Category: Blog

How Multi-Millionaires PROTECT Their Wealth

https://youtu.be/6z69B3pP-HU

What are some of those common safeguard? Or maybe not drugs in particular. Cause I think it would be that one off, but other issues into the surface with when these consults with families and how do you protect against how do you write it into a trust? The biggest again, communication is by far the biggest one.

And, but I want to hit that from a different angle that I answer your question in not a different way, but from another issue, critical David York and I he’s a coauthor on our books. But for, it was for trusting the state’s magazine in 2017 and trusted in states magazine. And our nerd world is, are our peer reviewed periodical.

And you got to do annotations and case studies and it’s, I’ll never write one of these damn things again, but we call it Gratz versus graphics. That was the title of the article. Now a grad in our world is a strategy for transferring wealth from one generation to the next extensor grantor retained annuity trust.

So the point of the title was, are you trying to pass on it again, written to our, our colleagues, other attorneys in the state world. Are you trying to help your clients pass on wealth or gratitude? Okay. We took a look at all of our families that again, have done this very well. And one of the things that we found was the biggest deciding factor about whether or not a family stays in harmony, meaning that a year after mom and dad dies, they’re still having Thanksgiving dinner.

Or we have this, the state is saying in the estate planning world that you never truly know a person until you share an inheritance with them because the best families, the claws will come out and people will fireboat fight over mom’s engagement ring. I don’t think it doesn’t say anything bad to the person.

It doesn’t necessarily mean that you’re greedy. I’ve seen a lot of greed in these scenarios, but you lose a loved one and you go through that emotional toil and then you hang on to a personal item. I remember when. Duck hunting with my dad for the first time. And he gave me a shotgun and the use, and I want that, whatever it is, it has this emotional attachment that because of the emotional turmoil you’re going through with that last one, you latch onto that.

I will see people fight over tooth and nail over that. So the point of this is the biggest deciding factor is openness being open with your family and having the open dialogue. And that’s a really counter-intuitive thing. Not so much for our generations. Our generations are getting a little bit more comfortable with it, but you have the silent generation.

There was a reason. They were called the silent generation. They did not want to talk about money. They did not want to talk about finances, include the family. David, one of my partners, he has this great story about this family. He was talking to this with, and the mom and dad looked at him and say, can we, we try to instill our kids, all these financial ideas and how lucky they are all the time.

And we did that recently on a trip because we sat in first class and we made them sit and coach you’re going. You don’t get it, pal, your kids still get it. Your kids still get that they’re flying the Maui that you’re sitting in first class, that there are assets. There don’t act like they’re stupid.

People include them. Let them know though what they’re going to expect, even if they expect nothing. Because then the anger you will, isn’t directed to you, or isn’t directed to their siblings. It’s directed at you. Who’s six feet under and they can jump on your grave all you want. So that the point being opened, the books is a really big thing that I encourage people to do.

And we really feel that kids can start getting involved in some of these discussions in age appropriate way. But his early as five years old, or just lie to them, tell them, it’s your grandparents trust. It’s not yours. No, don’t do that. No. Cause again, that’s our second principal with the first principal of them trusted families as they, like I said, they know who they are and they know who they believe.

But the second principle is that entrusted families. Prepare the next generation for the wealth, rather than concentrating on preparing the wealth for the next generation. And that’s all estate planning is doing right now is concentrating on preparing the wealth without again, the consequences it has on that next iteration, without question, including kids into.

Meetings. I was in meetings with family advisors, financial advisors, accountants. I was told to sit in the corner, shut up and suck my thumb, but I was also told to listen. And if I had a question, I could ask it and so forth, but it was a way for you to start speaking that language. There’s a whole nother financial language that’s out there and you’ve got, gotta be able to speak it.

CORE VALUES: Influence Wealth and Trust

https://youtu.be/1NqD1rrBvKc

You put in some of those safeguards where the trustee of the trust can suspend making distributions to that beneficiary. In the event, the trustee knows it’s going to be used for an inappropriate purpose. Doesn’t mean that the beneficiary can’t still benefit from the trust. For example, you’re worried about giving that beneficiary money cause he’s yours.

You’re going to take it and go buy drugs, alcohol, whatever, and they’ve got the problem. The trustee can pay. The person’s mortgage directly, they can make sure that the mortgage payment is going to get paid. So you have to have some of those. And then we even put in ours, the ability to obviously drug testing gets involved, but also we get counseling and have that counseling paid for.

They get a second chance. Although you have to be really careful about that. Drug has a huge recidivism, right? Those are some of the hard things that you have to craft around and identifying those is a really big part of it. And in fact, that’s what we always start out with saying is that people that successfully navigate this idea of transferring wealth with more purpose, and also, I think preserving family harmony, they routinely spend time knowing who they are.

And families don’t really do that very often, any longer. How often do you sit down and say, who are we as a family? What makes us unique? What are our core values? And that’s the other aspect to what this lifetime trust provides. It’s a way for you to pass on that personalization. I mentioned earlier that I’d come back to this.

This is where you, as a family could come in and say, these are the five core values. I don’t know, however many values you want to put in there that we really want our trust to be driven by. If you were to look at my trust document, you would see that there’s 35 pages, just giving directions to my trustees about the type of things that I would want to do, because I want to incentive my incentivize, my kids, and much more.

Then the static way that a trust is written, where it says the assets in that trust for the beneficiary are to be used for their health education, maintenance support. That’s not where I want it to end. I want my kids to be able to use it for entrepreneurial activities. I want to use it while they’re alive to help teach in some of these financial literacy ideas.

Right? Financial literacy is an extremely important thing for a parent to teach to a child because they don’t learn it anywhere else. They don’t learn it in school. You wouldn’t want them learning financial literacy in school. Last thing you want to do is take financial advice from a teacher joking, but the point being is that you, as the parent, whatever, however you define that, it really does have that responsibility for taking on that financial education to your kids.

How are you going to do that? Incentivizing them is just incredibly powerful. You’ll see things in people’s trusts, where they will provide for the family to be really thought of as a bank. And if a child wants something from the family bank, they don’t just get it given to them. They have to apply for a loan.

And if it’s for business, I don’t care if it’s a lemonade stand or like I have this family, actually, my son’s 15. Now he wants to start buying cars and, and, and reselling them and fixing them up. Right. Not in my experience, a real lucrative process, but he needs to learn his lessons and I’ll help him. And I’ll say, okay, look, I’ll loan you the money to help buy your first car, but I’ll tell you what, you’re going to come to the whole family, your brother, your sister, and I’ll ask your mom and your dad because you’re taking the family’s money and you are going to deliver us a, a business purpose, and I’ll help you.

I am teaching them how to write a business plan. And I want to understand what you plan on doing. You’ve done all the due diligence on costs, startups and all of these different kinds of things. I want him to start learning those things, even if he blows the thousand dollars or whatever that I might lend him.

He’s had a learning experience. Now, if he has an outstanding loan, he’s got to regularly come back. And deliver a state of the business address if you will, to the family. Cause that’s creating accountability, but it’s also teaching each other. There’s no better way to learn a topic or a subject than to have to teach it.

And my kids now are teaching each other about what they’re doing right. And what they’re doing wrong. In all of these activities, because I know my kids are going to make mistakes. You learn from your mistakes, but I’ll be really pissed off. If all of my kids make the exact same mistake. And if they can learn from each other, this is what I did.

This is what I did wrong. You’re creating family togetherness. You’re hopefully creating synergy for the kids working together. My kids are going to have to work together and how my plan is set up. Something happens to me. Nothing. It doesn’t go a third. Like I said, it all stays together and they’re going to have to work together on managing it under the principles that we’ve all got.

Can You Pass On Your Wealth ESTATE TAX FREE?

https://youtu.be/lxfYnL2MoVw

We don’t know what’s going to happen in the future. It’s very much an art form, but right now you have that opportunity to pitch it out to the running back and get it out. Now, before you take a chance what we are forced to do in the future and also in the future might be good. Potentially. When was it?

George Steinbrenner died? It was the a hundred million dollar in the mid twenties. He died three and a half, $350 million a state that 2010 was the throw momma from the train year. Cause if they died that year, there was no estate tax Steinbrenner was mentioned in the news, but the biggest one was this guy down in Texas.

He was an oil guy. And I think at the time he was the 14th wealthiest man in the world. Again, this is 2010 and I believe it was a $19 billion estate that he had his family. 10 billion, $8 billion. That’s with a B in taxes, just because he died that year. Now, one of the other things though that happened in 2010 is that stepped up basis went away.

Right? When you receive an asset at death, you get it with a clean tax base. So you could say sell it the next day and not have any capital gains tax to pay. But in 2010, when they said you can pass everything to state tax free, if you took that option, it had carry over basis. You had to take in essence what your parents, his basis was in it.

But look, if I can save a 50% a state tax and pay 25% capital gains tax or whatever it was back then, you’re certainly going to take the second option. There’s give and take. But why that’s important now is this is all cyclical and we’re seeing this stuff come back right. They’re wanting to get rid of stepped up basis at death there.

They’re talking about this right at death, whatever your basis in your assets are, as you pass them to your kids, they pass to the kids. And so they’re going to pay capital gains tax and some point on all of those assets. Now, I think that’s going to be a tougher tax, lot of pounds. Because everybody has to deal with that.

He average inheritance is 177,000 and most of it consents of primary real estate, primary residences. And there’s no child that’s going to want to inherit mom and dad’s house without the ability to sell it the next day, tax-free the estate tax it again, it doesn’t affect most people, even if it goes back to three and a half million, most people don’t have $7 million net worth, but you have to also.

Like I said earlier, all of the assets I glossed over this, but I want to touch on it pretty quickly. Life insurance prior to going into law school in 99, I was a life insurance agent, right. And the three most hated professions in the world are attorneys, life insurance agents, and used car salesman. My best.

Friend’s a used car salesman. So I hit all three in some way. One of the selling points of life insurance is that it’s not. Tax. And I have a $5 million life insurance policy on my life and my wife’s the beneficiary and I die. She gets $5 million, completely income tax rate. The only reason for that really is because the insurance companies have this really strong lobby in Congress, and they’ve been able to carve out the definition of income to include.

Life insurance death benefit. That’s it. So the reason, the issue though, is that my wife would now have $5 million of cash as part of her estate. And now is there an estate tax problem, how to plan for that life insurance death benefit becomes a big one. Anyway, I don’t want to, that’s a much more kind of stuff.

Tax issue. And it’s definitely something that can be dealt with, but there is a small window of opportunity that can be going away that portion out. Right. I think it’s important for folks to be aware of this stuff and understand it because things are going to change. And in the very end, you may just be stuck.

It just may be how the times are, but there may be opportunities to. Do that wild cat off as the ball to the right, when we’re all stuck. Right. It’s the way the times are. And we’re just going to have to live through it now, again, I’m not coming from any kind of political side on this. I just, as a tax attorney, I hate.

Paying tax and pay my fair share and all of those kinds of things. But, and by the way, if you ever worked with a tax attorney that likes taxes, you’re working with the wrong attorney, but the point is that there really are planning techniques that can put you in control and you in power of what happens with your legacy at your day. .

Rent Increase in Real Estate

https://youtu.be/nqln54QS5Ss

This is a report from Zumper boarding that rent creases are on the rise. If you haven’t noticed. I think the last couple months we’ve been reporting on it, but it’s been consistent since about the turn of the new year, January. And some of these they’re even reporting three, four or 5% or higher just in this one report.

I’m reading more into the article, two bedrooms, apartments rose 4.8% year of year. With a 3% increase in one bedroom bay area rents have flattened with San Francisco open and San Jose one bedrooms are all gaining compared to April. National rents are accelerated, driven by growth in cities like New York.

And I think this is the bounce back of the big urban areas, which got actually got hugely flatten, independent gear because of the, people wanting to move away from the highly dense areas. Milwaukee grew a lot 8.9% year over year. Drop 5.2% month over month. And that’s just to be expected when you have those big fluctuations.

Think of it like the volatility of like alter altcoins pops up dives down, Glendale, Arizona, one of the top growing nutshell area with 15.7% year over year increase. And Phoenix within 9.1% jump question here on Austin is like Boise. I’m not a huge fan of them. I think Austin is really overheated it doesn’t cashflow there, so I’m not interested, but I’m sure rent increases are up there too.

I might be able to pick it out here. Oh yeah. Austin. Number four here, Austin in Baltimore made 5.1% month over month gains, but Austin remains down by 0.8% year over year. There’s your answer to your question?

Ways You Can Defer Capital Gains From Real Estate

https://youtu.be/_e4kwdCupcc

We’ve got our first question here. Other ways you can defer capital gains from real estate, besides 10 31 exchange as an opportunity fund. I’m not a few 10 of either of these opportunity funds or this. You can Google all about it. But the thing about the opportunity fund is you’re investing in crappy areas.

Why the heck would you want to invest in crappy areas that the government has deemed an opportunity fund where they want to help funnel money? Because the area sucks. That’s just not the way I want to invest. I want to invest in good, solid stable area, whether there might be a problem with the management of the property or the management is distress, not any particular issue with the property and especially not an issue with the area, which is what the opportunity zone is all about.

For some times you can find an opportunity zone with a Starbucks in it. That’s an outlier of the map. Not a big fan of those. And then 10 30, 1 exchanges. Again, I don’t know why anybody really does. 10 31 exchanges that 31 exchanges. you got this timeline, you got to have 45 days identify all your properties.

You’re buying like lukewarm crappy deals then. Yeah, you can go into whatever you want, but if not, you’re a distress buyer and when we’re selling our parts, We love when we have a 10 31 buyer, because we know that they’re distressed and they’re typically unsophisticated, most 10 31 exchange. People just have a lot of money and they don’t really understand how taxes work.

How do you defer capital gains or how I do it? I go into a lot of syndication deals that do cost segregations. Not all of them. But if you go into those in a moment like, oh, I do, you’re gonna kick up these. You’re gonna pick up several hundred thousand dollars of passive activity losses, and you’re going to be able to hold them and Curt, and they’re going to be suspended, passive losses to a, you use them to offset ordinary income.

I probably should stop and say that I’m not a CPA . But look, I don’t pay too much taxes. You can go to simple, passive, casual.com/tab. And I put up my tax returns there and you can check out how much taxes I’ve been paying these last several years. And in 2019 advantage drove up my adjusted gross income down to 25 grand.

And part of it. By driving by creating more passive income instead of ordinary income. So I can use my passive losses to offset that if you have, the hard part is transitioning from the traditional way of investing on the only 401ks mutual funds with traditional way of real estate investing and into the more passive tax advantage way that we like to teach your folks.

And so the transition is the hard part, and that’s really where the family office, a Honda mastermind comes into play. That’s where we source the best practices to do that. But in a nutshell, what you’re trying to do is you’re trying to build up enough passive activity losses. So you, when you do sell your property and you can offset that, pull down your suspended, passive losses, offset those gains, right?

In that one transaction case. In point, I did this back in 2017. When I sold off, I believe seven off my rent. And it had a $200,000 capital gain day, which would have sucked, right? That’s a capital gain and also had to pay back the depreciation capture on that because I had owned those properties for several years, depreciating the properties over that time.

But I had been going into syndication deals prior and I had built up $700,000 of passive activity losses, which are used to offset it. If you look at again, go back to that websites that will pass the cash.com/tab. You can actually see where there’s a little emoji that says thumbs down to 10 31 exchanges.

Exactly because of this being able to use passive to be losses in this fashion. And the reason I don’t like 10 30, 1 exchanges, you’re just. Seller. Everybody knows you’re a sucker because of do one of these things and you’re going to get abused. And a lot of times you’re going to be abused on the buying end.

When you’re exchanging the property, everybody knows you need to buy, and now you’re going to pay the government Volvo the taxes. So you’re usually going to pay 10% over market price. If you don’t think you are, you’re probably the senescent isn’t aware. And then sophisticated investors. They don’t want to put all their eggs in one basket.

And this is what’s very typical. When you see these people running around with large capital gains in a hundred thousand dollars to a couple million dollars, a capital gain, likely they have a huge chunk of their net worth. I’m a big advocate that you don’t want to have any more than five or 10% of your net worth of any one deal because.

And it’s good to be diversify another, you want to spread your eights all over all around and not be to leverage things right there. Thanks, Bruce.

 

Tips for Real Estate SELLERS

https://youtu.be/RRmBSR-Il9U

On the side for sellers. Now here’s some, one big one, you for sellers the way, however you look at it, buyers too, but it’s the appraisal and they’re not coming in where we want them to. And they’re coming under purchase price or agreed upon price things to keep in mind. Whichever side you’re on is that transactions that are pending or active listings are typically not considered in the final opinion value.

You can’t say, oh, I’m in contract for $950,000. And there’s another comparable four bedroom house to that at 1.2 I’m golden. Right. And I know that’s the thing. Issue with appraisals is they look at historical closed transactions and that’s what they’re basing their appraisal off of. That’s the challenge we have, especially in an upward moving market, trying to substantiate these prices that are, or these agreed upon per purchase prices that are pushing the envelope on an upward moving trend.

Keep in mind, one fourth of offer prices are higher than appraised value. One out of four times, we’re coming out short, right? One way that the seller can help or the seller with assistance from your realtor, your agent is to detail itemize, any improvements or innovations that you have and provide it to the appraiser.

And if you have invoices or cost. Or the price that you paid to do these improvements or renovations that also helps is it’s not the silver bullet and it gets you up there, but it helps provide perspective to the appraiser. And if anything, it’s evidence for them to substantiate a higher, uh, praises as a realtor, never afraid to talk to that.

Praiser you don’t want to influence them. Make them think you’re influencing and every appraiser is different. Some appraisers, I think they’re their guide. In some case, they are in this situation because our hands are tied, but oftentimes appraisers are very amicable and friendly and I’d like to talk to them, let them know about the improvements that have gone on what makes this property more valuable than others and how, or.

Why it may be perceived as less, but why it’s not just letting them know your opinion. There’s no harm in that. Assuming that the prisoner is open to discussion and to talk about it, sometimes I’ll even provide like a packet of information, but it is what it is. They’re going to pull the comparables and you know what they say, goals, you can contest it on the buyer’s agent can contest it.

Or if it’s on the VA side, if it’s a Tidewater, there’s a process where you can appeal. But at the end of the day, You’re at the whim of the appraiser. Just do what you can to increase the chances of that praise of coming up, because it’s in the benefit of both the buyer and the center for it to come out, regardless of what I put as a fourth bullet point, which is an appraisal clause.

If anyone has been putting an offer. Recently and to get a fighting chance, you should all know what an appraisal clause is, right? In terms of the buyer is willing to come up with the difference of the appraisal clause versus the purchase price. In order to ensure that you close, ideally on the seller side, you would want to have a buyer who submits an appraisal clause and that they’re financially able to, to do so if it does come on.

And on the buyer side to increase your chances of winning in a multiple offer situation or getting your offer accepted appraisal clauses are going to help you in the light of looking like a stronger offer for this center.

Tips for Real Estate BUYERS

Let’s talk about some tips for our buyers, as well as their sellers are starting off for our buyers. This is information for tips that actually should be coming from your lens. When your buyers for mistakes that buyers make while they’re in escrow, or even before that number one is not checking your credit report regularly.

The statistic is that 34% of Americans have errors on their credit reports. That’s something you should request annually, review it and see if there’s anything that should be contested or removed or anything like another mistake is not being honest on the application. The whole. Drill is that your lenders underwriters are going to be dating into corroborate.

What you’re putting on the application. Does it make sense to put anything that even a little, what you think might be a little white lie? It could, yeah. Throwing everything off. I would say, just be honest, that doesn’t make sense to fib on it. Another mistake. And this is, you know, a little bit hard. Try not to take a new job while you’re in escrow is may not typically be a deal breaker per se, but it could slow things down.

And I say, this is hard because in current times, depending on your industry, this may be something you can’t control as much as possible. Try not to be transitioned to different jobs while you’re in this buying process. And if you do again, Be upfront with your lender and just tell them as soon as it’s happening.

Another thing is you talk to your lender and ask them what, what if I do this right? Will this have any effect? A lot of buyers while they’re in escrow, they’re like, Ooh, we’re getting a new house. Let’s go shopping for furniture. And we’re going to, where does it go on your credit card? Even worse when you buy a car and you take a loan out and that it’s going to affect your credit and making major purchases while you’re in escrow isn’t there isn’t no one or two, again, it may not be a deal breaker, but it could be, and it could also slow down the process and the timeframe that you close, it could throw kinks worst case scenario.

You won’t qualify it for anything. Final approval for the loan, but try to stick away from those things. If you’re in process, let’s say you’re walking on eggshells, but just be cognizant of what can affect your credit while you’re still in school.

Sell Your Timeshares NOW

https://youtu.be/I5KDB8qCTe0

What’s the process. If somebody wants to sell their time share, and then we’ll skip over to, I think most of us don’t really want, we want to buy. Timeshares from these distress buyers or sellers, get into that at the end, but what’s the process. If somebody wants to unload it, they want out of it. What they would do is I recommend that everyone first contact your resource, see if they’ll let you out for free.

That does happen on occasion, usually with a higher end brand. So explore that option first, plus, you want to know that you didn’t go and pay someone to get out of it when. You could have gotten out of it for free through the developer. That would be step one. If that’s not the case, then you know, you need to go through a company that can secure a buyer for you.

And I would encourage everyone to be very careful and not pay anyone up front. And I’m sure that your viewers are. You know, certainly a little more savvy than many of the people that have fallen victim to the scams, but in general, don’t pay anyone upfront. If a client comes to us, all we’re going to need is the deed copy of the deed.

If they have it, copy of their IDs, copy of a recent maintenance fee bill, we can then price it out. We use a calculator, so we already have pricing preset for every resort in the world and get them a quote within minutes. And if they want to move forward, we send them an e-sign contract. Open escrow. And it follows a normal real estate process.

So we’re never paid until the close of escrow and we don’t even collect payment. It all goes through the title company. So it’s a very secure transaction and a guaranteed one. If we are not able to secure a buyer on our own, then we’re going to transfer into our own name and turn it into vacation rental.

But it’s a guaranteed quick process. And what our clients are looking at is, Hey, we don’t use this thing. We’re paying for it every year anyway. And then what’s going up at six to 10%. Okay. Or just throwing money away. Let’s basically stop the bleeding.

How Sneaky are Timeshares?

https://youtu.be/aFO0l_rVDy8

And just so that we can pinpoint it because every time people ask me why I’m a real estate investor, I it’s time share. I’m like, dude, that’s not, you’re not an investor. You just got suckered into a deal, but I can never explain. I can’t explain to myself. I just walk up upset and frustrated my understanding it’s because.

When people buy a timeshare, they not only is it expensive. And when you figure out the cost of ownership that you do, like a life cycle cost analysis, it doesn’t start a good deal. But also you get into these nasty arrangements where you have annual maintenance fee, and then you have a termination fee since like negative equity.

If you can explain that a little bit, it’s ultimately a timeshare was once sold as an embed. And there was a resell market now because of Airbnb. VRVO the internet consumer confidence in being able to plan a trip short notice and having a condo with accommodation, similar to the timeshares where you have a kitchen and space, there’s just no, you know, resale market for it.

That’s gone. So, what you have is it’s basically a prepayment of vacations and it can be really quality vacations. I actually believe there can be some value in the ownerships. If you use them now, getting back your original upfront investment that’s as you’re speaking. With auto purchases that certainly buying resale would be much more advantageous.

You don’t have that 30 grand or whatever to recoup from the upfront. It can be a good value. I always tell people at our seminars or whatever, don’t feel bad, 10 million homes in America owned timeshares. And, or you bought this because you wanted to spend time with the people that you love and a beautiful place.

Right? If it gave you those good memories, you probably wouldn’t trade those for the money. That being said, it’s really not a good investment because at this point you can jump online, make reservations for anywhere in the world for this weekend and pay less than what the maintenance fee .