transcript
Speaker 1:
[00:05] This episode is brought to you by SmartVestor. Connect with an investing pro near you at ramsysolutions.com/smartvestor. Jill is with us. Jill is in Dallas. Hi Jill, how are you?
Speaker 2:
[00:17] Hi, I'm good, how are you doing?
Speaker 1:
[00:18] Better than I deserve. What's up?
Speaker 2:
[00:20] I have a question about a trust. I've heard you say a couple different things, and I was just curious what you would do in that situation.
Speaker 1:
[00:26] Okay.
Speaker 2:
[00:27] I've heard you say maybe an LLC, or if you're raising smart kids, then you don't necessarily need a trust, but I have minors and I'm just curious what I should do. I have a house and I have a house that is paid for, and then I have some mutual funds and my IRAs and stuff like that.
Speaker 1:
[00:47] Okay. So your net worth is a million or so?
Speaker 2:
[00:51] It's close to four million.
Speaker 1:
[00:53] Oh, good for you. Well done. Very well done. Okay. What we did when we were at your stage and we had minor children was, we set up a will and the will, I'm sorry?
Speaker 2:
[01:05] I'm sorry. I should also add, I'm divorced. So my kids are taking care of in the form, in the fashion that they will go to their dad if something happened to me. I just want to take care of my stuff for them.
Speaker 1:
[01:17] Okay. Yeah, that's fine. So you can do the exact same thing then. So the actual guardian would be your ex, but then what do we do with your stuff if you die while they're minors? So what we had set up on ours were minors was the trust is formed upon death, and it's just a children's trust, very simply, Jill's kids, and that's the trust and whatever. You can call it whatever you want to call it. But it's a children's trust while they're minors, and all of your assets are dumped into that trust, and then you leave instructions to the trustee of how you want those assets handled. I'll give you a couple of things we did, and you could choose to add those or not add those. One was the income generated by the trust while they're minors. A good healthy child support payment goes to the guardian to take care of the kiddos while they're minors. So I don't want him to be, in this case your ex, to be stressed at all with clothes and food and so forth for having all the kids now full time. That's one thing. The second thing we said was, okay, you can use some of the money from the trust when you go to college and pay cash for college. You could use it for the purchase of your first car, a minor amount for that. You could use it if there was a major medical event and you needed to pull some out in addition to the monthly income to cover medical expenses for the child while they're minors. But other than that, the money was just going to be sitting there growing. Okay? And then when they turn 18, their portion of the assets would be turned over to them. That's how we had it set up. Later on, we modified it because it's got to be a little larger amount of money. We said, okay, at 18, you get X amount and at 25, you get the rest. Because we didn't want to dump millions and millions on a freaking 18-year-old. Okay?
Speaker 2:
[03:07] Right.
Speaker 1:
[03:08] So that's how we handled it until they were grown. When they were grown, we changed everything, of course, because they're not minors anymore. And we even put in hours, we dictated how the money in the trust was to be handled and what it was to be invested in. Like the four types of mutual funds we talk about. And there's this piece of real estate and it's paid for and it just stays in there. Can't be sold. And so the trustee can't get all conservative and put it all in CDs or something.
Speaker 2:
[03:38] What about, should I put my house in anything right now?
Speaker 1:
[03:42] Not now, no.
Speaker 2:
[03:44] Everything just goes upon death. And then when they both turn 18, then I can restructure everything?
Speaker 1:
[03:50] Upon 18, you can dictate that the trust does X. Or once they are 18 and you're still alive, then you'll change the whole thing. And decide what you want to do at that point. And you do that based on whether or not they're going to be competent adults and whether this money is going to be a blessing. Because you give money to an incompetent, it's not a blessing. It magnifies their incompetence.
Speaker 2:
[04:12] Okie doke.
Speaker 1:
[04:13] So that's what we did. And so as they grew, now we're way past that now. I mean, my youngest is 35. So, you know, we're way past all that. And we're way past the competency question and all those kinds of things. So all of our structure today is all just built around risk management and around keeping the stinking government's hands off of it upon death. Because the stupid government takes 55 percent of every thing above, I think this year it's $28 million or something. So the death tax, you know, they tax you once while you're alive, they tax you again when you die. So you spend a lot of money and a lot of time keeping their hands off of it then also. But that's a different discussion than you're worried about today. Right now you just want to make sure your kids are okay and the stuff is managed well. Yeah. And good on you, mom. You know, great job with your financial situation. I just wanted to let you know you're a real hero. And they're going to appreciate that someday. To be a single mom and in your situation, great, great job. Yeah, and being intelligent, intentional and all of that. There's so much wisdom there. Well done.