Podcast Episode - Suze School: Understanding Trusts


Estate Planning, Stock Market, Trust, Trusts


July 16, 2023

Listen to Podcast Episode:

Suze starts off this episode with a quick update on inflation and market conditions.


Podcast Transcript:

00:00:02

Music: Music (in).

00:00:28

Suze: July 16th, 2023. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. All right. How happy am I, that Robert, my lovable producer is almost all the way through with his Dead & Company tour.

00:00:56

Suze: I believe this weekend he is in San Francisco to hear all three of their concerts. So my life, KT's life and everybody's life will become a lot easier. Robert when, in fact, you're done having fun, but if anybody deserves it, you most certainly do.

00:01:20

Suze: Today's Suze school, I will get to in just a little bit. However,

00:01:27

Suze: I just want to say a few things as you may have noticed last week, the inflation report came in and it was only at 3%

00:01:38

Suze: down almost 6% from a year ago when it was at 9% when everybody went on a series I Bond frenzy, especially me

00:01:53

Suze: and everybody who had access to YouTube or to any type of social media. They were all in on I Bonds. OK.

00:02:03

Suze: But do you remember the last time that I Bonds were supposed to be auctioned? Which was in May. It was, should we buy them? Should we not buy them? What should we do?

00:02:17

Suze: So, do you remember me saying I don't want you to do it

00:02:22

Suze: enough. I think inflation is gonna go down and I think there will be better things for you to do with your money if we are just patient.

00:02:30

Suze: Well, now that we're down to 3% inflation and I think it's going further down, we made the absolute correct call. That does not mean that you come out of the I bonds that you're currently in. Remember, you have to stay in there at least five years to come out without any penalty. However,

00:02:54

Suze: I'm glad we made that decision. It was like, should we shouldn't, we should, we shouldn't, we? No, we shouldn't have. And why is that again?

00:03:04

Suze: It's because I firmly believe that you will get a higher interest rate with more liquidity

00:03:11

Suze: in either treasury bills or notes, certificates of deposits or whatever. They may be possibly even in investing in the stock market,

00:03:24

Suze: especially if in August or September or October,

00:03:30

Suze: maybe the market declines. Like, do you remember I gave a webinar

00:03:35

Suze: a little bit ago and about 100,000 of you joined in

00:03:40

Suze: and you heard me say that I still like oil stocks, energy stocks and I do everybody. So stop getting nervous about the prices of PXD or Devon or XLE or Chevron or any of them. Can you just be patient?

00:04:01

Suze: All right. I don't want to read emails anymore that say Suzie, I know it's a great dividend but I'm still down in value. That is why you buy a stock that has a great dividend. So that when it goes down in value, at least you're still making money. Got that everybody and given what I still think is gonna happen with oil and everything

00:04:29

Suze: fine. I still like those stocks. I would not be selling them here on any level. However, if you didn't buy them for the dividend, you bought them for growth and you need growth right away. All right, do what you want to do, but that was not the reason you were supposed to buy them. Do you hear me?

00:04:49

Suze: But do you remember that? I said, I thought that the markets were going to go down about 20% when I say such a thing. I don't know when I think that's going to happen,

00:05:01

Suze: but eventually I think it could happen. Now, I'm thinking that it could happen seriously around

00:05:10

Suze: end of August, maybe September somewhere in there, maybe. Yes, maybe no,

00:05:17

Suze: if that happens, however, that might be a great chance to, again, continue to dollar cost average in stocks. That absolutely makes sense that are for the long run. All right. And that's not just Devon or PXD. Those are so many other stocks that are out there or ETFs and we'll talk about that as time goes on that you might want to take advantage of.

00:05:45

Suze: So when you are in the stock market

00:05:49

Suze: and you have purchased individual stocks, I need you to think about it as if you are in a relationship

00:05:58

Suze: now. Isn't it true that when you get in a relationship with somebody

00:06:06

Suze: at first, it's fabulous. You usually like it. But as time goes on, it can become rough.

00:06:13

Suze: And if you're committed to that relationship and for whatever reason, it gets rough, you have your low periods and somehow you just are patient and you work through them and then all of a sudden you have your high periods and it's great, but sometimes it can take years to get through really what you need to get through in a relationship. You know that and I know that. But if you can do that, the rewards are incredible.

00:06:42

Suze: There are also times when you are in a relationship, when things just are going down, you know, you need to get out of it. There is no way to repair it, but yet you stay in it because you're afraid to get out of it for many, many reasons.

00:07:01

Suze: Ok.

00:07:02

Suze: That analogy relates exactly to owning a stock.

00:07:09

Suze: Sometimes you just have to stick with a stock when you know it has good earnings. When you know, it has good potential when you are getting a dividend from it and you just have to be patient with it and hold it and hold it and hold it when you've done research and you have a good feeling about it and you really are in a relationship with this stock, then just hold on and in the long run,

00:07:37

Suze: if it's a good stock, just like if it really is a good relationship and you're just going through hard times, stocks go through hard times and you've got to stick with them when they do.

00:07:50

Suze: And you saw that a few years ago, you saw, you know, Netflix go all the way down and now it's coming back up. Same thing with NVIDIA, same thing with Apple. It happens, everybody.

00:08:02

Suze: But then sometimes there are stocks

00:08:06

Suze: that aren't good, they're not gonna recover. Everything has gone wrong with them. And that's when just like in a relationship, when, you know, you should get out, but you're afraid to get out and you're afraid to get out of the stock because maybe it'll come back. You, you have hope both in the relationship and the stock. And so you just hold on

00:08:32

Suze: as you watch the stock or the relationship go down and down and down in those relationships

00:08:40

Suze: and in those stock purchases now you have to sell and cut your losses no matter what they are.

00:08:48

Suze: But that's usually with a stock that doesn't have potential. That's lost its way. That's just totally not worth holding

00:08:58

Suze: the stacks that I've talked to you about. None of them are like that.

00:09:02

Suze: Right. They're all have potential no matter how long we may have to wait for them.

00:09:07

Suze: But I just want you to remember that.

00:09:12

Suze: So,

00:09:14

Suze: in relationship, as well as in investing, there really is no difference between the two if you think about it,

00:09:24

Suze: you know, and again, only Suze Orman would probably compare investing to a relationship. But that's not so crazy. Given that I think you are your money and your money is you because, you know, I've always said your money can't do anything without you.

00:09:40

Suze: You're the one who works for it, invest it saves it whatever it may be.

00:09:46

Suze: So when something's not going kind of right there,

00:09:51

Suze: it's all connected. So just make intelligent, unemotional decisions. Got that everybody,

00:10:02

Suze: I just also have to say something about relationships

00:10:07

Suze: the other day. And it made me so sad.

00:10:11

Suze: I was talking to somebody who is so intelligent. I can't even tell you. And I was saying something about money to her. And she said to me, I know I really need to listen to this Suze. I said, I know you do. You're a mess with your money.

00:10:32

Suze: And she said, I know. And I said, do you know why you're a mess with your money? You're a mess with your money because of the relationship that you're in

00:10:41

Suze: and she said, I know, but I don't know what to do about it, Suzie, he's cheated on me. He's stolen money from me. He hasn't made any money. I have a child with him,

00:10:55

Suze: but I'm afraid to leave because the house is in my name. Everything is in my name. But I'm afraid if I leave, I'm gonna lose half the money I have.

00:11:11

Suze: And I said to her, are you kidding me?

00:11:15

Suze: Are you just kidding me?

00:11:18

Suze: I said, has he been physical with you? Yes. Meaning physically abusive. Has he been emotionally and verbally abusive to you? And she said yes.

00:11:29

Suze: And I said, and you think money keeping your money, she's like in her forties, you know, keeping your money is worth living like that.

00:11:40

Suze: Are you serious?

00:11:42

Suze: And after a long, long talk with her,

00:11:47

Suze: she came to the conclusion because she has a very young child and doesn't feel safe leaving the child with him

00:11:55

Suze: that

00:11:56

Suze: she was going to contact a lawyer and she was gonna do something about it. I asked her how long she's been feeling like this? And she said for years now.

00:12:09

Suze: So why do I tell you this story?

00:12:12

Suze: I tell you this story because there are so many abused men and women out there

00:12:20

Suze: that are in relationships that they need to leave.

00:12:27

Suze: So you are not under any circumstance to value money and what you have more than your own happiness. Do you hear me?

00:12:42

Suze: Who you are,

00:12:45

Suze: how you feel, how you wake up in the morning, even if you're in a little shack and you feel safe and you know that you now have your whole life ahead of you no matter what your age is.

00:12:59

Suze: Just because you are afraid to lose money. If you get a divorce is not a valid reason for you to lose your life, for you to lose the joy of your life. For you to lose the Peacefulness of your life. Are you out of your minds?

00:13:18

Suze: I've worked enough now with abused women

00:13:22

Suze: and I have seen them make these hard decisions of leaving and doing this and doing that.

00:13:30

Suze: Usually they always stay because of the fear of losing money or because they have Children. And I know that many people have said, but Suze, you don't understand

00:13:42

Suze: if I leave, he's gonna make my life miserable. He's gonna make my kids' life miserable. He's already or your spouse, she or whoever it is, they're already making your life miserable.

00:13:56

Suze: So, in the majority of cases, seriously,

00:14:01

Suze: when you are physically, financially, emotionally and psychologically abused,

00:14:10

Suze: money is not a big enough excuse to stay.

00:14:17

Suze: Got that everybody.

00:14:20

Suze: Ok,

00:14:21

Suze: Suze school.

00:14:24

Suze: Now

00:14:25

Suze: I said to you last week that I was going to do a Suze school on trust and the difference between a revocable trust and an irrevocable trust and a special needs trust. So take out your little Suze notebooks

00:14:41

Suze: and I'm just going to briefly tell you the difference between a revocable trust, an irrevocable trust and a special needs trust.

00:14:54

Suze: So let's start with the kind of trust that almost every single one of you out there, in my opinion, should have known as a revocable trust, also known as a living trust,

00:15:10

Suze: a revocable trust or a living trust is used primarily for efficient estate planning and asset management during one's lifetime. And after death, what do I mean by that

00:15:30

Suze: when you have assets that you own in your individual name or joint tenancy with somebody

00:15:39

Suze: and you are going to be passing those assets down to somebody who is a beneficiary and their names are not on the title of your assets.

00:15:52

Suze: The most efficient way to pass those assets down to your beneficiaries is through a living revocable trust. Got that. Just that simple. Why? Because if you don't have a trust, hopefully you have a will

00:16:16

Suze: and if you have a will, when you have a will, the assets that are passed down through a will in most cases have to go through probate, which is a very lengthy and costly court procedure in certain states. It could take six months, one year or two years to be able to complete the procedure

00:16:40

Suze: and it's just a total waste of time and money.

00:16:47

Suze: Now, a lot of you have been told you don't need a living revocable trust and I'm combining a revocable trust and a living trust so that all of you can relate to this.

00:16:59

Suze: You don't need that if you own a house that you own in joint tenancy because if you die, it will pass immediately to the person that you own an in joint tenancy with. Yeah. Well, what happens if you're both killed in a car crash?

00:17:15

Suze: Now, what happens to that house? Now, that house is governed by a will. If you don't have a will,

00:17:24

Suze: then that house is governed by what's called intestate succession where the state that you live has already decided who is going to get your assets upon your death? It usually passes either to your parents, your Children, your spouse, whatever it may be, there is a succession

00:17:47

Suze: passage every single state has. If you don't have at least a will where you've dictated how your assets or who your assets should pass to.

00:18:01

Suze: Oh, you own a house in joint tenancy with right of survivorship. So you think you don't need a trust and now one of you is in an accident or has a stroke and now they're incapacitated.

00:18:18

Suze: They don't know you. They don't recognize anybody. They're totally incapacitated. You need to sell the house maybe because that person was contributing to the mortgage or it's a two story house and you need a one story house. But now you need to sell the house. Can you, you cannot not because the person that's incapacitated cannot sign the deed to sell it and since you own it and joint tenancy,

00:18:48

Suze: it takes both signatures to sell that house. So what are you gonna do? Now? Now you have to go down to probate court

00:18:58

Suze: that will cost you a lot of money. Have your spouse or whoever you own that house with in joint tenancy

00:19:06

Suze: declared incompetent. So you can sign for him or her and vice versa. Got that

00:19:15

Suze: you could avoid all of that if you simply put your assets like your home, like your stock portfolio, like your bank accounts, all of those things in a trust. Now, obviously, you can make your bank accounts pay on debt accounts, transfer on debt accounts. You can set up everything like that,

00:19:42

Suze: but that doesn't take care of the problem of incapacity. Do you understand that everybody,

00:19:51

Suze: the thing with a revocable trust is that it has flexibility.

00:19:58

Suze: You, if you create the revocable trust, you are known as the trust store and you have the ability to modify that trust, amend that trust, revoke the trust, do anything you want during your lifetime. It does not change your tax status. You don't have to create another tax form for it. Nothing,

00:20:24

Suze: everything stays the same. All that changes is that everything now is in this suitcase, you put it in this suitcase and in this suitcase that's known as a trust holds all of your assets that have a title to it.

00:20:43

Suze: Just that simple. Everybody, you do not put an Ira or retirement account or any of those things in a trust.

00:20:52

Suze: It's mainly your bank accounts, your stock accounts, your buildings, you own your home, whatever it may be that goes in trust.

00:21:02

Suze: Also, if you have a minor child,

00:21:08

Suze: a minor cannot directly inherit money. They're a minor. Therefore, within a revocable trust,

00:21:19

Suze: you can name a trustee to take care of the money for your minor child

00:21:27

Suze: and leave instructions as to how you want that person to invest the money or when that minor child is to get that money at what age you can control all of that.

00:21:41

Suze: So again, the components of a revocable trust

00:21:46

Suze: is a trustor. The person who has created the trust, the trustee, the person who makes all the decisions, what's in the trust and usually the trustor and the trustee are the same people,

00:22:01

Suze: the successor trustee who takes over if your trustee becomes incapacitated or something happens to them

00:22:11

Suze: and then your beneficiaries and it's just that easy.

00:22:17

Suze: So that's what a revocable living trust is mainly all about.

00:22:24

Suze: In my opinion, the less money you have, the more you need a living revocable trust.

00:22:33

Suze: Next, an irrevocable trust,

00:22:38

Suze: an irrevocable trust is exactly what that name says. It is irrevocable.

00:22:46

Suze: You cannot change it once you create it, period. And an irrevocable trust is created to accomplish specific estate planning goals such as asset protection, estate tax reduction or Medicaid planning how does it do that?

00:23:11

Suze: Once the assets are transferred into an irrevocable trust?

00:23:17

Suze: You as the trust store, also known as the Grand Tour,

00:23:22

Suze: you, the one who put them into this trust, you are going to relinquish total control and ownership totally over those assets. So once you put money into that trust,

00:23:40

Suze: it's now out of your estate, you may think you own it, but it is no longer yours. It's in that trust, you cannot change it. And it's held usually until you die for the benefit of whoever you named on that.

00:23:58

Suze: Now, if you wanna make changes to that trust to an irrevocable trust, it will generally require the consent of the beneficiaries of that trust and you have to have court approval, one or the other or both

00:24:17

Suze: another reason that people love an irrevocable trust or they think they do anyway, is that an irrevocable trust can shield your assets from creditors, lawsuits or other claims. So, unlike a revocable trust that does not provide any asset protection whatsoever,

00:24:44

Suze: an irrevocable trust does provide a level of asset protection.

00:24:52

Suze: How does it help you with taxes?

00:24:56

Suze: Irrevocable trusts are used to reduce estate taxes, not income taxes necessarily, but estate taxes because once you remove those assets from your taxable estate and you've given up control of those assets

00:25:17

Suze: and anything about them as they grow, they're not in your estate. So if they grow to be very large and then passed to the beneficiaries, they're not in your estate, so they're not counted for estate tax when you die

00:25:38

Suze: for Medicaid planning.

00:25:41

Suze: Now, listen, if you anticipate the need for a long term care or nursing home expenses, it is true that an irrevocable trust can help protect your assets and qualify you for Medicaid benefits. Now, how does it do that when you transfer your assets into an irrevocable trust, you create a separation, so to speak between you

00:26:10

Suze: and your personal assets and therefore your eligibility for Medicaid allowing you

00:26:18

Suze: to preserve assets for your beneficiaries while still qualifying for Medicaid, which is governmental assistance. Now, obviously, there's five year look back periods and things like that. But you know how I feel about this,

00:26:35

Suze: I've said to you before, I personally believe that when you have money and you get older, that money is to take care of you. And I understand that some of you say, but Suzie, what happens if I have a special need child or something like that? Maybe you get insurance, maybe that is when whole life or universal life insurance comes to play. But while you are alive,

00:27:05

Suze: I think it's really important that you look into the difference between care in a nursing home. When you are a private paid patient versus care in a nursing home. When you are on Medicaid also to be on Medicaid, you have to be in a Medicare approved nursing home.

00:27:29

Suze: And as time goes on with Medicare possibly going bankrupt just like social security. Although I don't think that will happen

00:27:37

Suze: and the majority of the people in many ways are in nursing homes on Medicaid paying the most amount of money. All right,

00:27:48

Suze: you never know when they'll cut that back. So, just be careful here

00:27:55

Suze: Now, in an irrevocable trust, you can also set specific terms and conditions for how your assets should be distributed to your beneficiaries. And again, this can be really useful for you if you have concerns about the financial responsibility of maybe your kids or your beneficiaries and you want to provide for them over an extended period of time.

00:28:24

Suze: All right,

00:28:26

Suze: an irrevocable trust just like a revocable trust avoids probate just so, you know, and so that is a good thing. However, what's really important to remember the main differences and think of the names of those two is revocable versus irrevocable? And are you sure you really want to do that

00:28:56

Suze: before you do this? It is crucial because once you do this, you cannot change your mind with an air of vocable trust that you really consult with an experienced estate planning attorney or financial advisor

00:29:13

Suze: to really determine if an irrevocable trust aligns or is really in sync with your specific needs and goals.

00:29:24

Suze: All right, last but not least

00:29:28

Suze: a special needs trust.

00:29:32

Suze: Now, a special needs trust is also known just so, you know, as a supplemental needs trust and this is just simply like a legal arrangement and it's designed to provide for the financial well-being of an individual with special needs or disabilities

00:29:52

Suze: without jeopardizing their eligibility for government benefits. Remember when somebody has special needs, that means they have special needs, meaning they can't necessarily take care of themselves. They need aid of some kind. And many of your Children may be in that situation and therefore maybe they happen to be on

00:30:19

Suze: S SI which is governmental aid that pays them 600 or some odd dollars a month and that they need that money.

00:30:29

Suze: But if they have any money in their individual name or if you leave them money outright,

00:30:39

Suze: chances are they will be disqualified from SSI

00:30:44

Suze: and good luck getting back on to SSI.

00:30:50

Suze: Right. So that is what you really need to know. So again, right, it's a legal arrangement to provide for their protection, their financial well being without jeopardizing their eligibility for government benefits. So the primary purpose, everyone of a special needs trust is to enhance the quality of life

00:31:20

Suze: of the beneficiary by supplementing their government assistance rather than replacing it. Did that make sense? So once you want to have your cake and eat it too for that child or that person where they get governmental assistance and they still have access to money that maybe you are going to leave them.

00:31:44

Suze: So truly, the key characteristics and I guess I'd call features of a special needs trust is that you are again preserving government benefits for individuals that have special needs

00:32:01

Suze: that rely on benefits provided by the government such as Medicaid or S SI. And by the way, S SI stands for supplemental security income.

00:32:16

Suze: And so that's what's really important. Again, these programs, Medicaid

00:32:23

Suze: as well as S SI, they are based on the financial need of the person. So if you have a child, a special needs child and they are dependent

00:32:40

Suze: on this money that's coming in from SSI, they would be disqualified if they were to receive from you a significant inheritance or even a gift directly. So it would, it would disqualify them from that assistance. So a special needs trust is structured

00:33:02

Suze: to hold assets for the benefit of that beneficiary without affecting their eligibility for Medicaid or SSI.

00:33:13

Suze: So you supplement their needs. That's why it's also called a Supplemental Needs Trust. And this trust is designed to supplement but not replace government benefits. It can however, provide funds for additional expenses that can enhance the beneficiary's quality of life and well-being.

00:33:39

Suze: You know, so maybe they need medical treatment or a they have to go see a dentist or things that aren't covered by insurance. It can also be where they use that money in the special needs trust, right? For what? For therapy? Maybe for education, maybe for transportation, recreational activities. Let's see, maybe personal care attendant, things like that.

00:34:07

Suze: Now, here's what's really important. The trustee of the special needs trust

00:34:16

Suze: is typically managed by a trustee by a person who has a fiduciary duty

00:34:25

Suze: to act in the best interest of the beneficiary

00:34:30

Suze: because the trustee and that probably will be you if it's your child is responsible for managing the assets that are in that trust for making distributions for the beneficiary's benefit

00:34:45

Suze: and to ensure that you are in compliance with all laws and regulations, everybody that are applicable to a special needs trust.

00:34:59

Suze: Now,

00:35:01

Suze: there are two primary types of special needs trust. One is a third party special needs trust and second, a self settled special needs trust,

00:35:18

Suze: a third party special needs trust. This is the type of trust that is funded by assets that's owned by someone other than the beneficiary. So chances are, that's the one that most of you will want if you have kids. So if you are a parent or a grandparent or another family member, it allows all of you

00:35:45

Suze: to provide for the beneficiaries needs while maintaining their eligibility for governmental benefits. However, what's fascinating and very seldom talked about are self settled, special needs trust. Now, this is a trust that's funded with assets that are owned by the individual that has special needs.

00:36:13

Suze: It is typically used when somehow the beneficiary comes into assets through maybe a legal settlement or an inheritance or a personal injury settlement.

00:36:24

Suze: And that Medicaid will require that any remaining trust, funds are used to reimburse the state upon the beneficiary's death.

00:36:37

Suze: So if somebody who is a special needs person has the capability they can or a lawyer can let's say they got a car accident settlement, put the money into a self funded special needs trust, they can use it while still then being on governmental aid. But upon the death of that person, that money then will go back to Medicaid

00:37:06

Suze: to reimburse the state

00:37:08

Suze: for any money they spent on this person. Upon that person's death,

00:37:15

Suze: again, I will reiterate it is important to work with a seriously experienced attorney who specializes in special needs planning when you want to establish a special needs trust. All right. Now, I know I went a little long but

00:37:36

Suze: that is the Suze School for today. Keep this podcast. Keep your notes because trust me, that's funny. Trust that is what this topic is all about. But trust me, there will come a time when somebody's going to tell you you should do an irrevocable trust.

00:37:56

Suze: You don't need a revocable trust or what's the difference for a special needs trust, whatever it may be, come back and listen to this podcast. But until next Thursday, when Miss Travis will rejoin me here for Ask KT and Suze, anything. There's really only one thing that I want you to say every single day

00:38:21

Suze: and that is today. Wherever I go, I will create a more peaceful, joyful and loving world And if you do that, if you believe that as always, I promise you you will be unstoppable.

00:38:48

Music: Music (out).


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