Estate planning can be a daunting subject, especially with the myriad of myths surrounding trusts. Michael Bailey, a seasoned estate planning attorney, brings clarity to this topic by breaking down how trusts work, their advantages, and their role in protecting assets. Learn why trusts are an effective tool for ensuring smooth transitions and safeguarding family interests over generations.
Welcome to Mobile Estate Planning with your host, Michael Bailey. Over a decade ago, attorney Michael Bailey turned his attention to estate law after he recognized the unacceptable number of adults without proper end of life planning. Michael recognizes that many of his clients have difficulty finding the time for making a proper estate plan. That’s why he became the Mobile Estate Planner. He will go to wherever you are to assist you with your estate planning, including writing wills, trusts, and giving you the information you need to avoid probate. Now, ATX, Ask the Experts, presents Mobile Estate Planning with your host, Michael Bailey.
SPEAKER 02 :
Good afternoon. Welcome to Mobile Estate Planning with Michael Bailey. So we can do something besides just leave your family alone. You’re listening to 560 KLZ AM or 100.7 FM, possibly the 560 KLZ radio or the KLZ 560 radio app. I said that backwards. I hate it when I do that. But we’ve… uh just trying to do something to leave your family in a good spot when you’re gone so as we are um sitting here and you know talking about estate planning i had a couple of clients this week and just in general talking about trusts and um There’s many people who they understand or they hear or believe different things about trusts. I had a few of these kind of misconceptions happen with somebody today, so I thought I’d talk a little bit about trusts. Now, not everybody needs a trust. Not everybody wants a trust. Not everybody has to have a trust for estate planning. But those who do have trusts, I often hear people who ask me, like, well, you know, when we set up in a trust, aren’t we giving up our money? Aren’t we giving up everything? So it’ll just go to the kids. So do we need the kids permission to live? Do we need the kids permission to use our money? You know, this doesn’t make any sense. And I’m like, well, if that’s the way that it were, then I would agree with you with it would make any sense. But that’s not how it goes. Instead, when you set up a trust, there are types of trusts where you give up control of your assets. But those types of trusts are the type that you set up when you’re trying to protect assets from long-term care costs or things like that. And then you want to create a legal wall of separation between you and the assets so that you’re no longer the owner. But most of the trusts that I set up are revocable living trusts. And in a revocable living trust, when you set up the trust, you are the one that you create the trust. You’re the trustee of the trust, so you’re in charge of it. And you’re the primary beneficiary of the trust while you’re alive. So the trust will exist, and the trust will help avoid the probate process. But while you’re alive, you’re in complete control of everything. Sometimes people will ask me, they’re like, oh, well, why are we putting our house inside of a trust right now? Doesn’t that make it so much more difficult to sell? And I say, not really. It’s more a matter of, hey, you’ve got a trust. You put your house inside of a trust. Now you want to sell the house from the trust. Well… Most trusts have been around long enough that people will understand that you go to sell a house out of a trust, and you just sign your name, and then you put comma, trustee, because you sign as the trustee of the trust, and you can sell a house right out of the trust. Now, let’s say that you have a… a title company or a real estate that doesn’t quite get that and can’t quite figure that out. And it’s like, oh, well, that’s not going to work. That’s going to be problematic. We can’t do that. Well, then you take and you can transfer ownership of your house from your trust back to you. To put your house in a trust usually takes a one-page quick claim deed. And so to take it out of the trust, you do a quick claim deed out of the trust back to you personally, and then you can sell the house personally. So it’s really it might be an extra step, but that’s not too bad of a step. So you’re not giving up control of your assets. You’re not going to make your life super more difficult. You’re just going to have a couple extra words to write or, you know, an extra piece of paper to get filed. So, no, when you create a trust, you’re not giving up complete control of your assets to your kids or to the other named beneficiaries unless you mean to do so. And if you mean to do so, then you can set up your trust to do that. And situations where you mean to do so would be like, let’s say that someone has Alzheimer’s or dementia or they have Parkinson’s. And we know that down the road, they’re probably going to need to go into long-term care. And in that long-term care, they’re going to need to They’re going to need to pay for that, and they may not want to spend all of their assets on long-term care, but rather they’d prefer to preserve some of those assets to pass on to future generations. So those types of trusts are different types of trusts than the one we’re talking about here. Those types of trusts, on purpose, were giving up control of the assets. But at that point, you’re giving up control of the assets so that you can create a legal wall of separation between you and your assets. So those assets can then be preserved and not get picked up by long-term care or Medicaid or the government or something like that. But most trusts, you’re still in control. So no, you’re not giving up. You’re not saying, oh, well, if I have to sell the house, do I have to get all the kids’ permission? No, not unless you need to do that or want to do that or it makes sense for you. And then I had another, you know, the same client was like, well, you know, if we put assets in there, you know, well, you know, how can we make distributions out of the trust? Are we, you know, are we funding the trust now? How are we getting, why are we putting assets into the trust right now? And that goes back to kind of the fundamental theory of what a trust is. Now, a trust, it’s a device that you put assets into a trust to be used for the benefit of another person called a beneficiary. And so you have a person who’s a beneficiary who’s going to be the one who can receive things out of the trust. And, you know, if you, assets that are owned by the trust, they, so when you, one of the points of doing a trust is that when you die, the trust does not die with you. So if you have your assets that are owned by the trust instead of by you personally, or you have assets that are pointed to go into the trust, like through a beneficiary designation, like an IRA or a 401k, you’re like, oh, I’m going to make the trust a beneficiary, so it’ll pay out to the trust. instead of to me personally. And by doing so, then all of those funds will go into the trust. And so when you die, the trust does not die with you. And since the trust does not die with you, that means that the trust continues to exist. The trust continues to own the assets. So you have somebody come in as a successor trustee, someone else to, you’re the trustee while you’re alive. Somebody can come in as the successor trustee, and the successor trustee can then access those assets and can use them for the proper purposes as defined by the trust. So let’s say you’ve got a house. You put your house in the trust. You’ve got an investment account. You put your investment account inside the trust. Bank account. Bank account has a pay-on-death designation, so it pays out to the trust, and then you die. Your successor trustee can come in, they control the house, they control the investment account, they can go to the bank and get a pay on death designation that pays out to the trust, and then everything’s consolidated in the trust. And then everything that’s in the trust, the trustee controls and the trustee can use to pay off your debts if you had any when you died, and then distribute it out to the named beneficiaries. Now, a trustee can be a beneficiary. So, like, for my parents’ trust, I’m the successor trustee when they pass away, but I’m also the beneficiary, which means that… I’m not the sole beneficiary. I have to share with my siblings. But it means I can take and distribute, you know, split things up four ways and distribute them out to the named beneficiaries and we’re good. So what we’re really trying to do is to take the is avoid needing to have the government involved in everything in the probate process. Because if you have just a will, then the will goes through the probate process, and you have to get legal permission from the court to transfer everything. So one of the points of a trust is that you don’t have to go through probate. So you are listening to Mobile Estate Planning with Michael Bailey, here on KLZ 560 AM, also heard on 100.7 FM, or the KLZ 560 radio app. Phone number to talk to me on the air is 303-477-5600. And again, that’s 303-477-5600. And my direct line is 720-394-6887. And once again, that’s 720-394-6887. So as we’re going through and deciding whether or not we want to do a trust, and one of the points of having a trust is that it will control assets, but a trust only controls assets that are owned by the trust or that will be owned by the trust. Then at a future time, so like an IRA or a 401k account, you’re in control of it, you die, pays that to the trust, you’re like, okay, now the trust can control that asset. Because a trust cannot control assets that it doesn’t own. So, yes, you want to fund a trust once you’ve created the trust. And you want to have your assets in there. And, yes, they’re supposed to be in there right now. It’s not supposed to be a, oh, well, we’ll put everything into a trust at the time of your death. I mean, I guess it depends on the type of assets, you know, real estate assets. I have had clients who wanted to do a beneficiary deed to have ownership of the assets transfer into the trust at the time of their death instead of currently. And while that can be done, I don’t think it accomplishes much besides feeling like you don’t want to put everything into a trust until you die. That’s fine. If that’s something that’s important to you, then go for it. But if it’s something that’s not going to be a big deal, then we don’t need to worry about it too much. But the point of a trust is that… when you when you die it doesn’t die with you and so it’s an alternative to the probate process it’s a private document helps everything transfer smoother and easier to other people so yes you want to put assets inside the trust right now now sometimes people will tell me oh but if i put things into a trust and people will know who the trust is and who the who’s in charge of the trust and they’ll be able to track things down and i say well Are you planning on giving your trust agreement to somebody? They’re like, well, we have to file it with the court. I’m like, why? No, you don’t. When you create a trust, people get, I’m not entirely sure where it comes from, but people are sure that everything you do has to be filed with the court. But a trust does not necessarily need to be filed with the court. Now, you can file a… If you’re going to move assets into the trust, like real estate assets, you can file the deed that transfers ownership of your house from you personally to the trust. You record that with the county clerk and recorder’s office. But the trust itself, you don’t need to… File with the court. You don’t need to record with the court. You just, it’s a private document. So, I mean, upon your death, there is a trust registration statement where the county wants you to say, oh, well, there is a trust and it’s going to transfer everything. This is who’s in charge so they can do it. And, you know, oddly enough, the fee to file a trust registration statement is the exact same fee as it is to start a probate case. So, in other words… The county wants their money. And it’s not that, because if everybody had a trust, then there wouldn’t be any probate filings and there wouldn’t be any fees that need to be paid for. The probate filing fee in Colorado is $199. The fee to register a trust is $199. So basically the county wants their money one way or the other. As I tell people all the time, I’m like, well, you know, good luck doing anything with the county without paying a fee. Because that’s how counties tend to be. They charge fees. That’s what they do. They’re counties. And so as they charge fees, then you’re like, well, you charge a fee and you pay it and that’s kind of what you do. We recently made it all the way through the process of getting our back deck on our house has been there for 24, 25 years. And it’s time to redo the deck. But in order to redo the deck, we needed permits from the county. So we had to go through the permit process. And the permit process for the county is kind of what you’d expect a permit process with the county to be. There’s a million different forms, most of which ask for the same information in slightly different formats. But if you have any one that’s wrong, then they need you to redo it. And if you have too many that’s wrong, then they want you to start the whole process over again. The county tells us they’re embracing technology. So they have a portal where you can upload your request. And so you upload it. And it’s supposed to send you a confirmation that you have things. And you’re supposed to get a confirmation that everything’s been submitted successfully. And even if the portal shows that, we’re still waiting on the emails that confirm that. And then you do that, and then you wait. And then we got an inspector who looked at it and said, oh, yeah, but I need this. So we sent it in and didn’t get a response. And then we had to call, and they said, oh, we’re out of office. And we’re not checking voicemail, which sounds about right. And so all of it, we finally got through. So now we have the last step. They’re like, oh, well, we need you to send us our contractor stuff. And I’m like, no, we’re redoing the deck ourselves. They’re like, oh, well, then you just need to pay the fee and you’re good to go. We’re like, okay, cool. So we went to pay the fee. And we did. And now we’re like, okay, we can purchase the materials. This would have been nice to have known three to six months ago when we weren’t already having pre-tariff price increases for materials. But… It was one of those processes where you’re like, well, the government is kind of built on… The government, as much as everybody would like to think the government’s built on being efficient and things like that, the government is kind of built on being inefficient. It’s supposed to move slow. It’s supposed to not… quickly move and do things. It’s so that we can hopefully think about and consider and look at things and say, this might not be the best idea to do. And somewhere along the line, somebody will say, hey, this might not be the best thing. Moving quickly and efficiently is is very helpful in a lot of areas, but being quick to react to something went wrong so we need a new law might not be the best way to handle government. Just my opinion. So government is built in there to say, hey, let’s try to, at least the way things are set up, under our current form of government is we’re trying to do things so that it’s not you know quickly reactionary to oh we’re going to do these things you know there’s there’s some built-in inefficiencies there’s some built-in ways to slow things down so that we in a rush to make government and laws and rules we don’t end up doing something that might not be the greatest of ideas now And it’s amazing how if you have a law that becomes there, people start to think that that’s the way it has to be. So somehow it’s not possible to change laws. And I get that. There are certain things that we don’t want to change, like estate planning, for instance. We don’t want to get huge changes to estate planning law. And say, hey, everybody who created an estate plan, everybody who created a will or a trust, guess what? The rules are completely different now. You’ve got to go back and redo it. That might not be a great thing for everybody who’s planned ahead and has a will or a trust. Now, there are plenty of people who don’t have wills or trusts. But as I’ve created a will, I created a trust for me and my family. And… I went through and did all that exercise. I do it for other people. I can’t imagine that all of the thousands of clients that I have would love to get an email from me. Hey, the state government has completely changed the way that wills and trusts work now. So we have to redo everything the way, you know, according to the new rules. Sorry that I, you know, as we set everything up, you know, 1, 2, 3, 4, 5, 10, 15 years ago. But now we get to redo everything. So please come back in and see me. And people, I’m sure that people would be like, well, you know, well, are you going to do this for free? No, I’m not. Um, so that’s one of the, one of the nice parts about having a government that doesn’t change a lot is you get stable rules and those stable rules. especially for people who do estate planning. It means that we don’t have to change everything all the time, but rather we can just kind of continue doing the same thing that we are, knowing full well that it should all work itself out. So you are listening to Mobile Estate Planning with Michael Bailey here on KLZ 560 AM, also heard on 100.7 FM or the KLZ 560 radio app. Phone number to talk to me on the air is 303-477-5600. Once again, that’s 303-477-5600. And my direct line is 720-394-6887. Once again, 720-394-6887. So one of the other things that goes along with trust is people think that, or every once in a while people are like, oh, you just want to write me a trust so that you can charge me more. And I’m like, well, not really. I don’t want to do that. But if it works for your situation, that’s what we want to do. So I and my family, we have a house. We have a townhouse. It was the first house that we bought, and we were upside down in it when we moved out. So we’ve had the same renters for the last decade or so, and they’re good renters. And we take care of them by not raising the rent, and they take care of us by taking care of the house and paying on time and in full. And it’s a great rental situation. And they’ve been there for a long time, and the original guy who we rented it to, he passed away a few years ago, but his daughter and son-in-law live there, and the daughter has had some medical issues, and they have not been able to qualify for treatment. buying a house on their own. So we try to be fair to them. They try to be fair to us. It’s a good system. We also own two RV campsites in Idaho right near the sand dunes in St. Anthony, Idaho. So my in-laws, they’ve all got their sand vehicles and their RVs, so they’ll go stay for a week or two and ride the dunes all the time. And I’ve gone a couple of times with them. They usually don’t go for the whole week because it’s the in-laws vacation. And as we all know, camping is the greatest time to go hang out with your in-laws. Everybody camping is happy. Everybody camping is well fed. Everybody’s well rested. That’s why the expression is he’s not a happy camper. Now, I do know people who really love camping and they are happy when they’re camping. They’re happy campers. But most people when they’re camping, they’re usually tired because you don’t sleep as well as you would at home. They’re usually a little bit cranky. They might not be too thrilled that they don’t get nice hot showers and everything because you’re out camping and it’s not quite the same, especially if you have campfires at night. There can be old campfire musty smell on clothes and things like that. So going camping with my in-laws for the entire week, probably not my favorite thing to do. So instead, I found that the flights up there used to be like 125 bucks. Now they’re a couple hundred, 300, just because the first time I went was just coming out of COVID and they were just trying to get people back in the airlines. But I’ll go up and do that, and then I drive home with my family. It works out great. But we own those. So we own property here in Colorado. We have some in Idaho. And I don’t really want my kids to have to go through probate in both states. So I’ve created a trust so they don’t have to go through probate in either state. And for us, that’s a really good solution. You know, I also happen to have kids who are under the age of 18, at least two of them now. I have one who she’s 19 now and she’s she’s a full adult and You know, she can act as an adult and all sorts of fun things. But when we went to pick her up from college and she had been following our progress because apparently my wife’s phone was broadcasting where she was through the Snapchat app. And so, you know, she was following us in and we got there and we called her. It was like, oh, we’re parking, we’re walking up. And so she came out of her dorm room and as we were walking up the hill and there’s a little grass hill. And so she came and she saw us. And she came running down the hill as fast as she possibly could to come give us a big hug because we hadn’t seen her since Christmas in December when we sent her off. So it had been four months that we hadn’t seen her. And so she was a full adult, very capable of doing all of the things she needs to do. But at that moment, she was just a little kid running down the hill to see her mom and dad. And so the little kid running down the hill to see her mom and dad, I don’t want the little kid running down the hill to see her mom and dad have to go through all of the probate process here, and then try to figure it out in Idaho, where it’s different, you know, all those type of things. It’s, it’s just can be very problematic. It can be very obnoxious. So we’ve, we made the decision that it would be easier and better on our kids to set up a trust so they don’t have to go through probate in either state, much less just one state, or multiple states. You know, as an extra bonus, The trust is already in place so that if my wife and I die while our kids are underage, the money will stay in trust and it will be able to be used for paying for the kids’ lives until they’re old enough to handle it. Now, my 19-year-old is mature enough that we could put her in charge of everything and she’d be perfectly fine. But I don’t necessarily want to do that to her as a 19-year-old because she’s just finished her college freshman year. She worked as a research assistant on a professor who was working on cancer research. When she left, she was all excited. Be like, oh, you’re coming back next year so I can have your help. And she’s like, yes, for sure. Well, last night, she got a phone call that that professor apparently suddenly resigned from the university, leaving the research project in kind of a suspended state and not entirely sure what to do. So she and one of her other… I was seeing one of her other lab tech people. They reached out to a different professor to say, hey, we’d hate to lose all of the progress that’s gone here. If you can, we’d love to have you be kind of the faculty sponsor of this. There’s a PhD student who’s kind of running everything. So we just need a faculty sponsor to handle things, and maybe you could take over for us. So my adult child is dealing with adult things, but I don’t necessarily want her to have to go through the legal process that she’s never been associated with, of probate, both here and in Colorado. Going through it here in Colorado isn’t too bad. Sorry, I meant and in Idaho. Going through probate in Colorado really isn’t that bad, but it still is a legal process and you have to follow the proper rules. Going through a legal process both here and in Idaho, Idaho is gonna be slightly different. It probably is decently similar, but I’m only licensed here in Colorado and I don’t necessarily know what the process is up there in Idaho. So we set things up in a trust to make things easier on our kids. Fortunately, setting up a trust doesn’t necessarily make you not in charge of your own assets or create problems for you when you’re trying to do other things with those assets. But rather, it’s just a matter of understanding what you need to do with the trust to make sure that it works properly. So the music tells me my time is up. Thank you so much for listening to Mobile Estate Planning with Michael Bailey here on 560KLZ. I will be back next week, but John Rush and Rush Reasons are up next. So stay tuned. Thanks and bye.
