As a parent, I've always heard that it's important to have your estate in order. You know … your trust and your will. But since I've never felt like I own an “estate”, I haven't quite gotten everything in order per se.
I invited Cody Barbo and Patrick Hicks from Trust & Will to talk to us about the importance of a trust when it comes to protecting our family wealth and legacy. We also discuss the differences between a will and a trust.
Andy Hill: What are the major differences between a trust and a will?
Patrick Hicks: Trust and wills are both different types of state planning documents. They have a lot of overlap and they have a lot of differences. The concept of a will is really old, almost 500 years old. It gets your property where you want it to go after death, and that's about it. It's a very simple document. The downside of wills is that it does have to go through probate in most cases.
A trust is a more modern development. It gives you a lot more control over what happens, when it happens and exactly what you want to have happen.
Do you have an 18-year-old child and you want them to get all of your money or do you want to stretch it out a little bit more? It's a more complex, more modern document that gives you a lot more control over what happens.
What is probate?
Probate is the process where you prove the validity of a will and affirm that this is a legally valid will and we're going to uphold it as a matter of law. We go through the court process and ask whether this met the legal requirements.
- Has it been signed?
- Is it an authentic document?
- Does it meet each of the requirements or just the really basic legal technical requirements?
It should be simple, but it's not. Courts are underfunded and overwhelmed. It can take a year, or two years, in some places. It costs a lot of money, around $20,000, just to have your will proven to be valid and the terms of your will actually carried out.
Cody Barbo: It can get messy too. It's unfortunate that probate is where often families get torn apart, and a lot of members of our team have dealt with that in the past. It's actually part of the reason why we started the company; to try and help families out there.
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If we have the trust set in place, do we avoid probate altogether?
Patrick Hicks: Most of the time, yes. That's exactly what happens.
Either you avoid it, or you minimize it to the point where it doesn't really matter. It's not that big of a hassle. The goal of a trust is to either eliminate it entirely or to carve it down to such a small minor detail that you barely even know it happens.
If my wife and I passed away, what would a trust do to protect our kids?
Cody Barbo: Regardless of what stage you are in your life, what level of wealth you have, what financial decisions you've made so far, the number one reason why people even start to think about estate planning is their kids.
It's pretty staggering that there are 64 million parents in this country with minor children, but only 30% of them have a will. Which means 45 million parents have kids with no will, no plan, no guardians in place. The hypothetical situation of the plane crash or the bus crash is unfortunate, but it's the emotional cord that hits parents. That's why we're trying to get this into people's hands and do it in an easy way.
What is a living revocable trust?
Patrick Hicks: A living revocable trust is one type of trust. It is living because it's created during your lifetime, and it's revocable because you can revoke it, and there's a whole lot of legal background into that. What that really means is it gives you a lot of flexibility to make sure that your trust evolves and adapts.
As your life situation changes, you can update and amend your trust. If something happens and you need to get rid of your trust, you can revoke it and get rid of it, but you still get that great benefit of not only saying where your assets go but avoiding probate along the line.
If someone doesn't have a lot of assets and they are in debt, do they need a trust?
Patrick Hicks: No.
Asset levels and total wealth is one of the considerations of whether or not you need a trust. If you get over $200,000, and that would include something like your house, that's kind of the point where you should start at least considering a trust for the probate savings alone.
The other thing to consider is if you do have young children and if you have a will and you were to die and leave everything to your children, the day your children turns 18 all of that money is immediately theirs. An 18-year old that inherits $200,000, they may decide that college isn't worth it or that they'll just go ahead and retire and travel the world. Or even do a whole lot of things that most 18-year-olds want to do and most parents probably would not want their 18-year-old to do.
With a trust, it would say “I want my money to go to my children, but I want it to go over time. I want them to get it at age 25”. Or “I'm going to get half at 25 and half at 35”. You get a little more control, even if it's not driven by your total assets. The fact that you have young children, it gives you that control over how they receive your assets.
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Why are there so many people who don't have a trust or will?
Cody Barbo: Only half of all adults have gone through this process. And when you look across generations, 40% of boomers still haven't done it, 50% of gen X, and 80% of millennials. And half of us millennials are 30 to 40 years old now. We're not young kids. We're kind of entering those peak years of our career and family life.
It has nothing to do with age. It also doesn't have a lot to do with wealth. I think it really just comes down to procrastination if I'm being completely honest.
It comes down to the fact that people just don't want to think about death. It's an uncomfortable subject for a lot of people. So part of the goal of Trust & Will, and how we want to kind of reshape the perception of estate planning in general, is to give it a brand of positivity. That estate planning can be this act of love, and that you're doing it for your family to preserve your legacy, more so than just having to think of your own mortality.
If you own a business, can you incorporate that into your trust?
Patrick Hicks: Yeah, absolutely.
If you have a corporation, or partnership, or LLC, you can absolutely put that in your trust. The same way you could put your house in, you could put your bank, and you can put your business in. That gives you that same ability to pass that down to someone else and still avoid probate.
One of the complexities through probate is that you could have a situation where you own a business, you die and then there's no one left to run that business. Your business would essentially evaporate all of the value you've built up. There's nobody that can take over and there's no one that can operate that. By putting it in a trust you've got a trustee named and you've got someone designated who can keep it going almost seamlessly.
Can you stipulate when your kids will receive money in a will?
Patrick Hicks: You can do that in a will. It gets a little more complicated because then you're stretching your will out over a period of time. It's easier in a lot of ways, and generally preferable, to do that through a trust.
You can say they get it at age 25 or they can get it over a 15 year period. You can set all types of different conditions through a trust.
How does Trust & Will help with the process?
Cody Barbo: I got married a year and a half ago. A lot of the guys on our team are new parents or newlyweds. This is a really relevant topic for us as we go through our own life journey. We really wanted to help the everyday American family take these next steps and not end up in the messy side of estate planning.
With Trust & Will, we streamline the process to get from start to finish in anywhere from 15-45 minutes (depending on which product you choose). In a traditional sense, if you were to go to an attorney, you'd spend hours if not days or weeks working with them to get an incredibly granular plan. Most people just need a basic estate plan.
We've unbundled that with three products that we brought to market. The first, as Patrick has highlighted for most of today's conversation, is a revocable trust. A little more complex, but definitely for someone who is a homeowner and has built up that net worth.
For somebody who just wants something in place, the will is the perfect option. It's $69 and $129 for an individual or couples will, and it really just gets the basics set across.
For that young parent who doesn't have a house, who hasn't built up their assets and that doesn't want to think about death we have a brand new product, the first of its kind called The Guardian. It really is just as the name suggests, it's a nomination of Guardian form. It literally takes 5 minutes.
Those are the three products we brought to market. Really for us, the vision for the company is we want to be that TurboTax for estate planning. We want to be the national player that the everyday family can choose and can think off the top of their head and tell their friends and family about to make this as easy, approachable, and affordable as a process.
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Why should they be able to trust your process just as much as meeting with a lawyer?
Patrick Hicks: Well, I am a lawyer.
I've been in estate planning through my entire career. That's my role here, I've brought that experience and those processes and all that legal information and knowledge into Trust & Will. We've created fantastic software that builds on not only my knowledge and experience but our other legal advisors as well.
We can take all of our collective information and knowledge we've gained over years of practice and put it into software that makes it easy for anyone who has not gone to law school and has not incurred that debt to still go out and make their own estate plan. It can be complicated, but it doesn't have to be. And for most people, it is not, and so they can use a product like ours to make it simple, fast, and easy.
The documents that are generated for every customer are state-specific and come with state-specific instructions on how to make it legally valid, which would include a signature, a notary, or witness signatures. What's nice about it being an online platform is if you make any changes, or you want to make any changes as life events start to take place, you can come back in and make them. They're all included in that first year and then you just need to reprint the documents and follow the instructions to make it legally valid again.
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