Ken Moraif  

Did you know that you can protect the inheritance you leave to your greedy, unwashed, undeserving heirs for up to 100 years, from lawsuits, from divorce, from bankruptcy and even estate taxes? Yes, I said 100 years. We’re going to talk about that in this Retirement Planners of America podcast. Hello everyone, and welcome back to our retirement planners of America podcast, and we’re doing our series on estate planning. And in this episode, we’re going to talk about how to protect your estate from lawsuits, divorce, bankruptcy and estate taxes for up to 100 years, yes, an entire century, and maybe even longer. So we’re going to dive into that, because I know all of you want to do that. And so I’m going to bring Jeromy into the convo. I’m going to call it a convo. And so you’re interested in doing that, right? You, Yeah, but you’re not married and have no kids yet, right? Right, yeah. But when you do right, right, and you want to pass on to your those greedy, unwashed, undeserving heirs of yours, yes, you want to make sure that if they ever get divorced, sued, declare bankruptcy, whatever, absolutely, you want to protect them from

Jeremy Thornton  

all of that. Absolutely, I hope they’re not ne’er do wells, but we’re not gonna you know you you prepare for the worst and hope for the best. Yes. So yes, I would love to be able to protect a legacy for them.

Ken Moraif  

Yeah. And from the standpoint of you inheriting, wouldn’t you like to inherit in such a way that the what you inherited is now in a hermetically sealed package, absolutely, that is protected from all those terrible things. Absolutely. How do I do that? Okay, well, let’s talk about that. So again, as we’ve said many times, when it comes to state planning, it always turns out that it’s a trust. Yeah, right, yes. So this is another trust, okay, so there’s, I don’t even know how many? You know, one day I should sit down and write down all the different kinds of there’s probably, like 75 of them. I don’t know crazy Well, this trust is, we’ve, we’ve called it a dynasty trust, okay, that’s kind of what we branded it. But the dynasty trust, if you talk to a lawyer, is called a generation skipping tax trust, a, gstt, but that’s kind of hard to say. So I like dynasty trust. It’s, yeah, so we’re talking about the dynasty trust today. And the dynasty trust is basically, like I said, it is a trust that what you put in it, it’s a hermetically sealed container, and potentially for 100 years, it’ll protect against all those aforementioned bad guys. The reason it’s 100 years is because in most states in the union, there’s a law against perpetuity, yeah, okay, which means that you can’t set up a trust and forever, right? It’s protected against those things. Yeah. So the reason why we say potentially 100 years is because in most cases, the dynasty trust can last until the youngest beneficiary of the trust dies. In theory that youngest is three years old, could be a grandchild, right? And they live to be, you know, 90, so you got another, you know, 87 years to go before this thing. So it can last a very long time, yeah, so that’s why we say that. So we talk about, so what? How does it work, right? Yeah. So basically, the dynasty trust is an irrevocable trust, okay? And so do you remember the difference?

Jeremy Thornton  

It cannot be changed once it said, the assets are taken out of your ownership and placed into the trust ownership. I’m learning, folks, it’s a miracle. Man,

Ken Moraif  

that’s wonderful. I love that. That’s correct. So what you put into the dynasty trust and and you can fund the dynasty trust while you’re living, okay? So for example, if you want to put money away for your grandchildren, your grandchildren, and you want to put some money in that, the perfect vehicle for that would be a dynasty trust. In most cases, though, the dynasty trust is what’s called a testamentary trust, which means it comes it comes into existence upon your death, okay? And we read your testament, your will or your living trust, and it tells us create now the dynasty trust, okay? So the dynasty trust then receives your stuff, right? Usually, we want to segregate real estate from investments, because real estate comes with liability, trips and falls and whatever. We want to segregate that from your investments. But do that as it may, we put your investments into the dynasty trust. Why does the dynasty trust protect us from all these terrible things? Yeah. How can you do that? So the first thing is. That, let’s say that you my favorite number is a million dollars. Okay, so we’re gonna use that 1 million. So $1 million goes into the dynasty trust, and this is for my daughter. And so she’s married, and now she gets divorced. Okay, all right, so what happens is that her former husband did not divorce the dynasty trust, right? Because he was never married to it, correct? Yeah, he’s divorcing my daughter, right? So what she’s going to say is, darling, if we’d have stayed married, you could have helped me spend this million dollars that I have in this trust, right? But since we’re not, he has no access to that money, yeah? Because, like I said, he was never married, he has no claim on the trust. So it’s a separate property. It’s segregated from that. Gotcha, that same concept applies to lawsuits. So my daughter is driving down the freeway, and she’s a bad driver, and she hits his doctor and breaks his hand. Turns out he’s a surgeon, yeah, lost his career. Sues her for $20 million wins the lawsuit. She got $20 million lawsuit, and he goes after that. What’s in the trust? Well, the trust wasn’t driving that car, yeah, the trust didn’t hit him. The trust has no liability, because it was never involved in any of that. Yeah? So now what’s happened is, is that she can tell this doctor, you know, I’m sorry I broke your hand, but you can’t touch the money in my trust, right? So that’s why it takes care of liability. Same concept again, with bankruptcy. You know, if you’re if my daughter declares bankruptcy, all these things I hope don’t happen, but

Jeremy Thornton  

Right, right, right, you’re speaking a lot of things out loud. I don’t think that’s a you’re hoping it happens. You’re saying if, yeah,

Ken Moraif  

but again, that’s what we do. They can happen to people. They can. And what’s our motto? You prepare for the worst

Jeremy Thornton  

and you hope for the best. That’s

Ken Moraif  

exactly right. So we’re doing is we’re we’re addressing something we hope doesn’t happen, but we’re planning for it. So the next thing is that my daughter, you know, potentially starts a business or something, and then has to declare bankruptcy. Things didn’t go well, right? Well, it’s the same concept with that too. The bankruptcy estate does not include stuff that she doesn’t own, because the trust owns this. Yeah, she is just the trustee and the beneficiary of it, but she’s not the owner. The trust is right, so therefore the assets are not subject to being part of the bankruptcy estate. And all the creditors that line up, they can’t touch any of that money. So now let’s talk. So I’ve talked about the 100 years. We’ve talked about bankruptcy and talked about lawsuits, right protection, we’ve talked about those things, so let’s talk about the mechanics of it. The money is out of your estate, right? It’s an irrevocable trust, right? Just as you said, so therefore, the money you put into it, if you do it while you’re living, it’s not yours. It’s not yours anymore. Yeah, right. So it has to be a completed gift to get it out of your estate, yeah, and to allow it to have the protections that I just described. So you have to be aware of that before you do that. But assuming that you’re okay with it, and that’s that works on the inheritance side, it’s the same thing. So if you’re married, there are assets that you want your spouse to have access to, and there, there are assets that you don’t that you can part with, that you want the kids to be available to. The dynasty trust is basically for the kids. Now you can name your spouse after your death as a trustee and the first line beneficiary of the dynasty trust. Okay, okay. So that means that your spouse can benefit from this trust. So again, going back to that million, yes, it goes into the trust. I would name my wife, which I have, we have a dynasty trust, and the money going into the dynasty trust, she would have access to, she would she’s the trustee, and she can use it for what’s called hems. Okay, another ARPOA Say, another accurate, I’m sure. Yeah, so hems is what is called, is a health, education, maintenance and support.

Jeremy Thornton  

Okay, so, what the heck does that? Yeah, that sounds pretty all encompassing. Well, that’s

Ken Moraif  

true, yeah, very astute. What does that mean? Essentially, what it means is, is that the trust is there during my wife’s lifetime for her hems, and what that means is to keep her in the lifestyle that she’s accustomed to, right? So if she’s been living a Buick lifestyle, she can’t now start living a Rolls Royce, lifestyle, right? Okay, with the trust money, right? And now you may say, Well, who’s the police on this? Yeah, well, the greedy, unwashed, undeserving, next layer down cops, yeah. So they’ll go after mom and say, Hey, wait a minute. What happened to this? Rolls Royce, where that come from? You’re depleting the whole estate. You’re not. You’re so. So there. Is that. But again, we talked about the block provision, right, right? So tell me what the block provision is. See if you if you learned from a previous podcast,

Jeremy Thornton  

that is when you take your errors and you walk around the block and you say, Listen, if you want to use all of this, you want to abuse this, that’s fine, but you will get nothing else.

Ken Moraif  

I will cut you out of the you are out of it. Yeah, it’s amazing how effective the block provision is. So anyway, so So therefore my wife, in this instance, she’s she can decide how the money’s invested, and she can use it for hems, which is pretty broad. Basically, she can get it for her income, whatever she needs upon her death, though. The beauty of this is that it will now pass on to the next generation with no estate tax. And since this trust can last for potentially 100 years or more, it can go down potentially two or three generations before any taxes come due, and it will pass on from my wife to my children, for my children, to my grandchildren, and even to my great grandchildren with no estate tax, yeah. And you know, right now the estate tax is, you know, for you to owe any estate tax, you have to have a pretty large estate, yeah, but there’s no guarantee on that. There was a time when if you had over $200,000 you were subject to an estate subject to an estate tax, and we could go back to that with the deficits that were running. So let’s not take for granted today’s environment, right? So the beauty of that is that if those laws change or whatever, and suddenly there’s a huge tax, it doesn’t matter. It’ll pass from one generation to the next, to the next, and even maybe to the next, with no haircut in each step, yeah, from the IRS, yeah. And if you think about the estate tax, potentially, is 50% at the highest level, if you cut something in half every 50 every generation, essentially, what’s what the estate tax is designed to do, is to take it all back over to the course of two generations. Yeah, that’s what it’s designed to do, yeah. So we want to avoid that, and the dynasty trust can help with that.

Jeremy Thornton  

I love that. That’s that’s a great plan, and that’s something your heirs would, I’m sure, greatly appreciate.

Ken Moraif  

I mean, you know, if I was to inherit that, I would love that, because now I know that this inheritance is protected against all those things, and then upon my death, it’ll pass on either to my wife or to my kids, tax free, yeah, yeah. So and keep in mind one other thing about the dynasty trust, only you can do it your kids cannot. Yeah, so you’re leaving to your kids and then to your grandchildren and your great grandchildren, but only you can do it, yeah, they can do it for their kids, that your inheritance, if you don’t do this and it goes to the kids, there’s going to potentially be a tax between you and your kids that you can’t you that is basically unavoidable.

Jeremy Thornton  

Gotcha. Now, you did mention a little bit about the real estate, and what you want to have that kind of separate is real estate, typically speaking, not put in a dynasty trust, or does he go into the one something we’ve talked about previously?

Ken Moraif  

So that’s a great question. Basically, what you don’t want to do is put the fox in with the hen in the hen house. Okay, so real estate comes with liability, yeah, the slip and fall, you know, whatever. So it comes with that. And so you don’t want to. So if you think about the trust, it’s hermetically sealed, right, right? It’s protecting all these outsiders from getting in, but it’s not protecting from any insiders suing and getting stuff that’s inside. Gotcha. Okay? So if you put the real estate and the investments inside the same trust. What’s going to happen is, if you get a lawsuit on the real estate and they win, they can attach the investments that are also in that trust. So if you segregate the two, then the investments stand alone and they’ll never have liability, because they’re never going to slip and fall, they’re never going to do anything. They’re going to hurt somebody in a car. So you want to always have your investment segregated and your real estate segregated. Now, in a really complex case, which we don’t run into very often, you know, our clients are what are called a mass affluent. They’re average people. But every once in a while we run into somebody that has, you know, we had one person that had three mini shopping strip malls, and what they did was they had one of those in each one in a separate trust, because they didn’t want a lawsuit on that one to get at the other two and to get at their investment. So planning is involved in that. And again, as you always say, let’s talk

Jeremy Thornton  

to an expert. Talk to your professional

Ken Moraif  

before you do anything. Maybe talk about here. Make sure you talk to your professionals, or, better yet, talk with us first. We can give you ideas on what to ask for and what how to think through it and all of that. So ladies and gentlemen, I hope that this was more fun than a human being should be allowed to have when talking about all this boring estate planning stuff. And if we’ve accomplished that, then. We took a bunch of steps forward. As you guys know, our goal is to create skippers. And if you don’t know what squippers are, skippers are. It’s an acronym. It’s second childhood without parental supervision, and that’s what we want for you when you retire, we want you to go out and play and have fun and enjoy. So when a client of ours retires, we call him a squipper, and we tell them, get out of here. Go play. Go have fun. Let us worry about all this stuff so that you don’t have to. And we’d love to do that for you. So get in contact with us. If that appeals to you. In the meantime, hope this found you healthy, wealthy and wise. Thanks for watching. Make sure you like and subscribe, and we’ll talk soon.