Two reasons people have a revocable living trust

Attorney Tom Olsen: People are using trust really for, almost always for one reason, sometimes for a second reason. The reason that people are using family revocable living trust is for the purpose of avoiding probate. People want to avoid probate because it's expensive and it takes a long time. The second reason people are using a trust is that if they have young children, if they want to include their grandchildren in their estate plan, if they've got children who are spendthrifts or have addiction issues. We don't want to give minors or addicted people a big lump sum of money. You just can't do it. Therefore you create this trust that says, "Okay, if we pass away, this child's share, this grandchild's share of our estate does not go to him or her outright. It's going to be stayed, it's going to stay in this trust. It's going to be used to help them go to college, help them buy a house, help them buy a car, help them pay rent, cell phone, et cetera. They only get it when we dictate," and that might be a much later age, 40, 50, 60, whatever the clients want.

Attorney Alexis Richards: A lot of times I have found when talking to people, the minimum age that they're saying is at least 35.

Tom: What we're saying is that if you've got, grandkids or kids that are under the age of 35, your trust would say, okay, if we pass away and our grandkids or kids are under the age of 35, their share of our estate going to stay in the trust, help them go to college, buy a house, buy a car, and then they only get it once they turn this age of 35. Sometimes they do half at 30 and half at 35 knowing that they're going to blow the first half and hopefully be older and wiser at the second half. That's a great call, Bob. We do so much. Appreciate it.

By the way, Alexis, back when the day when I did have to do separate trusts for married couples because of the low estate tax rate exemption, man, it was a big pain and uncomfortable for the clients because here you've got a married couple who are used to having owned everything jointly in both of their names during their marriage life and now all of a sudden they got to take it and they got to split it up. They had to put half the home in his trust, half the home in her trust, take their investment account and divide it in two, and put half in hers and half in his. It was an uncomfortable process for people.

Alexis: Did you see that a lot when you first started practicing law or when did you see the transition change where you were doing more of the family trust?

Tom: If we went back over the years to see, "How did we get from $250,000 exemption to a $13 million exemption?" It's been a long transition. But I would also tell you this, that in the early years when somebody came to me and they substantially exceeded the federal estate tax exemption, I would have to pass. I'd have to send them on to another attorney that has expertise in drafting trust, not only for the purpose of avoiding probate, but also for the purpose of minimizing estate taxes.

If we're saying that a married couple these days could pass up to $26 million free of estate taxes, hey, over the years I've had people come to me and say, "Tom, I got $50 million." I'm not going to help them because I can't help them minimize the estate taxes. I'm going to have to refer them to somebody that's got more expertise in that area, because there are tools, if the exemption is 26 million and you've got 50 million, guess what? There are tools that you can use to avoid paying estate taxes. I don't know how to do those tools. Let's leave that up to another expert.

Alexis: Yes.

Tom: Hey, folks. My name is Tom Olson. The name of the show is Olson on Law.

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