May 07, 2021

Estate Planning Mistake of Not Having the Right Type of Trust

One of the key tools in Estate Planning is a Trust.
There are many types of Trust. What you should do would depend on what your goals are. Again, we don’t always need a Trust. If you just want to avoid probate then a Beneficiary Designation and maybe a Lady Bird Deed for the home may do. But if you want to avoid probate, protect your kids, and protect yourself then you may want to look at a Trust.

Attorney and Financial Advisor Chris Berry discuss this in today’s episode of Daily Wisdom.

Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.

Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.

Castle Wealth Group helps families with their legal, financial, and tax planning for their retirement and legacy.

With the use of legal structures like revocable living trusts, Castle Trusts (asset protection trusts), Chris Berry and Castle Wealth Group can help your family plan, protect, and preserve what is important through their Retirement and Legacy Blueprint Process.

For more info visit:
https://castlewealthlegal.com/home
https://michiganestateplanning.com/

Episode Transcript

Trust as a Focal Point

Hey, this is Chris Berry, with Castle Wealth Group. Today, we’re going to talk about the estate planning mistake of not having a trust or not having the right type of trust. If you’d like this information, please make sure to subscribe to our YouTube channel and leave a comment below.

Christopher Berry is a leading estate attorney and advisor in the area of retirement and legacy planning. He has been featured in publications such as Forbes, Kiplinger’s Crain’s Detroit and more. He’s the host of the weekly radio show and podcast, The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning, and has authored the Amazon best selling book, The Caregiver’s Legal Guide.

So with estate planning, one of the focal points or key documents, key tools in an estate plan is a trust. Now, we don’t always need a trust and it’s not tied to the size of your assets or the size of your estate. We’re not looking at trust for just estate tax purposes like we used to in the past. So a common question is, how much do I need before I set up a trust? It’s not so much about the size of your estate or your assets or avoiding estate taxes. Really, the reason we would look at a trust would be entirely dependent on what your goals are with your planning. So if your goal is just to avoid probate, sometimes we don’t need a trust. We can get by just with beneficiary designations and maybe a Lady Bird Deed for the home.

But if you want to avoid probate, protect the kids and maybe protect you or protect other beneficiaries, then we may want to look at a trust. And quite often we do. I’d say 90% of the time when clients come in and it has nothing to do with the size of their assets, 90% of the times we are using a trust. And it’s not because they have a certain amount of assets, it’s just because these are the goals a lot of our clients have. For example, I’ve had clients that had $50,000 in a house and they set up a Castle Trust. I’ve had clients that had two and a half million dollars, a couple of kids, and they just did a will-based estate plan relying on beneficiary designation and a Lady Bird Deed to avoid probate. So it’s not about the size of your estate, it’s all about, what are your goals?

Avoiding Probate

And I would say, a majority of our clients, they want to do a couple of things. They want to avoid probate, that’s the baseline. And then if they have children, they want to make sure that the money they leave to the children is used for the children and is protected from divorces, creditors, bankruptcies. And then if your child were to pass away, they want that money to flow down to the grandchildren versus going to a spouse, an in-law, who we call an outlaw. So if that’s the case, if you want to make sure this money stays in the family, then chances are you’re going to look at a trust. And not just a basic revocable trust that says our distributions are 25, 30 or 35. Chances are, you’re going to look at a revocable living trust that has what we call legacy inheritance trust provisions. Legacy inheritance trust provisions. So if you and a spouse were to pass away, instead of going out right to the kids, we’re now … once they inherit the money, it could be lost to a divorce, creditor action, bankruptcy.

Instead, your one trust could be split into separate shares, one share for each child. And each child could then inherit their share where it’s held in trust. Think of it like a piggy bank, it’s held in a little piggy bank where if they need it, they can go in and take money out of the piggy bank. But if they were to go through a divorce, a creditor action or a bankruptcy, whatever they keep inside of the trust would be protected from those types of things. So it’s the difference between money going out right to a beneficiary where now it’s in their hands, and then if they get divorced, half that money might be gone or if they pass away, all that money might be gone to a spouse, versus leaving it to your children in trust where if something were to happen to them, whatever they keep inside of the trust would be protected from the divorces, creditors, bankruptcies.

And then if they pass away, the money doesn’t go to the spouse, but instead would go down to the grandkids or would stay in the family, thereby protecting the bloodline. That’s something that’s only available through trusts. You can’t do that through beneficiary designations. So one of the reasons why we might want a trust is we want to protect that bloodline. We want to make sure the money stays in the family. And so that’s why we might look at a revocable living trust that has these legacy inheritance trust provisions. Now, taking it one step further, there’s other types of trusts. For example, a lot of my clients, they want to protect their kids, but also they want to protect themselves. Protect themselves from a lawsuit, a creditor. You drive around Metro Detroit, you see a lot of signs for these personal injury attorneys.

Moving Assets to Castle Trust

Well guess what? Somehow they’re making their money and they’re suing people just like you. So by moving our assets into what we call a Castle Trust, whatever we have inside of the trust would be protected for you from creditors, lawsuits, bankruptcies. And then very important, the money that we move into the trust, once we move the money into the trust, once we put it into that piggy bank, if we’re setting up a Castle Trust, which is different than a revocable trust, if we set up a Castle Trust, whatever we have inside of the piggy bank would be protected once we’ve made it five years from that nursing home or Medicaid spend out. So if you do have concerns about long-term care, then by setting up a Castle Trust, moving our house, moving our assets into the trust, once we make it five years, if you were to need nursing home care, your spouse were to need nursing home care, everything we have in the trust would be protected from that nursing home or Medicaid spend out.

That’s something that’s available through a trust, it’s not available through any other means. So a big mistake we see is people relying on just a will-based estate plan. Understand, a will, all it does is gives instructions to the probate court. If you’re looking at avoiding probate, controlling the distribution, protecting your beneficiaries, and maybe protecting you, then we need to look at a trust. And it’s just a matter of what type of trust do we want. If we want to avoid probate and protect the kids, we’ll do a revocable living trust that has these legacy inheritance trust provisions for the kids. If we want to protect you, protect the kids and avoid probate, then maybe we want to do a Castle Trust. So this has been Chris Berry with Castle Wealth Group. Hopefully you found this information helpful, make sure to subscribe to our YouTube channel and make a comment below. Let us know what type of trust sounds best for you. Thank you so much.

Castle Wealth Group has clients across the nation and helps them plan, protect, and preserve what is important by creating a retirement and legacy blueprint.