Family, Health Insurance, Trust, Will
September 17, 2020
Listen to Podcast Episode:
On this podcast of Ask Suze Anything, Suze answers questions from Women & Money listeners about last Sunday’s “The Life Of Flowers” episode concerning the Must Have Documents.
Suze Orman’s Women and Money podcast is proudly sponsored by credit unions; a safe home for your money, rain or shine. September 17, 2020 Suze O. here and welcome to the Women and Money podcast, and as I always say, and the men smart enough to listen. You know, it's funny, everybody. So many times when I'm being interviewed, they always say, why do you have to say the Women and Money podcast as well as the men smart enough to listen? And I go because that's the official name of the podcast. And they go, well, why is that the official name of the podcast? I always say to them, because this is not a podcast for just women, it is not exclusive to women. My job is not to separate women and men. My job, in my opinion anyway, is to make sure that if you happen to be in a relationship with a man, that we educate men as well because the number one reason for divorce today in the United States is arguments over money. So, why would I want to segregate women and men that are together? No, I want to make finances a family affair. And they always go, oh, that's a good idea. And then I always say to them, and don't you know that men are the biggest financial fakers I've ever met in my entire life? They'll tell you they know exactly what they're doing, they'll say, don't worry your pretty little head about this, I have it all together. And I can tell you over the years they do not, they do not, they do not. So, we all have to learn about money, together. Today is Ask Suze Anything and we're going to continue to follow up on last Sunday's podcast, which was called "The Life of Flowers" which is why it was so important to have the Must Have documents which happen to be a will, a trust, an advance directive, and a durable power of attorney for healthcare. And it truly, that podcast struck a chord. So much so that we actually put it on the Women and Money app, which all of you should download, because there are things that happen on that app that don't happen anywhere else, and I take the questions that I answer on the Women and Money podcast from the app. So, if you want to be part of really what happens here, because we're going to be expanding that app and doing all kinds of other things that will be exclusive to that app, just go to Apple apps or Google Play, search for Suze Orman and download the app. There are so many things there that really you would want to have, seriously, you would just want to have them. You could search past podcasts, you can listen to the podcast there, you can ask questions, you could see the answers to my other questions, you could take the courses, you could get the Must Have documents, all kinds of things. But there was such a great response to this that Sarah, who kind of runs the Women and Money podcast, with Robert behind the scenes, put out a little thing saying, you have a question about wills and trusts and what happened on Sunday, and we were flooded with questions in all kinds of ways. So I've chosen the questions from the podcast in response to the query that Sarah put out.Before I begin, one of the questions that have come in the most is, Suze, I listened very, very carefully to "The Life of Flowers" podcast and my question is, why do you need a will if you have a living revocable trust, since a will, according to you, is really the most inefficient way to leave assets to your family? And for those of you who may be tuning in for the very first time, go back to last week's podcast and listen to it thoroughly so you know what I'm talking about here because I really don't want to take the time today to go through and explain how each of these documents works and why they are called the Must Have documents, according to me. The reason that you need a will and a living revocable trust is that a living revocable trust holds assets that you have changed the title from your individual name to the title of the trust. Not everything that you own has a title. There is stuff that maybe you have like your dishes, your jewelry, all kinds of things like that, your precious little things. For me, it's like my Emmy Awards and my Gracie Awards and all these things. My radio equipment, my fishing rods, my lures, those can't be dictated by a trust because they don't have a title to them. So, those items are dictated by a will. Also, a will is where you actually name the guardian for your child. So, a will does that as well. In a trust, you could name a successor trustee who looks over money and things like that, but a will is who names the guardian for your child in most cases. Also, there are sometimes where you forget to put something in trust. You filled out all my Must Have documents but you did not follow the directions fully where you have to fund the trust, which means you change the title of your bank accounts, of your, you know, your homes, things that have title to it into the title of the trust. Maybe you forgot to do it or maybe you didn't realize you needed to do it. And so then, if you don't transfer something into the title of the trust, it is then governed by the will. So, anything that is not governed by the trust pores over into the will. That's why you need a will and a living revocable trust. So, I'm going to try to do a rapid-fire right now and try to get through as many questions as I possibly can in this podcast. The very first question comes from Olga J, she says, and thank you, Olga, we are so happy you are back and doing well. Me too, you have no idea. Anyway, she says we have your kit and did all the steps, but fell on a hiccup. Our bank doesn't transfer our accounts to our trust name. Any advice on what we can or should do? Thank you so much. Olga, I don't know where you are writing me from, but for some reason, there are still banks and institutions that are so behind in what you really need to do to protect yourselves, that they just don't want to take the time to do it. Get yourself a different bank. Really, are you kidding me? I have accounts all over, all good banks. TD Bank, First Republic, you name it, and they will, absolutely, a good bank, when you go in there, will absolutely change the title from your individual name into the title of the trust. So, get yourself another bank. Tina K says Suze, I received a modified mortgage in 2010 after the real estate crash. We want to put the house in a trust, but I wonder if the modification would be voided when the trust is recorded? I'm going over the modification paperwork now and so far, I don't see any info on this. Do you have any ideas on this issue?Tina, they should be able to transfer the title of your house into the title of the trust. I would simply go to a title company and do so. However, you never know, with modification agreements, there are some lenders that don't like to hold a mortgage in trust. So, that's possible. For those people who buy a house or are purchasing a home and your lender doesn't on your purchase or on your refinance, doesn't want to hold it in trust, after you have refinanced it or purchased it then go to the title company and change the title from your individual name into the title of the trust.C-o-k-p, CokeP, I guess that's how you would say it, says Suze, I'm 60 and my husband is 67 and believes himself immortal. So funny, most men do. I have found over the years that I've been doing this, which is a lot of years, everybody, the women always want the trust, want to get everything in order, and for some reason, men, men just absolutely don't want to deal with it. So, one of the great things, when I created the Must Have documents, by the way, that you will find on the app, is that you can do them right in the luxury of your own home and then, your husband really can't complain. And you're going to say, either you sit down with me and you do these or I'm just going to do it myself, and it's so great. And I will explain more later on about the Must Have documents and why I offer them and everything like that. But for right now, let's continue on with this one. I have been retired for five years with the pension, and he retired from the Air Force in 1994 but continues to work as he collects is his Social Security that started at age 66. We are a blended family with all kids being adults. We have no debt, blah, blah, blah, blah. Here is her question. Would our youngest daughter incur taxation, be it inheritance or capital gains tax, if we awarded her our home upon our demise via the revocable trust? Our home is valued at $500k. No, my dear friend, here. She's not going to get a capital gains tax on your home if you leave it to her via the living revocable trust. What will happen though, is she will not have to go through probate. So, in the state that you live in if you left her this property via a will, she would have to pay probate, she would have to pay a lawyer, she would have to pay possibly an executor, and it could take her a long time. If you leave it to her via a trust, it will be her home two weeks approximately after you have died and all it will cost is $800. In terms of capital gains tax, whether you leave it to her via a will or a trust, currently, and they may change this law so keep up on it. When you leave in assets such as a home to your child or to a beneficiary, they get what's called a step-up in cost basis. So, let's just say you bought that home for $200k and now upon your death, it's worth $500k. Her new cost basis is $500k. If she turns around and sells it for $500k she has no capital gains tax whatsoever. If she keeps the home and it is her primary residency, let's say she decides to move in and she's lived there for two out of the past five years, and she goes to sell it, and she owns it all by herself, then she gets the $250k exemption, plus whatever money she put into it. So, she could sell it for at least $750k and not pay any income tax on that or capital gains tax at that point in time. So, it makes no difference, she'll be fine. And unless you have an estate valued at more than $11.7 million I think it is right now, there will be no inheritance tax whatsoever. The next one is from DiamondRoad369 says, I have these documents and an attorney put them together for me, but I want to transfer them into the documents you have. If I don't understand some of the legal verbiage in my documents to be able to move them into your program, please discuss if you already have these documents, what you need to do. So basically, here's what you got to get DiamondRoad369. You should simply go and do the Must Have documents. The name of your trust is going to stay the same, it does not matter what you have in your old trust, you're now doing a new trust. But the name of the trust, let's say it was me and I had done a trust years ago, and it was: Suze Orman Trustee for the Suze Orman Living Trust, dated May 1, 2001. And now, I'm doing a new trust. I keep the same date but I just changed how I want everything to go. The great thing about our trust is, you could go over it and over it again online. If you have a question, there's a help button that you can either do a live chat, send it in an email, you know, call an 800 number and somebody will help you. You can change it as many times as you want, so if you're going to do a new trust with our Must Have documents, it's very, very simple. But if I were you, I would just really recreate the Must Have documents and make sure that it's everything that you want using the same title. All right? J13 says, I still don't understand the incapacity clause as a reason to have a trust. Isn't that what a financial or health care power of attorney is for while you're still alive? You would think so, wouldn't you, J13? But did you know that the day that you become incapacitated, that most power of attorneys for finances become null and void? Your healthcare power for attorney is a very different thing. That's who's going to make decisions for you when you can't make him them yourself because why? You're sick, you're incapacitated. Very different documents, which is why the Must Have documents that we have on our site, there are four of them, and the trust is different than the durable power of attorney for healthcare. So, let me just give you an example. You own a home in joint tenancy with right of survivorship with your spouse, and things have changed. You were affected by COVID, you lost your job, whatever it may be, and you need to sell this home. But guess what? One of you is totally incapacitated, they don't know who you are, they've had a stroke, maybe they were struck down by COVID and they're still sick and they're in the hospital and you can't even see them, whatever it may be, and you need to sell the house. Can you do so? You cannot because one of you is incapacitated and it takes two signatures to be able to sell the house. You and your spouse who you own the home with. Now, you would think that a financial power of attorney would do so. However, you have to be very careful because nobody really knows. You gave somebody a financial power of attorney, and then did you take it back because they're very kind of elusive documents. So many banks, many lenders don't like the fact that all you have is a financial power of attorney. So, they want to see it via a living revocable trust. So you're taking chances if you do it any other way. Also, how does one declare somebody incompetent? The financial power of attorney doesn't help you with that at all. So in the trust, in the Must Have documents on the app, what's interesting about them is it requires only one doctor that has to declare somebody incompetent. In many cases, they want two doctors to declare somebody incompetent and you don't want two doctors to have to agree, you just want one. What happens if you don't have that? They don't honor your financial power? All right, you would have to go to probate court, have your spouse declared incompetent, get a conservatorship for them that could cost you $5k, and from that point on, every time you do something with that person's money, you're going to have to check it, possibly with the courts. The easiest way to do this is to have a living revocable trust that says who is to sign for you when you can't sign for yourself? Who is to sign for your spouse, or whoever, when they can't sign for themselves? And what happens if something happens to both of you? How many times, the people that have financial power of attorneys, they give it to each other, they're in a car accident and both of them are incapacitated. Do not think that cannot happen, do not think that. So, in the living revocable trust, you could name as many people as you want and no financial institution really is going to question it. That is why. The next one is from Gabe. And this person asks, is a living trust the same as a revocable trust? Yes, it is. I just call them a living revocable trust, and I do that so people understand that you really have to do this while you are alive. Revocable means you can change it anytime you want. Trust is the name of the document, but they are identical. Jackie G asks, is the tax shelter on an irrevocable trust worth it versus a revocable trust? If you have, Jackie G, a seriously large estate, over $11 million or so then, yes, you might want to look into an irrevocable trust because if you do an irrevocable trust, which means you cannot change it under any circumstances, that if you put money into an irrevocable trust and it grows within that trust, then when it passes to the beneficiaries of the irrevocable trust, it will pass to them, probably estate tax-free. So a revocable trust is very, very different than an irrevocable trust. A revocable trust, you can change it, and any time you want and trust me, you will probably want to change it. JoePro says I have completed these documents for myself but my older brother, who is single and only has his two siblings, is being told by his attorney that he would not need a living trust. They are telling him with a durable power of attorney and healthcare power of attorney, plus his will, he has everything he needs. We are very close and I just want to make sure he has what he needs. Does someone without kids and a family that gets along need a trust document? Alzheimer's does run in our family, so I want to make sure all of us have what we need. My other brother has children, so he has a trust document in place. Listen, over the years, here's what I've found. Who is the one that gets to probate somebody's assets if they die without a trust? Oh, the attorney does. I'll never forget that there was a time when a very, very wealthy woman from New York, hundreds of millions of dollars to her name, was told by her lawyer she did not need a trust. She came to see me in California just for other things, about investing money and so forth. And I had one of the heads of the trust law department that really helped to establish trust laws to meet with her. And she refused to believe him how much money she was going to pay in probate because she loved her attorney so. Well, guess what? She died. You don't want to know how many millions of dollars her kids had to pay in probate and how long it took because she believed her attorney. I don't care who you are, I don't care if you are single, I don't care what. I really believe from the bottom of my heart that you need a living revocable trust. So, I just want to talk for a second about the Must Have documents that we offer on the app. The reason that I originally created the Must Have documents over all the years, starting in 1980, that people would come to see me and I would tell them they need a living revocable trust. I would tell them a lawyer that they should go to because way back then, the only way you could do it was via a lawyer, and they would say to me, But Suze, we don't have $2500 to go see a lawyer. And then they would say, and also we've been told all we need is a will. We don't have that much money, we don't have children, we've, whatever it may be. And in the end, when they died, somehow their kids would always come to me and they would say, we don't have the money to do probate, what should we do? So, I kept thinking, oh God, I wish I could create a program that people could afford. In the very first book that I wrote in 1995, You've Earned It, Don't Lose It: Mistakes You Can't Afford When You Retire, there was a whole chapter on trusts and why you need a trust. But back then, I couldn't help people because the technology wasn't available. But starting in the year 1999 and the year 2000, technology was available, where, with my own trust lawyer, she was able to create the trust that I used for my own estate and people were able to go online and do these trusts. Over the years, we have sold millions and millions and millions of these, but I've always made it at a price that everybody can afford. Currently, that price on this app, anyway, is $69. Now, you can go to an attorney, you can spend $2500 or $5k, or whatever it is that you want to spend, but these are state of the art documents. They are good in all 50 states, and I've made it so that all you have to do is buy one and then you can share it with all of your family members. So, the goal of this is not that you have to buy one, your brother has to buy one, your other brother has to buy one. Just you buy one and they will go on, they'll use your activation code, register with their own passcode so that you can't see what each of you has done. But then you don't have to buy one for you, one for your brother, one for your other brother. You can all just do it for $69. You can all come back and redo it as many times as you want. Again, these documents are created by my own trust lawyer, they are the exact documents that I have. We do, as I said earlier, have a helpline that you can call, send in an email, ask questions via a live chat, and we are there to help you. Every time there is an update with this program, we update it. And so it's really important that you at least take a look at these. And because it's not just the trust, it's not just the will, it's the advanced directive, and durable power of attorney for healthcare as well. So all of those, and actually it's also the financial power of attorney, so it's really five documents, but I mostly talk about the four that you must have. So, take a look at them, everybody, it, in my opinion, it's a deal of a lifetime. Who says you can share something with everybody? Who says you can update it as much as you want without having to go back to an attorney? It's me because I want you to be protected versus a lawyer that says in JoePro's case, well, you don't need these documents. So if you ever come across an attorney that says that to you, then here's what I would suggest. I would say, OK, I want you, on your letterhead, to write a letter to my beneficiaries that says, if I die, this is what it is going to cost to go through probate, your fees, everything so that they know exactly what to expect. How much do you want to bet it is going to be more than $69? Really, everybody? And also you can go on my own website, www.SuzeOrman.com, and you will see that these exact documents are sold for $199 which is still an incredible bargain. However, because you are part of the Women and Money podcast, because you have downloaded the Women and Money app, now you can get them for $69 so you should really look into that. All right, I just want to answer a few more questions about this. One is from Marta M, and she says that she has the Must Have documents. She keeps them updated, you know, she's moved everything into the name of the trust, she has set money aside for the care of her mother, who is being taken care of by her older sister and between the two of them, they pay for most of the caregiver's expenses. However, she is worried that if something happens to her now that her kids may create a problem for her sister. She says that in a meeting with her Fidelity advisor that she said that she didn't have to have my cash account in the name of the trust and to put my sister as the beneficiary so that if something happens to me, she will cut her a check. She says I did it, but she says this has been on the back of my head if it's correct or not, it worries me. So, other than going to an attorney and paying the big bucks, I thought, maybe you can clarify this for me? Marta, again, remember, you don't have to go to an attorney and pay the big bucks, you could do the Must Have documents on the site, but you don't have to. If those of you who are listening have an account at a bank, a cash account at a brokerage firm, or whatever it may be, you can make those accounts pay-on-death accounts or transfer-on-death accounts. That simply means that upon your death, you have designated a beneficiary, and it will go directly to that person, regardless of what your trust or will says. So, Marta, you're fine, you're absolutely fine. So, just make it either a pay-on-death account. But also, if you have an account that is held in joint tenancy with right of survivorship, then upon your death it automatically goes to whoever you hold that account with, in joint tenancy. Even if your trust or will says that account is to go to somebody else, it will go to the person you own it in joint tenants with right of survivorship. So, for those of you listening, please remember how you hold title to something overrides the wishes of your trust or will. All right, I'm just going to go a little bit long today because there are so many questions and I just want to get this over with right now so that really, all of you that care about these documents and want to live the life of a flower, you better listen to last week's podcast if you don't know what I'm talking about. I want you to have answers to your question. B Muckley says, hi, Suze, my partner and I want to use your trust kit to create a trust together but we're not married, and there is not a way to indicate that when working through the program. Listen, you don't have to create trust together, just do your own individual trusts, it's really that simple. KT and I are married, and we both have our own individual trusts, so just think about that. A lot of you may go well, Suze, why don't you have a tax planning trust, and really the reason for that is, if I die, everything goes to KT. If KT dies, everything goes to me. But the majority of our estate goes to charities, so we really don't need a tax planning trust at all. Um, Nam wants to know, please discuss bank accounts for single retirees and the need to have more than one person with signature authority. Nam, that is why really you might want to have a living revocable trust where you have your bank account in the name of the trust and your name in the trust. If you are incapacitated, who is going to sign for you if you cannot sign for yourself? Just something you might want to think about. And one more just to make this clear, which is from GD Jacoby. I'm refinancing my house and they asked whether my house is in trust. How would the refinance be different if I did the documents and the house was in a living revocable trust? Again, I mentioned earlier, but I'm going to mention it again. Many lenders do not like living revocable trusts for some reason, so just refinance if that's the case in your individual name, then change it to the title of the trust. So, that's it for now. But here is the bottom line, everybody. It is easy, it is simple, there is absolutely no reason that every single one of you should not have the Must Have documents, especially since we have made them available to you at a price that every single one of you can afford. I just want to say this. When you do the Must Have documents, you need to make sure that you keep the original safe and sound somewhere because to be valid, it has to be the original document, it cannot be a copy of it, it has got to be the original. If you happen to keep it in a safety deposit box, fine. But you better make sure if something happens to you, your trustees' names are on that safety deposit box, they have the keys and everything, so they can get to your Must Have documents. This is so easy, you have to give it a try. You really need to do this, everybody. So, now you know about the Must Have documents and hopefully this version of the Ask Suze Anything session really, really helped you. See you on Sunday. Hi, I'm Sarah, and I'm Robert, and we're back here to tell you that Alloya's member credit unions are so proud to have brought you this episode. You know, Robert, credit unions live by a people helping people philosophy. Absolutely, Sarah. And that means when you bank with a credit union, you can trust that they have your best interest at heart. The fact is, regardless of circumstance, a credit union will have your back and keep your money safe, that's the credit union promise. Go to www.MyCreditUnion.gov to find a credit union that fits your needs. That's MyCreditUnion.gov. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information.
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