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When you hear the term "trust fund," does your mind go straight to the ultra-wealthy? If so, you’re not alone! There’s a common misconception that trust funds are exclusive financial tools for the elite — something far beyond the reach of the average entrepreneur. But in reality, trusts are a valuable tool for anyone looking to protect and pass on their wealth effectively. Whether you're building generational wealth or simply want to secure your assets for your loved ones, understanding how a trust works and how it differs from a will can make all the difference.
Today, we’re showcasing insight from Diana Khan, attorney and founder of DK Law Group. Diana speaks from both personal and professional experience, having helped both her own family and innumerable clients navigate the often murky waters of estate planning. Believe it or not, preserving your legacy might be easier than you think. Let’s dive in!
What Is a Trust Fund?
“In my world, everybody's born with a backpack. Everything you make in your life goes in this backpack… the idea of a trust really is very simple. You come into a lawyer's office and you say, I've got my backpack… I want to do things better for my kids. What do I do? And a lawyer says, I'm going to build you a new backpack… you get to invent it from scratch.”
Diana provides this incredible analogy to demonstrate what a trust fund actually is — a legal entity created to hold and manage assets on behalf of a beneficiary. Think of it as a personalized financial structure where you can specify how, when, and to whom your assets will be distributed after you're gone. Unlike a will, which simply lists who gets what, a trust gives you much more control over how your wealth is passed on.
The Key Differences Between a Trust and a Will
“With a will, your kids have to take this backpack to the courthouse and say, ‘Here's my mom's stuff. Help me open it.’ With a trust, your kids can pick up the bag. It was theirs to begin with. There's no probate. There's no taxes. They can open the bag the moment I die, and they're good.”
While both wills and trusts are designed to distribute assets after your death, there are crucial differences in how they work. A will goes into effect only after you die and often requires a lengthy probate process, where a court oversees the distribution of your estate. This can take months or even years, leaving your loved ones waiting to access the money or assets they need.
In contrast, a trust takes effect as soon as it’s created and doesn't require probate. This allows your heirs to access funds more quickly and without the complications of court proceedings.
Why You Should Consider Setting Up a Trust — Even If You’re Not “Filthy Rich”
“Regardless of what I die with, I know that whether or not they liked me or not… I've set it up in a way that the money is going to be available for them. And you can write whatever instructions you want.”
One of the biggest misconceptions about trusts is that they’re only for the very wealthy. In reality, anyone with assets to protect — whether it's a home, a business, or savings — can benefit from setting up a trust. Trusts aren’t just about passing on massive wealth; they’re about ensuring that what you’ve worked hard to build continues to benefit your loved ones long after you're gone.
Trusts also provide flexibility and control. You can specify how much money should be distributed at different life stages, such as funding education, home purchases, or retirement.
Steps to Start the Process of Creating a Trust
"When you have a trust set up accurately, there are definitely ways that you can protect your family from a lot of that debt… With probate, I charge hourly and you pay me over the course of a year and a half. With a trust, you pay me upfront to create it."
If you’ve never thought about setting up a trust before, the process might seem overwhelming. But it’s easier than you think, especially if you break it down into manageable steps.
Assess Your Assets: Start by taking stock of what you own — this includes your home, savings, investments, and any business interests. These are the assets that will go into your trust.
Choose a Trustee: This is the person or institution that will manage the trust and ensure your instructions are followed. It can be a family member, trusted friend, or a professional trustee.
Decide on Beneficiaries and Distribution: Decide who will benefit from your trust and how you want the assets to be distributed. You can set conditions for when and how beneficiaries receive their share.
Consult an Attorney: Setting up a trust is a legal process, and working with an attorney will ensure everything is properly documented. Trusts can be revocable (meaning you can change them during your lifetime) or irrevocable (meaning they can’t be altered after they’re set up).
Protecting Your Legacy for Generations to Come
“If somebody in America dies with a will or without a will, it doesn't really matter. The first generation, meaning your children, will blow through the money that's left over in three years from the time you die. With a trust, the third generation after you die still has 30% of the income you generated in your life.”
Whether you’re a seasoned entrepreneur or just starting to accumulate wealth, setting up a trust isn’t something to leave for later in life. By taking steps now, you can ensure that your assets are protected from lawsuits, taxes, and other financial drains — and that they’ll continue to benefit your loved ones for generations.
…Class Dismissed!
Do you have assets to pass down? Trusts aren’t just for the 1% — they’re a powerful way for anyone to secure their financial legacy. Whether you're an entrepreneur with multiple businesses or someone who simply wants to make sure your family is taken care of, a trust can provide peace of mind, flexibility, and long-term financial protection.
In short, setting up a trust now could save your family unnecessary stress — and ensure that the wealth you’ve worked so hard to create continues to have a positive impact well into the future.
Want to hear the full interview with Diana? Click here!
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Transcript
Diana: [00:00:00] If somebody in America dies with a will or without a will, doesn't really matter. The first generation, meaning your children will blow through the money that's left over in three years from the time you die.
Kirsten: How much time have you honestly put into thinking about what's going to happen to the wealth that you create after you're gone after you die? I know it's not a really fun, comfortable conversation for us to have, but the reality is it's going to happen for every single one of us. And you definitely want the hard work that you've put in to create a legacy, to have a lasting impact for your family and for the people that you're working hard right now for.
And today's guest, Diana Kahn is going to walk us through how we can not look at trusts and financial planning as something that's just for trust fund babies and people who have massive amounts of wealth. But even us, the aspiring millionaires, the soon to be millionaires who need to think in bigger terms about how we're going to use this wealth and pass it on.
This is going to be a phenomenal episode. She's going to really open our eyes [00:01:00] to the difference between wills and trusts and what you need to know to make that money that you're working hard for it last for generations. So let's get into it. Class is officially in session with Diana Kahn. All right.
Welcome to the
Diana: podcast, Diana. I am so excited to be here. I get, So excited to just talk about how to do that generational wealth stuff. I feel like I don't know. I never listened to podcasts growing up, probably because I'm not going to show my age. It's fine. But now when I listen to podcasts, I was like, holy schnitzel.
I really wish I had this ability to learn all this stuff when I was trying to figure it out. So love to connect. Love to talk about it.
Kirsten: Amazing. So give us a little bit of insight into your entrepreneurial journey because you obviously know what you're doing, but there's a reason for that. You've practiced this, you've built businesses, you've got multiple professions.
So just tell us a little bit about what you do.
Diana: Yeah. So I like to say I'm a multrepreneur rather than entrepreneur, because I have seven companies I effectively. Own a law firm. It is, I [00:02:00] believe now one of the top rated on the East coast, as far as Maryland goes for real estate. And I just got named top lawyers in America under the age of 40.
So top 40 under 40, I own a real estate brokerage, a title company. I own a property management company that oversees about 600 doors. And then a construction company as well. I own a, it's a mentoring company, but I'm trying to work out the kinks of it. I call it a life coaching slash life architect company.
And then I'm also working on a media company. So about seven companies in total, all in different spheres of success. Some have been around for about 10 years. Some have been around for about three, but just entrepreneur all across. I have three kids at home, six and under. So I literally am the woman that says that she does it all.
I don't do it successfully all the time, but I do it all. And I'm happy to talk about it.
Kirsten: I love that. I think that's a stigma that we have to break is understanding. We can do a lot. We can do it all. It's just got to look [00:03:00] really different. We have to determine what success means for us when we incorporate family in with business.
So that's amazing. And that's. That's that probably sounds to our listeners like either extremely daunting and crazy or extremely exciting, depending on where you're coming in from in your entrepreneur journey. But I also think that it is going to resonate with most people because we are multi passionate.
We have typically when you can have success once you want to have it again and again, all of that to say, you know what you're doing when it comes to creating wealth before we even dive into the longterm estate planning, I would just love even a little bit more of a glimpse behind what that looks like for you.
You said three to 10 years on these businesses, but how have you gotten to the point? Was it just one led to another and they were all interconnected and it was just easy to springboard into a new business because this one was working really well or like, how did, was that always the plan to have that many businesses or how did we get there?
Diana: It's actually funny. It's it, most of them found me. I got into real estate first. And then I went to law school. And when I went to law school, I was like, I'm never going [00:04:00] back to real estate ever. So I did the whole traditional law firm life and I hated it. And then I reinvented, I was like, what did I make money on?
Even if I didn't love it that much. And it was real estate. I was really good at it. So I went back to that and then slowly but surely I realized that my legal knowledge. Was making me basically be the best lawyer not charging in Maryland. So I was like, you know what, if I'm going to be a lawyer and giving people free legal advice, might as well start making money off of it.
And then one thing led to another where they all vertically integrated and then. I also am not scared to say no. Like I'm very much under the belief that I have self conscious issues just like everybody does. And everybody else has issues that they do or they feel like they're gonna not do that great.
And I used to tell myself, I can't possibly be on TV. I can't possibly do this. I'm plus size. I'm this. And you know what? Now that I do it, I tell people, you know what, if you're looking at me on TV and you're like, man, her arms are big. My whole thing is I'm on TV and you're not. [00:05:00] And that's I think the difference between success and not success.
Is that I got over the stuff in my head and realized everybody felt that way. Everybody feels like they can't do enough. And so the businesses are like vertically integrated, but it's also just not being afraid to say, why not? Instead of I can't possibly do that. It's like, why not? Somebody else is doing it and they figured it out.
I'm only going to figure it out just the same way and profit off of it. I think a lot of it goes with. When you get out of law school, you could go like be a pro bono attorney. That's a thing that we do where you volunteer to be a pro bono attorney. You don't charge for the pro bono section teaches you everything you need to know about the law.
So a lot of people do that to get experience. And I'm like, I could do that in my business. I could take the same courses. I can learn, get a client and tell them, Hey, listen, I'm going to charge you less, but I'm going to figure it out. We're going to figure it out together. And then slowly, but surely I got really good at what I did.
Kirsten: That's awesome. As you, you mentioned, these are companies you own. These aren't just seven [00:06:00] different side hustles. So are you utilizing systems to be able to have wealth generating from each one of those income streams?
Diana: Yeah. So I really struggled with like identity branding because at first it was me and all the companies.
So it was like, you're working with Diana regardless, but as you grow, that becomes impossible. Like I've got a staff of 40, 50 now. So I've had to learn to like a systems and processes be, I firmly believe in knowing everything you hire people to do. So if I fired all 40 of my employees right now, I could do every single one of their jobs because I don't believe in creating roles that I haven't done myself.
Yeah. That's a system in and of itself. You create systems when you have to do it. If you run a restaurant, you've never cleaned the toilet in your office or your restaurant. You don't know why it's dirty. Cause you don't know the challenges your people face. So it's, I will not be able to run all of my companies by myself, but I know how to do everybody's position.
And then I built those systems with AI. I built them with like systems [00:07:00] streaming. And then the other big part of it is. I go to my employees a lot and I tell them this is the system I like, this is what works for me, what works for you? And they're like, what do you mean? And I'm like, I'm not doing this job.
You are. I tell them my goal is X. This is how I do it. How do you make it better? And I say yes a lot to things that I would never do and it's been very successful for me.
Kirsten: I saw a quote the other day that just talked about how there's kind of this lie with feeling like you shouldn't have to grind it out, you shouldn't have to Put in the long hours, you need to work smarter, not harder.
And it was basically saying you have to work hard first in order to work smarter. So I think that lines up with what you're saying. Sometimes we would just want to outsource, bring on team members and we don't even know if they're doing a good job. We can't measure it because we don't really understand what we're having them do because we haven't done it ourselves.
And I think people might have differences of that opinion, but it is so much more effective for me to know when I bring someone on, Oh, I know exactly what your benchmarks and your KPI should be because I did this [00:08:00] for five minutes, you know, like I at least explored it.
Diana: I think the other thing that I guess would lead to my success that people don't think about is when you Google a law firm, you will find positions to fill a law firm.
And there's a paralegal and there's a receptionist and all of that. I enjoy talking to people. I love talking to people. I can retain pretty much anybody if they talk to me. So the first person I hired, I was like, I guess you should be picking up phones. I should be off the phone. Like, that's what Google says.
Google says, hire somebody to be your assistant and pick up phones. And then a week or two later, I was like, I'm getting less clients. And I was like, Google's not right. Cause they don't know my personality. So I started breaking away from the positions you should fill and really got away from this idea.
Cause I have a lot of guilt. I grew up with a lot of guilt in my life. So it's like when my kids go to sleep. At seven. So between five to seven, I'm with my kids, which means that at eight, nine o'clock at night, I'm doing something. And I used to feel [00:09:00] guilty. Like my employees. It's not fair for me to ask for my employees to work at nine o'clock at night.
And I got away from that and I was like no like google says that's not traditional work hours But those are my work hours and if i'm paying you to work for me and I set those expectations And you've agreed to those expectations. There's no guilt here. Like I'm paying you for your time and breaking away from what you're supposed to do and making it work for you as a business owner works really well.
That doesn't mean treat your people badly. That doesn't mean have them work at nine o'clock at night when it's their mom's birthday. It just means set expectations. Be real with your people, what you need. And if they can't fill that role, they can be the best employee in the world, but they're not the employee for you.
Kirsten: Yeah. Okay. So fascinating. I want to come back to this if we have some time, because I just, I knew that other people listening, when they hear I own multiple businesses, seven businesses, we want to hear a little bit of insight into what that looks like. And I think it establishes a strong foundation of how to generate income, definitely for sure.
And so [00:10:00] for you, have you always, did you grow up with this background of understanding how to use money to grow it and invest and create more money? Or is this something you've had to be self taught with? And it's just come as you gained those higher levels of income.
Diana: I absolutely knew nothing about money.
I grew up in a third world country. My parents got me here when I was 10. My parents were very well off in this country, so we didn't really feel poverty there, but poverty there and poverty here, pretty much. We took whatever money we had. I was very young. They came here and they drained it in three months.
And then I was just, his poor broke until I was like in my twenties. I worked at a fast food restaurant. I never had anything handed to me. This was a time again, showing my age a little bit. Insurance got cut off 18 when you were under your parents. I have an autoimmune disorder. So at 18, I was like, how do I afford my medicine?
I've been through that. So never really knew how to do it, figured it out on my own. And. I gotta tell you, [00:11:00] I'm looking at the way my kids are being raised, and I think that they've got a lot more opportunities because of the schools and everything I've given, but that hard work really leads to you learning how to do it better.
My brother had a different upbringing than I, because we just had different life scenarios, so he had a little bit less of hard work, and his kids are sort of spoiled brats, sorry, but we make the same amount of money, it's just that he raises them very different, and I look at him and I'm like, If they lose everything, they're not going to know how to do anything.
Like set them up for success.
Kirsten: Yeah, that's so true. And I think it's so interesting how no matter where we come from, our backgrounds are going to dictate the way that we handle money. But I love that it's, you don't have to stay stuck in that, right? You didn't come from this generational wealth, but you have since learned that as a priority for you.
So what were some of the first things that you did as you were generating income as an entrepreneur to start thinking long term and planning for more wealth?
Diana: So, I think the big thing is, my law firm does trust in estates, and I used [00:12:00] to think, in my world, estate planning was for people in their 60s, and you just plan it.
But then as you start making money, you realize, holy moly, I'm not going to qualify for Medicaid. I'm also not saving for retirement, because that's not realistic. So how am I going to afford this? Did you know that 80 some percent of Americans Will deplete their life savings within the last five years of their life because of long term care, hospice care, all these things.
And did you also know that then I started learning about trust and I'll happily talk about what they are, but I'll give you the statistic before I even talk about it. It's if somebody in America dies with a will or without a will, it doesn't really matter. The first generation, meaning your children will blow through the money that's left over.
And three years from the time you die. There's no statistical, like, how much money you have. With a trust, if you have a trust, the third generation after [00:13:00] you die still has 30 percent of the income you generated in your life.
Kirsten: Wow. That's pretty significant.
Diana: So let's talk about what it is because people are like, I need to know what it is.
Kirsten: I'm like, tell me how we get there.
Diana: Yes. Forget about lawyers and the way lawyers speak. In my world, everybody's born with a backpack. And I'm trying to patent this idea because I think it's so easy to understand. You're born with a backpack. I'm born with a backpack. I grew up in Bulgaria. Mine probably has a Bulgarian flag on it.
Whatever. And it's so ridiculous, but if you think about it that way, everything you make in your life goes in this backpack. And then, it has your name on it. If you have a spouse, your spouse's name may go on it, right? So the whole idea is that when you die, or something happens to you, the bag drops to the floor.
Doesn't matter if it's death, it doesn't matter if you're sick, nobody can pick up that bag without further instructions. Those instructions could be a will, or it could be a power of attorney if you're alive. So if you die with this backpack, essentially what happens is your kids have to take this backpack to the courthouse [00:14:00] and they have to say, here's my mom's stuff.
Help me open it. Now, most people aren't going to die. Some people will die very peacefully in their sleep in their nineties, but some people die unexpectedly. Some people die without having stuff in order. So here's the thing. I've got three kids. They're young. If I die right now, their bills don't stop.
Private school tuition is gonna continue. All these things continue. And if you don't have things set up, that backpack, when you die, drops to the floor. The person who's left behind has to pick up the bag. They can't open it till a courthouse says, go ahead and open it. And the average time frame, at least in the state I'm in, is 6 So now it's like all of this money is in this bag and you can't even like open it and The process of probate and a will is the idea of just winding down this backpack.
It's I'm gonna open it back up I'm gonna pay off the debt. I'll pay off everything my mom owns and then eventually I'm gonna get it But before I get it if I die with a certain amount of money My kids are gonna pay taxes on it And if they don't [00:15:00] pay inheritance tax because I'm not a millionaire They'll still pay capital gains when they sell my property, which is an additional 8%.
So there's just, the system's rigged, right? Because like, your family's grieving you but now they also have to navigate all these things. Now with a trust, growing up I always was like, trust funds are for rich people, right? Like, they just have money and that's what happens. But the idea of a trust really is very simple.
You come into a lawyer's office and you say, I've got my backpack, it's got my Bulgarian flag on it. I want to do things better for my kids. What do I do? And a lawyer says, I'm going to build you a new backpack. And you're like, what do you mean? And you're like, we're going to build a brand new backpack and you get to invent it from scratch.
But the key part of it is that backpack doesn't belong to you. It belongs to your kids. And we're going to gift it to your kids right now at creation, but they don't get to open it or touch it until a triggering event occurs, such as death. Incapacity. So then what we do is we take everything out of my personal bag.
We put in this trust bag and this trust bag. [00:16:00] Now I don't own that bag anymore. I just control it. I control it until my death. So there's a couple of things that happen with that. The first is if something happens to me, my kids can pick up the bag. It was theirs to begin with. There's no capital gains tax.
There's no probate. There's no taxes. They can open the bag the moment I die and they're good. So that's instruction. Number one, instruction. Number two is I can actually put. Guidance on what I want for that bag. So I can probably do a whole talk about what guidance means, but I'll just tell you what my bag says.
Because I feel like that's easiest to understand if I die under the age of 18, my kids are under 1820 percent of my income can be used. Under the age of 18 for them, it can be used for health, safety and wellness. And it is not given to the guardian. Who's going to care for them. It's given to my brother, who's good at managing money.
The other 80 percent has to remain in the trust. At the age of 18 to the age of 25, an additional 20 percent can be used for educational purposes [00:17:00] only. And I have a statement in there that says education is not for everybody. I don't buy into that. I don't buy that an art degree is going to help you make a lot of money.
I just don't buy that a bachelor's degree is really going to help you that much. So I don't need you to get an education. However, if I die with 10 or if I die with a million, 20 percent of that at the age of 21 is going to go to alcohol and that's it. Because I was 21 and I remember what I would have done with it.
Kirsten: So
Diana: 20 percent goes to education, or you could just leave it on the trust and it's going to be there for you when you turn 25. And from 25 to 35, an additional 20 percent goes to my kids for the purchase of their primary residence and an investment property, but they have to qualify for the mortgage on their own first.
So now I've set it up that my money will help them facilitate their life, and But it will not allow them to live outside of their means. And then 35, they get the rest of it. So now what I've done is I've taken, regardless of what I die with, I know that whether or not they liked me or not. So the next [00:18:00] 29 years, I set it up in a way that that money is going to be available for them.
And you can write whatever instructions you want. Some ideas just for those of you listening is it could be things like, I don't want my daughter's spouse to think that this is spousal income. So if they get a divorce, it's separate from spousal income. It's not part of proceeds. I don't want my grandkids to use that for this.
You know, I want my pet to be cared for. I don't want the house sold until my kids are 18. I there's quite a lot of instructions and some of them get really weird, but you can just basically put instructions because now you've created a gift that's given to them on a projection of time. And you've given instructions with it.
So that trust is not just about money. It's about allowing generational wealth to continue so that if somebody loses you and they're You know, not okay. They're not spending that money right away. Other cool things to think about for business owners is let's go with that same backpack example. If you have an LLC, or you have any sort [00:19:00] of investments, that LLC is basically a water bottle inside a knapsack.
Got it? And it goes in that same backpack that you were born with. So piercing the corporate veil, which we've all heard about is like how it goes from business liability to personal liability. For a horrible example, you take a knife, you stab inside my backpack, and if you manage to pierce the corporate veil, that water is going to spill onto the rest of my stuff.
That's the idea of protecting your personal from your business. Well, if I have a trust and I've taken everything personal out of my backpack and put it into this trust, Now if you pierce the corporate veil and water gets all over my stuff, what's in there? Nothing. Like you can sue me all you want.
There's nothing in there. There's none of my stuff belongs to me. I've given it to my kids. I don't on paper own anything. My kids do. I just, I'm just controlling it while I'm alive. Similarly, if I age and I need to do assisted living and houses in America, the number one way we protect our income. My house has about 300, [00:20:00] 000 worth of equity and I've only lived in it for five years.
By the time I turn 80, it's going to be paid for if everything goes well. Assisted living says that's income and we're going to sliding scale, figure out how much you can afford where we're at in Maryland. An assisted living facility that I would never step foot in with a roommate is 3, 000 a month. A good one is 10, 000 a month.
That goes quickly, very quickly. So guess what? What if you have a trust and your house is no longer in your bag, but it's in the trust bag and you need to qualify for Medicaid and they're looking at your income. What's your income? What are your assets? You don't have any. So now all of a sudden you qualify for Medicaid.
There's obviously parameters and all that stuff. And you should definitely talk to somebody cause there's a seasoning period and there's all this little mumbo jumbo, but this backpack pretty much just gives you this idea of why it's so important for generational wealth. Because the truth is, and as a lawyer, I know [00:21:00] this, if you get sued one time, you could deplete everything in your bag unintentionally.
Cause lawsuits don't just happen when you're a bad person. Lawsuits happen when you make mistakes unintentionally, lawsuits happen for other reasons, and you've got everything mixed up. So everything we're working for just vulnerable.
Kirsten: And that was great. I know that that's even a lot of the reason that we separate personal from business income, but to hear going in the other way.
For those of us, including myself, it sounds like, how are we able to have that workaround in the system to where I've earned this, it's mine. And I think this goes outside of like taxes and all of that. That's a totally different discussion, but moving those assets into the trust. I don't know if you can just clarify to me.
That's still your stuff. Like you're saying, you're, you've put it into this different backpack, but why is it that if your business over here is attacked, you can, and I guess my second question is, can your business become one of the assets in your trust, or is it always going to, can you do a trust for your business?
Like, where does that fit to protect everything that you're doing? [00:22:00]
Diana: So the way I do it with my businesses is they're all owned individually by me. But I have a succession plan in my operating agreement that says if I die, the owner of the business after me, the succession is the trust. So I've essentially, I keep it separate, but then there's still this trust option.
And then obviously, if you have an LLC, you should look into a buy sell agreement. Because if you have a business partner or an insurance, it's huge for people to continue to actually have the option to sell the business or take out an insurance plan so that you can support that. So that's the first part.
The second part is trusts are really, they're, they're older than most of our laws, believe it or not. So they're just seen as like a protected entity. It's no different than an LLC, but for your personal stuff. Now, for following that book back example, there's different types of trusts. The trust that most people do is called a revocable trust or one that can be changed So you can open and close the backpack at any time meaning that it's yours.
You can open it close it access everything No problem at all. It's when you [00:23:00] die It locks down meaning that your children can't change it an irrevocable trust is one that's the same example Just you can't open the backpack after you've created it doesn't mean you can't sell your house It just means that whatever you create at time of creation cannot be changed So if you want to be able to sell a house and put the assets in another bank account, your trust better say that at creation.
And then a big one that I think people with kids with special needs don't think about is if you have a child with special needs and you're their primary caretaker, something happens to you. They're your only child. They've just inherited everything you left them behind. All of a sudden. They've disqualified for government benefits that they qualified for while you were alive because they're on a disability.
So a special needs trust is actually a trust that says it supplements income to somebody who's special needs after the government benefits. So there's quite a lot of benefits in there.
Kirsten: Wow. That's really fascinating. And I would bet that most people are not thinking in this way. And before we get into another little nitty gritty part of it, I'm curious if [00:24:00] you can just clarify for us, you did a great job of Explaining the scenario when you have just a will, you can't really open the backpack, but why is that?
Because I think so many people think, oh, if I've written a will and I've had it notarized, then I should be good to go. And what is the biggest difference between just having something like that and what does go into will versus what goes into the trust? And I know this, we don't have to get into all the nuance, but just in a very basic way, help us understand the difference.
Diana: So the idea with a will is your will just basically says, here's who gets my stuff. And who's going to be responsible for handling it. You still own all that stuff, which means that there's people that you owe money to there's debt. There's a way that the United States government has said, we have to unwind your life.
We have to allow creditors the opportunity to give notice to your family that they have to get paid first because that gets paid off first. So the reason you can't open the backpack is because you have to make sure there's something left over. After Medicaid or [00:25:00] after all these things. People believe that Medicaid just covers you and you're done.
No, they usually collect after you've passed away, just so you know. In a lot of like, weird, different instances, but. So, the wind down period really is for your life to be wound down. Because just because you died, your responsibilities did not. Your credit card bills didn't die. Your mortgage didn't die.
All those things need to be removed. And separate it from your social security number. So when we take it to the courthouse, we create actually a social security number, EIN number for the estate. And then the estate takes on your debt for that year. As we wind down with a trust, you've created a separate entity.
It's almost like an LLC, right? That entity is no longer yours. So when you've passed away, you've given instructions. Here's who gets it. Here's how taxes are handled. You've taken care of all of that prior to death. So at the time of death, your kids just need to pick up the bag and move on, and there's no probate because everything you owned is in your bag, and that backpack might go through probate, and if there's nothing in it, they're skipping probate altogether.
Kirsten: And just [00:26:00] so that we're clear and don't say, if you have a trust, you don't have to pay the debts. That still has to happen, right? It's just prioritizing a little bit differently.
Diana: Yes. So your debt doesn't go away, but it just stuff out of your backpack. So if you have a trust set up accurately, there's definitely ways that there's a seething period where if you had a trust for five years and it's an irrevocable trust, that won't touch your personal stuff.
So you can't jump into a lawsuit and be like, let me go create a trust. But if you set it up, it will protect your family from a lot of that debt, which is phenomenal. And then the other part that people think about is when you have a trust is it also allows you to do tax benefits. Let's use small numbers because small numbers work well for everybody.
If your investment home is worth 10 and you die, your family is going to pay capital gains. It doesn't matter if there's inheritance tax, they're going to pay capital gains when they sell the property. Capital gains is about eight to 10 percent additional taxes. If I give my kids an investment property through a trust when I give them that [00:27:00] home at time of death, and if the home's valued at 10, the value I'm giving to them is zero, which means that if they sell it at 10, they're paying taxes on zero.
If they hold it for an additional 4 years, it's now worth 14. They're paying taxes on the step up tax bases, which is the 4. So instead of 14, they're paying taxes on just for whatever grew after death. So imagine how many taxes you can essentially save on. And then the more money you have, a trust will actually say things like, if I end up having to owe money to the IRS, my family can actually create a nonprofit and put that money into the nonprofit and guess who runs the nonprofit, my family, and they get paid a salary.
Kirsten: Wow. There's a lot here to unpack because I think there's so many layers, right? To entrepreneurship, it's figure out how to get a business successful. And then it's, how do we create more wealth and invest that? And now it's, how do we protect that wealth and be able to pass it down and make it something that's going to [00:28:00] make a real impact for many years to come.
And even going back to what you said, The reason it's so obvious now, the reason that a will, the money's going to be gone within a few years versus a trust where you can really dictate how you want that wealth that you worked so hard for to be used throughout time. And it really doesn't matter the amount of money there because the ratios and the instruction remains the same.
So you just, you're still able to have this control when you're not here in helping to create a longer term impact, which is really cool.
Diana: Now, the other thing that people, obviously there's a barrier, right? A will is not expensive. It's cheap. Everybody should have a will. I'm not telling you don't have a will.
Wills have their own benefits. Like kids don't fit in backpacks. So if you have kids under 18, you should have guardianship set out in a will. If I make a trust, I usually do a will as well. If we call it a pour over will. So what a pour over will essentially means is if I win the lottery and I die and I have that lottery ticket.
I haven't put in a bank account that's owned by the trust yet. It's now mine, but my will say My intention [00:29:00] was for it to be in the trust And if I died by accident and forgot to put in the trust, that's where it's gonna go So that's like it pours back into the trust But the other kind of barrier is that people always tell me trusts are expensive and that's true.
They are expensive I'll give you that but i'll give you the tidbit that at least in maryland I do probate and I do trust Trusts are cheaper. The only difference is that with probate, I charge hourly and you pay me over the course of a year and a half with a trust. You pay me up front to create it. But I'm going to tell you right now that I have 18 employees at my law firm.
Most of them love trust as far as like creating them. I have a staff members who just do probate and they themselves are After they started working for me, we're like, mom, dad, you have to get a trust. I never doing probate. It's not easy. It's horrible. Some States make it easy, but it's, it's a horrible experience.
Kirsten: Wow. We experienced this a little bit. We were really grateful that my dad had a trust. He died unexpectedly in [00:30:00] February and the amount of time that we're able to save not having to go through probate and just everything there. And I think he had even done bare minimum. There wasn't all of this instruction for all of the things that you mentioned, but even just having the assets there inside that trust has made it.
All of our lives a little bit easier. And I love that you mentioned, like, we want to be able to grieve them and not have to additionally add to the stress of trying to navigate finances. It's just not the time you want to be doing it. So even though this may not be a glamorous conversation or the part we want to focus on when we're generating wealth, it's such an essential one to ensure that.
We're looking out for people long term for our loved ones and those that we're working hard and building these businesses for.
Diana: I think the other question really is like when you think about trust, right? Like people are like, Oh, well, it's in the future or it's not something to do, but I'll tell you this much.
When I have people come into my office, I have two or three type of people that I do trust for. There's the people who come into my office and have lost a loved one and they've done probate [00:31:00] and they will literally, they just take out their credit card and they're like, take my money. My family is never going to go through it again.
Like they're the easiest sell I've got like two minutes. They're like, you tell me what I need to do. I'm not doing it because they've lived through it. And then there's all these business owners who do it for like the smart economical side. And then there's like people who have heard about trust and they're like, Oh, that's too expensive.
And those are my biggest selves because they haven't really thought about it. Because I'm a younger entrepreneur, I take a lot of time to educate people because I think the problem is that people who are willing to pay for a trust is because they've gone through that horrible experience. And the reason we're successful as entrepreneurs is because we're trying to break the mold and do different and set the parameters.
So the thing is, why are you waiting for a trigger for your mom or your dad or somebody else to go through this life change for you to realize how heartbreaking it can be? You might not actually go through that experience. Your children might. There's no guarantee of it. And my mom, just as a quick side story, [00:32:00] she got really sick two years ago.
She lived. But her chance of life was less than 1%. It was unexpected. I had a newborn. She was in the hospital within three days. Unexpectedly shock, trauma, septic shock, multiple organ failure. We were talking about amputating her leg life support, completely unexpected. I had a newborn. I had two kids under five.
I had never dealt with a sick parent. And overnight I was literally watching my mom get bathed. She didn't have a personality, she didn't know who I was, and that was my life for seven months, and she had nothing in order. So on top of just, like, taking care of her, having a formula shortage, and being able to, like, make decisions for myself, I also had a dad who, my mom was his primary caretaker, and like, a week into this whole ordeal, I was like, I thought I was doing okay, you know?
My dad calls me, he's like, can you bring me some potatoes when you're done? And I was like, what do you mean? Like, why do you need potatoes? Like, I don't understand. He's like, well, I can't drive and there's no food in the house. [00:33:00] I was trying so hard to function and the basics of just getting my dad food had like, I hadn't thought about it, but my mom was his primary caretaker.
She had nothing in order. He had no access to cards. He didn't know how to pay bills. He didn't know how to do like Medicaid. He didn't know how to maneuver any of that. And I didn't either. I was dealing with all that. I got my mom's laptop, I sat in front of it, and I was like, I don't even know where to start.
I couldn't even prove that I could call and be her daughter to do her cell phone bill, let alone her BGE, and that's our gas and electric. Seven months, she was in the ICU for seven months. And my entire life stopped. And would it have been easier if she had a trust, or if she had this stuff? Absolutely. A hundred percent because I would have not had to deal with a lot of this hard stuff.
And then the last part I'll leave you with is on top of that, I don't like to admit this, but I, four or five months of my mom's ICU stay, we [00:34:00] stopped talking. Because when she was on life support, they made me in control of her life, because she couldn't make decisions for herself. She didn't have a trust, she didn't have her wishes written down anywhere, so she started getting better, I didn't think she was mentally able to make those decisions.
They had put me in charge of her life, we didn't see eye to eye on what to do, and we ended up having fights about it. And now I realize later that it would have never been my decision, but if she'd had a trust, I would have never had that control to begin with and our relationship would have been better because I wasn't thinking about money.
I wasn't thinking about her house or her car or her ability of freedom of having those things. I was just thinking like, you almost died. You're not going back home because it's a safety issue. Meanwhile, she was like, I want to go home because if I'm dying, I'd rather just die at home. I was like, that's crazy talk.
So in the middle of it, we stopped talking. And if you have this stuff in order, you're preventing a lot of grief and saving money.
Kirsten: Wow. Well, I think we're all [00:35:00] pretty convinced at this point that trust funds, creating trust is not just for the very, very wealthy elite. It's something that can save sanity, save relationships and help you be extremely intentional.
And I think no matter where you're at in your business journey, this might feel like something that's way in the future, but it's not. Start right now, starting to prepare and protect and plan accordingly so that wealth that you're working so hard to create today can be something that is not a source of stress in the future.
It's funny how having money can be stressful if it's not handled properly and not having money can be stressful for the same reason. So very, very helpful. Good insight. Thank you so much for opening our eyes a little bit and giving us some insight as entrepreneurs. Of
Diana: course, I'm happy to be here and I appreciate the talking points.
Kirsten: Yeah. So where can everybody find you follow along? You have a tremendous amount of knowledge when it comes to this and your legal expertise. So where can we continue to connect with you?
Diana: So believe it or not, I give my cell phone number on all of these, which people think is insane. [00:36:00] We've already talked about the fact that I do insane things.
So I'm gonna go ahead and give you my cell phone number. Yes, you can text me. Yes, you can call me. Yes, I can help you in whatever state you're listening to this to. And yes, I will help you figure it out. My cell number is 443 739 6724. I'm sure you guys are also gonna tag my social medias. You can message me, send a carrier pigeon, whatever works easiest.
Kirsten: Awesome. Thanks again, Diana. This is a great conversation, very eyeopening, and I'm very appreciative. Thanks for everything that you've shared. Thank you for having me. Thank you so much to Diana and our other show sponsors for today's episode. I love episodes like this that really opened my mind and helped me to think a little bit bigger about wealth creation, because while here on the podcast, we're teaching you so many things about marketing and building a business and We need to know what to do with all of that success when it comes.
And speaking of building a business, make sure that you have checked out our awesome new product. That's going to help you build a money machine. Just [00:37:00] had to build my money machine. com to check out all the things. Thanks so much for tuning in today. And we'll see you guys on the next episode. Class is officially dismissed.
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