Hi there, Darol Tuttle here, we have a lot to talk about today. Number one, do you own a timeshare? Want to know what it is, how to get rid of it, how to transfer it as part of your estate. I'll answer that question in today's episode. I will also dive deeper into trust law. We will talk about what a trust is, the job descriptions, trust, or trustee beneficiaries involved with a trust.
We will also talk about the advantages and disadvantages of a trust. And I will answer a very common question. Should I choose a professional trustee or should I choose a family member to be responsible for administering my family trust?
I have a lot to talk about. Let's get started.
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Now, here's the BoomX show the laws of money.
Greeting members of the BoomX nation. My name is Darol Tuttle, host of the BoomX show. If you did not know, BoomX refers to two different generations, the baby boom generation and the X generation also known as extra. I myself have one foot in each of these generations having been born in 1964, which many consider the border of both generations.
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If you think about just like concept of asset protection, you can move assets without a trust. Like you can transfer title to it, to an asset just outright. Like I can say I have this thing. I want to give it to Susan here, Susan, and I can execute an agreement. I can give you a receipt and a, we can sign up a contract.
Like you're going to buy this from me purchase and sell agreement. And maybe it's some kind of installment agreement. Like I'm going to sell my boat and you're going to make payments, or maybe I'm going to buy all of your supply of widgets that you can manufacture. You can even have promissory notes between family members.
Now in contract, your damages are limited to, you have to sue for breach there's formulas about what you can recover in damages. And the guy can just file for bankruptcy, right? But that's what sucks is if it's big enough, it doesn't matter if you have a judgment or not. If they file for bankruptcy, your judgment's discharged.
There's no remedy. In trust law, if somebody takes that trust assets and make the transaction or a transfer that violates the trust. The law says that a constructive trust has been created between the grantor, the person entitled to the asset and the recipient. So if the trustee did something bad, which I've seen happen, did something bad and transferred assets, like took them himself, took money out of the trust himself and bought something.
Or then transferred it to a third party. The trust says that third party is holding the assets for the benefit of the grantor. And it's not a breach of contract. You cannot discharge that wherever those assets go can be brought back into the trust because the court says you just extended the trust arrangement to a third party.
Doesn't matter. It's still a trust asset then the court can pull it back, which is a protection you can't get any other way. That's one reason why it's powerful. I like a story I read on, on the internet yesterday. It wasn't quite that, but it was a inheritance thing where the mom was, what do you call the person who was supposed to administer the estate.
She's spending all the money that the daughter was supposed to get some of the money, but the mom was blowing all the money it was working. And the advice was you better stop it
clawed back if it's spending on some service or trip or something or, yeah. Heck yeah. She's breached her fiduciary duty. Yeah. They do it all the time. They think they're entitled to the money somehow. If you choose family members to be the trustee or the personal representative, you're asking for it because they just have, sometimes they have ended up in court litigating.
This is public record, but brother was stealing money from the trust for his disabled sister, a special needs trust. Like you're stealing money from your disabled sister and the trust are you insane? But they had to get a lawyer, me to an IRA, racked up tens of thousands of dollars in attorney's fees because the other side fought it tooth and nail.
And I'm like, how expensive is it to have a personal representative that is not your relative? A lot cheaper than losing it because a family member trustee went to Hawaii. We're looking at a trust company now that only charges 55 basis points, 55 bips. So half of one person. To be a personal representative, not the trustee, the personal representative.
They won't do that. Chris Neil's outfit will do that. He, I went to law school with Chris and he just bills by the hour. I mean, some probates require hardly any work at all. If it's a complex thing.
You said something about Hawaii. What happens if you have a timeshare? I hate timeshares. Why do you have a timeshare?
I don't know, but it's in Hawaii. And you were drinking my ties and you're walking through the hotel lobby and there was a person that said, Hey, come over, come to my kiosk and look at it. Here's another drink. You know, it only costs us 2,500 bucks and it's the best rated one of the best on Hawaii.
So we feel good about that, but that's not the question. The question is what happens if you die? Where's the timeshare. It's not really. So do you, is it tangible property? You know what I mean? Yeah. Well, here's my experience with timeshares. Every single time I've had a client with the timeshare, that question has come up and when it came time to deal with the asset in the estate to really figure out how it was going to transfer every single client I've ever had said, I don't want to worry about them I'm going to get rid of it.
Every single one. I've never had a client when it came down to it intended to keep it.
You're right. You're right. That would be correct. Unless you died unexpectedly, which you can then what happens. It's probably a timeshare is a contract. And the people who draft the contracts are big firm lawyers that represent an advocate zealously for the timeshare. And so they've put all these provisions inside of the contract that govern how that timeshare will transfer.
Now, can it be assigned to a third-party? Can it be passed at the event of death to the kids when the kids inherit it, do they still own it? And what the timeshare companies try to do is put unfavorable language inside of the contract to the customer that they try to combine it because they know it's bad deal.
They know that, look, we have this real estate and we have to make money on it because whatever our development. Timeshare companies didn't start at the real estate guys, didn't start out thinking, oh, we'll do timeshares. They built a resort. They weren't making money on the resort like they wanted to. So then they come up with this scheme.
How can we divide this up so we can have our occupancy rate paying, even if our occupancy rate is low and unprofitable. We still will make money because we sold the time, ahead of time and they know damn well that people aren't going to actually use their, do you use your timeshare every year? Not every year.
Yeah. See, there you go. That's why they do it. And so they have drafted a contract that they have you signed that is completely unfavorable to you. Now, as it stands as it so happens. Unilateral contracts are disfavored by the law. A unilateral contract is exactly that it's complicated contract that's several pages long that one party drafted and it's a take it or leave it contract.
Like here's the timeshare. You can't negotiate terms. You can't say I don't like paragraph three. This is the language I want. Take it or leave it. Well, when it comes time to go to court over it. A defense to it is judge. This contract is unenforceable because it was unilateral. The law hates unilateral contracts.
I, myself, I have not been able to have a court rule that an entire contract was unenforceable, but on two different cases, I've had the court strike paragraphs. It's just bullshit. Just like unilateral boiler plate, take it or leave it completely one-sided. Especially if they think the court case law talks about the sophistication of the non drafting party.
That's almost exact words. So if you have a little old lady who bought a timeshare, then the courts are like, come on, sheep. What are you guys doing? Now, what is it? One, two exit times. There's a company that gets people out of timeshares. I forgot what they call it. Probably more than one. Yeah. There's probably more than one, but for the most part, it's just a contract and yet the contract rights can transfer.
Like you have it, it has value. It has economic value of 2,500 bucks or whatever it is. It's part of your estate. If the contract allows for transfer, which I'm sure it does because they want to have somebody on the hook. They don't want to have to resell it. You can donate it to I've thought about donating it.
Oh. They use it. I don't know how they use them when you're doing well. I'm like, okay. Humane society. Oh good. We just got a donation of a timeshare poodle. There's a certain company that I think, I don't know. I don't know. I had a timeshare and I had to pay somebody like $500 to get rid of it.
Yeah. It was a big mistake that you bought a, timeshare at a golf resort. And so I don't golf, so I never went there other than the initial visit, we just traded and went to other places. But there was, that's the thing. We don't use it every year, but the years we don't use it, we bank it. And when you bank it you get a bonus week.
So then the next year you take the whole family for a week and you got three units. Yeah. So if we go like every other, last year we went and we're going to give this year. So I think you'll have a good time share that people want. A lot of people wanted to go to my timeshare in Florida. It's in Princeville on Hawaii and so it's a good one.
LIke Disney, I assume Disney as they have a timeshare program for, because they have a lot of properties, especially in Disney world. And of course the cruises and all that. And I'm like, I can't imagine Disney's doing shady stuff. I've never heard anybody complain about a Disney timeshare, but my clients hate them.
Like I haven't met one that doesn't want to get rid of it. It's like, divorce attorney and drug addicts. I've never met a drug addict or a divorce attorney who wasn't trying to quit. Timeshare owners, like they just want to get rid of it.
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Okay. I'm going to have, I'm probably going to have the drafting app now has an upgraded work product for taxable estates. I haven't quite finished the new work product on non-taxable. So that affects you, Susan. I'll probably have it done the next week or two.
So you can rerun your last will and Testament. I think you'll like the new version of. It's just going to be a lot easier. Like you've spent a lot of time understanding the provisions, but your kids are going to have to pick up the file one day. And so the new version, I think will be, it's a lot easier to follow.
I have to figure out a verbiage for Shane, because I want him to pick the trustee who knows if he'll even be around. You know what I'm saying? It's hard thing to put in your Will. So we, I was talking to him last night about it. Yeah. And so we got our, a couple of things to consider how that verbiage would be, which you'll probably need to talk to you or him or something together.
Or he may already know and just say, okay, here's what you say. We've been kicking the tires on some trust companies. And there's, I'm saying Oklahoma, because the trust company I like is headquartered in Oklahoma, but they have trust offices in Texas and Missouri and Kansas. And so it, the best. I think it's better just to pick one, rather than say, I want Shane to pick one because you're exactly right.
He may be dead or retired or both, but it's your money. So you want to feel good about that? Yeah, I could do that, but I didn't know if he was ready to. I dunno. He's talking words that I don't understand. He's going to be the relationship like. When you work with Shane it's white glove concierge, because he's running the investments and he's giving you access to an extremely good, but cheap trust or services that you can't get on your own.
And so when there's a question, you're not really, you're not going to the trust department, really. You're going to Shane because he's your guy. And, but Shane has to have a business owner succession plan. Now he's got Bob who's I like quite a bit. And he's aware of bringing up young advisers that he trains like law firms.
If I come up with a business owner succession plan, that's better for me because then a younger lawyer can like all apparently cause clients like me because they get really anxious about me retiring or dying. I can't go on forever. Right. And I don't have the energy to find a younger version of me. So I'm like, well,
But I'll need to find out from Shane. See, because we were talking about the whole view. I don't remember what he called it. Let me see if I wrote it directed trust. Yes, I do. He a directed trust is trust administration lingo. It's like revocable and irrevocable. His lawyer classifications of a, directed trust has no meaning legally, but what it refers to is when the trustee is not taking any responsibility for there's two ways you can do it.
One way would be Shane is completely responsible alone for managing the assets in the trust. And the trustee is only doing administration until they're not doing their expensive reg nine review IPS. Right? That's what he said, right? Yeah. But if you want it you could say the trustee has oversight and they will have an IP investment policy statement that Shane must conform to.
So what's Shane called in that situation. He's just, he's like the investment advisor to the trust. So he's making the decisions about the portfolio. So the thought is why have this trust company investing your money when they already know your investment strategy, all these you like Shane. And why pay them, like you said, to do all these fancy things that you don't really need.
Th the thing about money though, is it's tempting, it's luring, like, just in terms of like family members. And if you had family wealth that you wanted to last more than one generation, then what kind of governance? Like what kind of decision-making model do you have to make sure that the investment policy statement, which is created by the grantor, the trust maker isn't being violated, Karen is a lot more conservative than you are.
And I can tell you right now, Karen is not going to allow anybody to use cryptocurrency. No one's investing in that in her trust ever. Right. Now, if it's a directed trust or if you have your kids running it there's absolutely no safeguard. She can't control that. Whereas with like a trust, with a professional trust company that has to comply with the trust company regulations of the banking industry.
Now, granted you're paying for that regulatory oversight. But they have internal audits and they have external audits that come in and say, look, here's the trust instrument. If they find a cryptocurrency in Karen's trust heads are gonna run. So they're going to make sure that the little moneymaking, the rules that we came up with while the grantor the Trustmaker was alive, those rules are still in place and they're being followed.
Like we've created the swim lane and nobody's going to go outside of this swim lane. Whereas with a family member, man, it's sometimes it's like the wild west. Can you tell them it depends on how you structure it, but the trust, the investment advisor is the guy who is Shane. He's an investment advisor.
And so he, an a directed trust. The trust company is saying, look, you pick Shane's the guy we're going to go with Shane. He's going to run the investments. We you're not doing it because you're dead. So the person that used to own the assets is now deceased. So who's making, buying, and selling and trading decisions for the investments.
Now, when you're alive, Shane can not buy, sell, and trade anything without your permission. He could, if you want him to, but most people say, look okay. Let's do a suitability questionnaire. Let's come up with a profile. Let's come up with a proposed portfolio. Do you like it? We can adjust it this way. We can make more tax efficient.
We can eliminate options and pork bellies and ETFs or whatever your preferences are. Some people like to invest socially in a socially conscious way. And so they will prohibit the buying and selling and trading of tobacco or alcohol or whatever, but then he'll come to you and say, look, what do you think?
And then you'll say, yeah, I like that. And you say, do I have permission to execute, trade? You have to like, basically sign something. That's like a trade order. And then he'll go out and take your cash from a bank account and he'll buy those mutual funds to construct a portfolio. If you're deceased, who's doing that.
There's only three trust makers dead. So there's that trustee and the beneficiaries have no control over the money. They don't get to tell anybody how the assets should be managed. That's the point? The trustee is the owner. Now, the trustee can delegate that and say, look, we're going to have you. Have absolute discretion on meeting the IPS of the trust and buying and selling.
You don't need to check with us every time you want to make an adjustment, that's one way. Another way is the trustee is responsible for the way in which the assets are managed, the type of assets. And I personally believe that's a safer way to go. Because you're working with Shane, but the trustee is on the hook for it.
And so you just have that extra layer of protection. Now, some people don't like it because they don't like paying the trustee fee penny-wise and pound-foolish sort of thing.
It's funny because in a recent conversation I've had in my career, family members chosen who upon investigating once we got into it, the family member has bipolar disorder. This is the person you're choosing to run the trust after you're dead for your other kids. That doesn't sound right. It's not that people with bipolar can't function, but sometimes they can't.
Well, if there's a trust, how is a relative running the trust? I thought that it had to be the trustee in a relative. No, because it's taken me four or five months to convince you not to use your daughter. I know. No, I know that, but that's not the question. The way you said that. Trustee is a job. So there's the trustor Trustmaker there's the grantor, same thing, the person that owned the asset.
Then there's the trustee. That's the person running the trust trustee. And it can be anyone over the age of 18, not convicted of a felony. It can be a business owned by lawyers, or it could be a professional trust company. That's regulated by the banking industry.
Now of the three, we have been talking about family members as the trustee or a professional trust company. The advantage of family members is they're cheap. They work for free, or they work for right? The disadvantage, they do all your investing in the disadvantages? They don't know what they're doing. They have no experience.
They don't have time because it's, there's running their lives. Like I've had clients, they choose the daughter. Old's daughter because she's the oldest daughter and lives closer. Wow. What you want to is that how you would hire somebody at a bank? She's just like, she's old and she lives near me, but they don't know how to do a 10 41 tax return for a trust.
And so getting your daughter, I know I've probably asked you this a hundred times, be the personal representative, but not the trustee. Personal representative just to walk it through the probate. Right. Yeah. Yeah. Son or daughter. That's a great choice for personal representative. They don't really have that much authority only to do what your will says and good.
It's good that they. Okay. Look, when the asset owner dies, the assets have no owner. The that word estate is a legal contract. That's created. When an asset owner dies and estate is a legal holding pin for the assets of the now deceased owner. And, but there has to be a human being that represents the estate to the court, to the judge, to the world, just to have a legal construct.
You've got to have somebody in charge. And so a personal representative is a person that represents the estate. Personal representative, the medieval word is executor. If you're male executive tricks, if you're female, but it doesn't really have any meaning. Personal representative is opens the probate.
Petition the court to admit the will gets letters. Testamentary takes the letters, testamentary to bank of America, to the Schwab accounts sets up the estate. Once the letters testamentary are presented. Then the financial institution goes, oh, okay. So you're the personal representative. What would you like?
I want you to set up an estate account. So estate of Darol Tuttle account number, blah, blah, blah. And then go ahead. No, go ahead. So if you're still married and one of you dies. That's where the, your spouse is not your personal representative. A spouse can be a personal representative, however, not if the will establishes a trust under 42 USC for his or her benefits.
There's no prohibition in probate law. There's no rule in probate law that says the spouse cannot survive. The spouse cannot be the personal representative it's in federal law and some case law when we're creating a spousal protection trust. Because if the personal representative is the spouse, she's exercising too much control over those assets.
And that concludes this episode of the BoomX show laws of money podcast. I'm your host Darol Tuttle. As a reminder, you can go to boomxacademy.com. Membership is absolutely free. And best of all, you can enroll in the BoomX show companion course. That's all for now until next time, remember? Yes, you can learn and leverage the laws of money to your advantage.
