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How to Give Away Your Assets Without Losing Them. | Ali Katz · The Great Wealth Transfer

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  Once people see that you're making money, they see you as prey. Even though I'm a lawyer, I used to
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  think that this was just a lawyer's way of trying to make money, scaring us into asset
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  protection strategies. For most of us, when we're just starting out or we're making small
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  investments, we don't think much of them. And yet as our assets grow, those assets become at risk. I
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  did a handshake deal with an employee who, behind the scenes, really hated me.
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  It turns out that she had been stealing from me. I decided I would fire her immediately. Within a few
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  weeks, I had a lawsuit sitting on my desk. She was suing me for wrongful termination. That was
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  immediately $10,000 out of my pocket. The lawyer said to me, this is going to cost you at least
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  $50,000, if not more, in legal fees. I learned the lesson. Lawyers aren't just making this up to
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  scare you. You've got to protect your assets. So how do we do that? Well, the first thing that we do
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  is Dan Martell sent me an email that said it took him 15 years to write about a
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  $3.6 billion exit of one of his early investments in a company called intercom. And when he wrote it,
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  it got me thinking about whether he made this one mistake that you're probably making as well. If
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  you're investing in businesses, if you're building your own business, if you're investing in real
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  estate. Let's talk about that mistake right now. Dan Martell is the author of the book Buy Back
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  Your Time. We all know him. We all love him. His Martell method, his podcast, and we know that he is
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  very transparent about his investments and the decisions that he's making. And that's part of
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  what we love about Dan. So when I got this email, I was very interested to read about his investment,
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  how he held onto the investment for 15 years, even though he got lots of offers to sell along the
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  way. And he would call the founder that he was investing in, Owen and say, hey, are you selling or
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  are you continuing to build? And no one would say, nope, I'm still building. And Dan said, okay, I'm
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  staying in. And that paid off in a big way with this $3.6 billion exit. Congratulations,
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  Dan. Congratulations, Owen. And intercom now. Finn. What a great opportunity for everyone. I'm
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  so glad to read about it. The thing that the email didn't mention is whose name was that investment
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  in? Was that in Dan's name or did he do something better with it? That's what we're going to be
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  looking at for most of us when we're just starting out, or we're making small investments, we
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  don't think much of them. Right, because they're small or we're just starting out. And yet as our
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  assets grow, those assets become at risk. And even though I'm a lawyer, I used to think that this was
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  just a lawyer's way of trying to make money, scaring us into asset protection strategies. And
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  I thought they didn't really matter until I started making money. And I saw what happens as a
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  result. And the first thing I saw is that once people see that you're making money, they see you
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  as prey. There are predators out there that are preying on people who make money. And so
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  as you start to make money, you want to protect your assets in such a way that if a predator
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  comes after you in the form of a lawsuit or in the form of some sort of false accusation,
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  that your assets are going to be protected in such a way that they're not going to want to come
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  after you, because your assets would actually be hard to get at. Another way that that happens is
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  once you start employing people, I used to think, no way, I'm only going to employ people that I
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  love to work with and that I trust. And I would enter into handshake deals with people all the
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  time thinking, well, if I have to do a written contract, well, I'm not going to want to do
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  business with that person. I only do handshake deals. Well, that lasted until I did a handshake
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  deal with an employee who, it turns out, behind the scenes, really hated me.
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  And this was one of the worst experiences of my life. We went into business together because I
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  wanted to support her. She had a child. I knew I was going to be starting another business. I
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  wanted to create a business with her that would allow her to earn income. Even if I wasn't in the
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  business that I was in employing her then. So we start this business and we made a deal where if
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  she didn't have a certain minimum income, I would cover it. She told me she wasn't making the
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  minimum income. I said, okay, I'll cover it. Until one day I went into the office that she was
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  working in, and I saw her move something very quickly, and I thought, what was that all about?
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  Later that day, after she left the office, I got into her computer to see what was going on there.
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  Well, it turns out that she had been stealing from me, that she hated me. I was shocked to read
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  everything that I found in her emails. It turns out she was getting paid from other clients, that
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  she was engaging and just telling me that she wasn't theft. And it was devastating. And before
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  I could even think, I decided I would fire her immediately when she came in the next day, which I
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  did. But she was eight months pregnant and her stepmother was a lawyer. So within a
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  few weeks I had a lawsuit sitting on my desk, and she was suing me for wrongful termination and all
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  sorts of other things. The first thing that I needed to do was find out if I had insurance to
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  cover it, I didn't. The next thing that I needed to do was hire a lawyer. That was immediately $10,000
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  out of my pocket. The next thing I needed to do was provide my lawyer with all of the legal
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  agreements that I had with my friend, my business partner, my team member. Well, we were on a
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  handshake deal, and the lawyer said to me, sorry, this is going to cost you at
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  least $50,000 in legal fees. You need to just settle this even if you think you're in the right.
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  So five figures. Maybe it was even a six figure settlement later I was out of pocket and
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  luckily that was 15, 16, 17 years ago. I learned the lesson, though, that lawyers aren't just making
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  this up. In order to scare you. You've got to protect your assets. We can have a whole nother
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  episode on insurance and legal agreements. This one is about the asset protection that you can
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  put in place to protect what you have now, even before it's worth anything. So that as that asset
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  is growing, it's growing outside of your estate. Because if Dan made a $25,000 or $50,000
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  investment in intercom, that investment would have grown to nearly $1.8 million, very likely based on
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  the numbers that I've calculated in this cash out. And if that investment was growing outside of his
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  estate, it would be totally protected from creditors so that if anybody were ever to come
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  after him for anything, an employee, or if one of his children is driving a car and gets into an
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  accident and it's not covered by insurance, that asset would be totally protected. And he can do it
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  in a way where and you can do it in a way where you're still able to control the asset. Even
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  though it's fully protected, that's the important feature of the kind of trust that I recommend
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  that you set up. Asset protection from predators or creditors or lawsuits is just one aspect.
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  There's also an asset protection piece from taxes. And one of the biggest taxes here in the United
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  States is estate taxes. And you might think, oh, that doesn't apply to me. I don't have $15 million
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  because right now, today, you could have up to $15 million without any estate tax impact when you
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  die. But that number is going to change based on the administration that's in office. When I first
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  started practicing law, it was only $675,000. And that's federal. There's also state
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  estate taxes, depending on what state you live in. So what you can do with your asset, because we
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  don't know what the estate tax exemption will be when you die. We don't know what you'll own when
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  you die. And we don't know what the estate tax rate will be when you die. Today it's about 40%,
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  meaning that if you are over the estate tax exemption amount. Your family is going to pay 40%
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  to the government. That number has been as high as 77%. And again, we don't know what it's going to be
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  when you die. So if Dan lived in the US, which he doesn't, he lives in Canada. And if his 1.8 million
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  was subject to estate taxes today, that would be a $700,000 estate tax hit at his death. But
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  if he'd taken that investment, that 25 or $50,000, and instead of making it in his own name, had made
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  it in the name of an irrevocable trust that I call a steward's trust, it would grow in value
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  from that 25 or $50,000 to 1.8 million, completely free of risk from estate taxes, not just
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  in his death, but for many generations to come. And even better now, whoever is
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  stewarding that trust, whether it's him during his lifetime or his kids during their lifetimes,
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  they're actually incentivized to grow those assets, to learn how to steward those assets in a
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  way that they're able to grow and multiply and not be at risk of creditors, predators, lawsuits,
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  divorce, or estate taxes. So let's talk for a moment about the kind of trust I'm talking about.
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  I call it a stewards trust, which is an irrevocable trust versus a revocable trust, a
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  revocable trust you can set up during your lifetime. And you should to keep your assets out
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  of court at the time of your death or in the event of your incapacity. But it's revocable
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  during your lifetime, meaning that it is completely subject to estate taxes. It is
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  completely at risk of lawsuits, creditors, predators, divorce because it's still your asset.
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  It's a revocable trust, meaning you can take back the asset at any time. There's no protection other
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  than for incapacity or death, which is huge protection, but not from lawsuits, predators,
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  creditors or divorce or bankruptcy. But with an irrevocable trust. You've
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  given the asset away. Well, you might say, I don't want to give my assets away. I want to be able to
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  use my assets. I want to be able to invest my assets. I want to be able to grow my assets. And
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  that's why if you're going to use an irrevocable trust, you want to set that trust up so that you
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  can still have control over the assets and use over the assets. But the control is limited in
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  such a way that the assets are still protected. So how do we do that? Well, the first thing that we do
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  is we have an independent trustee who has full discretion, meaning they get to decide whether or
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  not to make any distributions from that trust or not. You might say, well, I don't want some
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  independent person deciding whether I get distributions for my trust. But yes, you do, because
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  that's what provides the protection. And you don't want distributions from the trust. You want to do
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  everything inside of the trust because you want all of the asset value to grow inside of the
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  trust. So if you want to buy a house, the trust buys the house. If you want to invest in a
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  business, the trust invests in the business. So everything happens inside of the trust. And you do
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  have a measure of control if the trust is drafted in the right way, which is that you, as the
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  beneficiary, would have the right to remove and replace the independent trustee with another
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  independent trustee. So that's your control. You can always fire the independent trustee and say, I
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  don't like how you're choosing to make distributions or not. I'm going to remove or
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  replace you. Now the other thing is that you want to make sure that you are named as the
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  investment trustee. You're the one who decides how the investments are made. Not a financial advisor,
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  not a trustee, not a friend, not your parent. You. You're the one that's in control of how those
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  investments are made. And that's what allows you to still invest those trust assets for growth. And
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  you want to build in. And this is what we do in our stewards trust. We build in a provision that
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  if as soon as an investment trustee steps into that role when they're young, maybe they're, you
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  know, 25 years old, 30 years old if their parent is creating this for them. Now, if you're creating
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  this for your kids now, you actually want to name them as a co trustee with another trustee and
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  give them a training period. Now this trust starts to become an educational tool where the
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  beneficiary of the trust, the investment trustee, is getting trained on how to make eyes wide open
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  investment decisions and engage with these trust assets in a really good way. And so, yes, it's
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  irrevocable. That's what makes it protected. But when the trust is drafted with the right terms
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  and in the right way, there's going to be a lot of educational opportunities, a lot of investment
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  opportunities, but a lot of protection from lawsuits, creditors, predators, divorce and estate
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  taxes. If you've made it this far in the video, it's because you really care about what you're
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  building. Even if it's really tiny right now, you believe it's going to build into something big, or
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  you might have already built something big, and you want to protect what you have. So the right
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  next step for you is to register for my next live masterclass. I'm going to link to that here in the
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  show notes. So look for that. Get on that masterclass. Because on that masterclass I'm going
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  to lay out for you in detail how to find the right person to support you to create a stewards
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  trust. Just like this. If you go to any old lawyer, what's going to happen is they probably won't
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  even know what a stewards trust is, or they may put in place an irrevocable trust for you that
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  isn't going to meet the criteria and characteristics that we've talked about today.
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  Maybe it won't really keep the assets out of your estate, or maybe it will have controls that are
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  way too tight that you don't want your loved ones to get stuck with, and you may not understand all
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  of the details. That's why I lay it out in detail on my masterclass. How to become Your Own Best
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  Advisor when it comes to these matters. What to look for, how to hire the right support, what you
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  can do yourself and what you need to pay somebody to do for you, and how to look at what you already
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  have in place to decide if what you already have is going to work. So I'll go over that in detail
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  on my next master class. Go ahead and find the link in the show notes and I look forward to
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  seeing you there, by the way. This is not specific legal, insurance, financial or tax advice for you.
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  You'd know if it was because you'd be paying me and I'd be looking at your specific situation. So
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  this is not that. This is for educational and informational purposes only. I strongly recommend
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  that you talk with your own legal professional, and that you attend my masterclass before you
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  hire one, to make sure that what you're getting is actually going to work for you and your family
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  when they need it. Because there's a lot of lawyers out there who are just putting in place
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  legal documents that are ultimately going to fail when it's too late. So I'll cover all of that on
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  the masterclass. If you've loved this, please subscribe, like, share, follow, do all the things so
• 14:35
  that you get notified about my next video or podcast and I'll see you next time. Bye for now.