Latest / Money And Wealth With John Hope Bryant / Learn from the Wealthy

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Learn from the Wealthy · Money And Wealth With John Hope Bryant

• 0:00
  Speaker 1: Welcome the Money and Wealth with John O'Bryant, a production
• 0:03
  Speaker 1: of the Black Effect Podcast Network and iHeartRadio. Yo Yo.
• 0:16
  Speaker 1: This is John Hobryant, and this is another exciting episode
• 0:20
  Speaker 1: at least I think it's exciting of Money and Wealth.
• 0:24
  Speaker 1: Money and Wealth is one of the top one hundred
• 0:26
  Speaker 1: business podcasts in the country, Top forty Entrepreneurship. Tell all
• 0:30
  Speaker 1: your friends about it. This is John O'Briant, and I'm
• 0:33
  Speaker 1: about to break some eggs. I'm going to tell you
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  Speaker 1: how the wealthy do it. And I'm not some guys
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  Speaker 1: selling books and tapes whatever. I don't mind people doing that.
• 0:43
  Speaker 1: There are a lot of great teachers doing that. This
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  Speaker 1: is this. I'm a practitioner. I'm somebody who've done it,
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  Speaker 1: who's done it, I'm doing it. I have four hundred
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  Speaker 1: employees right now. My payroll is a mell and they
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  Speaker 1: have dollars every couple of weeks. You know, we have
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  Speaker 1: one hundred million dollars of annual activity and our various
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  Speaker 1: enterprises best at four hund and a half billion dollars
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  Speaker 1: four point eight billion dollars. Through the various enterprises in
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  Speaker 1: the communities and individuals and homes and small businesses, et cetera.
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  Speaker 1: About three hundred million in private enterprises. So I'm talking
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  Speaker 1: from experience, right, had some successes, had some failures. I
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  Speaker 1: was homeless. My credit score was at one time three
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  Speaker 1: to four hundred when I was homeless in Compton. Grew
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  Speaker 1: up in Comptent in south central LA from the bottom quartile,
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  Speaker 1: the bottom, the worst zip code, not the worst, the
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  Speaker 1: one of the poor zip codes in America, certainly in
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  Speaker 1: the West Coast, Confident, south central to you know, the
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  Speaker 1: point zero one percenter above the one percent group on
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  Speaker 1: income and wealth, and one generation did it legally. Right.
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  Speaker 1: So the first thing is you hear people saying I
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  Speaker 1: hate rich people. No, you don't. You hate rich people
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  Speaker 1: until you become rich. What you hate is a gamed system.
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  Speaker 1: You hate a system that no matter how hard you work,
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  Speaker 1: that you feel you just can't get ahead. You feel
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  Speaker 1: like you just can't succeed, like you've got too much
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  Speaker 1: month at the end of your money, and you feel
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  Speaker 1: this system is rigged against you. And in many ways
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  Speaker 1: it might be, and in some ways it is. And
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  Speaker 1: then there's bad capitalism, right, there's bad capitalisms where I
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  Speaker 1: benefit and you pay a price for it, and good
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  Speaker 1: capitalism is where I benefit and you benefit more. I
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  Speaker 1: try to practice good capitalism, and capitalism and democracy are
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  Speaker 1: horrible systems except for every other system. I've been to
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  Speaker 1: one hundred countries around the world, so about a little
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  Speaker 1: under half of all countries in the world, and I've
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  Speaker 1: seen a lot, and I can't think of a better
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  Speaker 1: system with regard to being able to go from the
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  Speaker 1: bottom to the top than ours. It can be better,
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  Speaker 1: it can be improved. There's a reason why everybody in
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  Speaker 1: the dang on world wants to get to the United
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  Speaker 1: States of America, even with are current challenges and problems,
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  Speaker 1: even with the politics of division, even well, by the way,
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  Speaker 1: it's been worse. You had slavery in this country. You
• 3:09
  Speaker 1: had Jim Crow in this country. You had legal racism
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  Speaker 1: in this country. You had assassinations in this country. Like
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  Speaker 1: be hopeful the sun will come up tomorrow. Everything's going
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  Speaker 1: to be okay. Now let's get into this episode. By
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  Speaker 1: the way, thanks to everybody who participated in Green Socks
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  Speaker 1: Day April thirtieth, the last day of Financial Literacy Month. Walmart,
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  Speaker 1: thank you very much for making the socks at no
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  Speaker 1: cost to Operation Hope and the Financial Literacy for All initiative.
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  Speaker 1: He was co sponsored by Financial Literacy for All Initiative,
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  Speaker 1: which I CoA chair with the CEO of Walmart, douglat Millan,
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  Speaker 1: and Operation Hope. I'm the founder of Operation Hope and
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  Speaker 1: involved all the sports fanchises. So thank you Roger Goodell NFL,
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  Speaker 1: Thank you Adam Silver of the NBA. Thank you for
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  Speaker 1: the commissioners of the Major League Baseball, Major League Soccer,
• 4:01
  Speaker 1: NASCAR Hockey. I missed anybody out of going from memory,
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  Speaker 1: so all the sports franchises did it. Organizations, thank you
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  Speaker 1: so much. You didn't have to do it. First time
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  Speaker 1: I think they've ever collaborated on something like this in
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  Speaker 1: a public effort. Was the first time I ever had
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  Speaker 1: they were on one stage together in a public way
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  Speaker 1: when they came to our form December twenty twenty four.
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  Speaker 1: If you've never seen that, go back and watch it.
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  Speaker 1: It's online. You see it on YouTube. Pretty amazing. And
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  Speaker 1: then we had a bunch of corporations and companies and
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  Speaker 1: housewives and folks from the streets to the suites from
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  Speaker 1: urban America rural America. Is really quite beautiful. The color
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  Speaker 1: for a moment was not black or white as in
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  Speaker 1: race arguing over that, or red or blue as in politics,
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  Speaker 1: but green, the color green, which is at the root
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  Speaker 1: of everything. I keep saying, your day's not by God
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  Speaker 1: or Love. Your days about money. So let's learn about money.
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  Speaker 1: And this segment is about teaching you how the wealthy
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  Speaker 1: use their money, right, And I don't just want you
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  Speaker 1: to get rich. I want you to build wealth. And
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  Speaker 1: how did I build wealth? How do I continue to
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  Speaker 1: build wealth? By night? Because this is an ongoing process.
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  Speaker 1: I'm in the I'm in the arena of capitalism every day, right,
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  Speaker 1: and I think the best is yet to come. My
• 5:22
  Speaker 1: biggest endeavors, I think in the often you'll hear a
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  Speaker 1: few of them that gets announced here soon. I mean,
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  Speaker 1: I've done some big stuff, but I think the biggest
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  Speaker 1: is coming. So I'm still learning. But I'm to quote
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  Speaker 1: my friend Quincy Jones, I'm just nosy as hell. I've
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  Speaker 1: got two years in one mouth, so I listen twice
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  Speaker 1: as much as I talk. Right, I'm just nosy as hell.
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  Speaker 1: I want to know everything about everything, and I want
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  Speaker 1: you nosy, and I don't want you resentful of people
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  Speaker 1: who are successful. I want you to learn how to
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  Speaker 1: go get some yourself. This is the James Brown version
• 5:53
  Speaker 1: of affirmative action. Open the door. I get it my
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  Speaker 1: dang self, So get into this. So this episode is
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  Speaker 1: learn from the wealthy, how they spend, how they borrow,
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  Speaker 1: how they pay and don't pay taxes, and know this
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  Speaker 1: is not some tax avoiding scheme. I'm going to break
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  Speaker 1: it all down for you. As I keep saying, I
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  Speaker 1: like math because it doesn't have an opinion. That is
• 6:18
  Speaker 1: a quote from my friend Melody Hobson that I you
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  Speaker 1: try to give her credit for all the time, even
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  Speaker 1: though I own I've taken ownership this dang on thing
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  Speaker 1: because it's so much of what I believe. Okay, get
• 6:29
  Speaker 1: your pen and pencil out, or your iPad or your
• 6:32
  Speaker 1: iPhone or your notes app or whatever. If you're running,
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  Speaker 1: you may need to stop and take some notes, or
• 6:38
  Speaker 1: you may want to come back with your girlfriends or
• 6:40
  Speaker 1: your guy friends and get in a huddle. And really,
• 6:43
  Speaker 1: this is an episode you may want to replay back
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  Speaker 1: and have a conversation about, because I'm going to really
• 6:48
  Speaker 1: unpack a number of topics I'm trying to throw top
• 6:52
  Speaker 1: I'm gonna try to tackle three big areas at the
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  Speaker 1: same time or in one episode that I think a
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  Speaker 1: major area is a major in misunderstanding about the wealthy,
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  Speaker 1: not just a rich the wealthy. You make rich as
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  Speaker 1: a contract, so you make so rich. You can make
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  Speaker 1: money on a contract, as I keep saying, thirty thousand,
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  Speaker 1: three hundred dollars, three three thousand dollars, thirty thousand, three
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  Speaker 1: million dollars, you can still lose it, okay, because it's
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  Speaker 1: a contract. It's income, right, and if your outflow exceince
• 7:22
  Speaker 1: your inflow, then your overhead will be your downfall. If
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  Speaker 1: a contract stops, then in your and your and your
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  Speaker 1: expenses continue, and you've not built wealth that will allow
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  Speaker 1: the income to sustain your way of life. You can
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  Speaker 1: still go broke, which is why you hear about you know,
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  Speaker 1: professional uh, professional sports players with a one hundred million
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  Speaker 1: dollars contract, you know in the working at Starbucks or
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  Speaker 1: something in eight years because they thought it was going
• 7:47
  Speaker 1: to last forever and just spend, spend, spend, since spent. Okay,
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  Speaker 1: So you make money during the day, you build wealth
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  Speaker 1: in your sleep. And my brother Tony Wrestler told me
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  Speaker 1: this one day and it just really blew my mind.
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  Speaker 1: And this was six years ago. I really thought I
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  Speaker 1: knew something until I didn't realize that I didn't. And
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  Speaker 1: Tony's one of the most successful business owners in the
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  Speaker 1: business leaders in the country and a good friend of
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  Speaker 1: mine has been a partner and a couple of my
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  Speaker 1: initiatives and adventures. I also want to give some credit
• 8:15
  Speaker 1: to Michael Righetti, who's also an early partner in my
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  Speaker 1: Promise Homes company. Okay, let's start this. We're going to
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  Speaker 1: pull back the curtains on how the wealthy really live.
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  Speaker 1: Let's talk about how they finance their lifestyles, how we
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  Speaker 1: finance our lifestyles. I guess I'm now part of this group.
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  Speaker 1: Then I'm going to talk about how they can lose
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  Speaker 1: it all. Okay, the wealthy and I'm also talked about
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  Speaker 1: how to navigate taxes. And I'm also going to talk
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  Speaker 1: about a unique financing tools that the wealthy use. Okay,
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  Speaker 1: concept number one. Wealthy people borrow against assets. They don't
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  Speaker 1: just spend cash. This is I mean, this is so important.
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  Speaker 1: The power of margin accounts and security base lines of
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  Speaker 1: credit is something going to I'm going to break down
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  Speaker 1: for you. I'm gonna come back to that after I
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  Speaker 1: give you sort of this framework. Borring at low interest
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  Speaker 1: rates against stock portfolios or real estate, using leverage to
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  Speaker 1: keep assets growing while still accessing cash. All this is
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  Speaker 1: part of the same conversation. Rich people don't sal stock,
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  Speaker 1: they borrow against it. This is really important. So while
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  Speaker 1: this delays or avoids capital gains is a mystery to
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  Speaker 1: most people, or how this avoids capital gains and just
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  Speaker 1: taxation is a mystery, most people are going to unpack
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  Speaker 1: that for you. I'm going to relate this to Elona Musk.
• 9:48
  Speaker 1: I'm not picking only a lot of Musk. I think
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  Speaker 1: he's a genius. Actually I use the starlink, you know, technology.
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  Speaker 1: But I'm going to explain why and how he did
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  Speaker 1: the stuff he did, not just him, but I think
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  Speaker 1: he's the most notable example because he doesn't earn an
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  Speaker 1: income best based I can best I can tell. Okay,
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  Speaker 1: wealthy homeowners take out helocks instead of refinancing or selling
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  Speaker 1: home equity lines of credit. Uh philosophical point that it's
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  Speaker 1: important to note here the poor sale time, the middle
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  Speaker 1: class sell labor, the wealthy sell or borrow against assets.
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  Speaker 1: And by the way, just going back to the Elon
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  Speaker 1: Musk thing, for many this is a trait that I
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  Speaker 1: want you to pick up in your life, which is
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  Speaker 1: I want you to not be emotional about decision making.
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  Speaker 1: Emotions have an incredible value. In fact, I think that
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  Speaker 1: if you're if you don't have EQ emotional intelligence and
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  Speaker 1: you just have IQ intellectual intelligence then you have, then
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  Speaker 1: you're at a loss. I mean you you you're a human,
• 11:01
  Speaker 1: you're a human doing You're not a human being. We're
• 11:04
  Speaker 1: not human beings having in spiritual experience. We're spiritual beings
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  Speaker 1: having a human experience. So energy matters. And so you
• 11:12
  Speaker 1: can have a lot of brilliant people who have a
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  Speaker 1: blind spot called people. Some financial brilliant people have this issue,
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  Speaker 1: and some tech brilliant people have this issue where they
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  Speaker 1: just have a blind spot called people and they're just
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  Speaker 1: not complete leaders or even though they think they're smart
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  Speaker 1: in one area, it can make them smart in others.
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  Speaker 1: A great leader who's well rounded, Okay, And that's what
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  Speaker 1: I want you to be. You have a multi multiplicity
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  Speaker 1: of skills. You have IQ and EQ intellectual intelligence, and
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  Speaker 1: you have emotional intelligence right, which includes empathy and caring
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  Speaker 1: for people. In my opinion, treat others as you want
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  Speaker 1: to be treated when something happens. Is capitalism is a
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  Speaker 1: gladiator sport right. I don't want you getting locked up
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  Speaker 1: and all getting your emotions all wrapped up because somebody
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  Speaker 1: in business took a jab at you, or somebody in
• 12:02
  Speaker 1: business event took an advantage over you. That's in the
• 12:06
  Speaker 1: broader context. It's just business. And when I've explained that
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  Speaker 1: that often, capitalism is a negotiating table. Right on one
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  Speaker 1: side of the table is the seller, and on the
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  Speaker 1: side of the table is a buyer of a product.
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  Speaker 1: And the seller's job is to extract as much from
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  Speaker 1: you in price as they and deliver I guess as
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  Speaker 1: little as you and resources in that product so they
• 12:30
  Speaker 1: can make the maximum profit. Your job, on the excited
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  Speaker 1: that table is to give the least in price and
• 12:35
  Speaker 1: to extract as much in value. And every negotiating table
• 12:39
  Speaker 1: is a good negotiation. Everybody leaves slightly annoyed. I said
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  Speaker 1: that in a previous podcast. It can't you can't say
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  Speaker 1: that enough. So you're going to have disagreements in business.
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  Speaker 1: You're going to have people who are gladiators at the
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  Speaker 1: highest level, who are going to take takes, you know,
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  Speaker 1: swipes at each other from time to time. I try
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  Speaker 1: it to make that my business. My business is business.
• 12:59
  Speaker 1: I try to stay focused. And you know, I'm just
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  Speaker 1: not one ounce to my self. Steem depends on somebody
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  Speaker 1: else's acceptance of me or not or not. So uh,
• 13:09
  Speaker 1: but I do recognize that other people see a win
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  Speaker 1: lose situation, not a win win situation. I want you
• 13:15
  Speaker 1: to be win win oriented and you treat people lovingly
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  Speaker 1: and with respect because that's how you're built, not because
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  Speaker 1: how anybody else rolls. Right, So don't be emotional in business.
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  Speaker 1: So so the wealthy again. Thing differently, this is a
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  Speaker 1: very powerful point. The poor cell time, the middle class
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  Speaker 1: cell labor, the wealthy seller barrow against assets. Okay, so
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  Speaker 1: let's dig into this a little bit. This is so powerful. Okay,
• 13:52
  Speaker 1: let's talk about in order to understand what I'm talking about,
• 13:55
  Speaker 1: we got to unpack a couple of the vehicles. The
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  Speaker 1: biggest one I want to talk about are marginal ounce
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  Speaker 1: and securities based lines of credit. So these are major
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  Speaker 1: vehicles for the wealthy. They use them smartly to build wealth,
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  Speaker 1: to reduce taxation, taxes, and maintain liquidity availability or access
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  Speaker 1: to cash without selling their investments. Right. I use these vehicles,
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  Speaker 1: by the way, So the definition is let's start there.
• 14:30
  Speaker 1: Because people for all these terms around, and nobody actually
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  Speaker 1: ever tells you what this stuff means. A marginal account
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  Speaker 1: lets you borrow money from your brokerage from using your
• 14:38
  Speaker 1: existing investment investment or investments as collateral. I want you
• 14:43
  Speaker 1: to think about a stock account, ETF's, bonds, et cetera. Okay,
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  Speaker 1: it's often used by more securities investable publicly traded investment
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  Speaker 1: grade products and is used prime a ready to leverage
• 15:00
  Speaker 1: your portfolio to grow it. And that's different from a
• 15:03
  Speaker 1: securities based line of credit. Slightly. I'll explain that. So
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  Speaker 1: how does this work? So let's say you deposit I'm
• 15:12
  Speaker 1: going to say a million dollars, but you can, by
• 15:14
  Speaker 1: the way, you can put one hundred thousand dollars in it.
• 15:16
  Speaker 1: You can do fifty thousand dollars in it. I guess
• 15:19
  Speaker 1: there may be some minimums, but theoretically you could have
• 15:22
  Speaker 1: a twenty five thousand dollars margin account. So but let
• 15:25
  Speaker 1: me make this, make this easy. It's a million dollar
• 15:29
  Speaker 1: in stock that you have in this hypothetic hypothetical example.
• 15:32
  Speaker 1: Because in this example you're wealthy, your brokerage firm might
• 15:36
  Speaker 1: let you borrow let's say fifty percent of that. Okay,
• 15:39
  Speaker 1: It depends on the kinds of stock. If these are
• 15:43
  Speaker 1: perceived to be riskier stocks, maybe there are technology stocks,
• 15:48
  Speaker 1: then the brokerage might say, we only want to give
• 15:51
  Speaker 1: you fifty percent on the value. If these are stocks
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  Speaker 1: that are considered blueship, as they say, you know the
• 16:01
  Speaker 1: best of the best, what they call the flight to quality.
• 16:06
  Speaker 1: I don't sorry naming names, but like you know the
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  Speaker 1: companies that you it would be obvious to you. Then
• 16:12
  Speaker 1: they might let you borrow beyond fifty percent, sometimes as
• 16:16
  Speaker 1: much as seventy percent. Okay, I don't think you should
• 16:19
  Speaker 1: be borrowing seventy percent of the value the stocks. Explain
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  Speaker 1: in a minute, I explain why in a minute. Uh
• 16:26
  Speaker 1: that borrow money now can be used to buy more
• 16:30
  Speaker 1: stock or for other purposes. This is America. You can
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  Speaker 1: use you don't even tell you what. Well, if they
• 16:37
  Speaker 1: are restrictions, they can tell you what to use it for.
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  Speaker 1: But in this example, the margin accounts and I'm aware
• 16:42
  Speaker 1: of they would not attempt to restrict your movements as
• 16:45
  Speaker 1: long as it's legal. So now you have a million
• 16:47
  Speaker 1: dollars with a stock you now borrow. You have a
• 16:49
  Speaker 1: margin account of five hundred thousand dollars in an example,
• 16:51
  Speaker 1: do not use all five hundred thousand dollars please, but
• 16:54
  Speaker 1: you could theoretically borrow up to five hundred thousand dollars
• 16:59
  Speaker 1: in this example, well to buy more stock. Now you're
• 17:02
  Speaker 1: going to pay interest on the money you borrow this. Now,
• 17:06
  Speaker 1: let's say your name is Joeanne. Here you've become the
• 17:08
  Speaker 1: bank of Joanne John the bank of John. So you're
• 17:12
  Speaker 1: not borrowing from a bank or an institution or whatever.
• 17:15
  Speaker 1: You're borrowing from yourself. These are your assets, right, But
• 17:20
  Speaker 1: you must pay for the person the institution extending the
• 17:24
  Speaker 1: credit to you. Okay, Against your assets, you must pay
• 17:27
  Speaker 1: an interest rate and margin. Interest rates vary, you know,
• 17:30
  Speaker 1: seven to twelve percent on average. I pay a little
• 17:33
  Speaker 1: less than that. The more of a preferred customer you are,
• 17:36
  Speaker 1: the less you pay. But seven to twelve percent, and
• 17:41
  Speaker 1: it might actually be lower for this next product, I'm
• 17:42
  Speaker 1: gonna tell you. But just one step at a time. Okay.
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  Speaker 1: Why is this a smart use? The wealthy us is
• 17:57
  Speaker 1: to leverage for growth. Is used in increase returns the
• 18:02
  Speaker 1: profit when you're confident about a stocks performance. So this
• 18:08
  Speaker 1: is where it gets a little complicated. Good debt juices profits.
• 18:17
  Speaker 1: So our friends of mine who are in the hip
• 18:18
  Speaker 1: hop industry who have bought properties for all cash, real
• 18:22
  Speaker 1: estate properties. I've encouraged them that that is very admirable,
• 18:27
  Speaker 1: and I just know they want to be free, okay,
• 18:29
  Speaker 1: But I've explained to them that there is no billionaire
• 18:31
  Speaker 1: or sent a millionaire that got there without good debt.
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  Speaker 1: There's no city or county in America or the world.
• 18:39
  Speaker 1: Actually that's a leading GDP gross domestic products, leading economy
• 18:44
  Speaker 1: that didn't do it with good without good debt. So
• 18:46
  Speaker 1: bonds that are issued. But I mean these are prime products,
• 18:50
  Speaker 1: not the homeboy shopping that work financing. So I want
• 18:54
  Speaker 1: you to use good debt for conservative leverage. You shouldn't
• 18:57
  Speaker 1: be leveraged up to your eyeballs. You shouldn't be nice
• 19:00
  Speaker 1: and eberson loan of value. But I've encouraged my friends
• 19:02
  Speaker 1: who own these properties free and clear that they should
• 19:04
  Speaker 1: put a modest mortgage on it because that juices your returns.
• 19:08
  Speaker 1: The less money you have in it in the higher
• 19:11
  Speaker 1: the guarantee the return I guarantee. But if you are
• 19:14
  Speaker 1: highly confident this asset is going to yield your return,
• 19:19
  Speaker 1: the less of your money's in it, and the more
• 19:22
  Speaker 1: of OPM, other people's money that's in it OPM, the
• 19:25
  Speaker 1: higher your return on your investment, if that made me sense.
• 19:29
  Speaker 1: If not, you can play this back. But I have
• 19:31
  Speaker 1: a lot of ground to cover in a short period
• 19:32
  Speaker 1: of time, and I'm already twenty minutes in as I
• 19:34
  Speaker 1: need to go a little faster. And by the way,
• 19:38
  Speaker 1: the comments when you see out clips of this in
• 19:41
  Speaker 1: social media, you can ask me my opinion on go
• 19:44
  Speaker 1: deeper on something and I will try my best to
• 19:46
  Speaker 1: respond between meetings and all that kind of stuff. Okay,
• 19:49
  Speaker 1: So with regard to stock, so if you think that
• 19:51
  Speaker 1: the stock you're invested in are these things you're investing
• 19:54
  Speaker 1: in are really really really special, and you just want
• 19:57
  Speaker 1: to invest more in it, and you're confident about this
• 19:59
  Speaker 1: performance hard to be by the way, but if you're
• 20:01
  Speaker 1: a highly of a performance the then leverage is a
• 20:06
  Speaker 1: good thing. Okay, reasonable leverage. There's another benefit that's much
• 20:12
  Speaker 1: more palatable to me than talking about leverage, because I
• 20:15
  Speaker 1: think you'd be very careful about leverage. Liquidity without selling
• 20:19
  Speaker 1: you can access your cash without triggering capital gains taxes
• 20:23
  Speaker 1: from selling stock. Yes, that's what I said, and I
• 20:26
  Speaker 1: want you to play that back. Slowly in your head.
• 20:29
  Speaker 1: This is or repeat it for those in the back
• 20:31
  Speaker 1: of the room. You can access your cash without triggering
• 20:35
  Speaker 1: a tax bill because you haven't sold anything. Yes, that's
• 20:40
  Speaker 1: what I said that. You do not pay taxes on debt. Okay,
• 20:46
  Speaker 1: even if it's your debt, even if it's debt that
• 20:50
  Speaker 1: you've incurred to get access to your own money. This
• 20:53
  Speaker 1: is very important. You do not pay a tax on
• 21:00
  Speaker 1: debt proceeds loan proceeds. Now, don't go crazy going to
• 21:03
  Speaker 1: get loans. I'm just telling you this is what the
• 21:05
  Speaker 1: wealthy do, and you get all this stuff is anything
• 21:08
  Speaker 1: that's done moderately, Like you know, anything in moderation. Most
• 21:12
  Speaker 1: things and moderations are healthy for you, good for you.
• 21:16
  Speaker 1: You know, drugs and moderation are prescribed. Alcohol and moderation
• 21:20
  Speaker 1: will lower your blood pressure. Right, most things in moderation.
• 21:23
  Speaker 1: You know, sleep and moderation is wonderful. Too much sleep
• 21:26
  Speaker 1: puts you to sleep. Right. So debt and moderation strategic timing, borrow,
• 21:32
  Speaker 1: doing downturns to buy the dip or hold onto appreciating assets.
• 21:38
  Speaker 1: So this is a more sophisticated thing. I don't want you.
• 21:42
  Speaker 1: I've wanted to cover that. But I don't want you
• 21:43
  Speaker 1: really holding onto that, buying in the dip. That requires
• 21:47
  Speaker 1: a lot of confidence and sophistication. And I don't want
• 21:49
  Speaker 1: you calling me blaming me because you thought as soon
• 21:51
  Speaker 1: as it was a dip, it was really a carbon
• 21:56
  Speaker 1: a canvenist valley that opened up because of an economic earthquake,
• 21:59
  Speaker 1: never to cover again. So you don't do that unless
• 22:02
  Speaker 1: you're a sophisticated investor. Now let's talk about risk. If
• 22:06
  Speaker 1: the value of your securities fall, the brokera made issue
• 22:10
  Speaker 1: what's called a margin call, and a margin call requires
• 22:14
  Speaker 1: you to deposit more money or sell assets quickly. Okay,
• 22:20
  Speaker 1: put simply, you have one hundred thousand dollars account. You
• 22:24
  Speaker 1: had a margin margin account for fifty thousand dollars. You
• 22:29
  Speaker 1: use all fifty thousand dollars. Let's be aggressive. You had
• 22:31
  Speaker 1: a margin account for you had a margin account for
• 22:33
  Speaker 1: seventy percent. Loan of value. You borrowed seventy thousand dollars.
• 22:36
  Speaker 1: The top end value the stock was one hundred thousand dollars.
• 22:39
  Speaker 1: There was a shaking of the market, the market which
• 22:42
  Speaker 1: just happened, by the way, and the value that account
• 22:44
  Speaker 1: went down to Theoretically, down to eighty thousand dollars from
• 22:50
  Speaker 1: one hundred thousand. Okay, and you were able to borrow
• 22:53
  Speaker 1: seventy percent of that stock value. Now you can only
• 22:56
  Speaker 1: borrow let's just say sixty thousand dollars or fifty five dollars,
• 23:01
  Speaker 1: and you've now leveraged yourself to seventy thousand dollars. There's
• 23:04
  Speaker 1: a margin call that calls you up to say you
• 23:07
  Speaker 1: either pay that down to the maximum or lower of
• 23:11
  Speaker 1: your available limit, or we must sell they must sell
• 23:14
  Speaker 1: some stocks. Okay, So this can amplify the losses, are
• 23:18
  Speaker 1: can amplify gains. Okay, Now let's get I want to
• 23:21
  Speaker 1: get into the lesson here. Let's get to securities based
• 23:23
  Speaker 1: lines of credit. A security based line of credit is
• 23:26
  Speaker 1: a line of credit secured by your investment portfolio. Right.
• 23:29
  Speaker 1: It's similar to a home equity line of credit, but
• 23:32
  Speaker 1: backed by stocks instead of real estate. And the easy
• 23:37
  Speaker 1: example between this and just a margin account is just
• 23:39
  Speaker 1: it's more sophisticated. It is issued typically by a bank,
• 23:44
  Speaker 1: not by your brokerage company, and they just give you
• 23:48
  Speaker 1: a loan securitized by your not by your house, but
• 23:52
  Speaker 1: by your securities portfolio. The interest rate is typically much less.
• 23:56
  Speaker 1: Sometimes it's lowes three to five percent better terms. That
• 24:00
  Speaker 1: are conditions, generally speaking, the same tax treatment. You're not
• 24:05
  Speaker 1: basically taxed on it because it's debt. Yeah, and there
• 24:11
  Speaker 1: are other parts of this, you know it. You can
• 24:13
  Speaker 1: get slightly higher leverage with this vehicle, but they're basically
• 24:19
  Speaker 1: the same, just the ones more sophisticated. So what's my
• 24:22
  Speaker 1: drop the mic on this? Before I get to sort
• 24:23
  Speaker 1: of the risk The rich don't sell, They borrow. Uh,
• 24:28
  Speaker 1: they let their money keep working and growing while they
• 24:32
  Speaker 1: access credit like it's cash. Poor folks sell to soon.
• 24:38
  Speaker 1: Rich folks borrow smart and build empires. Can I get
• 24:42
  Speaker 1: an amen? Okay, So now let's go back to the
• 24:49
  Speaker 1: lessons because now I want to get to how folks
• 24:55
  Speaker 1: can lose their money. So let's take and I don't Again,
• 25:03
  Speaker 1: I'm just I'm not picking on this guy. I'm just
• 25:04
  Speaker 1: saying that this is just a wonderful example because his
• 25:07
  Speaker 1: stuff is so public. And again, I mean, I'm not
• 25:12
  Speaker 1: saying this is better or worse. I'm just saying here
• 25:14
  Speaker 1: it is so Elon Musk, the theoretically the richest man
• 25:19
  Speaker 1: in the world today does not earn best. I can
• 25:22
  Speaker 1: tell an income. He tried to get an income from
• 25:25
  Speaker 1: his company and the courts blocked it, so his pay
• 25:30
  Speaker 1: package was blocked. He does not get an income. There
• 25:33
  Speaker 1: are other people who don't want an income. I'll get
• 25:34
  Speaker 1: to that in a minute. And most of other people
• 25:36
  Speaker 1: don't want an income. So how did he buy what
• 25:39
  Speaker 1: was called Twitter, which we now call X what he
• 25:41
  Speaker 1: calls X. He used I believe stock from a company
• 25:46
  Speaker 1: he owns called Tesla, which is a publicly traded company,
• 25:50
  Speaker 1: his Rocket company, other companies he owns, other assets the
• 25:53
  Speaker 1: owner not publicly traded, privately finance and all that kind
• 25:57
  Speaker 1: of stuff, the publicly traded end of the The biggest
• 26:00
  Speaker 1: he one he has is Tesla, which trades at a
• 26:05
  Speaker 1: higher price to earnings ratio price of the stock than
• 26:11
  Speaker 1: any other car company, so kudos to him. He uses
• 26:18
  Speaker 1: the stock from the car company his stock, takes a
• 26:21
  Speaker 1: loan against it. I'm calling it a margin account. Might
• 26:23
  Speaker 1: be more sophisticated. He might have it in a trust
• 26:25
  Speaker 1: or whatever, and hopefully I'll get to that before this
• 26:27
  Speaker 1: podcast is over. And he used that to borrow money
• 26:30
  Speaker 1: along with bank money and other investors to buy assets.
• 26:33
  Speaker 1: In this good example, he bought he uses to buy
• 26:37
  Speaker 1: X what we call Twitter, what I used to call
• 26:41
  Speaker 1: what I call Twitter, And that works as long as
• 26:44
  Speaker 1: the asset goes up or his stock value doesn't go down.
• 26:48
  Speaker 1: And then he used some money to go pay for
• 26:50
  Speaker 1: this and to pay for that and lifestyle. All that
• 26:53
  Speaker 1: works unless you drop below the ratio of value of
• 27:01
  Speaker 1: your stock to your debt that you've floated. Now I
• 27:05
  Speaker 1: don't know his business model, and that's a lot of money.
• 27:08
  Speaker 1: It's really, really, really really hard to go broke when
• 27:11
  Speaker 1: you even if you're losing one hundred billion or one
• 27:15
  Speaker 1: hundred and fifty billion on a basis of I mean
• 27:17
  Speaker 1: a billion dollars would by itself would be hard to
• 27:20
  Speaker 1: go broke on in one lifetime. So let's leave that
• 27:25
  Speaker 1: aside for a moment. Let me give you a practical example.
• 27:27
  Speaker 1: You're a tech entrepreneur and you have taken a company
• 27:32
  Speaker 1: public in Silicon Valley, and everybody told you this company
• 27:37
  Speaker 1: was not Everybody Wall Street told you the valuation of
• 27:39
  Speaker 1: this company was a billion dollars. In this example, you
• 27:42
  Speaker 1: own seventy percent of the stock. You owned seven hundred
• 27:45
  Speaker 1: thousands worth of stock. You then when got you're not
• 27:49
  Speaker 1: earning any income because the company is not earning any income.
• 27:51
  Speaker 1: It's a startup and it has not made a profit yet.
• 27:53
  Speaker 1: It may not make a profit for a while, but
• 27:55
  Speaker 1: Wall Street believes in it. The stock has gone public,
• 27:57
  Speaker 1: the stock is worth a billion dollars. Investors have bought.
• 28:00
  Speaker 1: You owned seventy percent of the stock in this example.
• 28:02
  Speaker 1: I'm just making this easy, and your stock is worth hello,
• 28:05
  Speaker 1: seven hundred million dollars. Now you wouldn't get a margin
• 28:08
  Speaker 1: loan or or securities loan against that. You now want
• 28:12
  Speaker 1: to go buy a yacht and houses and planes and
• 28:15
  Speaker 1: whatever it is. You bought right, and you got your
• 28:17
  Speaker 1: lifestyle expenses every year, and you ran up a tab
• 28:20
  Speaker 1: in this example of five hundred million dollars, and you think, well,
• 28:23
  Speaker 1: this is easy, that it probably is worth a billion.
• 28:25
  Speaker 1: I owed five hundred million, but my valuation is seven
• 28:29
  Speaker 1: hundred million. I still have two hundred million dollars. Then
• 28:32
  Speaker 1: there's something that rocks the stock market, that rocks the economy,
• 28:36
  Speaker 1: and tech stocks are more volatile than normal stocks, by
• 28:39
  Speaker 1: the way, traditional stocks. In this example, the value that
• 28:44
  Speaker 1: you wake up one day in the value of this
• 28:46
  Speaker 1: company now not a billion, is six hundred million. Okay,
• 28:50
  Speaker 1: you had a lot of credit for seven hundred million.
• 28:52
  Speaker 1: You've used five hundred million. You have a seventy percent
• 28:55
  Speaker 1: loan of value ratio, okay and maximum. The bank calls
• 28:59
  Speaker 1: you very nicely in this example, because you're worth so
• 29:03
  Speaker 1: much and you owe so much. If you owe the
• 29:06
  Speaker 1: bank four million, the bank owns you. If you owe
• 29:08
  Speaker 1: the bank four hundred million, you own the bank, or
• 29:10
  Speaker 1: at least you have leverage to negotiate. Right, So the
• 29:14
  Speaker 1: bank calls you and said, hello, you need to No
• 29:18
  Speaker 1: big deal for you, right, you just need to pay
• 29:21
  Speaker 1: this down because now your line of credit is not
• 29:23
  Speaker 1: seven hundred million. Your line of credit is actually sort
• 29:27
  Speaker 1: of the holding is worth six hundred million. A line
• 29:29
  Speaker 1: of credit is more like, you know, three fifty three,
• 29:32
  Speaker 1: seventy five something like that. You owe five hundred million
• 29:35
  Speaker 1: in this example. No, yeah, you owe five huty million
• 29:37
  Speaker 1: this example. So you got to come up with one
• 29:39
  Speaker 1: hundred million plus in cap. I'm doing this off the
• 29:41
  Speaker 1: top of my head. It's a bad day, right, you
• 29:45
  Speaker 1: don't have that money. You may have to go sell assets.
• 29:49
  Speaker 1: That's called a fire sale. So you used to got
• 29:51
  Speaker 1: to start selling assets quickly or the bank and the
• 29:56
  Speaker 1: bank or execurity firm can ceize take your ownership. You
• 30:02
  Speaker 1: just go broke. There's many people have gone broke just
• 30:04
  Speaker 1: like I just told you. So here's another example of
• 30:08
  Speaker 1: what really happened in most recently twenty twenty one twenty two,
• 30:12
  Speaker 1: you had this mean stock fiasco where people thought a
• 30:16
  Speaker 1: company was worth x and for no good reason, they
• 30:19
  Speaker 1: drove the price up. And then people who are wealthy,
• 30:22
  Speaker 1: people who were you know, mischievous, they sold at the
• 30:26
  Speaker 1: height while all poor people got stuck in the middle
• 30:29
  Speaker 1: and couldn't and then the price was dropping. And there
• 30:32
  Speaker 1: it is like a falling knife, right, and they're stuck
• 30:35
  Speaker 1: at four hundred dollars of stock and the stock is
• 30:37
  Speaker 1: really was words was worth a hundred bucks, right, and
• 30:40
  Speaker 1: you could figure out the rest and hopefully you didn't
• 30:42
  Speaker 1: take out a loan. In the midst of all that stuff.
• 30:46
  Speaker 1: There's a company called Archicos. Archicos, I'm sure seeing this
• 30:50
  Speaker 1: improperly capital management that collapsed, losing twenty billion dollars because
• 30:56
  Speaker 1: they were overleveraged. In this particular crisis, you have new
• 31:00
  Speaker 1: wealth like cryptocurrency, in tech exits and IPOs and these things.
• 31:10
  Speaker 1: If you're overconfident, if you're over leveraged. If you're ignoring
• 31:13
  Speaker 1: taxes and liquidity needs, well you can it can be
• 31:18
  Speaker 1: a very very bad day. So you got to remember
• 31:20
  Speaker 1: the wealth is not what you earn, is what you keep.
• 31:23
  Speaker 1: Leverage without discipline is a shortcut to poverty. Do the
• 31:37
  Speaker 1: wealthy pay taxes? I guess I'll mix these two. Okay,
• 31:42
  Speaker 1: do the worth it because I want to do with
• 31:43
  Speaker 1: a Warren Buffett quote. And I know Warren. I mean,
• 31:46
  Speaker 1: we're not like buddies, but I do know I'm gonna
• 31:48
  Speaker 1: see them at least once a year. And I got images.
• 31:51
  Speaker 1: I remember one day I was going to a conference
• 31:54
  Speaker 1: in speaking and I didn't know what the conference was.
• 31:57
  Speaker 1: I just went there as a favor to a friend
• 31:59
  Speaker 1: and I just gotten married. And that's when you know
• 32:02
  Speaker 1: when you marry the right person, when they on their
• 32:04
  Speaker 1: honeymoon goes to a business conference with you and it's like,
• 32:07
  Speaker 1: just cool with it. So we go to this conference
• 32:10
  Speaker 1: in the middle of you know, no place, and I
• 32:15
  Speaker 1: can't name the conference, sorry, and I walk into double
• 32:19
  Speaker 1: beds and I called the front desk. It was a
• 32:23
  Speaker 1: little end like. Look, I don't mean be like rude
• 32:26
  Speaker 1: or whatever, but we just got married. Can we at
• 32:29
  Speaker 1: least get a queen bed, like, you know, I'm so sorry.
• 32:31
  Speaker 1: You know, we're sold out, but we can get you
• 32:34
  Speaker 1: someplace two or three miles down the road. I like, well,
• 32:37
  Speaker 1: let me go register and think about it. I don't
• 32:39
  Speaker 1: be a good, you know, a burden here. Let me
• 32:41
  Speaker 1: talk to my bride and I'll get back to you.
• 32:43
  Speaker 1: So I went to the to the sink to wash
• 32:49
  Speaker 1: my hands, and there was no hot water. But okay,
• 32:51
  Speaker 1: one thing leading to the other. I walk out the door,
• 32:54
  Speaker 1: turn right, which means the sink was facing the next bedroom.
• 32:58
  Speaker 1: The next door, the next door neighbor would have shared
• 33:03
  Speaker 1: the same sink as mind, because that's how they built properties.
• 33:06
  Speaker 1: So my hot water's not working. They're hot water's not working.
• 33:09
  Speaker 1: So I turn out. I turned, I go out the door,
• 33:11
  Speaker 1: and I turn right. Coming out that door, Warren Buffett.
• 33:17
  Speaker 1: I look at him. I look at Shakespeare. I turn around,
• 33:21
  Speaker 1: not saying a word. I go back into the room.
• 33:24
  Speaker 1: I call the front desk. I said, you know what,
• 33:26
  Speaker 1: I'll stay right here, no problem whatsoever. Got to hang
• 33:31
  Speaker 1: out with Warren Buffett and and pick his brain and
• 33:34
  Speaker 1: get to know him. He's a really nice guy in
• 33:36
  Speaker 1: his family. But Warren Buffett is a number of great quotes, right.
• 33:42
  Speaker 1: One of them is, well, this is not great quote.
• 33:45
  Speaker 1: This is something he talks about that he thought it
• 33:47
  Speaker 1: was a shame that he had his secretary paid more
• 33:50
  Speaker 1: in taxes than he did. Well, he meant, I believe
• 33:55
  Speaker 1: tax rate. Okay, so that is correct. But let me
• 34:01
  Speaker 1: get into this because it's more complicated. So the wealthy
• 34:07
  Speaker 1: often pay taxes differently, not necessarily less, but maybe later
• 34:13
  Speaker 1: and in a different form. And this is a really
• 34:16
  Speaker 1: important section for you to pay attention to. So this
• 34:20
  Speaker 1: is called the buy, borrow and die strategy. Right. So
• 34:25
  Speaker 1: I've just told you you buy assets like real estate
• 34:28
  Speaker 1: or are marketable securities like really good quality stocks and
• 34:32
  Speaker 1: things like that, you modestly borrow against them because that
• 34:36
  Speaker 1: allows you to live and do stuff you want to
• 34:38
  Speaker 1: do and reinvest. But you do that modestly, okay, and
• 34:42
  Speaker 1: then you die and you plan for your death, and
• 34:46
  Speaker 1: guess what you're not doing in that example, paying taxes.
• 34:51
  Speaker 1: Now you're gonna end up paying taxes, or your errors
• 34:54
  Speaker 1: will end up paying taxes. I'll getting that a minute.
• 34:56
  Speaker 1: But look, fair change, no robbery. What I just told
• 34:59
  Speaker 1: you is not illegal. That is the tax As long
• 35:01
  Speaker 1: as you're respecting the tax code, you have a proper accountant,
• 35:06
  Speaker 1: not playing games with the federal taxi agencies, then what
• 35:09
  Speaker 1: I just told you is completely legal. This is the buy,
• 35:12
  Speaker 1: borrow and die strategy. That's what a trust is for,
• 35:15
  Speaker 1: is a state planning. So you want to buy appreciating assets,
• 35:19
  Speaker 1: borrow against some tax free die, and pass on stepped
• 35:23
  Speaker 1: up basis to your heirs. A steped up basis means
• 35:26
  Speaker 1: basically what happens after you remove the debt and all
• 35:30
  Speaker 1: that stuff. It's less. So if you have a dollar
• 35:34
  Speaker 1: that you're going to sell an asset for, you're going
• 35:37
  Speaker 1: to pay taxes on the dollar. But if there's the
• 35:40
  Speaker 1: only thingess left is twenty cents, the unions taking pay
• 35:43
  Speaker 1: taxes on the twenty cents. Okay, I'm confusing myself here
• 35:48
  Speaker 1: or not being clear to you, but trust that you're
• 35:51
  Speaker 1: really smart, so you'll catch this on replay. You're going
• 35:55
  Speaker 1: to so capital gains versus earned income tax rates. This
• 35:59
  Speaker 1: is really important. While the rich prefer capital gains. Now
• 36:05
  Speaker 1: we're talking about me rich and wealthy fifteen to twenty
• 36:08
  Speaker 1: percent over a salary which is thirty seven percent. Okay,
• 36:14
  Speaker 1: I'm talking about the use of trusts, foundations, liability corporations.
• 36:18
  Speaker 1: Philanthropy is a tax strategy dynasty dynastic dynastic wealth via
• 36:25
  Speaker 1: a GRATS, g R, a t S grats and estate
• 36:31
  Speaker 1: planning tools. So the wealthy paid lesson in percentage terms,
• 36:37
  Speaker 1: not necessarily in total dollars. This is the game that
• 36:40
  Speaker 1: politicians play often, by the way, So it's a myth.
• 36:43
  Speaker 1: This bus bursts some myths here. Rich people don't pay taxes. No,
• 36:51
  Speaker 1: not true. In fact, the wealthy pay most of the taxes,
• 36:55
  Speaker 1: but they may they pay much lower tax rate. Okay, John,
• 37:00
  Speaker 1: what did you just say? That made no sense? Right? Okay,
• 37:05
  Speaker 1: So if you are you own some real estate, let
• 37:13
  Speaker 1: me give it practical. IM gonna give you my own example.
• 37:15
  Speaker 1: So I bought a piece of real estate in LA
• 37:17
  Speaker 1: for you know, two hundred thousand dollars. Then it went
• 37:20
  Speaker 1: down to one hundreds some of my thousand dollars in
• 37:22
  Speaker 1: the economic crisis two thousand and eight. I let I
• 37:24
  Speaker 1: held on to it. Poor people just seale sales sale.
• 37:26
  Speaker 1: But everybody was telling me that was broke, so I listened.
• 37:28
  Speaker 1: I didn't pay attention to them because they hang around
• 37:30
  Speaker 1: nine and broke people you'll be the tenth. I kept
• 37:32
  Speaker 1: a hold of it. Uh. Several years later, six years later,
• 37:37
  Speaker 1: I wanted to buy a piece of real estate called
• 37:39
  Speaker 1: seven nd and fifty thousand dollars. Where do I get
• 37:41
  Speaker 1: seven fifty thousand dollars from? Let me got okay, let
• 37:43
  Speaker 1: me figure out what to get it from. I want
• 37:45
  Speaker 1: to buy this property. So I call a friend of
• 37:47
  Speaker 1: mine in Los Angeles, a real estate broker, a brother
• 37:51
  Speaker 1: actually named low who's just absolutely great. And I asked him,
• 37:58
  Speaker 1: I knowe. Daniel Lowe is his name if you want
• 38:00
  Speaker 1: to use an ice real estate agent in LA. And
• 38:03
  Speaker 1: his wife is Jennifer Lowe, and I knew her, and
• 38:05
  Speaker 1: so I got to know the sun. So anyways, this
• 38:10
  Speaker 1: real estate agent named Daniel Loan, and I said, look,
• 38:12
  Speaker 1: this is my property and I'll tell you the address
• 38:15
  Speaker 1: at seven one two two Latira in Los Angeles, and
• 38:18
  Speaker 1: it's a townhouse and I want to sell it. What
• 38:22
  Speaker 1: can you they go get it for? Keepn know how
• 38:23
  Speaker 1: I bought it for two hundred thousand change. He said, oh,
• 38:26
  Speaker 1: probably seven to fifty. I said, excuse me, what'd you say?
• 38:31
  Speaker 1: He said, yeah, I can probably give you seven to
• 38:32
  Speaker 1: fifty thousand dollars and I pay SoSE yes, how soon
• 38:36
  Speaker 1: can you sell this? I can probably sell this in
• 38:37
  Speaker 1: a week. Really, we listed it. It was sold within
• 38:40
  Speaker 1: a week. He had an offer women a week to
• 38:42
  Speaker 1: a minute to close. And then when I got the
• 38:45
  Speaker 1: seven to fifty transferred to me thousand dollars. I'm not
• 38:50
  Speaker 1: a genius here, I'm not a rocket size. This is
• 38:52
  Speaker 1: a power of real estate. I keep telling you the
• 38:54
  Speaker 1: number one way you build wealth, this home ownership. I
• 38:56
  Speaker 1: did nothing but buy it and hold. And somebody rented
• 38:58
  Speaker 1: this place out to me when I wasn't there and
• 39:00
  Speaker 1: moved to Atlanta, and it was a police officer, black
• 39:03
  Speaker 1: police officer in the LAPD laid on paying rent. By
• 39:06
  Speaker 1: the way, it's fine, and all I have to do
• 39:07
  Speaker 1: is just pay the property taxes once a year, which
• 39:10
  Speaker 1: I was, you know, fine, but you know it's my asset,
• 39:12
  Speaker 1: and I had sort of put it on set and release.
• 39:14
  Speaker 1: I forgot about it, really and other than chasing's got
• 39:17
  Speaker 1: for rent anyway, So we years later I bought it again,
• 39:19
  Speaker 1: sold it for what three times what I paid for it.
• 39:22
  Speaker 1: That Okay, here's the magic. Through a ten thirty one
• 39:26
  Speaker 1: tax free exchange, I was able to take that seven fifty,
• 39:31
  Speaker 1: transfer it to another state. Within a year, buy another
• 39:36
  Speaker 1: asset tax free. Hello John Bryant to your head, Hello
• 39:44
  Speaker 1: did that? Oh? Did that ring? True? Zero taxes? That's
• 39:49
  Speaker 1: a ten thirty one tax free exchange that's available to
• 39:51
  Speaker 1: everybody if you do it within a year. Real estate
• 39:54
  Speaker 1: to real estate, you pay no taxes. In fact, if
• 39:58
  Speaker 1: you have a single family home and you sell that home,
• 40:02
  Speaker 1: this is this is this is just mainStreet capitalism. Here,
• 40:05
  Speaker 1: you sell that home and you're a single person, I
• 40:08
  Speaker 1: believe you have profits of capital gains. Profits means a
• 40:11
  Speaker 1: gain on capital game versus a gain on income income
• 40:14
  Speaker 1: tax thirty seven percent, capital gains tax twenty percent, fifteen
• 40:20
  Speaker 1: twenty percent. I'll get to a difference in a minute.
• 40:22
  Speaker 1: You want to be in the capital gain side. Right
• 40:26
  Speaker 1: of a very wealthy friend of mine who got upset
• 40:28
  Speaker 1: when I try to bring him a business deal, he said,
• 40:29
  Speaker 1: I don't want to make any more money. I've already
• 40:31
  Speaker 1: made as much money. I'm trying to manage what I've
• 40:33
  Speaker 1: got because if I make if I make some money,
• 40:35
  Speaker 1: I got to pay thirty seven percent plus the city.
• 40:37
  Speaker 1: In the city, the state and city taxes might be
• 40:40
  Speaker 1: as much as fifty percent in the state of California
• 40:42
  Speaker 1: of every dollar you make. I'm not trying to do that.
• 40:44
  Speaker 1: But if I just manage the asses I've got and
• 40:48
  Speaker 1: I sell buy and sell assets of a capital gains bass,
• 40:53
  Speaker 1: I'm paying twenty percent. It's just smart right. You should
• 40:57
  Speaker 1: try to legally, legally, properly decrease your tax bird as
• 41:01
  Speaker 1: much as you can and pay what you pay what
• 41:04
  Speaker 1: you legally or obligate you. And I paid my first
• 41:07
  Speaker 1: seven figure tax bill. I was very honored to do it.
• 41:10
  Speaker 1: Paying taxes means you're making money, you're building wealth. It's
• 41:12
  Speaker 1: a compliment to the capitalist system and the compliment to
• 41:14
  Speaker 1: you use. Don't get angry gous you got to pay taxes,
• 41:16
  Speaker 1: just prepare for it when you do. What you do
• 41:18
  Speaker 1: not want to do is being in a fight with
• 41:21
  Speaker 1: the irs. Back to the story or the franchise tax board,
• 41:24
  Speaker 1: which I've been in the fight with before. It's not fun.
• 41:26
  Speaker 1: They would just come and take your stuff. That's true,
• 41:28
  Speaker 1: gangster they don't play. So if you're a single person,
• 41:32
  Speaker 1: you can get up to two hundred and fifty thousand dollars
• 41:33
  Speaker 1: with a tax free money when you sell a house,
• 41:36
  Speaker 1: marry up to five or one thousand dollars. Now check
• 41:38
  Speaker 1: with your tax pro I'm giving you general advice, okay,
• 41:41
  Speaker 1: or go to my one of my whole financial coaches
• 41:42
  Speaker 1: and operation. Nope. Now, if you make less than forty
• 41:44
  Speaker 1: seven thousand dollars a year as an individual or ninety
• 41:47
  Speaker 1: four thousand dollars a year as a couple, your capital
• 41:50
  Speaker 1: gains tax is zero. See this works, It works for people, right.
• 41:58
  Speaker 1: And if you've been made between forty seven thousand and
• 42:01
  Speaker 1: five hundred and eighteen thousand single or ninety four thousand
• 42:05
  Speaker 1: to five hundred and eighty three thousand as a married
• 42:07
  Speaker 1: couple joint filing jointly, uh, then you your capital gains
• 42:12
  Speaker 1: tax is about fifteen percent to uh what about fifteen percent?
• 42:16
  Speaker 1: Which is a bargain. If you're me and all of
• 42:21
  Speaker 1: my friends, you're gonna pay twenty percent to capital gains tax.
• 42:25
  Speaker 1: And you might pay a little mode of something on
• 42:27
  Speaker 1: a state level. I no idea in Georgia, but fifteen
• 42:31
  Speaker 1: twenty percent is even still a great deal. Now here
• 42:35
  Speaker 1: are the places where they're so Okay. So if you're
• 42:38
  Speaker 1: if you're making a living that's what they call it,
• 42:40
  Speaker 1: making a living, then you're earning a W A paycheck
• 42:43
  Speaker 1: with a W two or a ten ninety nine. Ten
• 42:46
  Speaker 1: ninety nine is a contract income. Okay, they pay, They
• 42:49
  Speaker 1: don't take any taxes out, but you've got to remember
• 42:51
  Speaker 1: to take your own taxes out otherwise the federalies will
• 42:54
  Speaker 1: become to get you. Okay. If if you're earning an
• 42:58
  Speaker 1: income is a W two, right, so you're cashing the check,
• 43:02
  Speaker 1: you're not writing it. This is another example. I guess
• 43:04
  Speaker 1: if you're if you're a capital gains person, you're writing
• 43:07
  Speaker 1: the check, Jerry speaking. If you're W two, you're cashing
• 43:10
  Speaker 1: the check. W two is a lower tax amount, but
• 43:16
  Speaker 1: a higher tax percentage. Okay, capital gains is a lower
• 43:20
  Speaker 1: tax amount us a percentage and a higher tax amount.
• 43:25
  Speaker 1: Here are some states in how they treat taxes. California
• 43:30
  Speaker 1: charged you thirteen on your capital gains. Uh. They treated
• 43:35
  Speaker 1: like ordinary income. California, where I was born, is gangster right,
• 43:40
  Speaker 1: no special deals, no special rates. New York same thing
• 43:45
  Speaker 1: they tax it. You're in capital gains is ordinary income
• 43:49
  Speaker 1: up to ten point nine plus a New York city tax. Uh. Texas, California,
• 43:55
  Speaker 1: so Texas, Florida, Tennessee. No state income tax. That's why
• 43:58
  Speaker 1: people love living there. So you only pay federal capital
• 44:02
  Speaker 1: gains tax Arizona, Georgia, North Carolina. Uh, you do not.
• 44:06
  Speaker 1: H They do not tax capital gains. But they have
• 44:09
  Speaker 1: a flat or a modern income tax, which is why
• 44:11
  Speaker 1: I told you I paid a modern tax in Georgia
• 44:14
  Speaker 1: over by the way. Once you pay that tax, you
• 44:16
  Speaker 1: start looking at your potholes and all kinds of stuff.
• 44:18
  Speaker 1: You're like, hey man, start writing letters, get fix this stuff.
• 44:21
  Speaker 1: Your council piers and your congress person the hey man,
• 44:24
  Speaker 1: that's me, Like, I just paid taxes, pay fix this stuff, right.
• 44:28
  Speaker 1: You start becoming real concern So yeah, now let's get
• 44:32
  Speaker 1: into some some some of the I'm just gonna run
• 44:34
  Speaker 1: through this stuff really quickly. The fifteen percent capital gains
• 44:38
  Speaker 1: uh tax applies at the federal level for most Americans
• 44:42
  Speaker 1: who earn you know, less than a half million dollars a year.
• 44:48
  Speaker 1: Your your total tax bill is going to just go
• 44:51
  Speaker 1: to your tax go to your tax pro Okay, So
• 44:54
  Speaker 1: here's what the what the federal the federal govern tells
• 44:56
  Speaker 1: about who pays what. So wh when you're your friends
• 44:58
  Speaker 1: say you these politicians and say rich people don't pay taxes,
• 45:01
  Speaker 1: it's a lie. Now, they may not pay their fair
• 45:04
  Speaker 1: share of taxes, and there are a lot of tax loopholes,
• 45:07
  Speaker 1: and there's some things that need to be addressed. In
• 45:09
  Speaker 1: my opinion, took me on Wall Street where people are
• 45:12
  Speaker 1: getting away with things. But the reality is this. The
• 45:18
  Speaker 1: top one percent of earners, which includes me, pay about
• 45:22
  Speaker 1: forty percent of all federal income tax. The top ten
• 45:28
  Speaker 1: percent of earners pay roughly seventy percent of all federal
• 45:33
  Speaker 1: income tax. The bottom fifty percent of earners pay about
• 45:38
  Speaker 1: two to three percent of all federal income tax. And
• 45:41
  Speaker 1: doesn't that feel fair? I mean, that's that's not bad
• 45:45
  Speaker 1: because it how this is the case because the US
• 45:47
  Speaker 1: federal income tax system is progressive. Higher earners or tax
• 45:50
  Speaker 1: at a higher marginal rate up to thirty seven percent.
• 45:54
  Speaker 1: So if you're earning money, then they're getting it from
• 45:58
  Speaker 1: your earnings. They're they but they want to reward investment.
• 46:02
  Speaker 1: It's a whole other conversation for another time, holding investments
• 46:07
  Speaker 1: and all that kind of stuff. And I mean, so again,
• 46:10
  Speaker 1: making money or building wealth. The effective tax rate is
• 46:16
  Speaker 1: what someone actually pays after deductions, credits, loopholes, not just
• 46:20
  Speaker 1: the top line rate. Right, So many ulture wealthy individuals
• 46:23
  Speaker 1: pay lower individual effect lower effective tax rates than the
• 46:28
  Speaker 1: middle class workers. Why they earn capital gains not salaries
• 46:32
  Speaker 1: again twenty to fifteen to twenty percent versus thirty seve percent.
• 46:34
  Speaker 1: They usu legal tax shelters like foundations, real estate depreciation
• 46:40
  Speaker 1: carried interest, which is for private equity and hedge fund managers.
• 46:43
  Speaker 1: And I think that is an issue that someone could
• 46:46
  Speaker 1: argue needs some more attention paid to borrowing against assets assets.
• 46:52
  Speaker 1: I talked about margin accounts and security insecurities backed lines
• 46:56
  Speaker 1: of credit. So when Warren Buffett says that he pays
• 46:59
  Speaker 1: a lower tax rates in his secretary, is because most
• 47:01
  Speaker 1: of his income is from capital gains and dividends. Okay,
• 47:05
  Speaker 1: is the light on in your head now? Like, oh, okay,
• 47:07
  Speaker 1: now I get it. Some ultrawealthy pay almost nothing legally,
• 47:12
  Speaker 1: all right. You know Jeff Bezos, Elon Musk, other billionaires
• 47:16
  Speaker 1: paid little to no taxes in some years. This wasn't illegal.
• 47:20
  Speaker 1: They simply didn't realize taxable income. Instead, they borrowed against
• 47:25
  Speaker 1: their stock. They used appreciation and claim investment losses. As
• 47:30
  Speaker 1: long as it's legal, it's all good. Now. I could
• 47:33
  Speaker 1: go deeper into that topic, but I really want to
• 47:36
  Speaker 1: make sure I'm covering everything for you in this particular episode,
• 47:45
  Speaker 1: and so let me go deal with structures. So the
• 47:59
  Speaker 1: wealthy used t us foundations, limited liability corporations, right, and
• 48:04
  Speaker 1: then you have a two like this g R A T.
• 48:06
  Speaker 1: I mentioned the grat. Okay, they'd used to minimize taxes,
• 48:09
  Speaker 1: preserve wealth, and shape their legacy. I'm going to just
• 48:13
  Speaker 1: go through this real quickly. So a trust is a
• 48:15
  Speaker 1: legal entity that holds assets on behalf of beneficiaries. You.
• 48:19
  Speaker 1: Wealthy individuals use various types of trusts. This is used
• 48:24
  Speaker 1: to avoid probate, which is an argument basically after you
• 48:27
  Speaker 1: die through the court system, and it's very expensive with
• 48:30
  Speaker 1: a lot of lawyers. The public court process basically settles
• 48:34
  Speaker 1: your estates. If you have a trust, it's sorted because
• 48:36
  Speaker 1: you've sorted it out in advance, You've told everybody what
• 48:39
  Speaker 1: you want, You've dealt with the tax issues. It's just
• 48:41
  Speaker 1: it's like you're alive. The trust is like you're alive
• 48:44
  Speaker 1: even though you passed on, and it minimizes your estate taxes.
• 48:48
  Speaker 1: I have a trust by the way, you control how
• 48:51
  Speaker 1: and when your heirs receive their money. Common types of
• 48:58
  Speaker 1: common types used by the way irrevocable trust. I had
• 49:02
  Speaker 1: a friend of mine who had an irrevocable trust, and
• 49:05
  Speaker 1: after he passed, someone he loved very dearly basically had
• 49:11
  Speaker 1: to go and negotiate with other members of their family.
• 49:14
  Speaker 1: Of the family, and I don't want to get too specifics.
• 49:16
  Speaker 1: I don' want aybody to guess who this is, but
• 49:18
  Speaker 1: they had negotiate with other members of their family on
• 49:21
  Speaker 1: assets because the trust has been put in place twenty
• 49:25
  Speaker 1: years before, and one group was targeted and there was
• 49:29
  Speaker 1: an assumption that somebody else was going to be okay,
• 49:31
  Speaker 1: and so the primary person in this person's life was
• 49:37
  Speaker 1: not okay. Actually, so irrevocable trust, you really need to
• 49:42
  Speaker 1: know what you're doing before you use one of those.
• 49:44
  Speaker 1: You move assets out of the individual estate, out of
• 49:47
  Speaker 1: an individual estate, lowering the state tax liability, but it's irrevocable.
• 49:55
  Speaker 1: There was a revocable trust. Also, by the way, grand
• 49:59
  Speaker 1: toward trust. Grand Or paid taxes on trust income, allowing
• 50:03
  Speaker 1: the assets to grow untouched inside the trust. And that
• 50:06
  Speaker 1: sounds that's exactly what that sounds like like. So if
• 50:08
  Speaker 1: I put something in the trust, I'd pay the taxes
• 50:12
  Speaker 1: on the trust income. Dynasty trust a designed to lasts
• 50:17
  Speaker 1: for multiple generations without incurring a state taxes at each
• 50:21
  Speaker 1: generational level, especially powerful in states that allow trust to
• 50:25
  Speaker 1: last for hundreds of years or more. In this d
• 50:30
  Speaker 1: this is the dynasty trust. That's again, it's just gangster.
• 50:34
  Speaker 1: I wish I had time to go into detail on
• 50:36
  Speaker 1: these things. You can tell me whether you want me
• 50:38
  Speaker 1: to do another podcast, because we're coming on the one
• 50:40
  Speaker 1: o'clock the one hour market. If you want to go
• 50:42
  Speaker 1: deeper in one of these areas or some of these areas,
• 50:44
  Speaker 1: I will, but I don't want to bore you. If
• 50:46
  Speaker 1: you like John, get on with it. Private foundations these
• 50:50
  Speaker 1: are these are not like Operation Hope. It's not an
• 50:53
  Speaker 1: Operation Open a five oh one c three nonprofit, public nonprofit.
• 50:57
  Speaker 1: I don't own the nonprofit I founded it, But the
• 51:01
  Speaker 1: four point five billion dollars I've run through Operation Hope,
• 51:04
  Speaker 1: I don't own that, And they can technically can fire
• 51:06
  Speaker 1: me tomorrow the board of directors that I put in place. Right,
• 51:10
  Speaker 1: many founders have been founded by that fired from their
• 51:13
  Speaker 1: own situation. So another discussion on the other day. So
• 51:19
  Speaker 1: a private foundation, these are non profit entities that wealthy
• 51:22
  Speaker 1: individuals or families fund themselves. I want you to think
• 51:25
  Speaker 1: about now, the Gates Foundation, why do you want to
• 51:28
  Speaker 1: use them? The donor gets a tax deduction from contributing
• 51:30
  Speaker 1: to the foundation up to say, thirty percent of adjusted
• 51:33
  Speaker 1: gross income. The foundation has only only has a distribute
• 51:38
  Speaker 1: five percent of its assets each year to charitable causes
• 51:42
  Speaker 1: to keep it legal. The rest can be invested and
• 51:44
  Speaker 1: managed often by family members and advisors. Now don't feel
• 51:48
  Speaker 1: a certain kind of way. They can't put the money
• 51:50
  Speaker 1: in their pockets, but they can keep this perpetually going
• 51:55
  Speaker 1: and just take If it's one hundred million dollars private foundation,
• 51:59
  Speaker 1: they can just you know, give out five million dollars
• 52:02
  Speaker 1: and it's legal for them to just reinvest the rest.
• 52:05
  Speaker 1: But the public got the benefit of five million dollars
• 52:08
  Speaker 1: of charitable activity. And this money is not available to
• 52:11
  Speaker 1: this individual or person or family to use to go
• 52:14
  Speaker 1: buy Bentley's and all kind of lifestyle stuff. So I
• 52:17
  Speaker 1: don't want you to understand that the one of the
• 52:19
  Speaker 1: benefits of this is legacy and brand control. The family's
• 52:22
  Speaker 1: name lives on while funding causes that they care about.
• 52:26
  Speaker 1: It's giving with intention and tax efficiency. I love this
• 52:30
  Speaker 1: next vehicle, LLC's I have a bunch of them, like
• 52:33
  Speaker 1: a boatload of LC's limited liability corporations. Wealthy individuals and
• 52:39
  Speaker 1: families can often place real estate, investment portfolios or even
• 52:43
  Speaker 1: businesses inside it limited liability corporation, then transfer interest in
• 52:48
  Speaker 1: the LC to airs or trusts. I cannot recommend this enough.
• 52:52
  Speaker 1: They're simple, they're easy, often one page to design. I
• 52:59
  Speaker 1: had seven hundred home homes when I used to own
• 53:00
  Speaker 1: the Promise Homes Company, just under set under homes, and
• 53:03
  Speaker 1: my ultimate goal was to get each one of those
• 53:05
  Speaker 1: homes and an individual LLC I didn't get. I didn't
• 53:08
  Speaker 1: get to that point because I was buying homes a
• 53:10
  Speaker 1: bunch of a time. But I would certainly have a
• 53:13
  Speaker 1: group of homes in a separate LLC. So something happens
• 53:16
  Speaker 1: that that that LLC gets sued or there's some issue
• 53:19
  Speaker 1: with that, or there's a legal fight, then then you
• 53:22
  Speaker 1: can only punch through to that limit liability corporation. You
• 53:25
  Speaker 1: can't punch through that to get to my other assets,
• 53:27
  Speaker 1: other properties that had nothing to do with that, And
• 53:29
  Speaker 1: you can't get to me. I ain't got nothing to
• 53:30
  Speaker 1: do with it. It was you know, you trip and fail
• 53:32
  Speaker 1: on in that home, and you can sue for recompense
• 53:37
  Speaker 1: with regard to that property. Although you'd hope that you
• 53:40
  Speaker 1: can work something out and not get into lawsuit. I've
• 53:42
  Speaker 1: been in a lawsuit in all the years I've been
• 53:44
  Speaker 1: in business. I try to work it out. So here's
• 53:46
  Speaker 1: the benefits of a LLC asset protection again, lawsuits, divorce,
• 53:50
  Speaker 1: et cetera. Now, you can't sign something personally. You can't
• 53:54
  Speaker 1: do a mortgage. You know, and sign it personally, then
• 53:58
  Speaker 1: retroactively put it into a limited life ability corporation and
• 54:01
  Speaker 1: then tell the bank that you can't come at me. No,
• 54:03
  Speaker 1: you signed that personally, you personally guarantee it. You just
• 54:06
  Speaker 1: put it inside of an LC. So somebody suing the
• 54:09
  Speaker 1: as suing later. I guess the asset may be have
• 54:13
  Speaker 1: some protections. I think about this. Yeah, I have a Yes,
• 54:19
  Speaker 1: I have a property in an LLC that I personally
• 54:22
  Speaker 1: guaranteed the mortgage. The company would come after me. The
• 54:27
  Speaker 1: bank would come after me if I default it. Yes,
• 54:30
  Speaker 1: but somebody suing because they it was some tied to
• 54:33
  Speaker 1: that property. You can only get Yeah, you couldn't punch
• 54:35
  Speaker 1: through to me if you were suing me externally, but
• 54:37
  Speaker 1: certainly the debt would be mine In that example, you
• 54:41
  Speaker 1: see I'm doing this in real time like so this
• 54:43
  Speaker 1: is like as honest and direct as it gets. So.
• 54:45
  Speaker 1: Asset protection valuation discounts. Interest in LLCs are often minority,
• 54:50
  Speaker 1: are non controlling, meaning their value for state gift tax
• 54:54
  Speaker 1: purposes can be reduced by twenty to forty percent. Talk
• 54:57
  Speaker 1: to your tax bro theyn't know what I'm talking about.
• 54:59
  Speaker 1: Get having ten percent to your daughter, ten percent to
• 55:02
  Speaker 1: your son, or that's what I'm talking about. Right, There's
• 55:06
  Speaker 1: there's some real benefits there from tax planning purposes. Helps.
• 55:09
  Speaker 1: It helps with succession planning and managing family business assets
• 55:12
  Speaker 1: under a unified structure. It keeps everything really clean. Inelegant.
• 55:18
  Speaker 1: Philanthropy is a tax strategy. This is my social impact playbook.
• 55:23
  Speaker 1: Wealthy families use philanthropy not only to do good, but
• 55:26
  Speaker 1: to offset income taxes through charitable deductions. I've done that.
• 55:30
  Speaker 1: It's a good thing. America is the most philanthropic country
• 55:34
  Speaker 1: in the world. Is it because Americans are better people? No, Okay,
• 55:38
  Speaker 1: it's because the tax structure incentivizes philanthropic contributions, and so
• 55:43
  Speaker 1: the tax structure incentivises home ownership. As an example, that's
• 55:46
  Speaker 1: why seventy five percent of whites in the country own homes.
• 55:51
  Speaker 1: And as soon as you're financially literate, you listening to this,
• 55:54
  Speaker 1: I'm convinced you're going to own a home and you're
• 55:56
  Speaker 1: going to do the things I'm talking about because your
• 55:59
  Speaker 1: incentive to do it. And it's very simple. You want
• 56:01
  Speaker 1: something to grow, you incentivize it. You want something to die,
• 56:05
  Speaker 1: and you want to stop it, you penalize it. I
• 56:08
  Speaker 1: used to ride I still ride bicycles, but I loved
• 56:11
  Speaker 1: add this carbon fib or bicycle, and I loved it
• 56:14
  Speaker 1: so much I wanted to travel with it. So I
• 56:15
  Speaker 1: would take that bike to Maui with me, and I'd
• 56:18
  Speaker 1: go to the Delta counter and I'd say, my bike
• 56:22
  Speaker 1: is in a bike bag. I want to ship this
• 56:23
  Speaker 1: to Maui, Hawaii. And they look at me crazy because
• 56:26
  Speaker 1: it's big and bulky. Okay, mister Brian, and we're gonna
• 56:29
  Speaker 1: do it for free because we like you. But then
• 56:31
  Speaker 1: I did it, you know, several times a year. They're like,
• 56:34
  Speaker 1: he and a bunch of other people are doing it.
• 56:36
  Speaker 1: Let's let's charge him one hundred bucks each way. And
• 56:39
  Speaker 1: I grow griped and grumbled a little bit, but I said, fine,
• 56:42
  Speaker 1: hundred bucks each way. Then they increased it to two
• 56:45
  Speaker 1: hundred dollars each way, and then I think that three
• 56:48
  Speaker 1: hundred dollars each way. Well, when he got to two
• 56:50
  Speaker 1: or three hundred dollars each way, I said, now the
• 56:52
  Speaker 1: bike staying at home, and I rented a bike in Maui.
• 56:55
  Speaker 1: And by the way, I'm more than happy rinting a
• 56:57
  Speaker 1: bikes in Maui today. But that changed my beha. They
• 57:00
  Speaker 1: taxed me enough to change it. Wasn't they were being
• 57:03
  Speaker 1: mean to meet. They didn't want big bulky bikes that
• 57:05
  Speaker 1: worth ten dollars in the whole of their plane gets broken, scratched,
• 57:09
  Speaker 1: whatever they get charged for it, sued for it, and
• 57:12
  Speaker 1: it mess less room for them to take luggage. They
• 57:14
  Speaker 1: weren't a by delivery program right, so that something they
• 57:19
  Speaker 1: tried to do as a convenience to their passengers became
• 57:22
  Speaker 1: some of the people like me took advantage of. And
• 57:24
  Speaker 1: they stopped it by creating a disincentive. That made sense
• 57:28
  Speaker 1: because it applies to a lot of different things. So
• 57:33
  Speaker 1: charitable deductions or offset income avoid capital gains taxes by
• 57:38
  Speaker 1: noting by donating appreciated assets like stock. So you can
• 57:42
  Speaker 1: donate stock to avoid capital gains tax, reduce the state
• 57:47
  Speaker 1: taxes by moving wealth out of the estate into a
• 57:50
  Speaker 1: charitable vehicle. Again, you want to go deeper in some
• 57:52
  Speaker 1: of this, I will. I'm just trying to do this
• 57:54
  Speaker 1: very quickly. Okay. Let's deal with a grand tour Retained
• 57:59
  Speaker 1: Auity trust a GRAT g R. A T A GRAT
• 58:03
  Speaker 1: allows a wealthy individual to freeze the value of their
• 58:07
  Speaker 1: estate and pass on the appreciation of an asset. That
• 58:10
  Speaker 1: air is tax free if done right. Yes, I said
• 58:14
  Speaker 1: that right in this gangster wich about it. We can
• 58:16
  Speaker 1: be talking about millions and millions of minions of dollars,
• 58:19
  Speaker 1: tens of millions of dollars for a wealthy estate, maybe
• 58:21
  Speaker 1: even hundreds of millions, depending on how wealthy somebody is.
• 58:25
  Speaker 1: So the person puts appreciating asset stocks in a private
• 58:29
  Speaker 1: company or real estate into a GRAT. They receive annuity
• 58:33
  Speaker 1: payments back over a set term, to say over five years,
• 58:36
  Speaker 1: based on a fixed IRS interest rate. If the asset
• 58:41
  Speaker 1: grows faster than the I R S interest rate, which
• 58:44
  Speaker 1: is typically low, then the excess growth passes the AIRS
• 58:49
  Speaker 1: with no additional gift or state taxes. You can play
• 58:53
  Speaker 1: this back later. This is one of the most powerful
• 58:56
  Speaker 1: state planning to used by the by ultra wealthy families. Thing,
• 59:00
  Speaker 1: the Waltons, thing, Zuckerberg, Matta, who's a friend of mine?
• 59:03
  Speaker 1: I think Jeff Bezos, et cetera. It's crazy. I know
• 59:05
  Speaker 1: all these people, not well a lot, but I'd at
• 59:07
  Speaker 1: least know them. Most of the Marxite pretty nice in person.
• 59:12
  Speaker 1: A dynasty trust is used by wealthy families to preserve
• 59:15
  Speaker 1: wealth across multiple generations while minimizing or eliminating the estate
• 59:20
  Speaker 1: of gift taxes over time. It's one of the most
• 59:22
  Speaker 1: powerful tools. We're creating multi generational wealth. Again, we don't
• 59:27
  Speaker 1: have time to get them at an hour now if
• 59:28
  Speaker 1: I bored you, A couple of benefits. Normally, with wealth
• 59:31
  Speaker 1: has passed down, it's taxed at each generation, okay, forty percent.
• 59:37
  Speaker 1: Federal state taxes ouch forty percent. Okay, So I'll say
• 59:42
  Speaker 1: that again. When wealth has passed down, it's taxed at
• 59:45
  Speaker 1: each generation. Okay. A dynasty trust locks in wealth now
• 59:50
  Speaker 1: and future generations benefit tax free because the asset never
• 59:54
  Speaker 1: legally enters their states. Did you get that? It protects
• 59:59
  Speaker 1: assets from credit, divorce and lawsuits because the trust owns
• 1:00:02
  Speaker 1: the asset. Not the beneficiaries. Those assets are shielded from
• 1:00:05
  Speaker 1: creditors or bankruptcy, divorce settlements, poor decision makers. By making
• 1:00:09
  Speaker 1: by heirs, this creates a financial firewall for the family.
• 1:00:15
  Speaker 1: You can set you know, you can set your own
• 1:00:17
  Speaker 1: detailed rules. Money only released by for educ You can
• 1:00:20
  Speaker 1: say your money's only released for educational purposes, or health
• 1:00:23
  Speaker 1: and housing, or starting a business. It prevents trust fund
• 1:00:26
  Speaker 1: baby syndrome, where heirs don't blow the fortune because they
• 1:00:30
  Speaker 1: never learned how to work and they figure that they
• 1:00:31
  Speaker 1: can just jail forever. By the ways the joke, first
• 1:00:34
  Speaker 1: generation makes it, second generation spends it, third generation loses it.
• 1:00:39
  Speaker 1: Often so this you can encourage people to work and
• 1:00:41
  Speaker 1: do stuff because you can limit how much money it
• 1:00:43
  Speaker 1: goes to them. It often guided by a trustee or
• 1:00:46
  Speaker 1: a family member. By the way Shack I think with
• 1:00:47
  Speaker 1: Shack said when his kid said, man, Daddy, why are
• 1:00:51
  Speaker 1: we working? We rich? We rich? He says, no, no,
• 1:00:53
  Speaker 1: I'm rich. You got to go to work, right. It
• 1:00:57
  Speaker 1: often's guided by a trustee or family member. Family offer.
• 1:01:00
  Speaker 1: It's not a family member maintaining oversight, family office. You
• 1:01:03
  Speaker 1: mean you when we deal with that in the next podcast,
• 1:01:06
  Speaker 1: has so much to go over. It takes advantage of
• 1:01:08
  Speaker 1: current gift and the state tax exemptions. In twenty twenty five,
• 1:01:12
  Speaker 1: the estate tax exemption may be reduced significantly by the way,
• 1:01:15
  Speaker 1: from thirteen point six million to seven million. Most people
• 1:01:18
  Speaker 1: are listening to this, going, what do I care. I
• 1:01:20
  Speaker 1: don't have seven million, but for somebody like me, what
• 1:01:22
  Speaker 1: I just told you is relevant. Families are using dynasty
• 1:01:25
  Speaker 1: tax trusts now to lock in the larger exemption before
• 1:01:28
  Speaker 1: its sunset. So basically they're doing they're creating these trusts
• 1:01:31
  Speaker 1: like right now in a hurry before the end of
• 1:01:33
  Speaker 1: twenty twenty five, so they get the benefit of basically
• 1:01:36
  Speaker 1: fourteen million dollars worth a coverage versus seven million dollars
• 1:01:38
  Speaker 1: with the coverage one. Once in the trust, that wealth
• 1:01:41
  Speaker 1: can grow indefinitely outside the taxable estate benefits from growth
• 1:01:46
  Speaker 1: over time. Assets placed in a dynasty. In a dynasty
• 1:01:49
  Speaker 1: trust can be invested growing for generations, no estate tax drag,
• 1:01:55
  Speaker 1: so the compounding of power is much stronger than an
• 1:01:58
  Speaker 1: a taxable to state, what I tell you make money
• 1:02:00
  Speaker 1: during the day, you build wealth in your sleep, all right.
• 1:02:03
  Speaker 1: I can go on and on and on, But basically
• 1:02:05
  Speaker 1: a dynasty trust is how the wealthy play chess, not checkers.
• 1:02:08
  Speaker 1: It's not just about giving your children money. It's about
• 1:02:10
  Speaker 1: giving your family a foundation for one hundred years. Hello,
• 1:02:15
  Speaker 1: I'm not gonna get this right. But Warren Buffett one
• 1:02:17
  Speaker 1: said that he wanted to give his children enough money
• 1:02:19
  Speaker 1: so they never wanted for anything, but not so much
• 1:02:23
  Speaker 1: that they didn't want to do did not want to
• 1:02:27
  Speaker 1: do anything. He wanted to give them purpose and dignity
• 1:02:30
  Speaker 1: and all that stuff, but not a free ride. He
• 1:02:33
  Speaker 1: wanted them, you know, he wanted them to not suffer,
• 1:02:36
  Speaker 1: but he didn't want them to be spoiled brats. And
• 1:02:39
  Speaker 1: I think he succeeded. That kids are pretty cool people,
• 1:02:41
  Speaker 1: the ones I've met. I think I met all of them. Okay,
• 1:02:44
  Speaker 1: I hope that I've covered. I thought I'll both done
• 1:02:46
  Speaker 1: this this some justice. I really want to cover these
• 1:02:50
  Speaker 1: margin accounts and the lines of credit and how wealthy
• 1:02:53
  Speaker 1: people can go broke. That was a really important, important
• 1:02:56
  Speaker 1: thing for me to cover. I think I covered decently.
• 1:02:58
  Speaker 1: The trust foundations in l sees that in taxation that
• 1:03:03
  Speaker 1: most most taxes in this country are paid like seventy
• 1:03:06
  Speaker 1: percent are paid by the wealthy. So you can tell
• 1:03:08
  Speaker 1: politicians when they say this, you're lying. You're lying, You're lying.
• 1:03:11
  Speaker 1: John Brian told me that actually the wealthy pay most taxes,
• 1:03:13
  Speaker 1: but percentage wise they don't, and because of loopholes, they
• 1:03:19
  Speaker 1: probably we probably should be paying more. I mean, once
• 1:03:24
  Speaker 1: you get into a tax conversation, I mean, you got
• 1:03:26
  Speaker 1: to you. When you're wealthy, you have a whole team
• 1:03:29
  Speaker 1: of people who do nothing but sit down and try
• 1:03:31
  Speaker 1: to figure out how to avoid unnecessary taxation legally. And
• 1:03:35
  Speaker 1: some people push it too far. They're taking money off
• 1:03:38
  Speaker 1: shore and all that stuff. You go to jail for
• 1:03:39
  Speaker 1: that kind of stuff. Some people just say, I don't
• 1:03:42
  Speaker 1: you know, say some of these celebrities you've seen that
• 1:03:44
  Speaker 1: I don't owe any taxes, that taxing is a legal system.
• 1:03:47
  Speaker 1: They didn't literally in prison like they thought because they
• 1:03:50
  Speaker 1: were a celebrities are gonna say no, They literally ended
• 1:03:52
  Speaker 1: up in prison Wesley's Knipes and a bunch of other people.
• 1:03:55
  Speaker 1: So don't do that, all right. This is John O'Brien
• 1:03:58
  Speaker 1: this Money and Wealth on the Black Effect Network. Thanks
• 1:04:02
  Speaker 1: for making this a top one hundred podcasts and business
• 1:04:04
  Speaker 1: in the country, Top forty for entrepreneurship. Thanks for giving
• 1:04:07
  Speaker 1: me some love. I want you to give my book
• 1:04:09
  Speaker 1: Financial Literacy for all. Thanks for your support. If you've
• 1:04:12
  Speaker 1: been involved in Green Sock State. It'll be back next year.
• 1:04:14
  Speaker 1: By the way, if you missed it this year, get
• 1:04:16
  Speaker 1: my book, which now in paper book, paper book, paperback right.
• 1:04:20
  Speaker 1: Tell your friends to follow this podcast and also go
• 1:04:24
  Speaker 1: to Operation Hope and sign up download the Hope and
• 1:04:26
  Speaker 1: End app Hope in hand app, and sign up for
• 1:04:29
  Speaker 1: financial coaching if you tell them I sent you to
• 1:04:32
  Speaker 1: give you a thousand dollars scholarship for coaching and counseling
• 1:04:36
  Speaker 1: on me. That'll get your credit score up, your dead down,
• 1:04:38
  Speaker 1: your savings up so you can start building wealth again.
• 1:04:41
  Speaker 1: I want you to I don't want you saying you
• 1:04:43
  Speaker 1: hate rich people. I want you to be one, and
• 1:04:45
  Speaker 1: then I want you to focus on then once you
• 1:04:47
  Speaker 1: want you can become rich. I want you to start
• 1:04:48
  Speaker 1: being focused on becoming wealthy. My mother wanted a smith
• 1:04:51
  Speaker 1: got wrestler, so worked an hourly job for thirty two years.
• 1:04:54
  Speaker 1: The mother of one is the mother of Maara Hoskins
• 1:04:58
  Speaker 1: and Donnie Dave JN. L. Harris, my brother and my
• 1:05:02
  Speaker 1: sister and my brother and myself. My dad was Johnny
• 1:05:05
  Speaker 1: will Smith Arlene Hayes was my half sister. She's gone
• 1:05:08
  Speaker 1: to glory. My mother worked for thirty two years at
• 1:05:12
  Speaker 1: Bowing Aircraft and Downdouge's Aircraft, which became Bowing Aircraft a
• 1:05:15
  Speaker 1: merger and making eighteen dollars an hour, had a great
• 1:05:19
  Speaker 1: credit score, did not have generational wealth, so she had
• 1:05:22
  Speaker 1: to hustle, so she made money during the day. She
• 1:05:25
  Speaker 1: had a part time income from making handicrafts and things.
• 1:05:28
  Speaker 1: She used a part time income to save a down
• 1:05:31
  Speaker 1: payment to buy a house. She bought her first house,
• 1:05:34
  Speaker 1: then sold that one for a profit, bought a second one.
• 1:05:36
  Speaker 1: She did that seven times, and she gave a down
• 1:05:38
  Speaker 1: payment to my brother, and my sister gave me an
• 1:05:41
  Speaker 1: emergency loan when I needed it. I paid her back.
• 1:05:43
  Speaker 1: And she died with a min dollar net worth and
• 1:05:45
  Speaker 1: a credit score over seven hundred. It was only was
• 1:05:47
  Speaker 1: it dropped from eight to fifty because she wasn't using
• 1:05:49
  Speaker 1: credit anymore in the later parts of her life. But
• 1:05:51
  Speaker 1: she had lived a life of self determination. She built
• 1:05:54
  Speaker 1: a generational wealth at a whale. Her will was gangster
• 1:05:57
  Speaker 1: by the way. It basically said, anybody argue with his
• 1:05:59
  Speaker 1: will is cut out of it, so She had created
• 1:06:02
  Speaker 1: her own form of a trust in a very tight wheel,
• 1:06:06
  Speaker 1: and in the way she structured there was not no
• 1:06:08
  Speaker 1: taxing issues. But anybody can create a trust. You can
• 1:06:11
  Speaker 1: create a trust that you need to be wealthy to
• 1:06:13
  Speaker 1: do it. You should, at the very least have a wheel,
• 1:06:15
  Speaker 1: and you should have life insurance. Whether you can't get
• 1:06:17
  Speaker 1: a whole life, get term. All right, Love and light,
• 1:06:19
  Speaker 1: John O'Brien, let's go do this thing. Financial literacy is
• 1:06:23
  Speaker 1: the civil rights issue of this generation. You know better,
• 1:06:25
  Speaker 1: you do better. Piece and Light, No days off. That's
• 1:06:29
  Speaker 1: my t shirt today. Money and Wealth with John O'Brien
• 1:06:46
  Speaker 1: is a production of the Black Effect Podcast Network. For
• 1:06:49
  Speaker 1: more podcasts from the Black Effect Podcast Network, visit the
• 1:06:52
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• 1:06:57
  Speaker 1: favorite shows.