In this video, Rustin Diehl discusses the importance of digital asset protection trusts in safeguarding your wealth. Learn how you can protect your digital assets and ensure their secure transfer to your loved ones with the help of a digital asset protection trust. Don't leave your virtual assets vulnerable and unprotected, watch this video to learn more!
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Digital Ascension Group - https://www.digitalfamilyoffice.io
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#xrp #xrpnews #xrparmy
Find more from Jake Claver by visiting the links below:
🖥Websites🖥
Digital Ascension Group - https://www.digitalfamilyoffice.io
Beyond Broke Mastermind - https://mastermind.beyondbroke.com
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LifestyleTranscript
00:00In the following presentation, Rustin Deal breaks down some of the things you need to know about protecting your digital assets in a trust.
00:06And if you'd like to set up a time to talk with Rustin, please email us at info at digitalfamilyoffice.io.
00:13So my background, I deal in a lot of private wealth with mostly closely held businesses of different types.
00:22It's kind of like a house. It's probably more like a house than anything.
00:25To find a package deal is very difficult that meets your needs.
00:29And so to kind of look at it from that perspective, if somebody just says, you know, what do I need to do to get a trust?
00:36That's kind of like walking up to a builder and asking, what do I need to do to get a house?
00:40They're going to have a lot of questions to follow on to your first question.
00:45So these kinds of instruments are designed primarily for three purposes.
00:52Number one, for estate planning to make sure that there is an orderly device to your heirs and beneficiaries, if you pass away, to make sure that we've got a clear plan for that.
01:03Number two purpose would be to protect assets.
01:08In some cases, we set up trusts that can protect assets.
01:12There are some tradeoffs in doing that.
01:14And so I would again and again mention to you, there are always tradeoffs in the different kinds of trusts in terms of asset protection.
01:22And the main tradeoff is between flexibility and control.
01:27Those are the big tradeoffs.
01:29If you give up some control, you get more asset protection and you're less flexible.
01:34If you want to maintain control and flexibility, then you have less asset protection.
01:38The third reason to do trusts is generally for tax planning.
01:43And there are several types of taxes.
01:46So there are transfer taxes.
01:48That's taxes on appreciation of assets.
01:50So if you have an asset that's appreciating, getting it out of your estate can be very helpful on the transfer taxes.
01:57Those are primarily taxes on gifts during your life and taxes on transfers, estate taxes after your death.
02:04And the second type of taxes we can plan for in some instances are income taxes, taxes in the category of capital gains and investment income and earned income.
02:16So those three things, estate planning, asset protection planning and tax planning are the main purposes of these trusts.
02:24And there are a great number of trusts of various types that you can set up for these.
02:31Now, sometimes you'll get kind of fixated on a specific type of trust, just like somebody might get fixated on a specific vehicle.
02:42And all they know is the vehicle make and model and all the specifics on that.
02:48And they'll come to me and say, I think I want this vehicle.
02:51And they might need a minivan, but they're looking at a Porsche.
02:55And so I see that quite often.
02:56And so I can you can break down these different types of trusts because there are infinite varieties.
03:00And in fact, many of the trusts that people come to me with are similar to like a Porsche, a G3R or something like that.
03:09They are a very specific model that somebody, another attorney, in fact, has taken general characteristics like a chassis, a motor, the cabin and the seatbelts and the airbags.
03:21And they've packaged them together like the Porsche and they have decided that they want to brand them.
03:29And so they'll even trademark the name, even though the concepts underlying the trusts are general.
03:34Anybody can set up that trust.
03:36Some attorney will trademark the name.
03:38So just be aware there are thousands of names for different types of trusts that people, marketers come up with the name and then trademark them.
03:46And the attorneys sell them.
03:47So what you need more than anything, rather than picking a specific vehicle, is you need a skills based attorney who has a background in estate planning, in asset protection planning and tax planning.
04:01And so you're welcome to look me up on LinkedIn.
04:02But I work in all those areas and I've done a bunch to work for different families across the country in those areas.
04:08And so I'm able to set up trusts that are specific to you, just like you'd want your home to be specific to house you.
04:15You want your trust to be specific to house what your needs are.
04:19So that's that's a basic overview on what I do.
04:22I have a general Swiss Army knife set of skills in this area and the trusts that I develop.
04:27I don't trademark all my names.
04:29I come up with exactly what somebody needs in terms of estate planning, asset protection planning and tax planning.
04:35The best way to describe the pricing is based on my hourly rate.
04:41And so to give you an idea, somebody I have a Juris Doctor and an LLM in taxation, which is a postdoctor in taxation from Georgetown and across the country.
04:54Comparable skill sets.
04:55You can find an attorney with a hourly rate of triple mine or quadruple mine on one of the coasts, especially the East Coast.
05:02I'm basically in the in the Mountain West.
05:07And so my pricing is different than those coastal markets.
05:12But that's that's probably the best way to describe it.
05:15Most trusts that I set up at the low end require approximately 10 or 12 hours multiplied by that hourly rate.
05:23If I do multiple trusts, several trusts for a client, then then that can multiply by the number of different trusts, because we might need to do one trust for assets that are going to get traded around and exchanged.
05:35Might need to do a different trust for assets that are going to be protected and held.
05:39Might need to do a yet another trust for assets that are going to be positioned in jurisdiction, for example, for digital assets that deals better with digital assets.
05:54So depending on the size of an estate, we might have anywhere from one at the low end.
06:00And I've got clients with, you know, eight or 10 trusts at the high end.
06:03We don't try to overcomplicate these things, but each one of these vehicles deals with a different thing.
06:09And so you can imagine just like a family might have one vehicle, one car at the low end to deal with all their needs.
06:15And then I've got clients with 40 different cars to drive around in for different purposes.
06:20So it just depends on on the person.
06:23But, yeah, everything's based on my hourly rate.
06:25And then I do set a fee for the different types of trusts, a fixed fee, depending on the characteristics.
06:32So, yeah, the range is, you know, depends on how many trusts you need.
06:36But the range is usually between at the low end around 10 hours for a very simple trust.
06:41Some trusts I do are over 20 hours of time.
06:44I'll walk you through a couple hypotheticals.
06:46That's probably the best way is to just start exampling how a trust might work.
06:51So kind of just to lay out a fairly typical hypothetical, if you've got a married couple and let's just say that right now they own a house that they're living in.
07:05And then over the years, they may have bought a couple of rental properties.
07:08Maybe they lived in the houses over time.
07:10And so you've got a couple of rental properties.
07:12They've got their house, their residence.
07:16Let's call that the home.
07:17And let's say that they've got a 401k, maybe two of them, and maybe it may be a 401k in an IRA.
07:27The 401k, they've got 500.
07:30In the IRA, they've got 200.
07:34And then in addition to that, let's just say that they have some digital assets since we are on kind of a forum for digital assets.
07:43There we go.
07:43So they've got XRP, and they can have, whether it's in cold storage or on an exchange, there's different ways of dealing with this.
07:53Now, XRP, I'm just going to make a big disclaimer.
07:56I have no idea what's going to happen to it.
07:58That's for you guys.
07:59I don't want to get in on the hype on any asset because I've never been right, and I don't know what's going to go up and what's going to go down.
08:06But who knows, a lot of people think the XRP could go up or down.
08:11And so given that we're talking about the potentialities of this asset, that is a unique thing to think about.
08:18We don't know what way it's going to go, so we have to build trusts that work for that volatility, for that both systemic and non-systemic risks of XRP.
08:29And any other digital assets, these are a nascent and developing market, and so I tend to build trusts a little differently for assets like this that have great potentiality to either depreciate or appreciate.
08:42Okay, so let's talk about the three reasons, the three things that we ought to think about in digital assets.
08:49As far as estate administration, whether or not this goes up in value, there's some complexities in dealing with digital assets in an estate, and that could be an entirely different presentation.
09:04I've given that presentation numerous times, but planning for digital assets has its own unique issues in estate administration.
09:12Just the institutional costs and challenges of managing those in an estate are, in and of itself, one reason to look at these separate from the others.
09:23Another reason would be to look at these as asset protection.
09:27I don't know what these guys do for work yet, but if they're professionals, either in dealing with investments, maybe one of them's in real estate, one of them could be a doctor, insurance sales, finance, all those things.
09:42If they're a professional, then they have their own unique risk.
09:44Let's just say that this person in the couple, this spouse, has got a risk because of the way that they work, what they do for a job.
09:53And then they've got these two risks. Rentals are hot items.
09:58And I would imagine all of us are going to drive around a little bit today in our cars, and we're probably not going to see any car wrecks as we drive around.
10:05Yet we all know full well that there are car wrecks happening all around us every day.
10:10Renting it out and have all these renters in there does not mean that there aren't rental accidents happening all over the place.
10:16You just haven't had one yet, but they can be quite big when they do happen.
10:20And so you've got these three risk points. And so asset protection is a good idea for this couple.
10:27The other reason would be tax planning. Tax planning for these, as I said, could go both ways.
10:33We don't know if this is going to go up or down.
10:37And so we want flexibility that if it goes up or down, we can deal with it inside of this trust.
10:43Now, that's a challenge, as I said, to try to meet this trifecta of needs, to have tax planning, asset protection planning, and estate administration.
10:54And so I can't really put out a package deal because it's always, always unique to the person what they're going to need.
11:02So let me kind of illustrate this.
11:04Let's say that what we do on this, a very good way to deal with these, is to put in place a trust.
11:10And often what I'll do is put in place a Wyoming Domestic Asset Protection Trust.
11:16Why did I choose Wyoming?
11:19Because they have got the foremost in estate administration features in their statutes.
11:27The jurisprudence in Wyoming is very much in favor of digital assets.
11:32They've got the leader in all of the digital assets law.
11:36They put in place the first DAO.
11:38So if we had, in addition to XRP, let's say that this person also had minted a few NFTs.
11:46We might put the NFTs in a DAO LLC.
11:50A Wyoming DAO LLC is a very good holding structure for any assets that a person has minted for which they might retain risks of different types.
12:05And you can see in the bulletins I'm getting, the SEC is starting to crack down on NFTs as being securities issuance.
12:14We've got to be very careful about that.
12:16There's a lot of different areas where these assets are now being retroactively regulated.
12:23And so I have set up a number of DAO LLCs for very specific assets that can go inside of a Wyoming Asset Protection Trust.
12:31Wyoming Asset Protection Trusts are excellent for both the state administration, but they're also very good for asset protection.
12:38Wyoming's law provides that after you've put your assets in here, as long as you are very careful of the transfer,
12:46careful, another risk point is the transfer in.
12:49You can't be transferring assets into this trust unless you're going to do it and not leave yourself broke.
12:59You can't put your assets in here to hinder, delay, or defraud your creditors.
13:04You cannot do it in the face of threatened or pending litigation.
13:08You've got to transfer in and leave yourself liquid.
13:11So you have to sign an affidavit of solvency in order to do this.
13:15And so that's part of the work involved in these trusts is making sure on the solvency side that somebody transferring into, say, this Wyoming Domestic Asset Protection Trust is still solvent.
13:30So we've got to leave the person solvent in putting the assets into this trust.
13:38Now, once they've been in there and we've waited under your local law for transfers, most of the time that's a couple of years, two to four years,
13:47these assets are under Wyoming law are protected from creditors.
13:54And so it provides that if something happened on one of these diverse risk points, either up here with this profession that could go wrong or here with the rental properties,
14:08people cannot get in after the property that you don't own.
14:11And that's a fundamental characteristic of asset protection planning.
14:16Let's just say, just as a hypothetical, that this person had already put their rentals into LLCs.
14:23They had rental LLCs.
14:25So you might be wondering on the asset protection point, why would I need a trust when I've already put my rentals into LLCs?
14:32OK, so the answer is the LLC protects you from your renter.
14:37If that renter has a blow up, has a problem and tries to get out, as long as that LLC has been adequately capitalized, they cannot pierce it and get out.
14:46They're stuck in here.
14:47They can't get out and try to get after these.
14:50They can't sneak around and try to go upstream.
14:52However, if something goes wrong up here, they can go straight downstream and grab either of these.
14:58That's the problem.
15:00They can go downstream.
15:01We have a liability problem.
15:03Downstream is still possible.
15:08And that is why often we'll do even a separate trust specific to the rentals.
15:15Now, if this couple splits up, we have to be aware that marital protection is not afforded unless both couples sign off on these trusts.
15:23Because divorce courts are courts of equity, meaning the judge gets to do what they think is right.
15:27And so they can they can set aside a lot of different plans unless we're very careful on the way in.
15:34But to protect from downstream liability, let's just say this person malpractices in their real estate career and their errors and emissions insurance is not enough.
15:44Somebody could go downstream unless if they're going after property that this person doesn't own.
15:49You can't be sued for what you don't own.
15:50And so for downstream risk, that is why we set up these trusts, even if you have LLCs.
15:57Just to reiterate the example, this person, this guy malpractices.
16:01He does a real estate transaction badly or sells insurance wrong and gets sued by the client.
16:07And the client says, turn over everything you own.
16:09And he says, well, I've got malpractice insurance.
16:11The client says, that's great.
16:12Give me the whatever, two million.
16:14But my damages are five million.
16:15Now, where are you going to cop up the other three million you owe me beyond your insurance?
16:19And he's going to say, well, I've put everything in LLCs.
16:23I've got my rentals in LLCs.
16:25And that client that he messed up the real estate deal for is going to say, great.
16:28Thanks for putting your rentals into LLCs.
16:30Now, give me your LLCs because you own them.
16:33Unless they've put them into a rental asset protection trust, those are at risk from downstream.
16:39So the rental LLC protects them from downstream risks.
16:43Whether it be the asset protection that's afforded for the digital assets or the rentals, they do have to give up something.
16:52They're going to have to give up something to make it work.
16:54So with both of these trusts, in order to have the effective protection, we've got to have a distribution trustee that's a bit of a buffer.
17:06Now, if we're talking about a Wyoming trust, I have a distribution trustee I've used several on a number of different cases for a lot of years.
17:15And in the last few years, with XRP coming out, this trustee's got excellent both cold storage.
17:24So you can house cold storage with this trustee.
17:26And there's a specific way we do that by splitting your key into two pieces.
17:30Since these are cryptographic type assets, we split them cryptographically.
17:35So the key is split into a cipher or your key is split into a cipher and key.
17:40Kind of like old radio code where you have all the whatever, 10-4, 10-20 means your location.
17:4610-4 means everything's good.
17:4710-10 means there's a problem.
17:49You've got all these radio keys where somebody with the key or the cipher to those 10 codes on the referral radio stations can interpret what you're saying.
17:56You do the same thing with your cryptocurrency key.
18:00So we can split them and house them with your distribution trustee.
18:03You have to have a distribution trustee in Wyoming and before money can go out through the distribution trustee, they have to make sure that there are no creditors after it.
18:14Their role is to make sure there's no creditors.
18:18But you can't just pull the money out without going through the distribution trustee.
18:22And that applies to both of these trusts.
18:24That's how you get the afforded the protection is you have to have an unrelated, unsubordinate distribution trustee over purse strings.
18:31Now, inside of the trust, to the extent that you want to, you can manage that.
18:37Now, there are tradeoffs in managing your assets.
18:40The more control you have over them, the less asset protection is afforded.
18:45But in general, courts are willing to afford some control as long as you've got a distribution trustee not allowing you to distribute the money out without first going through the distribution trustee.
18:56And so inside of here, you can be the manager of your assets.
18:58You could sell this XRP and buy more real estate, but that real estate, if you were to liquidate, has got to stay inside of the trust.
19:07So you could buy real estate, but it's got to stay inside the trust.
19:11Yeah.
19:11So first step, you've got to have the vehicle that it's going to ride in.
19:17The XRP has got to have a vehicle.
19:18So you've got to form the trust.
19:20Then after that, once we've got the trust form, we've got and forming the trust is a big process.
19:26I'm skipping over a bunch of sub steps here.
19:29You've got to have a trustee appointed, a whole spreadsheet worth of checkboxes to get this done right.
19:34A lot of compliance with state laws.
19:35So just know that's a big step that I'll, you know, asterisk.
19:38There's a lot of risk in that.
19:39And then you transfer into the trust.
19:41If we're talking about cold storage, then you'll do what I just described.
19:46You'll split your key into two pieces.
19:48You can keep half and the trustee can keep half.
19:51You could transfer your entire key to the trustee and he keeps it in lock and safe.
19:56He's under a fiduciary duty.
19:58It's, again, the trustee that I generally recommend in Wyoming is an attorney that I've worked with for more than a decade.
20:04Uh, this particular attorney, uh, uh, he, he does the similar area of practice to me, does a lot of private wealth.
20:13And so I work with a Wyoming trustee there, this attorney, and you would transfer either half of your key to them or the full key to them.
20:22Now, retaining half is obviously a protection because in order to make the key work, uh, you've got to have both pieces.
20:29There's, uh, you know, obviously just like with any key, you've got to be cautious, uh, of the risks there.
20:35Um, but the key is that once you've transferred the key or the cipher to the key, split it in half with a key and cipher.
20:42Once you've transferred that, that's why I mentioned like federal radio, they've got all the 10 codes.
20:4710-4 means good.
20:48Well, you don't know that that means good unless you've got the cipher.
20:51If I just say to you 10-4 right now, and you don't have that cipher that, you know, that 10-4 equals good.
20:56You don't know what I've said.
20:58And so it's the same thing in transferring your key.
21:00So sometimes we'll do a key and cipher, just going back to cryptography.
21:03That was why I made that comment.
21:06So you need to transfer either one or the other to your trustee, and you can't retain the ability to transfer it yourself or else you don't have an effective transfer of assets.
21:17And that starts to impact your taxes.
21:20But yeah, we need to split these into a key and cipher.
21:23That's, that's the basic process.
21:24Now, once we've transferred, if the transfer is complete, we have some compliance.
21:29Meaning, and this is where it gets a little more tax complicated.
21:34If you want to have the appreciation or a locked out of your estate, if it does go up in value and you don't want to have an estate tax, then you do need to file a gift tax return afterwards.
21:49To show that you've actually locked out the appreciation, file a 709 and that requires an appraisal on the assets.
22:02And the reason it requires an appraisal is because these are not considered securities in most instances by the IRS.
22:11And so they generally require that you get an appraisal on the assets since we cannot mark them to market to set the price.
22:19Because if you transfer, whatever, $35,000, $40,000 worth of XRP right now, we need to file a 709 to show that's the amount you transferred.
22:30And then that goes against your lifetime exemption from gift and estate tax.
22:36But if we haven't done that, then this asset is still in your estate.
22:41And so if it suddenly had a jump in value and appreciation event occurred, that appreciation event would all be inside of your estate, even in this trust, unless we have completed the transfer and filed this tax return.
22:55This is on the tax planning side.
22:58In order to have an effective transfer, we've got to do that.
23:02Now, in order for that to work, in order for it to be a completed transfer, there are some other things that have to be built in.
23:10And so your beneficiaries on the trust really matter in this case, who it goes out to.
23:16If this plan, as the beneficiary, if you retain your beneficial interest on this plan, you were to retain that, hey, we are the beneficiaries.
23:27So this goes back to us.
23:29That can be a problem.
23:32And then also, that's for, if you retain the beneficiary, that can be an issue with tax planning.
23:40Also, if you retain the tax to pay the taxes, pay the income tax, that could be an issue later on.
23:56And so generally, I either make you a non-beneficiary, so you're not a beneficiary.
24:00Most people put their kids so that it will actually just go out to their kids.
24:05Most people said it, so the kids are the beneficiary.
24:12But if you retain these two rights, that could make this moot.
24:16It could make your transfer incomplete.
24:18And so any appreciations in your name.
24:20Now, you probably want to wonder, why on earth would I want to pay the income taxes on this trust?
24:28Now, why would you want to do this?
24:29Well, the answer is, trusts or you, either you or the trust, will be paying income tax if there's income tax to be paid.
24:39You're going to be paying it or the trust is going to be paying it.
24:43So why would you want to pay it rather than the trust?
24:46Well, if you're going to pay income tax, you have a lower tax rate than the trust, effectively, because you get a standard deduction and the trust does not.
24:54The trust pays the highest marginal income tax rate at a much lower threshold than you do.
25:03And so one of the reasons that a lot of people prefer to pay the trust, the tax rather than the trust, is because it's often less taxes.
25:12And so they often retain what's called grantor status on the trust.
25:17They retain certain rights over the trust property so that they can pay the tax rather than the trust.
25:26And so this is always a question whether we're going to retain grantor status.
25:30And so I generally build in on these two areas is where I have to do a lot of customizations.
25:37Now, if you're not confused, you're probably misunderstanding something.
25:41This takes this is like a foreign language.
25:43There is a lot of what some people call legalese, what I call clear communication.
25:50Legalese is just a simple way for attorneys that are initiated into this language to speak.
25:55And so as much as we'd like to get rid of it, we can't.
25:57It's like trying to get rid of medical talk.
25:59Medicalese is a way for physicians to quickly communicate important concepts so people don't die.
26:05Same thing with legalese.
26:06All these things, these complexities you're seeing, are there so that we can deal with a taxation system.
26:14So we all have a road to get to work on and all those things.
26:16Much as we don't want to pay them, we have to have clear lines and nobody wants to pay taxes.
26:21And so there's a cops and robber game going on.
26:23So what you're seeing here is a multivariable calculus.
26:26In order to effectuate a plan, we've got to look at both, again, all these things.
26:32A state of administration, where's the best jurisdiction for these assets?
26:36We've got to look at the asset protection.
26:38How much asset protection do we need?
26:40And again, that's a factor of the risks of the assets the people own as well as the people themselves.
26:46And then we've got to look at tax planning.
26:48In the tax planning, do we think the asset's going to go up or down?
26:51And if we're going to do tax planning, if we complete the gift, in other words, if the people that make the trust don't retain beneficiary rights and maybe do or don't retain the ability to pay income taxes at the lower personal rate, that can change whether the gift is complete.
27:08So then what we're looking at is if the people decide, no, we want to keep this trust tax simple, don't want to complete the gift, then they're just really aiming to get these top two benefits.
27:18But in order to do the tax planning as well, we've got these additional big considerations.
27:25So that's kind of an overview on how this works.
27:27I realize that's a lot.
27:29And for anybody who's learned a foreign language later on in life, you kind of have to, you just kind of have to work through it.
27:34It's difficult.
27:36And that's the challenge of dealing with this.
27:38It's not so much foreign.
27:40Yes, William.
27:42I see an opportunity here, but maybe you can provide some guidance.
27:46How would I, and this is kind of ancillary, but pardon me if I say I see dollar signs in the front of my eyes.
27:56How could I become, because as far as I know, there's no such thing as a licensed digital asset appraiser.
28:05How do I become a licensed digital asset appraiser so I could get that job in the compliance area and seek an opportunity?
28:15Yeah, so there are tests in order to be a qualified appraiser.
28:19You have to be a qualified appraiser.
28:21And you're correct, there could be a lot of market opportunity.
28:24I do have a valuation company that does deal in digital assets.
28:31But yeah, there are specific credentials that you need to pass a test.
28:35There's national tests in order to be considered a qualified appraiser.
28:39And the IRS sets those rules.
28:41But yeah, you have to have a qualified appraiser.
28:43That is a good question.
28:44And that is a market opportunity to be a qualified appraiser.
28:48Imagine, and just to kind of, it's a very interesting topic.
28:53How do you appraise?
28:56How do you appraise NFTs?
28:59If we add a few, a pocket of NFTs that we may be putting into an LLC up here, some NFTs that have been purchased or minted by this person, how do you get those appraised?
29:09And so that comes down to a qualified appraiser.
29:12Now, one other interesting thing about the appraisal of these assets that I'll mention, and this is kind of what I mentioned at the beginning.
29:20I said, when somebody asked me, how much does this cost?
29:23My answer was, well, how many square feet of house do you want, basically, is how I answered you.
29:27How many rooms do you want in this house?
29:29Well, if we could add on another room, because I've done a lot of work in the wealth augmentation and regeneration space.
29:37And so once you have enough value, once this couple has enough net worth, where they're worth, let's say they're worth, I don't know, with these rentals and everything,
29:47maybe they're worth $10 million and they've got a little bit of value here as well.
29:50Who knows if that'll go up or down.
29:52But once we've got enough net worth, just like you can take your credit score and generate wealth.
29:58I don't know if you guys have ever generated wealth with your credit score, but this is called credit score wealth right here.
30:03These rental properties, they were given the ability to borrow money from a bank because they were credit worthy.
30:09That's how they ended up with all this wealth, these rentals.
30:12And just like you can generate wealth on your credit score, you can also generate wealth on your insurable interest, on your insurable interest value.
30:23Everybody has a number over their head on how much insurance they can buy, but most people don't even make use of it.
30:28Just like most people don't use their credit to build wealth, most people don't use their insurable interest number to build wealth.
30:36But they have a value over their head, their mortality wealth value.
30:41And just like most people don't use their credit score, well, maybe they did use their credit score here.
30:46And maybe they would also consider using their mortality value to create shadow wealth.
30:50Because you can often, just like you can go to a bank and borrow money on your credit score, you can go to a bank and borrow money on your mortality wealth.
30:57And you can build another trust specific, and there's very specific features in here, but a mortality wealth trust.
31:06And we can use either insurance, modified endowment contracts, private placement life insurance, but a mortality wealth trust is another area.
31:15And that is where I've actually done the largest planning I've ever done has been in the space of mortality wealth.
31:21I've done hundreds of millions of dollars.
31:23I've seen people triple their net worth using mortality wealth.
31:27And so I do set up a lot of trusts in this area as well.
31:31And those are, generally speaking, both for tax and asset protection, they're life insurance trusts.
31:37If you've ever heard of an islet, irrevocable life insurance trust, those are the types I set up.
31:42But those types of trusts have a lot of features for tax and asset protection, as well as estate planning.
31:50So I just mentioned that as an example of what we started with, how much does it cost?
31:54Well, I don't know.
31:54Do you want a chance to, whatever, augment your wealth, maybe double or triple it?
31:58Because, yeah, there is an extra trust that you'll need there, and that is a bunch of time.
32:02I've been hearing a lot of market hype about whole life policies lately because the equities markets are soft.
32:09I was hearing the same amount of hype about indexed universal life, IUL policies about five years ago.
32:15I've been in the mortality wealth space a while.
32:16So I'd kind of back it up a step and kind of say that most often I recommend a blend of policies because there's two ways that a mortality wealth trust can fail.
32:26And so I often, and in fact, I've even come up with and worked with some private placement life insurance groups to be able to fund trusts that are IULs that are private placement using digital assets or digital asset traded funds.
32:41You can actually fund those with certain, as long as we're diversified, there's diversification requirements.
32:47We can fund this trust with digital asset related equities.
32:52So that would not be a whole life policy, but I generally recommend that those be funded with a blend of different insurance policies because the way that those trusts have to be set up to be safe is we've got in mind two issues.
33:07We've got in mind, number one, the cost of insurance and number two, the return on the insurance and number three, the borrowing, the interest rate risk.
33:22So the way that I generally set these up, I don't like to put all my eggs in one basket.
33:29And so the groups I work with in setting these up, we, I go through a matrix of around 30 different criterion in selecting very carefully insurers, not just based on their rating of their policies, but based on their reinsurance.
33:43So you've got to pop the hood on these companies and very carefully look at who's reinsuring them.
33:49And we've got to look at the various features, whether they're, whether these policies are going to have cash value riders and have an increased cash value quicker.
34:00There are different ways that we want to address systematic risks and market volatility, stochastic volatility within these, the way we structure this.
34:10And so I work with very closely with several groups in order to structure these carefully.
34:16But yeah, to just throw in a, like to just say, yeah, we're going to throw a whole life policy in there would be very simplistic.
34:22We've got to be very careful because otherwise the funding, the way that we finance this, the interest on the, on the credit chassis used to finance this can eat up the value of the policies.
34:34If you have an insurance company that starts to jack up the cost of insurance right here, if they increase it, that ruins the deal.
34:41If you have a policy where a private equity group buys out of an insurance company and starts not, not indexing everything, starts to not credit.
34:51If we don't have the crediting going on, that ruins the deal.
34:55If we have too much interest rate risk and not a good private banking relationship or relationships with different private banks, then with the interest rate can ruin the deal.
35:04So there's all kinds of things to very carefully structure these.
35:08And I work with a number of professionals in doing this.
35:12My main role in these things is to deal with the tax and asset protection planning.
35:16So because I would, I would first mention that contract law trusts, people usually assert that there is constitutional protection for contracts.
35:26And so they're usually based on that idea and that you can contract for anything you want.
35:32The reality is we are all subject to the statutes, whether we want to pretend that we can form a private contract or not.
35:41We are ultimately subject to being hailed into court.
35:45We don't pay our taxes or if we don't pay, if we don't satisfy creditors or people we've wronged, they can hail us into court.
35:53And the courts are not going to care whether you've put in place a private contract and assert that there is constitutional protections again and again and again and again.
36:02And I could say again and again multiple times.
36:05Courts, when they bring people in who assert that there is constitutional protection over a contract without regard to the statutes, the courts set that aside.
36:14And if the person like Wesley Snipes, if they say, well, I'm constitutionally protected, they'll just say contempt of court and throw you in jail.
36:23So to draw a distinction, to say that you can do a trust divorced from the statutory regime it's subject to is not correct.
36:31All trusts are contracts.
36:34People market the idea that you can be devoid of governmental controls through contract trust, but that's a slick marketing thing that has no basis in reality.
36:42You will be subject to a court that will hold you in contempt if you're not compliant with the statutes.
36:47That's a false distinction.
36:49There is no such thing as a separate contract from a statute.
36:53And there is no such thing as a statutory trust that is not a contract.
36:57All of my trusts are contracts, but they are contracts that are not divorced from the reality of our subjugation to statutes and courts.
37:05These are marketers, again, just a contract trust, or sometimes they call them constitutional trusts.
37:11They prey on people's ideology, but that's divorced from reality.
37:16The reality is all trusts are contracts and all contracts are subject to statute.
37:22So with IRAs and 401ks, I do set up a lot of trusts for them.
37:27I set up a lot of trusts in instances where, and these are already, I'll mention already, that these already have some amount of asset protection and some amount of estate planning and a lot of tax planning built into them.
37:42So the instance where you would want to put these in a trust is if your state statute did not provide enough protection or if the estate planning available through beneficiary designations was inadequate.
37:59Those situations generally occur when you've got a beneficiary who is not well equipped to receive those assets.
38:08So that's a very circumstance-specific trust.
38:12If I have a 401k, let's say it's more like a million or two million or an IRA that's that big, and these people have a child who has special needs, leaving that IRA or 401k to your child as beneficiary can be very, very dangerous to them.
38:32It can disqualify that child from the benefits that they were using, Medicaid, SSI, all those things.
38:39It can disqualify them from their benefits, and being disqualified from those can be life and death.
38:46It can cause them to miss medications, miss doctor appointments.
38:50It's a problem.
38:52And so I generally set up trusts for IRAs and 401ks when there's a problem with a beneficiary.
38:58Under the new rules, the SECURE Act, specifically for qualified designated beneficiaries, I set them up.
39:07A qualified designated beneficiary is somebody like I just described who's too young to receive a 401k or IRA or who's incapacitated.
39:14And with a qualified designated beneficiary, the trust enables you to protect the beneficiary from themselves or from disqualification, while at the same time funding certain needs.
39:27And so those come down to looking at your local administration of Medicaid, whether we've got specific, there are some savings, type of savings accounts that can be used in certain states for particular purposes.
39:43But those trusts have to be specifically designed so that we have, if we're going to put them in a trust, it needs to be see-through.
39:53Under the IRS rules, a see-through trust is one in which we've designated the beneficiaries so that the trust can distribute based on the beneficiary's required minimum distribution schedule.
40:04But those trusts, like a 401k or IRA, they can stretch out the payments to any beneficiary for 10 years.
40:12For a qualified eligible beneficiary, it can stretch those out for their lifetime if they're disabled or if they have special needs of different types.
40:22Or they're underage, it can stretch out their distributions.
40:25But the old planning that I used to do of putting 401ks and IRAs into trusts just to stretch them out for anybody no longer exists.
40:36They did away with the ability to stretch those.
40:38But for certain beneficiaries, we put them in.
40:41It's generally kind of more supplemental or special needs trust planning than anything at this point.
40:46So one thing I'll mention is there are ways in this trust to make your insurance overfunded and have some benefit going to a charity.
40:56There's a number of requirements that have to be dealt with in order to do that correctly.
41:02But that would be one area where you could do some charitable planning.
41:05If we're just talking about a charitable remainder trust, obviously, the way that these work is you have basically donated your asset to charity but retained the right to income for life.
41:18And there's specific rules about how much income you have to take.
41:21And we have to make sure that the charity will get a remainder.
41:26There are very specific calculations for those.
41:30But where you would want to use those is if you've not gotten enough assets out of your estate, they're very, very useful for getting both a deduction for your donation to the charity and also getting a bunch of value out of your estate.
41:48So kind of back to this, if we're getting all the value out of your estate now with this asset protection trust or maybe the rental asset protection trust, if we've removed a bunch of value from the estate using these control and using these compliance mechanisms I've outlined, you may not even need a charitable remainder trust.
42:10You might just be able to do an outright distribution to charity out of your trust.
42:14They could be a beneficiary of your estate.
42:16Another area to give away money that's very tax efficient is through your 401k and IRA.
42:23Giving that money away as a qualified charitable distribution before you lay hands on it is a very effective way to give money.
42:30So I'd mention that as well.
42:31That's maybe one of the best things to leave.
42:33But if you, let's say you didn't want to give up control, you didn't want to do the completed gift, didn't want to do the compliance, didn't want to do this, and you just hung on to this.
42:42Hung on to this in a trust where it's all in your estate and there was an appreciation event between your rentals, between XRP, between all your assets.
42:52You had enough appreciation that the estate was taxable.
42:56Well, that would be where a charitable remainder trust would come in.
42:59You could donate those assets to a charity, retain income for life, and we can actually reform this trust to do that later.
43:07Or if you've already got too much value or a bunch of appreciated rentals, that's another good scenario.
43:13If these rentals were highly appreciated, we could actually form this rental trust to both be protective for assets, but also to retain those assets for your use during your life.
43:24But the main ways in which to give to charity, I would say, would be, first of all, let's get these assets out of your estate so you can have discretion over when to give to charity.
43:34If we haven't appreciated assets, though, then that would be a scenario where we would maybe want to set up a charitable remainder trust to get these assets over to a charity.
43:45Because, again, charities don't pay the appreciation tax, the capital gains tax.
43:51Once you've transferred it to them, there are some donation restrictions.
43:56When you transfer appreciated properties, you don't get quite as much deduction.
44:00And be aware that your remainder payments, there is capital gains tax to the extent your remainder payments have a pro rata portion of appreciation attributed to them.
44:10But the charitable remainder trusts are very effective where you have, number one, appreciated properties, and number two, too large of an estate.
44:17I set up a number of private foundations for clients, and we can set those up in different ways.
44:26I sometimes set them up.
44:27I set them up often, as I mentioned, with these mortality wealth trusts.
44:31And we'd often set them up with donor advised funds.
44:34If you're just doing a simple family foundation that you don't need complete control over.
44:39If you need a private foundation for yourself, then, yes, we can set those up.
44:44I've done a significant amount of structuring of those.
44:46They come with, again, a lot of tax compliance.
44:49So you have to be careful.
44:50Make sure you know what you're getting into.
44:52But, yeah, setting up private foundations is another way to give away money and get tax deductions.
44:58But just be aware that foundations do have to distribute.
45:01They've got a bunch of excise taxes applicable to private foundations.
45:04And so the donor advised funds haven't yet come under full private foundation law.
45:13There's, of course, a lot of congressional impetus and momentum toward that.
45:18But those currently, the donor advised funds are a pretty good kind of hybrid to retain some control,
45:24while at the same time being able to get a charitable deduction.
45:28I pick the jurisdiction that is best for the asset.
45:32Now, if you were trying to put your rental properties in Georgia into a Wyoming trust,
45:37Georgia is going to have what's called quasi-in-rem jurisdiction over those rentals.
45:42And under quasi-in-rem jurisdiction, Georgia can say to you, if Georgia came to you,
45:47something happened with one of your renters over here, and the state of Georgia, the court system,
45:53came to you and said, hey, somebody's suing you.
45:57You're going to have to pay.
45:58And you said, well, I've put that Georgia rental into a Wyoming trust.
46:02Georgia's going to say, whatever.
46:03That dirt is stuck here in Georgia.
46:05You're subject to Georgia laws.
46:07So you've got to be cautious about the type of asset you put in.
46:10But for digital assets, because they don't have a specific situs necessarily,
46:16they're in the cyberspace.
46:18Those are good assets for a Wyoming trust.
46:20Same thing with equities.
46:22Same thing with businesses that are in interstate commerce.
46:25So you do want to pick the trust.
46:26If you were talking about Georgia rental properties, we would probably set up a Georgia
46:30asset protection trust for those properties.
46:33And that's why there's often multiple trusts, because we pick the jurisdiction best for the
46:38asset.
46:38Not all states allow asset protection trusts.
46:42And so I'd mentioned that if you're in a state that doesn't allow them, like around 20
46:46states permit them.
46:48If you're in a state that doesn't permit asset protection trusts, we use different trusts that
46:52deal with powers of appointment.
46:53That's a very complex topic to get into.
46:56But I generally recommend that the real estate in a specific state only go into a trust that
47:04that the particular state would recognize.
47:08So if you're in a state that does not recognize asset protection trusts, I wouldn't go dropping
47:16your real estate into an asset protection trust.
47:19I would drop it into a power of appointment trust, which is a kind of a workaround that
47:23permits some asset protection for assets.
47:27I wouldn't drop, for example, Idaho right next door to me doesn't permit asset protection
47:32trusts.
47:33So with digital assets, that would be different.
47:36Most states, if you don't, if the state doesn't have jurisdiction over the asset, then they're
47:43going to afford full faith and credit to the state where the asset is sidest.
47:50And so that would work much more effectively.
47:54You always have the risk of a state court judge, but putting it in an asset protection trust
47:58trust is a big line of defense for you.
48:02Mortgages, again, are subject to state laws.
48:06So if you have to look at what state that's in, it is a real estate interest.
48:10So we have to make sure that we're cautious.
48:12But any state that affords protection, and by the way, Georgia does have an asset protection
48:16trust statute.
48:17So they would likely afford protection to another state's asset protection trust statute.
48:22So it just depends on the state.
48:24That's where you've got to look very carefully at the transfers into the trust to make sure
48:29that the transfers into the trust are carefully considered.
48:54That's where you've got to look very carefully at the trust.
48:55That's where you've got to look at the trust.
48:56That's where you've got to look at the trust.
48:57That's where you've got to look at the trust.
48:58That's where you've got to look at the trust.
48:59That's where you've got to look at the trust.
49:00That's where you've got to look at the trust.
49:01That's where you've got to look at the trust.
49:02That's where you've got to look at the trust.
49:03That's where you've got to look at the trust.
49:04That's where you've got to look at the trust.
49:05That's where you've got to look at the trust.
49:06That's where you've got to look at the trust.
49:07That's where you've got to look at the trust.
49:08That's where you've got to look at the trust.