Like most of my elite clients, you’re probably on a journey to building generational wealth because you want to make an impact on those around you: your family, your community, and the causes you care about.
Today I’m talking about some wills, trusts, and other resources you can put in place to protect your wealth and legacy against potential lawsuits, fees, and even taxes after you’re gone.
As uncomfortable as these conversations can be since they involve the idea of dying, they’re a priority that you shouldn’t postpone. In the end, it’s going to be less painful to have them now than to have your family deal with these questions after.
Understanding and learning to handle them is an act of love, of protection, of making it easier for everyone around you. I want your legacy to live well beyond your years. I want to see you strive to live a life that outlives you.
Disclaimer: This podcast is for educational purposes only and doesn’t constitute financial advice. Please reach out to a financial and legal advisor based on your location, your circumstances, and your assets in the country you live in.
IN TODAY’S EPISODE I DISCUSS:
TAKE THE FINANCIAL LIBERATION ASSESSMENT:
OTHER RESOURCES:
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GET MY BOOK:
“The Entrepreneur's Solution The Modern Millionaire's Path to More Profit, Fans, & Freedom” - melabraham.com/book/
Like most of my elite clients, you’re probably on a journey to building generational wealth because you want to make an impact on those around you: your family, your community, and the causes you care about.
Today I’m talking about some wills, trusts, and other resources you can put in place to protect your wealth and legacy against potential lawsuits, fees, and even taxes after you’re gone.
As uncomfortable as these conversations can be since they involve the idea of dying, they’re a priority that you shouldn’t postpone. In the end, it’s going to be less painful to have them now than to have your family deal with these questions after.
Understanding and learning to handle them is an act of love, of protection, of making it easier for everyone around you. I want your legacy to live well beyond your years. I want to see you strive to live a life that outlives you.
Disclaimer: This podcast is for educational purposes only and doesn’t constitute financial advice. Please reach out to a financial and legal advisor based on your location, your circumstances, and your assets in the country you live in.
IN TODAY’S EPISODE I DISCUSS:
TAKE THE FINANCIAL LIBERATION ASSESSMENT:
OTHER RESOURCES:
CONNECT WITH ME:
GET MY BOOK:
“The Entrepreneur's Solution The Modern Millionaire's Path to More Profit, Fans, & Freedom” - melabraham.com/book/
Can you imagine for a moment that you take all the time doing all the right things to build your wealth to create legacy wealth that you're going to make sure is going to go to charities, and it's going to go to your children and your heirs and all that stuff just to have it taken away by the government, or by others in the form of possibly lawsuits, or fees, or taxes. The fact of the matter is, if you don't have the right wills and trusts in place, you could literally end up paying$50,000 or more in probate fees that is completely avoidable by having these things in place. So in this episode, the affluent entrepreneurs show, we're going to talk about some wills, we're going to talk about trusts and the things that you can do, and I get it, this is probably not the most uplifting show, until you realize that what you're doing is preserving your legacy and preserving your wealth for those that you have built it for. And to create the ability to transfer it without it being lost. Listen, Jimi Hendrix, I don't know if you know Jimi Hendrix, The fact of the matter is that he didn't have any of this. And do you know that it was 30 years of fighting until his estate got settled? Well, we don't want to do that with you. So in this episode, we're going to talk about it, get your pen out, take some notes, because you're gonna need to get some things done to protect your wealth from those people that might want to take it away from you, and shouldn't be entitled to it. I'll see you in the episode. This is the affluent Entrepreneur Show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth. So you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect. So you can scale your business, scale your money, and scale your life, while creating a deeper impact and living with complete freedom. Because that's what it really means to be an absolute entrepreneur. Welcome to this episode of the absolute Entrepreneur Show, this one's gonna be an interesting one, we're gonna talk about wills and trusts and protection and privacy and prosperity, we're going to talk about a lot of different things that are going to be a little bit technical, because we're gonna talk about some legal documents and some things to do to protect what you're creating. And look, I get that this may not necessarily be the funnest thing to do. But when you know that you're protecting it for the people you love, and you're protecting for the charities you care about, then it starts to become fun. Because when you don't do this, right, you can get hammered I just what came out of this, why I'm doing this episode is I actually had a call with one of my elite one on one clients and my master's clients, we were just talking about this whole idea, because they asked the question, what's the difference between a will and a trust? Do I need them? And the answer is, yes, in most cases, and we'll answer that in this episode. But the fact of the matter is that everything that she had was in her personal name, everything that she had, there was no trust or will in place, everything she had would be subject to the government deciding what was going to happen to it. Once she she got from it passed away. And and we can avoid a lot of that by making sure that we do this, right. So the mistake that we make is that we put this off, because I've got time. And look, these conversations are tough conversations. Because we have to deal with the idea of dying, we have to deal with the idea of who's going to take care of the kids, we got to deal with the idea of legal costs and legal fees to get things set up. But I promise you this, it is far less painful to do that, than to imagine your kids fighting over it. Your family fighting over it, the government taking a piece of it, you being taxed on it or the estate being taxed more than it ever had to if you did it, right. So let's just look at this idea. Here's this. You've got wills and trusts. We'll talk about some of the trusts the different types of trusts. And some of those now I am not an attorney, so I'm not giving you legal advice. This is all educational information. So you take it to your advisors for your specific circumstances for your specific state your specific country and make sure it's done right but a trust in legal terms. A trust and legal terms is just any arrangement in which one person one party is holding property for another party's benefit. In other words, I could be holding property for my son from my wife or my brother. So a trust is just creating This relationship, okay, the property owner in a trust in a typical living trust. Let's say I own a house. And I put that house in the trust, the trust is holding the property for the benefit of whoever I put in the trust. And we'll talk about who those people are. I never really give up control of it. Even though I put it in the trust, I still have control of it, in most cases, and do it that way. So understand how this plays out. The other misnomer that happens is that most trusts, they don't necessarily protect you from liability, or lawsuits. A lot of people think it's an asset protection. There are trusts that do that, but the living trust in the will all that stuff don't. So let me walk you through. I'm going to jump to the iPad here. We'll talk about a couple of situations where they didn't go so well. And then we'll talk about what you need to know to make it make it right. So let's just jump to the iPad. Here's the first one. Okay, Jimi Hendrix. Okay, if you're, you're watching on YouTube, you'll be able to see this but Jimi Hendrix his battle for his estate because he didn't have a will, because he haven't trust because he didn't have it all set up, took 30 years, three decades, three decades to get settled. Then you have someone like Picasso here art, well, this is Prince Prince took six years to get his estate settled, okay, he died untimely he was you know, because of drugs or whatever. And it took six years to get this up. So all these assets accumulated are locked up for six years and not able to be used not able to be transferred. And they're just locked up. Not only that, there's fees involved with all of that, to make that happen. Then you have Picasso, this is Picasso. It took six years for a Picasso to get his estate dialed in. But you know what, here's the deal. This is even worse, $30 million, went to the attorneys to settle the estate. This could have all been avoided, if if it was done right. You have this one Sonny Bono died in a skiing accident that didn't have a will. And then there was a challenge as to who got what and how that was going to happen. And all that creates is attorney fees, fees to the courts, fees to everyone except where the money was really meant to go, you've got this one, Tony Shea, who died untimely again, and his friends and family were trying to divvy up a half a half a billion dollars on sticky notes because he didn't have things in place. And so you create this craziness after you pass away. And some people say, Oh, I'm gone. I don't care. But I don't think that that's the way we want to play. Now. When you understand trusts, and that certain types of trusts, you start to see how things can play out. For instance, Walt Disney, Walt Disney built Disneyland here, where I live in Anaheim, California. And then he was looking to build Disney World in Orlando. And one of the challenges is that he was concerned that when he goes to Orlando to start buying up the acreage to build disney world that they would turn around and start to push the price up on the property in order to sell it because they knew that it was Walt Disney and Disneyland that was going to buy it. So he created trusts a land trust that kept him his identity confidential kept him anonymous, he literally bought over 27,000 acres at a price of $180 an acre 180 bucks an acre in Orlando where he was going to build Disney World. Whereas once they figured out that it was Disney World, the price jumped from$180 an acre to $80,000 an acre. So if he didn't use trust properly, he would have well paid, you know, multiples and multiples of what he paid to get Disneyworld built. And so it's important for you to understand where wills and trusts come into play, and how you can use them to your advantage, to invest to protect and to pass on and reduce taxes, reduce fees, and reduce animosity and fighting. So let's just talk about what the differences are and give you some some things to walk away with. All right, stay with me on this one. Let me jump back to the iPad. So first things first, what is a will? Okay? A will is just a legal document that you create that specifies how your property is going to be distributed after you die. Okay. Now, here's the thing. The will doesn't do anything until you die. In order for the will to take control of something you have to die Now I have a will, that says where things are gonna go. But I also have a trust that actually details things during my life. So I don't have to wait till I die to make sure that it's running, right. And it actually steps up from the will to make that happen because there is something called probate. In many states, not all states have this, but probate fees, for instance, in California, if I died with a million dollar estate, and I had no, no trust, then what happens is this, your assets go to the courts and the courts say, well, we need to decide where the proper allocation of these assets are, and who gets them. So the courts decide because you didn't decide prior to your death in the form of a trust, and they charge fees for that. And the fees are statutorily set. And you'll pay 50,000 Plus in fees and attorneys fees to make that happen. So it's totally avoidable when you put a living trust in place. You avoid all the probate, you avoid the courts and, and everything. So A will is a legal document that basically tells the world where and who gets your assets, your property, how they'll be distributed after death. So what is a trust? Well, a trust is any arrangement, any agreement in which one party one person holds property for the benefit of another, okay? It's any arrangement that is holding property for the benefit of others. So for instance, I have a trust that trust is holding property for the benefit of my wife for the benefit of my son for the benefit of my grandchildren, all of that it's a property that has that to do that. Now, the trust, the function of the trust, is to shield the owner of the property from some legal and tax exposure. But it is not an asset protection mechanism unless it's structured in a certain way. And so let's go back, if you now know what a will and a trust is, generally, let's just talk about what is in a will and what is in a trust, and so you can be more informed about that. So what's in a will. The first is who is the executor, okay, the executor is the person that is going to take care of the assets when you pass, okay? The second thing that you're going to see is that who's the Guardian, okay, guardian of the kids or anything like that, it's usually in the will. And then the beneficiaries, this is the people that get these people are the ones that get the assets, okay? And who you want to leave them to, so wills going to have those things in place. But it's not enough because the will has some problems with it. In fact, here's some of the problems. They're subject to probate fees, okay, these are fees that are statutorily set in many states that you have to pay, you can't get around it, okay. And a will can be contested, which means that there's legal proceedings, and the assets froze, okay. So we have the probate fees. But the other thing is that if you have just a will, you can end up paying a lot more in a state taxes, or taxes in general, if we're not careful. Okay. So, so you want to have a will, but you're going to want to overlay in many cases, a trust with the will for a couple of reasons. One, we avoid, we get rid of the probate fees, and we get rid of the challenges in most cases, and we can reduce our estate taxes and taxes. Now, here's the other thing with a will. Because the will becomes part of a court proceeding, there is no privacy. So if all you have is a will, or you don't have a will at all, there's a court proceeding, you basically are putting a billboard out saying here's all the assets I own and let the world see it. There is no privacy. There is no privacy. There is no confidentiality. There's none of that it is available for the world to see. And it doesn't do anything until you die. It doesn't work. Okay, until you die. Okay. So that's a will, you still need one, but you probably need one in conjunction with trusts. So let's talk about what trusts are because this is a little different. And this is where some power comes into play. There are effectively two main types of trusts. One is a revocable trust, which as the name says, I can change it, I can revoke it, I can pull it all back and turn it and shut it down if I want to. The other is an irrevocable trust. Like the name says, Yeah, I can see Agent, you can revoke it, you can pull everything back out. It is irrevocable. When you put it in there, most of the time your asset protection stuff is going to be in a revocable trust, because then it's presumed that you no longer own it, you no longer have access to the asset. But a revocable trust you do. So it's still exposed. revocable trusts are what you are going to see as living trusts. This is where you start to put your assets and it's to allow you to reduce estate taxes and put some things in there. Now there's at least three different parties to a trust. There's the grantor that's the person that's putting the property in. There's the trustee. Okay. That's the one that's administering the trust. And then there's the beneficiary. That's the one that's getting the assets. And when you create a trust, it typically has all of those things. Now, let's talk more deeply around revocable trusts first. Okay. And then we can talk a little bit about irrevocable trusts and everything. So what are the pros behind revocable trusts? Well, the first thing is this. It avoids all those fees that$50,000 In, in probate fees, it eliminates that. Second, it keeps everything private. No longer are your assets out for display. Okay, no longer can people see what you had or what you died owning. And now all of a sudden, if they found out that you if you died without a trust, and they see the assets, don't you think that people are going to go after the children, the heirs and see what they can get from fact of the matter is I have a family that two boys that came to me after mom died, and he came to me, he said, you know, we need help with assets, we're not good with investing and all of that type of stuff. And when he came to me, they were worth $5 million. That's great. 5 million bucks. The problem was that five years earlier, Dad died. When dad died five years earlier than worth 180 million, they lost 175 million in five years. And part of it was that they got bad advisors, they got people that put them in bad deals, because people understood and found out that they had all these assets. And so they came out of the woodwork scammers and everything. So to protect that one of the things to make sure you do is you put everything into a trust that allows you to know that everything is private, and no one's going to know about it unless someone opens in Blabs and opens their mouth. There's protection if you're incapacitated. Yeah, because you'll have provisions in there. If I'm incapacitated, here's how the assets will work. And here's who the people are that are going to be in there, you can modify a revocable trust. So, for instance, when my granddaughter was born, we modified the trust when I got the cancer, we modified the trust when when my next granddaughter is being born, you know, this coming year, will modify the trusts. So it's done and allows you to modify it as life changes, you know, you get married, you get divorced, whatever, you can change it along along that life. And you don't wait till you die once it's signed, and the assets are moved into the trust name. It's working. It's binding. It's working from that perspective to make that happen. Now, what are the problems with revocable trusts? Well, here's the problems with a revocable trust. There are no immediate tax benefits, it's something that you will get down the road potentially, but there aren't immediate tax benefits. There is no asset protection in a living trust. It's an alter ego, it's as if you own it, it is a mechanism in place to allow the administration of the assets and the estate, avoidance of certain taxes, avoidance of probate and avoidance of exposing your assets. Okay. It can affect financing or refinancing if things are in a trust name. So you have to be aware of that when you're having the conversation whether you're going to mortgage a property or or refinance a property, and there's some admin work and costs to set up. Okay. But it's not outrageous unless you're getting really, really complicated. Okay? But hopefully, you start to see that it's important to have a trust in place, and dunrite to cover yourself, especially if you have if you have children or you have multiple marriages or anything like that. Okay, that's the revocable trust. Now let's just talk about irrevocable trusts because that's the second type of trust and I'm only going to go surface on this because there's very different ones that you can use here. As the term says, It's irrevocable trusts that means that you cannot change it. Okay. Now, unlike the revocable trust, is where you don't get any real tax savings, immediately. irrevocable trust can give you a tax benefit right away, okay? It will direct how all assets are handled. And you can use it for asset protection, and potentially some gifting strategies to transfer assets outside of estate taxes, and gift taxes. Okay, so there are a lot of benefits to doing it. But now, one of the challenges is this. And one of the biggest challenges is this is that to absolutely lose control of the assets, once it's in an irrevocable trust, then you lose control of the assets. Because you can't change the terms of the trust, you can't move the asset back out. That's part of how you get the protection, the asset protection in there and everything. And you can change it sometimes. But you're going to need permission from everyone that's involved in the trust the beneficiaries and all that, to be able to do that that sometimes becomes problematic, depending on the family dynamics that are there. And so and then the other side is that if things go bad, maybe you fall on hard times, if you need the assets to live, you can't really get at them, or the income if you need it. So. So this is a trust that you go into, with your eyes wide open and the right advice because you can't modify the trustees Aliy if circumstances change, it just doesn't happen. But the fact of the matter is, is that if you have assets, as you're accumulating assets, if you have children, if you have spouse, if you have multiple marriages, and you want to make sure that your wishes are followed to the tee, while at the same time reducing fees, while at the same time potentially reducing taxes, then it's important for you to take the time to do a proper will. It's important for you to talk to proper legal counsel to see if you're a good candidate for a living trust, a revocable trust that allows you to put things in place to cover you to make sure that the assets are put in place in a certain way. And then you might even be a candidate to do irrevocable trusts. If you are more complicated, you have more assets, and you want to shield them from an asset protection perspective, to get more advantage from some of the tax rules with respect to using various trusts to maybe do something like Disney did if you want to acquire assets in a way that your identity is confidential, those kinds of things and the nuances of the different types of trusts. There's multiple types of trusts out there charitable remainder trusts and give trusts and those kinds of things, then you need to get proper counsel for your circumstances. This was just a primer, this was hopefully there to light a fire under your rear end. So I better check my will ever check my trust or I better get a will ever get a trust I better do that. We're at a time where I think that each year, I will look at our trust documents and say, Is there anything needs to change? Are there any assets we need to add? Are there any assets that are no longer there? What do we need to do make sure that it is it is properly set up to take care of the people I love the causes on behind to make that happen. Listen, you're going to build wealth during this lifetime. You're going to create that money machine as we talked about in the athletes blueprint, you're going to create that rich lifestyle, why not preserve it? Why not preserve it from lawsuits? Why not preserve it from taxes? Why not preserve it from government fees and court fees that you don't have to pay? Why not preserve it. So you have this legacy wealth machine that can can continue to support the causes, the people you love, and the future, even once you might not be here? All right. I know that this topic is probably a tough one for for a lot of people. But you know what is really important. If you're going to take the time to build the wealth, let's make sure that we take the time to do the right things to keep the wealth. All right. I hope you found this valuable. Listen, if you have questions if you have comments or anything DM me, send me a note or send me a question go to ask Mel now.com Give me a question there. I'll make sure that we bring it on the show we get it answered. Or I might even bring you on a show and give you some coaching help you guide you. advise you walk you through. Okay. Now, one more time. Everything in the show was for information education only. You need to get specific financial advice and legal advice based on your state, your circumstances and your assets in the country you live in. All right. But I hope that this serves you out that this helps. And let's make sure that you take take your pathway on the journey to financial freedom Do it in a way that you're protected. You take care of your vision, the affluence vision that you created to make it happen in real time. And until we get a chance to see each other in another episode, or see each other on the road, as I always say, always, always strive to live a life that outlives you. Cheers see in the next episode thank you for listening to the affluent entrepreneur show with me your host Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to mele ram.com For slash group, and I'll see you there