Ep. 201 – Do You Need a Trust in Retirement?

In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss the importance of having a trust as part of your retirement plan with Andres Mazabel. Trust & Will provides an “easy and secure” way to create estate plans and settle estates online, with the ability to customize legal documents.

A trust is a legal agreement that helps you secure whatever legacy means to you when you’re no longer around. Andres explains what probate is and why you need to create a trust as part of your estate planning to simplify things for your loved one.

Listen in to learn the importance of getting a financial advisor’s guidance when it comes to establishing a trust.  

In this episode, find out:

  • How Trust and Will empower people to understand the importance of estate planning better.
  • How estate planning helps protect whatever legacy means to you.
  • The difference between a will and a trust and the benefits of having each in place.
  • The privacy and control a trust gives over when and how distributions are made.
  • Andres explains the complexities of a trust – how it works when you’re alive and gone.
  • How to plan and transfer all your estate assets into a trust.
  • How to avoid probate by adding your assets to beneficiaries and having a trust.

Tweetable Quotes:

  • “With a trust, we have so much more control over when and how distributions are actually made.”– Andres Mazabel
  • “No matter what state you live in, you want to avoid the probate because it makes the process smoother, reduces cost, and it gets assets transferred to the beneficiaries in a seamless way.”– Murs

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To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Radon Stancil:Welcome everyone to secure Your retirement podcast. Murs and I are extremely excited to have a very special guest with us, Andres Mazabel. So first, before I go into any further, Andres, thank you so much for coming on and chatting with us today.  
Andres Mazabel:Of course, I appreciate it. Thanks for having me.  
Radon Stancil:So let me tell you why we’re so happy. Estate planning is something that Murs and I talk about a lot. We talk about it on every single engagement with either a person who’s looking at potentially working with us or every single client. We believe that everybody should have their estate plan in place. And for a lot of years we found that it was rather complicated. People we would say, “Hey, you got to go see this estate planning attorney, you got to go do this.” And people would say, “Yep, I got to get that done.” And they’d come back in a year and they never got it done.  
 And then we met Andres and we said, “Hey, how can we partner together?” And we actually, with his company, Trust and Wills are able to make that a very seamless approach to where we can actually get people and get their estate plans put together efficiently, quickly. They don’t have to go anywhere. They can do it right from home. So to today by the way, we’re going to talk about trust, but could you give us the two to three minute version, Andres, just because it’s been a while, we did have Andres on another episode, but could you get us an overview of Trust and Wills, how that’s set up and then how we work with you guys just to give a picture here.  
Andres Mazabel:Yeah, absolutely. I’m glad I made it back for a second round of interviews. So I appreciate you guys having me on here and really helping lead with education around estate planning. And that’s actually one why we started Trust and Will, we’ve been around for about five years now. More than 60% of families don’t have an estate plan. And to your point, there’s a lot of advisors that have historically have always referred to attorneys. And we don’t necessarily replace attorneys. We in some ways compliment the relationship, but we offer state specific estate planning documents in all 50 states and we really help on making the process easier, more accessible, and I think more importantly, more affordable. That’s been one of our biggest learnings is that most people don’t actually have very complicated or taxable estates over $10 million or whatnot. So by providing financial advisors with another option for clients in all states, you’re able to actually start, completes and execute your estate plan from the convenience of your home.  
 And what’s really nice is that it’s never just you. We actually have a full team of support. We have attorneys available in certain states to actually provide legal advice if you actually need that. So I think in short it’s really helping empower folks to, one, better understand the importance of estate planning, two, actually have that resource to say, “Okay, I need to get this done, execute it, and then also be able to make updates and changes.” I think this is a thing that historically many individuals and families lacked a lot is actually proactively saying, “I moved states or I’m getting closer to retirement. Let’s take a look at the beneficiaries and all the decisions that I made maybe years ago.” And really making sure that people understand the importance of having an up-to-date estate plan in place.  
Murs Tariq:And I think that’s spot on because procrastination is one of the easiest things you can easily put it on and say, “I’ll get to it in the middle of the year, at the end of the year”, and then that family never gets around to it. And then we’ve seen the scenarios where the documents aren’t in place and you have that scenario that you were never hoping to be a part of and now what do you do? We don’t have direction from those legal documents. So Radon and I, we put a lot of emphasis on trying to make that scenario and with the help of Trust and Will, it’s a little bit smoother now and there really is no excuse for procrastination because we’re providing the service and all you have to do is go literally sit down and take 30 minutes to an hour in front of a computer and now you’ve got your documents and they can be updated if needed.  
 And so I think it’s been great. Part of our process really is that someone comes in to say they go through our process of what are your dreams, goals, hopes and everything when it comes to retirement, and we’re going down the line and one of the first things that we talk about is, “Hey, is your willing in order?” And if not, that’s one of the first things that we want to put on the list to check off, or trust. And so it’s been nice and smooth ever since we started working with you guys.  
Andres Mazabel:Yeah, absolutely. And that’s one thing to really note and I want to commend the practice and the process that you’ll have. There was a Spectrum 2021 study that actually interviewed consumers that work with an advisor and they asked them, “As a consumer, what are the main expectations that you have of working with an advisor? And then what are the biggest gaps? Where are the biggest lack of the services that you thought you would be getting from the advisor that you’re not getting?” And two out of the top five gaps were actually wealth transfer advice and estate planning advice.  
 And obviously this isn’t to say that you know guys are providing legal advice or anything like that, but I think it really helps point out the importance of how much of a gap there is in consumers not understanding what happens when I die, what is probates, what is a trust, all that. So I just want to commend you all on how that’s been part of a process because this is a big need. It’s obviously great for folks to have their retirement plan in place and social security planning, et cetera. But one of our biggest things is our family, our loved ones, charity, whatever that looks like, whatever however we define our legacy, is being able to have that conversation, education, and then really more importantly to have that plan in place to really help secure that whatever our legacy means to us.  
Radon Stancil:Excellent. So here’s what we say. We say there is no question in our minds. Everybody should have a will, a durable power of attorney, a healthcare power of attorney, and their HIPAA forms. So we say that one’s a easy one. We’re both certified financial planners. And when we were taking that exam, it pretty much said, I went to a prep course, and in the prep course it says, “If you could read this entire story and they’re giving you this multiple choice, they’ll make it sound very complicated. And if anywhere in there you see that they don’t have a will or done, that’s always the answer.”  
 That’s the number one thing they need according to the CFP board. So that was the answer. You could stop reading everything else if they didn’t have a will, that’s the number one thing they need. But then there’s a question that comes up. We get the question, and so that’s why we wanted to talk to you about it today is at what point do we transition and in addition to those documents that I just said, said “Okay, we need a trust.” So I think to start us off, could you give us an overview of maybe the difference between just having a will and a trust and then we can talk about that into more detail?  
Andres Mazabel:Yeah, absolutely. So really quick, if I was just take a quick step back. So your basic will documents are going to essentially outline, put on paper in a illegal aid document, what assets do you have and how do you want those assets to be transferred over when you pass. There’s something in between called probates that if you have a will or don’t have a will at all, it’s going to go through probate. Now there’s some states where it’s simple, it’s efficient, and then there’s some states like California that the probates, which is the court process of a judge actually settling your estate. So if we put this into a a real life example, own a home, you have taxable accounts and retirement accounts, and if you have no beneficiaries, no will planning in place whatsoever, a judge is now going to be making the decisions on who should be getting those assets and how. Judge has no context on your family dynamic whatsoever. So think about that.  
 The importance of if you don’t have that planning in place, what that actually entails, not for you, because at that point you’re not allow around but for your family. So now we go into trust planning and trust planning, one of the main benefits of creating a trust is really one to help avoid probate. So that’s where, depending on your assets, the state that you live in, the types of assets that you have, and we’ll talk a little bit more about this, obviously without providing any legal advice during this conversation, is how and when people really start thinking about a trust. But in short, it can really depend on the state that you live in, the amount of assets. To give a more relevant example here in California, if you have taxable accounts, so again, if this is not in a retirement account and if it’s above $167,500, don’t quote me on the specific amount, but it’s right around there, those assets would then go through probate.  
 So from that perspective, does someone in California say, “Well, if I don’t do any will-based planning or I don’t do any estate planning in place and I might have a quarter million dollar taxable account and I might own real estate, either a condo or a home, whatever the case might be, knowing that there’s risk that if I pass without having a trust, those assets then go through probate”, and it’s taking roughly on average here in California over 12 months to settle an estate. So that’s where one people are like, “Okay, well I don’t want to have my family to go through probate. I want to have a very detailed, outlined plan on having that trust in place.” And then two, it also helps you have much more control over asset distribution.  
 So if you have clients that maybe have younger family, younger children, if they have charity intents. So as an example, if I have three kids, when do I want those assets to be distributed to my kids? Do I want them at 25, 35, 45? Whatever that case might be. Do I want to do that distribution but I want 10% of my estate to go towards a charity. So hopefully this is painting a picture that with a trust we just have so much more control over when and how distributions are actually made. And then a point that people value a lot is privacy. Obviously with probate it’s a public process. You can Google certain estates that went through probates and you can see all the details. Sometimes you unfortunately hear about this with popular pop stars or whatnot that didn’t have any estate planning in place. So there’s obviously that part of a benefit where it’s private, it doesn’t go through the actual court place.  
Murs Tariq:So yeah, I agree. I think there’s a lot of positive things that come with a trust, avoiding probate, being able to maintain control of the assets when you’re not there. And it makes you sit down and think things through really, if you’re trying to say, well, it could be the scenario of, “Hey, my kids can handle the finances, no problem, so let’s give it to them all at once.” Or it could be another scenario where I want to limit their interaction with the funds into different years or their age milestones or whatever it is. So it gives you full flexibility there.  
 But let’s talk a little bit on the other side because someone could be listening to this and saying, “Man, this sounds like something that I really would like.” And what are the other sides of the coin when it comes to a trust as far as, well, you got to have trustees, and that can be a difficult decision for people at times as well. I guess if you’re having a revocable living trust, typically you are the trustee until you pass and then you have to appoint someone to carry out your wishes and the documents wishes. So let’s talk a little bit about that. The things that people need to know about. If they are going to go down the line of creating one of these things, what are the complexities that could come with it?  
Andres Mazabel:Yeah, that’s actually a great question and I always like to use just silly example. So we’ll use myself and my trust as an example. So a trust in its most simple terms, it’s in essence an agreement, a legal agreement that in some ways actually creates an entity. So you have an individual, so I have a trust, let’s call it the Andres Mazabel Living Trust. To your point, revocable living trust, it’s the most common type of trust. It could be changed, it could be updated, super easy. In my example, I am the trustee, so they are my assets. I am essentially managing the trust so I can make changes to beneficiaries, all that. And I then have what’s called a successor trustee, which is who steps in when the trustee is no longer around. And that trustee is essentially going to be in charge and accountable for holding out the instructions that were laid out in my trust.  
 So how distributions are done, gifts, settling the trust, et cetera, that person is in charge of them. And there’s a couple different options. You can obviously choose a family member, in many cases it could be, if it’s a more simple estate where it’s not over $5 or $10 million, many people feel comfortable having that conversation with someone that’s obviously responsible that they trust, et cetera. But also keep in mind, you can always hire a corporate trustee and this would essentially be a corporation, a company that is doing that on your behalf. So I create my trust, I pass, X, Y, Z as a corporate trustee comes into play and they are now as a fiduciary, they’re now going to be executing all the decisions that you made on your behalf. Obviously there’s typically a fee for them to be able to do that. But in many cases I will tell you, at least at Trust and Will, we’ve created about half a million estate plan.  
 Most of our members, because of their net worth, we’re not focusing, Trust and Will specifically, is not focusing on ultra-high net worth, which I would define over on the low end, $10 million and above, I would say probably higher than like $25 and above in net worth. Most folks under $5 million don’t need a corporate trustee in many cases. So that’s where you make those decisions. Again, you can make changes to them. I think this is something that when you first talk about estate planning to folks are like, “Oh man, all these crazy and very important decisions.” Yes, they’re important. Two, we partner with advisors to help provide a lot of that education so that we hopefully are empowering you to make better decisions with your loved ones. But then three, just remember you can always make changes, life happens, things change. You can always come back either if you donate with us or with an estate planning attorney where you can go back and make edits and amendments to the estate plan if you need to as well.  
Radon Stancil:So let’s talk through just prior to our starting to record, I laid out a simple case and was asking you a question. So let’s just talk about a person, they got an IRA, they got beneficiary set up for the IRA, and then they got some personal property, could be a house, their primary home, they could have a vacation home as well. Could you go through the logistics of what they would need to do with this house so that it would be a part of the trust so that it would pass the way they would want it to without having to go through probate? Could you just walk us through what that would look like?  
Andres Mazabel:Yeah, of course. Absolutely. And remind me to send you, we have an article that I think would be helpful as notes for this episode that help outline the different options specifically to real estate. But in short, I owned this condo, before I had a trust, it was under my name only. So if I had passed away unexpectedly, this condo that I’m at right now would’ve gone through probate because it had no beneficiary. There was no one else on a deed, so just myself would’ve gone through probate. I now obviously created a trust and that trust is now the owner of my condo, meaning we’ve done what’s called a deed transfer and you can do this usually with a quick claim deed. And that is essentially transferring the ownership from myself as an individual to a trust. Couple different options, you can do this directly with the county recorder’s office.  
 We also actually partner with a company called UDeeds that actually helps customers do this. So they do the research, the recording, the titling, all that so that in essence you would be transferring the home or the real estate, even if it’s an investment property from your personal name to a trust. I do want to call at the fact there’s actually good amount of states where you can actually do a deed transfer on an actual real estate. So in my same example, if I didn’t have a trust, I could say I don’t have a trust, but if I pass, here’s who I want my real estate to go to, which is really nice. So again, it can depend on the state, depending their options and availability for real estate specifically, but that’s one big part of it. Two, you have taxable accounts and just in plain English, these could be your checking, savings, CDs, an investment account that you guys may be managing, but that is not under an IRA or Roth IRA.  
 So those are very important accounts to always make sure that you have titled correctly. From very simple, at least make sure you have beneficiaries on there. And then two, depending on the asset levels, that’s where you really want to start looking at is a will-based plan going to help cover that and help avoid probate if that’s your end goal. And or should we start looking at a trust where you can actually create a trust and put the trust as the owner of the savings account or the taxable investment account. Or in many cases you can also add the trust as a beneficiary. So I as an example, have online accounts under my name, but the beneficiary is the trust. And that would actually help avoid probate. Retirement accounts, without providing any legal advice or tax advice, most of the time those are actually not included as a trust whatsoever.  
 So most of the time, most common is for folks to actually have individual beneficiaries listed on retirement accounts. And then if you have any folks that are getting up towards retirement and have own a business, man estate planning is also a great way to help plan for succession planning for your business as well and really be able to say, is it a sole proprietorship? Is it an LLC? Is it a corporation? Really making sure that you have that covered as well because we do know that many business owners are so in the business that they sometimes really forget to plan for what if something happens and I don’t have any planning in place for my business.  
Murs Tariq:So if I was to sum up and someone, because we get the question all the time of, “Do I need a will? I read this article about everyone should have a trust”, and they get confused and bogged down on the differences and everything. I think it comes down to the moral of the story is you want to avoid probate no matter what state you’re living in, you want to avoid probate because it makes the process smoother, probably reduces cost and everything like that. And it gets the assets transferred to the beneficiaries in this almost seamless way. And so there’s a couple ways to avoid probate and I guess you got to start thinking about, well, what type of assets do I have? Are they cash assets like retirement accounts, investment accounts, bank accounts, and can they have beneficiaries added to them?  
 If you have a beneficiary, then they are going to get transferred, avoiding probate. But then you also want to think about, do I have other assets like real estate or a business ownership or anything like that? And that’s where things it sounds like get a little bit dicey depending on what state you live in and what probate law is in that state. So I think that’s where we start to lean to the side of, it may make some sense to have a trust in that scenario. Ultimately you need to have a conversation with either an attorney or an advisor that you’re working with to help you point in the right direction. And does that sum it up pretty good there?  
Andres Mazabel:That’s a great summary, yes, and to your point truly, it can depend a lot on the state. As an example, Texas for example, most people don’t create a trust, many people don’t because probate is so simple there. It’s a much streamlined process. So that’s where we would definitely help hopefully make sure that your clients are engaging with either an estate planning attorney getting some guidance depending on that specific situation because it’s usually not as black and white when it comes to estate planning when it comes to actually making that recommendation, if you will.  
Radon Stancil:Well, Andres, we certainly appreciate you giving us this nice overview. For listeners that are listening to this, if they’re one of our clients or they’re becoming one of our clients, we have worked a relationship with Trust and Will where we pay for it all. We make sure that they have all this in place and we take care of all the costs, but if a person is listening and they’re not our client, where can they go if they want to find out about how to get their will and trust set up through you guys?  
Andres Mazabel:Absolutely. It would just be trustandwill.com. And again, we offer the state specific documents in all 50 states. We offer the trust-based plan that we spent some time talking about, and then also your basic will-based planning as well. So with that said, I appreciate you guys having me on. I will tell you that lack of education continues to be a big barrier, so I truly appreciate how much you guys advocate for making this part of your process and to bringing the education to your audience as well.  
Radon Stancil:Excellent. Well, thank you so much. We appreciate you coming on the day.  
Andres Mazabel:Appreciate, gentlemen.