I was watching a feed from the brothers at Earn Your Leisure. They are content creators in the business, finance and entrepreneurship spaces. The feed was talking about building generational wealth in our communities. It’s no secret that African American communities have fared the worst in keeping wealth, ownership and capital. This is a result of a sustained and very real racist structural framework that permeates all facets of American society…but I digress. The interesting part of the conversation involved tools to help people grow and keep wealth.
The topic turned to trusts. What is a trust you ask? It’s a legal creation. It’s like a magic box that can hold assets, houses, cars, stocks, insurance policies or anything else of value. Why do you need one? Well in most cases when someone passes away, their assets go into probate. Probate is a fancy word for government control. Probate is actually the process of proving that a Will is valid. This happens in a court. Judges and attorneys are involved and that means money honey. Lots of it. Check out the potential fees. But what if you don’t feel like paying fees to the government or lawyers to transfer your things to the people you want? What then?
What if you put all of your things in a trust before you pass away, and set it up so you can name someone you want to be the beneficiary of the trust (meaning they benefit)? When you pass, the beneficiary immediately takes control and no one else gets to siphon fees off your estate. Hummm.
Wait a minute Askhollingsworth! What if I want to change my mind because the beneficiary I choose today turns out to be triflin? What then? I’m glad you asked. Then you can make the trust revocable, meaning you can change things up whenever you like before you go. Or you can make the trust irrevocable, meaning you carved those provisions in stone and left it on the mountain. In that case it’s up to the trust, Jesus and the courts.
Both options have pros and cons. Revocable trusts are flexible and changeable; you can avoid probate; you have protection if you become incapacitated; and its gives you privacy. However, the down side is there are no immediate tax advantages, no creditor protection and it can be expensive to set up or administer. Consult an attorney in your state. I am a Realtor, and I don’t provide legal advice. Either way, it’s worth looking into.
The best part is, if you do it right, you can turn the trust into a Family Bank. Whaaaaaa? Imagine controlling a family trust where you can grant loans to family members to start businesses or attend college. Your children or grandchildren submit business plans or loan applications to the trust. If you grant the loan with repayment terms, the borrower provides periodic reports on the investment. The borrower ultimately repays the loan, and trust keeps going for the next generation. It’s time to get our Rothschild on. I’m looking into this now and you should too.
If you need to add some real estate to your new family trust…Askhollingsworth.