You Want a Trust! Do You Know Why? | Series 5.7

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Welcome to the EnjoyMore30s Family Finance

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podcast. The only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out, and distract our focus

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from simply enjoying life.

Joseph Okaly: 00:00:16

Hello, hello, welcome once again to

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EnjoyMore30s Family Finance. Every week, I'm talking on this

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podcast to try to help you with money. Any steps forward, any

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confidence I can help you gain, that means you get to remove

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some of that financial anxiety that you might be carrying

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around with you because all I want you to do is focus solely

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on making life more enjoyable for you and your family. This

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series that we've been talking about is all focused on the

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kids. It's focused on your kids. That's why it's called the Your

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Kids Money Mindset Series. Makes sense. And we're going to do

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that a little bit more today and today's focus is going to be on

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trusts. This seems to be a word that tends to be associated with

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people that have money, right? TV, movies, trust fund baby kind

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of vernacular, it all supports this kind of an association in

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our minds. It may be can whet our curiosity. So you know today

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we're gonna dive into trust when it comes specifically to your

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kids.

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Now, as always, if you like what you're hearing, please make sure

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to subscribe, wherever you listen, Apple podcast, wherever

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that might be. Clicking that star leaving the review, it

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really, really helps. We're trying to reach literally

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millions of other young families just like you that are out

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there.

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Last week, we discussed a concept that most people have

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never, ever come across before, which was how you save for your

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kids when it comes to education, the one we all know, as opposed

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to maybe letting them handle more of this one, more of that

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education, and instead setting them up for a much better long

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term retirement, which is a really far off concept. But it

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allows them maybe to live much more fully in the present when

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they have their own families. So if you haven't checked out that

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episode, yet, I really highly recommend doing so.

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Today's episode that we have for you is titled You Want to Trust!

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Do You Know Why? Where we're going to cover some basics of

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these things called trusts, because you've likely heard

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about them before here and there on TV or otherwise. They may

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seem advanced, they may seem beneficial, but it could very

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likely be something that you don't actually need. And the

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great thing about this episode, it's the first time out of any

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episode we've done so far that it's talking about something

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that you may not have to do. Something that you don't have to

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think about, instead of things to take a step forward, this is

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a thing that maybe you have in the back of your mind that you

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may not have to have on the back of your mind. So the goal for

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today's episode is for you to walk away saying, you know, I

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get high level what a trust actually is now, and I'm pretty

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confident one way or another, I'm pretty confident that if I

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ever really need to worry about it, now I know. So there are

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literally you know, a million different trusts out there, all

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for different reasons, so this is not an all encompassing

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discussion on every single type of trust. But just again the

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high level concepts so you can better know if a trust could

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Now my education personally before I became an advisor,

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before I obtained my Certified Financial Planner designation,

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when it came to trusts, my education came from movies and

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TV. The rich people just seem to have them right. Trust Fund Baby

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was almost like an insult in a lot of the shows. It's something

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you would say to a younger person who was just kind of

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handed a bunch of money that they didn't really work for.

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That was kind of the trust fund baby insult. The classic movie

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plotline I feel like is some rich distant relative that you

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never knew that left you a bunch of money or something if you did

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you know A, B, C, or D. There were some who basically A, B, C,

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or D are the hoops that you basically had to jump through to

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get this money that some long lost relative just happened to

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leave you. So the first thing to know about trusts is that there

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is some problem they're trying to solve. Maybe the children are

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irresponsible. Maybe the children have a mental

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disability. Maybe you just don't trust your child's spouse. But

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there needs to be some problem you're trying to solve. It's not

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like you know, vegetables are good for everybody. We all need

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some kind of a thing. There's literally some outside of the

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box perhaps problem that we're trying to solve.

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Now the first way a trust can make sense is through this kind

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of classic movie restriction reference. Passing money to your

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children and creating that hoop that extra set of rules that

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your child may have to jump through. So maybe you don't

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think your kids are responsible enough to give them the money

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right now. Maybe if you passed away tomorrow, you'd want them

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to maybe get, say 50% now, just pulling it off the top of my

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head, and then get the other 50% at maybe 35 or 40, when you

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think they'd be more responsible. So if that is the

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problem you're trying to solve, then a trust could be a solution

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to that specific problem because a trust is a separate entity

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that can enforce those rules for you. If you have a child who

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suffers from addiction, that could be another common

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reasoning. Again, a trust could create certain rules for how

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that money, when that money is distributed. Basically, you

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know, you want this money to be for them. So they're the

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beneficiary. So beneficiary, meaning the one who benefits

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from the money beneficiary, but to have someone else to entrust.

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So the trustee who you're entrusting to make sure it's

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used according to those rules that you're setting. So instead

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of giving them the money directly, this separate legal

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entity, this trust, receives the money instead, with that list of

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rules or hoops that you basically established. So if

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your kids have no problems, which I hope your kids don't

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have any problems, if you died tomorrow, and you would say,

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here you go. Here, take the money, you're responsible,

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you're an adult, I have no worries about you whatsoever,

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then a trust to create restrictions is probably not

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something that you really have to worry about at all for them.

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Now, the other main reason for creating a trust, outside of

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creating restrictions, is creating separation. So let's

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say your child is married to someone you don't really trust,

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for lack of a better word, not fun to think about. But you

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know, unfortunately, it tends to not be an uncommon problem or an

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uncommon occurrence that we come across. Basically, if your child

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passed away, you would not want the spouse to get all this

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money. In this case, a trust is creating separation. The money

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is not your child's technically, it's the Trust's so you can

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stipulate where the funds would go if something happened to your

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child, or to protect those funds in the case of a divorce. So

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potentially even be something you need to worry about.

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again, a trust is created as the separate entity, your child is

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still the one who benefits again beneficiary, but you're

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entrusting a trustee, so entrusting someone else, to

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carry forward these rules that you've set out. This last

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example, though, is somewhat state dependent, as different

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states can have different rules on how property is split up in

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the case of divorce. So that could be something that you want

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to consider but depending on where your child lives, that

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could affect how much of a problem you're really needing to

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The other main example that we see here is in the case of a

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child with a mental illness or disability. If they are

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receiving Social Security Disability, and directly inherit

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a bunch of assets, then they would likely no longer qualify

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for Social Security Disability. So if you have what's called a

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Special Needs Trust, instead, inherit the assets on behalf of

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your child that has a mental illness or mental disability.

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Now, the trust assets, again, your child is still the

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beneficiary who had benefits, but the trust inherited the

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assets, so it would very likely not affect the disability

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benefits that your child is already receiving.

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So again, if you have no problem with your kid's spouse, if you

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have no special needs types of problems to consider, the

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separation goal, or the separation problem that a trust

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can solve, again, likely aren't anything that you need to be

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worried about. Now, there are some other kinds of trusts. But

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you know, kids are the focus of this series, these other ones

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may not be kid related. So I'm not going to go into them too

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much today. But you know, when you talk about an older person

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and Medicaid, or certain tax strategies, or sometimes for

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like a second marriage, you want maybe your assets to be used for

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your second spouse, but after your second spouse passed, you

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want it to go to your biological children kind of a thing. Those

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would be some other general areas. Again, you're solving a

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solve for.

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problem so just like before, but these are other possible areas

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where a trust could potentially be valid. But again, we're not

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going to dive into that too much today because we're focused on

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the kids.

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So for today, remember, trusts are not just for rich people or

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poor people. They are for people that are generally trying to

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solve a problem where creating restrictions, so when, who, how

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the money is used, or separation, so the money is not

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technically theirs. That's when we're going to look at hey, does

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a trust fit in here?

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So thanks for tuning in today. Join us for next week's episode,

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a bonus episode I might add, yes, very exciting, for a concep

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that I just came across and I'm really, really excited to share

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with you. The episode is called Motivations: Money Lasts Ju

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t Three Generations, where we' e going to touch on how all acro

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s the world so not just in the S but all across the worl

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, despite the region, despite t e culture, wealth that

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s accumulated tends to be lost y the third generation, and wh

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t motivational mindsets you c n implement to try and countera

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t what all this stuff is th t you're trying to do for yo

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r kids now. This wealth tha you're trying to build and mayb

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pass on, what motivationa mindsets can you help i

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implementing so that your wealt that you're creating is going t

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last beyond three generations

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Overall, if you're able to implement what we covered today,

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that is fantastic. As always, there is less to worry about

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than before, more focus on enjoying life. That's the point

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of all of this. If you are wanting help with these things,

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though, if you have questions you need help in clarifying

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something, check out the Ask Joe section on the show's website

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www.enjoymore30s.com. That's EnjoyMore30s.com until next

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week. Thanks for joining me today and I look forward to

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connecting with you again soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal, tax, or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer or other professional before acting upon

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any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS Securities, Inc., and TFS Advisory Services an SEC

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Registered Investment Advisor Member FINRA/SIPC.