living trust, just forget about it.

Kip:

Tell us, don’t worry.

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Cort:

But if you love your kids, then make sure you have a revocable living trust. If you love your parents, make sure that they get a revocable living trust so that the things that you own or they own get to the people, ultimately, the heirs that you want them to. And I think it’s just so important. I’ve gone through it with my parents and they had a structure in place and I’m very thankful for that, that they took the time to put things together way ahead of their passing. My wife recently had to deal with a friend that she was the executor of that individual’s estate and that person didn’t have it as organized. And it made things very difficult for my wife to try to unwind and identify the assets that were there. So I think, you know, for anyone with anything that they want to make sure gets to family members or a church or university, oftentimes some things get donated to ultimately. You want to get things set up properly, make sure that you, you know, reach out to an organization like us at NCH at Nevada Corporate Headquarters, and then you get to have a great conversation with Kip where he will help you figure out what’s going to go where and how to get this documentation put together for your family trust. Now Kip, how long does it typically take from the point where someone decides to engage Nevada Corporate Headquarters to completion?

Kip:

That’s a great question. So, from the moment that you contact Nevada Corporate Headquarters with the intent of setting up an estate plan, more often than not, you’re first going to meet with your specialist. This is going to be the person that’s going to help determine what’s going to be best for you and your family and your investments. Then from there, once you’ve, of course, gotten into the program, we will then reach out to you with the questionnaire that we’ll provide you a set of instructions on completing it. More often than not, I like to walk my clients through completing their questionnaires for whether it be an individual or a joint revocable living trust. From there, once all the documentation necessary to begin drafting, which isn’t a lot, a lot of basic information because we’ve spent time, money, effort, hours, hair in developing an estate plan that is effaceable and we try to account for everything. Hoping that the client doesn’t need it.

Cort:

Yeah.

Kip:

So, from there I’d like say about 7 to 10 business days we’ll have that first draft ready for the client’s review. During that review process, there is also a revision process, verifying the efficacy of the documents, ensuring that we’re outlining your wishes appropriately. And then from there, depending on how many revisions need to be made, depending on one’s circumstances, shouldn’t take more than two or three business days after the approvals received to print and ship the completed documents.

Cort:

Okay, so you’re talking maybe within a month. Most people can get this completed as long as they get back to us, let us know exactly what they’re looking for, review their drafts in a timely manner, and then ultimately, they’ve got the documentation to sign and put together.

Kip:

That’s right. And then on top of that, and this is something that now that we’re talking about, common things that are missed or incorrect assumptions, in the completed trust binder, we include two sets of instructions on funding the trust, what to do with it. After I’ve executed these documents do I send them back to you? Please don’t, they’re yours. They’re your families. So, in these instructions, it’ll give you advice on contacting a financial institution, and to transfer the account into the trust, update the payable on death beneficiary, contacting our wonderful Premier client services team to transfer the interest of the entities into the trust, real property, giving your successor trustee the instructions necessary to do their job in the event you pass away. All of it, all of it is contained within that binder.

Cort:

Hmm. Let’s talk about two important documents that come as a part of your revocable living trust. One, a durable power of attorney. Let’s talk about what that means and then also a medical directive. Talk about that with us. What are these two documents?

Kip:

Okay, so powers of attorney. Right? So, we’ve been talking a lot about setting up your successor trustee for success and ensuring that they have everything they need to care for the estate after you’ve passed away. But what happens when you’re incapacitated, right? You were on the way to the bank and you got hit by a bus and you’re in a coma. Who’s going to pay your bills? Who’s going to take care of your entities? Who’s going to manage the affairs of your entities? Who’s going to take care of keeping the lights on at home? That’s where that general durable power of attorney comes into play. So, also known as a financial power of attorney, this is you appointing somebody that you trust to take care of your affairs back home. The health care power of attorney deals in your condition by making medical decisions on your behalf, somebody who is empathetic enough not to pull the plug right away after you’ve been hit by that bus. But honestly, being able to sleep easier at night knowing that somebody is going to pay my bills, which are extensive, and then somebody who is going to be able to take care of me in the hospital, I sleep easier.

Cort:

Very nice, it’s very important too.

Kip:

Yeah.

Cort:

So it’s like, who do you want in that role? And then making sure that, you know, you’ve got somebody appointed if you do become incapacitated and then also that your wishes of how much you want in the way of heroics are brought into it. All that’s in the documentation that NCH provides for you so that there’s a clear path if something happens to you or if you become incapacitated, unable to take care of your financial affairs, or unable to even take care of your personal health, all of its laid out. So, it’s not just a document about your death. It’s also a document when you do get into trouble from a health perspective, that things are clear and you’ve laid out exactly who you want to make the decisions. And oftentimes I find that if you don’t put this together, you might have your kids fighting over what’s done for you from you might have breathing tubes on you might have a heart lung machine hooked up to you, things you might not want to have because they can’t let go. And then they’re infighting. And I know a lot of families get into big feuds over estates and also over the health and well-being of their parents on what to do for them. And if you’ve already communicated this, which is a part of what you get in the revocable living trust, now you’re just saving everybody the time and energy. It was interesting, Kip. My my mother had a cabin in Minnesota like so many people have, and I didn’t want an interest in the cabin. And I have two sisters that live in Minnesota. But even in the case of the two sisters that love each other, they get along, I told my mom, I said, you should really dictate to the one sister that has an interest in this cabin, that she gets it and then make sure that you carve out something else, maybe in the way of a financial asset for the other sister in order to keep things fair. Well, her comment to me was they’ll work it out. And guess what didn’t happen?

Kip:

They certainly didn’t work it did they?

Cort:

They fought in strange ways. It was still the same premise that one wanted it, the other one really wasn’t interested in it, but it was just interesting how it all came together. And unfortunately, there was some ill feelings after they worked it out and it could have all been handled in advance the way that I had asked my mother to do, who didn’t want to deal with it at the time. And they all get along now and everything’s going great. But there was a point in time where if the estate had just been buttoned up a little tighter, it would have saved the confrontation that did occur between my two sisters. And we wouldn’t have had to have dealt with it, you know, So it’s very important.

Kip:

That is absolutely tragic. Terribly sorry to hear that.

Cort:

Yeah, and you know it happens, unfortunately. And the truth is this, for everyone listening, whether your kids are, you know, young or older, if you don’t get things organized, there will be disputes as much as they respect and love each other. And even for your parents, if you have siblings yourself and your parents haven’t organized things, get with them and say, what have you done? What have you set up? And sometimes these are uncomfortable conversations, but we’re all adults and we should be able to have conversations like this, like, hey, Mom and Dad, have you set up a revocable living trust? How is it set up? Are we allowed to see it? You know, get in there to make sure that they’ve actually completed things because they might not have a medical directive put together. They might have loose ends that are not finished. They might have done a trust 20 years ago. Well, it needs to be updated. You know, things change. I think the update on a trust should happen every five years or you get back in.

Kip:

Three.

Cort:

Three of them.

Kip:

Given how invigorated a lot of folks have been.

Cort:

Yeah.

Kip:

Pandemic, you know, a global catastrophe it affected the world. And everybody who’s now getting out there is coming to the realization that, ah, you know, might need to update some things.

Cort:

Yes.

Kip:

Now, I don’t know who I have or have not left. On top of that, a lot of folks made out well in the pandemic and a lot of folks lost. So, making sure that that estate plan is up to date so that it reflects all of the change over the past, what, three years? At that five?

Cort:

Make sure you update and make sure that the people that you love are updating them as well. And know that at NCH, at Nevada Corporate Headquarters, we’ve got a great team, people like Kip that are going to be on the phone with you walking you through the documentation, helping you fill out the questionnaire, helping you with any clarity for anything that you might have a question on. That’s what we do day in and day out at NCH. And just know that we’ve got a whole team of consultants that can help you first launch this and then a whole team of professionals and our legal services team there to support you. Kip, thank you for being on the program today.

Kip:

Thank you for having me, sir.

Cort:

I appreciate it, and for all of you tuning in, know one thing every one of you need a revocable living trust. Every one of you that knows anyone else or parents. They need to communicate that about getting a revocable living trust. We’d be glad to help you at NCH. Thanks for tuning in to another episode of Wealthy and Wise. Please be sure to like and subscribe to our channel. Have a great day!

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

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