Main Street Business

#578 The Complete Guide to Estate Planning

• Mark J Kohler and Mat Sorensen

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In this episode of the Main Street Business Podcast, Mark J. Kohler and Mat Sorensen explain why every adult—single or married, wealthy or not—needs a will and a revocable living trust. Learn the practical steps for setting up your estate plan, naming a trustee, and ensuring your assets stay protected and your wishes are followed.

Here are some of the highlights:

  • Mark emphasizes the importance of having a will, noting that 50% of Americans do not have one.
  • Mat explains that a trust allows for more control over who gets what, when, and under what conditions.
  • Mark and Mat discuss the flexibility of a trust, including the ability to amend it as life circumstances change.
  • Example of Robin Williams' will being made public, highlighting the privacy benefits of a trust.
  • A living trust is effective immediately and can be funded with assets during one's lifetime.
  • The concept of a "trifecta" or "pitcher" that brings together all the elements of an estate plan.
  • Mark clarifies that a trust does not provide asset protection and should not be used for that purpose.
Speaker 1:

Welcome to the Main Street Business Podcast with your distinguished hosts, mark J Kohler and Matt Sorenson. Both are bestselling authors and have over 25 years of industry experience, with 10,000 client consultations, making them the leading tax and legal experts in the nation. Together, they'll unpack the most complex tax, legal and financial strategies. Crucial for saving more, stressing less and building generational wealth. Crucial for saving more, stressing less and building generational wealth. Today they're your personal advisors, ready to break it down for you and make the tax and legal game easier than ever.

Speaker 2:

Here is Mark and Matt. Welcome everybody to the Main Street Business Podcast. My name is Mark Kohler. I'm here with the illustrious Matt Sorensen, Excited today to talk about that special time of year, the Memorial Day and the estate planning special.

Speaker 3:

I was like that's a special time when we're talking about dying. Sorry, we want to think of our loved ones, those that have passed before us, but we also want to remind you this is time you need to plan for the year you will die one day. I hate to tell you that, so let's plan for it and leave a legacy and not a freaking disaster.

Speaker 2:

I love it. Yeah, it's an exciting time, exciting times, yeah, and regrettably, 50% of Americans don't even have a will. This is not something that should fall on deaf ears. I know there's going to be many of you listening today. They're like I got to get this done. What do I need to know? So we're going to break it down, matt, let's go hard Will versus trust. I'll be Mac, you'll be PC. Tell us about the will you good with that.

Speaker 3:

The will is the PC here, that's fair, the boring PC. The will says who gets your stuff when you die. It at least does that. So that's one feature of the will. I can keep going if you'd like. Yeah, you name a few. Here's the other thing that I like about the will is you can designate who is the guardian of your children after you pass away. Really critical for any of you that have minor children to say who's going to take care of them when I pass away.

Speaker 2:

Okay, we'll just riff on the will for a minute. A will can also be holographic. I mean, at the very least, I would recommend all of you sit down this weekend and handwrite out a will, which means holographic. You can't do it on a word processor. Print it out, you've got to handwrite it out. Get a couple of witnesses, but at least say who gets what. Who gets what, who's going to raise my kids?

Speaker 3:

Yeah, what else? Yeah, and even the holographic, I'll say in 46 states, as long as it's in your handwriting and signed by you, you don't even need witnesses. But in the other states, you do.

Speaker 3:

Here. Here's where the will starts breaking down, though. There's not much left. If you want to have a lot of other features and bells and whistles, you're going to roll over to the trust. After you say who gets what? There's not a lot of great features. Here's the problem, though, that most people don't like about the will and why they do a trust instead. You're going to probate with that will. Just because I have a will that's signed that says who gets my stuff doesn't mean we get to go carry that out and do it. You still have to take the will to the judge and get the judge's stamp of approval to say I approve this will, and they'll issue these things called letters of testamentary. That allows the executor of the will to then distribute the assets. It's public, it's not great, and that probate process is not only going to cost you money, but it's also going to take more time and it's very inflexible.

Speaker 2:

I like that. One last thing, and I think this is a good transition Even if you do get a trust, you have to have a will. Yes, A will is kind of the bookend of a trust, because we want to designate who the guardians might be, who that executor might be, and then that opens the door to the trust. I'm going to riff a little on the trust, the trust. What's nice about the trust? It not only says who gets what, it says when and how. So now we can put on strings, conditions, provisions, and we can really screw up our kid's life after we die as well during our lives.

Speaker 3:

Why stop all the fun? So obviously we're trying to protect our kids, right, and that's the purpose of the trust. We want to, of course, designate who gets what, so they're not left guessing for those of you who don't even have a freaking estate plan or even a will. But we also want to say at what point do they get it? If you pass on and you have an 18-year-old child, they can inherit your assets. That's kind of scary, and so we want to say what conditions do they get on? What if they have a drug or alcohol addiction? Do they need to deal with that before they get any inheritance for the trust? What if they are 20 years old? Do you want them getting a third of your estate if you have three kids?

Speaker 2:

No, absolutely, and I know many of you are either single and no kids, and the trust gives you a lot of creative options. You can create your own charity within the provisions of a trust and say here's where I want my assets to go. I want my trustee to create a charity that does the following or I want them to find a charity that does this. Or I'd like to leave my money to some nieces and nephews. I want to do this, I want to do that, does this. Or I'd like to leave my money to some nieces and nephews. I want to do this. I want to do that. This is your chance to write your book of where all this legacy goes, like all this hard work and money goes, and the trust allows you that flexibility. Now back to the probate. I got to have lawyers involved with the trust right and it's going to cost a ton.

Speaker 3:

Yeah, just at the front end, just for a little bit to get the plan and the trust done. But the nice thing is is, once you pass on, that trust lives on. The trustee of the trust we'll talk about here in a second gets to carry on. You don't need to go to a judge, you don't need a stamp of approval, the trust carries on, and all the conditions and restrictions you put in there are what's going to protect your assets and your loved ones, so that this legacy that we're trying to create is business owners, entrepreneurs, investors, people trying to build and grow wealth. We want to have a legacy, and if you don't plan for it and not only the who but the how and under what conditions, you leave a disaster instead of a legacy. So all this how is really important. But I'll say one other thing that I love about the trust. Oh, okay, keep going.

Speaker 2:

I just want to be a Mac too.

Speaker 3:

I got one too. All right, maybe an iPod. Jeez, let me come on, you go for it, it's private.

Speaker 2:

Oh, I was going to say that, yeah, I'm going to take that now. Yeah, the trust is. Isn't this fun? You never thought it would be this fun listening to trusts and wills. What's cool about a trust is you get to give it an innocuous name. I'm going to call it the Green Tree Trust, the Blue Sky Trust, and on a lot of the property you hold, it could even be brokerage accounts, crypto or other things, not just real estate. You're not going to have your name out there and when you die, your will is not public. Robin Williams, who passed away a few years ago, all he had was a will and it's been in court.

Speaker 3:

I mean everybody got to see his assets and how many assets he got and who did he leave it to and not leave it to and what kid was disinherited. Do you want that after you pass away? I don't think so. And you know the nosy, the nosy neighbors and all your other family members and some of your haters. You know, I don't know the, the ex spouse, whatever you know do you really want them all digging into that?

Speaker 3:

No, you don't, um. So let's get in a trust that stays outside of court and also I think it's less contestable because of that Cause. In the, in the probate process, there's like a contest period where someone could come in and be like they promised me this, but a trust is out of court. It's a lot more private, it's a little more chill.

Speaker 2:

Yeah, Now let's just talk about price for a moment. We talked about the will being simple and easy. I mean, heck, you could even do a holographic will on your own, so that's very, very affordable. But it's a myth. The trust has to be really, really expensive. You might see places out there charging five or 10 grand and they kind of base their price based on what your wealth is. But you don't have to be rich to have a trust. In fact, many, many people need it just with having some life insurance and a home and some family or not, and so the price point could be around $3,000. We have a special every year to bring that down, usually throw up to $500 off and we want to make sure it's easy, simple and affordable.

Speaker 3:

And once you get that estate plan done, keep in mind it's done. You don't have to do an annual fee, you only need to go back to it when you want to make a change. And this is a revocable trust. Don't do these irrevocable trusts. You see on TikTok, those are BS. You need a revocable trust. That's what I have, that's what Mark has, that's what we're doing for 99% of our clients, and we can change it whenever we want.

Speaker 3:

Because life happens, you might need to disinherit a kid, you might have a kid that gets divorced, you might get divorced yourself, you might get remarried, your financial situation might change and you might not be willing to give so much to charity that you were before. Who knows? But the nice thing about these trusts is it can be changed in an easy amendment. That can be very inexpensive and cost you only a few hundred bucks to just change little provisions here as you need. Yeah, and just remember if you don't have an estate plan, you're planning for disaster. That is your plan. For those of you don't have a fricking estate plan in place, you haven't gone through this process. We're here to help you take care of it. Now we got a lot more to talk about still yeah, it's going to be good. Now we want to talk about the trust, the components of it, the parties and a lot of the decisions you need to make to get the living trust done.

Speaker 2:

Yeah, so let's do a living trust 101 and break down the living trust. I think this will be really helpful for many of you so that, as you go into this process, you're going to have a lot of your questions answered, so that you can avoid getting misled by a lawyer that's trying to charge you too much. You need to get this estate plan done, get a living trust done. Let's help you with some of the basics so that you know what to ask and what to look for. So, matt, let's volley back and forth here. What do you like about the trust?

Speaker 3:

Well, the first thing I like about it is you're not going to probate court. I should say your loved ones aren't. You're dead already, so you're definitely not going to probate court.

Speaker 3:

But your family's not going to probate court, all right, and what's that mean? And that means it's all private and everything I put into my trust it's not out in court. There's not a contest period. I don't need a judge to put a rubber stamp on the thing to say this is a valid will and the assets can get distributed. It's all happening under the terms of my trust document, privately.

Speaker 2:

How probate came about was people that were dying with a will or nothing at all, and a judge had to verify what did they want, or guess what they may have wanted to do with their estate. The trust bypasses that. The trust allows you in advance to say here's my trustee, here's my stuff, here's where I wanted to go, and as long as your trust is funded, we'll come to that. Then your family can just handle the matters. The probate is about the people that are a train wreck with their planning. A judge is going to say, oh, there's no trust, so do they even have a will? And what are we going to do with their stuff, their kids, their money, their real estate? And that's what probate is about. And the trust allows us to bypass that. And the average probate in America is around $10,000 to $15,000 and takes over a year.

Speaker 3:

Yeah, and let me tell you what that trust document looks like too, just quickly here. I mean, this is a document you're going to sign. It's going to be notarized. Typically, we're doing these for clients across the country, in all 50 states. There's a little difference state by state on the signing requirements.

Speaker 3:

But it's going to say, hey, I'm married, I'm not, I've got kids, I don't If I got kids, here's who's involved, who's not getting anything. It's going to say what's the percentage of my estate that each person gets? It might say, hey, here's a specific asset that a specific person gets. I own a boat with my brother, but when I die, my brother gets the boat. Or I've got this musical instrument or the jewelry and I want a specific person to get this.

Speaker 3:

So it's all these things happening in the trust about your estates and this wealth you've spent so much time accumulating. Now we're going to get into some of the conditions and some of the restrictions we love to put in there to protect your family and to protect the wealth that you've built. But this is what the trust document is. It's not filed with the state, it's not in court anywhere. Once you sign this thing, we want to fund it, which Mark mentioned just a second ago. But this is the living document. It's alive and effective. Once you sign that baby, you don't have to go to court. You're not filing, you're getting approved by the state like an entity, and why?

Speaker 2:

people like it. The revocable living trust is while you're alive and starting right now. Once you sign it, you are the trustee. If you're married, typically it's going to be a joint revocable living trust. So you're trustee. You're putting stuff in it, you're taking it out. There's a lot of privacy. You may name it the Blue Sky Trust or Green Tree Trust so people don't see your name on public record where possible. So you're using this trust as you're alive and well to build it, grow it. But when you die you get to choose who the backup trustees are going to be.

Speaker 2:

That's the first key person in a trust. Is this trustee? It could be two or three trustees. It may be your surviving spouse and they're going to carry out the wishes of your trust without having to go to court and ask for permission. So it starts immediately. It's a living, breathing document. You're in control at all times and you can amend it whenever you want. We amend other people's trusts they bring to us for a few hundred dollars. Sometimes. It depends on how much they want to talk about it and what those changes may be, but it is very amendable.

Speaker 3:

Yeah, and let's talk about who to choose as your trustee. This is one of those questions when you're going in to get your estate plan done, you're going to need to answer, and some people get stuck on this one.

Speaker 3:

Now Mark talked, of course, during your lifetime you're the trustee. If you have a spouse, your spouse is likely co-trustee and whoever passes first the surviving one is still kind of trustee running it Once you're gone. Or if you're married, both of you are gone. Who is that trustee? I just want to give a couple ideas here, some of the common things people do, maybe some things to think about. Do they have to be good with kids? Not necessarily they got to be good with money. They got to be good with money. Okay, that's more what I care about. And can they follow direction and do they understand you and what you want? And so some of you might have an older child. That's you know. They're maybe in their thirties or so, more mature. You feel like they're responsible and that might be someone that you list as your trustee in your trust. Okay, that's who's listed in mine now. At first I had Mark listed, okay. Okay, mark was my trustee on my trust before and then I cut him out by the way.

Speaker 2:

This is a very emotional moment, Patty, and I wanted you to be our trustee. I would be honored. Yeah, because we're no fee either. You're not going to charge, we have this on tape. No, what's special about this, and why that would occur, is because we're a blended family, yeah, and so if you have that one child the oldest one, that could handle this role, I'd like your example. And let's say you do have a blended family, choosing one child from one of these two families could be problematic, so we want to choose someone that's good, with money, that we trust. I don't know if we could trust to get the kids to school and feed them. Yeah, you didn't give me that job.

Speaker 3:

Thank goodness, they're all adults too. No, no, no.

Speaker 2:

But I think that's a great point. You bring up as someone that you trust with finances. Well, someone else might be good with raising the children or handling your underwear and your sock drawer and emptying the house, and those are different jobs.

Speaker 3:

So, for those of you that have minor children, that's your guardian designation. You might be like oh, my brother or my sister is great with kids, if I were to pass on, I'd want them to raise my kid List, them as the guardian. But they might be like oh, my brother or my sister is great with kids, if I were to pass on, I'd want them to raise my kid List, them as the guardian, but they might be a disaster with finances, and so know that your trustee and guardian are not necessarily going to be the same parties.

Speaker 2:

Yep, now that executor is that third party. So you have trustee, you have the guardian who's really kind of again taking the kids to school making them lunch Could be terrible with money, but they love your kids and then you've got the executor or personal representative. They're going to be the one that handles the funeral, empties the house, sells some personal property and they're going to kind of work for the trustee and help them get their job done. Those three parties are something that attorneys should be asking you for and you can see this is a very tailored document to your situation and really hard to kind of find a boilerplate situation. You might be able to do that with a will, but not the trust.

Speaker 3:

Yeah, let's talk about some of the common provisions we like to put in the trust that protects your family. All right. Now one of the common issues that we have is hey, I might have a child that could be an heir to my estate, but they're 19 years old. If I just have a will or I have nothing, they're going to inherit whatever share of my estate is out there. But if I have a trust, I can put conditions on it. Maybe they get money to go to college, Maybe they get money for a first home, to start a business.

Speaker 3:

You can add those provisions and those common questions. We ask our clients Do you want some of this stuff in? Maybe they get a third when they're 25, another third when they're 30, and the final third when they're 35. So they kind of take care of the first little third and then maybe blow it, and the next third they're a little more safe and the final third they actually do something with it. So those are the little common provisions we want you to think about and what the trust does that a will just can't do.

Speaker 2:

Yeah, and I want to bring up another angle, and that's the business continuation plan or some real estate investing you might have going on. You want to make sure your trust is funded, which means it actually owns the LLC membership interest or the stock or the real estate. The trust has to own it so your trustee can control it. You could sign a wonderful trust. It's beautiful, but if you don't put anything in it it's worthless. You got to make sure it's funded. So for some of you that already have a trust, you want to make sure you're reviewing it every year, making sure everything's in it that it should be. We have what's called a trifecta, a picture that kind of brings it all together. When you work with one of our lawyers, they're going to lay it out like a beautiful piece of art and say this is how it all works and comes together, because if you can see it, you can feel it and believe it and make it happen.

Speaker 3:

Yeah, and let's talk about something that a trust doesn't do, though, because you still need some other documents. For example, let's say you want to have the kind of pull the plug document Okay, this is called a living will or an advanced healthcare directive. So if you're in a vegetative state determined by two physicians, do I get the plug pulled or am I staying on life support? So we want to address that question. It comes up more and more now. If you're going into surgery or something at a hospital, they ask for this now, like, hey, do you have a living will or advanced directive? If you don't make it out of here alive, you know what are we doing.

Speaker 3:

Are you in a veget state of state? So don't leave that decision to your family member. That has to make that decision for you. Decide ahead of time. That's part of the trust. The second thing that's part that we want to do outside of it and feel free to jump in here but is the powers of attorney. So let's say you're in a. You know you haven't passed away, but you're in a state where you can't make decisions for yourself. You might have a medical condition or be incapacitated. Can my spouse or some other person maybe it's the trustee. Do the financial decision-making for me, yeah.

Speaker 2:

Yeah, the trust can actually kick in earlier than death and take care of you when you get older. My mom had Alzheimer's and her trust. My brother and sister and I managed her affairs for a number of years inside the trust for her benefit, even before she passed away. Now, another thing the trust doesn't do and this is a big shocker for a lot of people it does not provide asset protection. That's not its purpose. I mean, we got all sorts of asset protection plans and ideas and we can set up entities and other types of trusts if necessary, but a revocable living trust is there for your legacy, your wealth, your estate. It is not to protect you from a lawsuit and anybody that tries to sell you that and tell you otherwise. They're ripping you off and they're a bad advisor. A revocable living trust is about your estate and wealth and going in the right direction, not a barrier or a bulletproof vest.

Speaker 3:

Yeah, now you want to take action on this. As we said before, we want you to leave a legacy and not a disaster for your family. They are going to be grieving for you after you pass on. Let's make it easy for them, give them a layup, give them some wins here. Let's get a trust and a well-crafted estate plan, and we want to help you.

Speaker 2:

We have a law firm? Yes, and every year we do a special and our pricing all year long is amazing compared to a lot of other estate planning firms Starting around $3,000,. We're helping families with all sorts of levels of complexity and estates and we have attorneys that help clients in all 50 states. You can get on a Zoom call, really collaborate and design something that really fits your needs, so you shouldn't delay Get it done. You can always change it later.

Speaker 3:

So click the link below to get started and take action. It's up to you to create an estate plan and leave a legacy, and if you fail to do it, that is the plan you are leaving to your family. Make no mistake no plan is your plan, so let's change that.

Speaker 2:

And thank you again for listening. We appreciate your patronage here at Main Street Business Podcast. We're here every week trying to bring creative and insightful topics. Next week, I think, it's going to be open forum, so please get to the website. We've got a refresh coming with that soon. It's going to only get better, but you can submit questions there. And next week is the People Show and we're going to see everything we can cover as quickly as possible. We'll see you there.

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