Latest / Glovisor Podcast / Ep. 6: The Rockefeller Method: How Multi‑Generational Wealth Preservation Actually Works

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Ep. 6: The Rockefeller Method: How Multi‑Generational Wealth Preservation Actually Works · Glovisor Podcast

• Joe Abreu: The wealthiest families don't just make more money, they use wealth preservation to keep more of it. A system that most people have never heard of. If you've ever wondered why some families have built multi-generational wealth while the rest have just completely disappeared, today's guests will be sharing with us the Rockefeller method of wealth preservation And this conversation is going to change the way you think about wealth and the future you're creating. Glovisor welcomes Cliff Morgan. Cliff Morgan: Joe, thank you so much. really appreciate you having me on today. Joe Abreu: glad to have you. We're excited. Can't wait to hear more about all this wealth preservation. I've had a lot of ⁓ clients that have asked me many questions about wealth preservation and we knew that you were the right person that we had to have on to answer these questions. Cliff Morgan: Well, I'm honored to be here. Joe Abreu: Excellent. All right. So first and foremost, let's start off with why do the wealthiest families structure their money completely different to the rest of us? Cliff Morgan: That's a great question Joe. So the wealthy actually think about money very differently than most people do. So most people think about money as, do need to take care of my niece today? What do need to retire today? Well the wealthy are thinking, how can I actually grow my wealth and preserve it so I can pass it down for multiple generations? it's a different thought concept between the two. And when you're about preserving your wealth for multiple generations, the methods that are used for doing that are quite different than they are for just manage your own personal needs for your lifetime. Joe Abreu: So what do most successful entrepreneurs misunderstand about wealth preservation? Cliff Morgan: Well, I think a lot of times they mistake liquidity for control. liquidity, while it does give you a degree of control, you can do things very quickly with it. It's exposed. And you put it in an LLC and you're like, well, I got it in a limited liability company. It should be protected, but it is still exposed. And if there's anything that happens, let's say that inflict harm on truly innocently. A really good attorney can find a way to pierce that company or corporate veil and go directly after your personal assets the injury is severe enough. So it's truly not protected. And the ⁓ understand this. And understand that it's very important for them to protect that wealth for longevity. Joe Abreu: all heard of the Rockefeller family and always equated to wealth, So what does it a Rockefeller-style trust? Cliff Morgan: Well, and a lot of people really understand this, but it's a very interesting story. when John D. Rockefeller actually started off, established his business, Standard Oil Company in the state of Ohio. And then, corporations were designed very differently than the way they are today. And he wanted to expand his business well outside of the state of Ohio and actually make the first national company or organization in the United States. And due to the way corporate structures were designed back then, it was very limiting. He really wasn't able to do that. So he gathered, believe, if I remember the story correctly, it's about 41 of his advisors to come together. they created a very specialized trust structure. And it was based on English common law that went back more than 300 years. And structured the English common law in such a way ⁓ that allowed the business to operate out of that trust instead of a corporate structure. So if you look online, you can still Google it and find standard oil trust not just standard oil corporation. he went from having standard oil corporation in 1870 to standard oil trust and ran that for many, many decades. When he into a situation, he noticed that the tax code was going to change, especially in the way that estate taxes were going to be managed. And prior to 1913 and the change in the Internal Revenue Code and the taxation that was about to go into effect, he assembled his team together again to form a trust that wasn't just for his business, but now for his family. And he to actually preserve his family's wealth because one of the biggest erodors to wealth is taxation. And if you always notice, the wealthiest people out there, find the best legal ways to mitigate what they pay in taxes. And that's really important because it needs to be legal. so he created a trust structure and placed his wealth inside of this family trust. And not only that, he did something that nobody had ever done before. He purchased permanent life insurance on each family member that was born inside of the family. And that permanent life insurance was held in the trust. Now it was held in the trust so that as long as the family continues to bear children and a permanent life insurance policy is purchased for each new child born into the family, you could never outspend your wealth after about the second or third generation. Now, Looking at the difference between the Rockefellers and the Vanderbilts the Vanderbilts actually started accumulating their wealth significantly in railroad in around 1860 and John D Rockefeller in 1870. So about a 10 year head start on the Rockefellers. But fast forward more than seven generations and the Vanderbilts are virtually penniless. I wouldn't say entirely penniless, but in comparison. And the Rockefellers net worth is more than $11 billion. Now what made the difference here? Well, the Vanderbilts didn't structure their wealth the same way that the Rockefellers did. So by 1973, there was actually a family gathering as a family reunion with the Vanderbilts and just talking with each other in a casual way, they all really that there's no millionaires left in the family. And this really surprising while today, so many generations the Rockefellers still have preserved their entire wealth and not only have preserved it but have grown it as well. Now do you grow that? Well if you purchase permanent life insurance policies and you store them inside of a specialized trust structure as Rockefellers did the death benefit going to be far greater than anything was put in to buy the premiums. So again by the second or third generation as long as you continue to have children you continue to do the same thing, you put those permanent life insurance policies inside of that structure, you can't outrun your wealth unless you do something very foolish. But there are measures that you put in place to actually protect that so things like that don't happen. Hence, they still have their wealth. Now, the method of actually putting the permanent life insurance policies inside of the structure that they did is called a waterfall distribution method. And it's something that they actually coined as a name, it's just something that's been called over time. but it's a very special method of actually distributing wealth over to subsequent generations over many years. Joe Abreu: is this ⁓ one or is a system? Cliff Morgan: Well, it depends. In some cases, it can be a single trust. really is dependent on the individual circumstances. So I work with different people at different times. So depending on what we're doing, we may actually structure a couple of different trusts. Maybe one that handles active income. We have another structure that we do. So if someone does a lot of real estate deals with a handful of very wealthy individuals, and they all go in on projects together, doesn't necessarily have to be real estate. It could be virtually anything. let's say that you had a group of individuals and one of the things that they did, wanted to purchase a plane and all of them actually own it together. And they that in one trust structure and then the individuals actually all ⁓ manage trust and benefit from that trust. They decide to lease the plane out for use to receive income on that. And then that's managed where we can greatly mitigate the taxes that would be disseminated back down to those investors. So really depends on what we're working on and how we do things. In some we may actually work with ⁓ an LLC an S-Corp to manage profits proceeds. In some cases, our trust can actually be a full owner in many states of an So it really just dependent on circumstances. Joe Abreu: So what problem was this originally intended to solve? Cliff Morgan: Erosion of wealth. truly it was it was erosion of wealth. So If you're talking about our structure specifically our was designed in the ⁓ 1950s and and Benson Esquire he was an Harvard graduate who after graduating from Harvard back and he actually worked under professor Austin Scott and professor Austin Scott wrote the books Scott on trust law, which is known as the encyclopedia of trust law in the United States. there some control by Congress with trusts, it's very believe in the entire US code, there's only six different references for how Congress actually manages trusts from the US code. And of the US code, the Internal Revenue Code is Title 26. So there's very little that's in there. Most of what we have in ⁓ code or trust law came from Scott on trust law and that came from common law which actually is what we govern all trust by today. through actually under the tutelage of Professor Austin Robert and Benson Esquire learned a lot about how trust are structured and how English common law works. And English common law today has now been replaced by the uniform commercial code. So it's not exactly the same thing, but there's a lot of transition that's still there. There's still a lot of the original foundation in place, but he ⁓ trusts that create separation from the individual and also protects it from its beneficiaries. It went intense scrutiny in the ⁓ 90s and that intense scrutiny was then copywritten. Joe Abreu: Mm. Cliff Morgan: in 1999, it was the first trust that was ever copywritten. So it's pretty exciting, which makes what we have truly proprietary. There's a lot of other copycats that are out there who have something very similar to what we have or state that they do, but ours is truly based from the original in its design and how it operates. Joe Abreu: why would you want to use a trust more today than ever before? Cliff Morgan: Well, if you look at what's taking place right now, I mean, we have a massive deficit in our economy. We have more than $37 trillion in debt. I believe it's more than a $2 trillion deficit, and it's growing each year. It's very concerning. know that there are things that are taking place to help mitigate that as a nation. But what really makes this important is you want to be able to preserve your own wealth. So whenever I talk to people and I ask them, do you think taxes are at an all time high and they're gonna come down or do you think they're at an all time low and they're gonna go up or do you think they're gonna stay the same? And everyone that I've talked to, they really feel like that we're at an all time low and it's gonna go up. I believe that the highest tax rate or highest tax bracket we ever had was during World War II. And it was a 94 % tax bracket levied on the wealthiest people that were out there. So there is, concern that there are some people that are in Congress and Senate that may actually change the law should they ever get into power dramatically shift the way that wealthy actually pay taxes and if you listen to the news and how they talk about it They're always talking about a wealth tax, you know, there are several states out there who have levied a wealth tax on their citizens and people are pretty tired of that. They want to find a way where they can truly preserve their own wealth without having to worry about whether or not officials in government are utilizing our funds appropriately. And if you really pay attention to what's going on out there, there's a lot that's coming out more and more about corruption with how tax dollars are spent. And we individuals have no control over how our tax dollars are spent. But as individuals, the wealthy are truly genuinely giving people whenever you're wealthy you don't have to be taxed to put your money to work. People want to find ways to put their money to work and really make a difference in life, in other people, in the world and if the choice they typically make better decisions and the wealthy at very differently than a retail individual would. Joe Abreu: other than taxes, what other risks that wealthy families face today? Cliff Morgan: Well, we live in a very litigious world, you know, where are very common, depending on your profession. If you're a medical practitioner, if you're sued once, ⁓ very highly likely to be sued again before you retire and your career. So asset is very important. So we have our trust structured in a way that you actually don't own anything in the There is no alter ego status. but you're 100 % able to control everything inside of it. So if you're ever sued as an individual, You don't own anything. It's all held in the trust structure. And that makes a really big difference because in some states, practitioners, for example, they can't protect their wealth by actually having their income go into an entity like an LLC or an S-corp. They have to receive it in their personal name. It's not in every state, but there are some states that require that. And know that that keeps a lot of them up at night because they're like, I work so hard to grow, build and develop everything that I have. I'm in the middle of a lawsuit right now. This is just tearing me up inside. You know, I wish I had done something differently to protect my assets. by that point, it is true. It is too late. Once they're actually in litigation, we can't help them because if we enter at that point, it's called fraudulent conveyance. We're actually conveying something to avoid creditors. And once lawsuit begins can't help so really, you know It's it's very important for people to be proactive with this then reactive and lot of people they're like Well, I'm not paying right now. I I really have a need to do anything today The problem is if you wait until you're in pain, it's too late Once you're actually going through divorce if you're in the middle of divorce, we can't help anybody But if all assets are moved into these structures prior to divorce, it's outside of the ownership of the individuals that are actually going through the divorce. And if they're not owned by the individuals going through the divorce, they're not divisible through divorce, nor can they be forced through divorce. So it truly creates asset protection. Joe Abreu: You have to go through it and then you can resume the process and you can transfer into the new system afterwards. Cliff Morgan: just not during we'd much rather work with people before they get to that point because you know the biggest loss of wealth preservation for the wealthy are two things your wealth tax you know when you die you know you make over 15 million dollars per person 30 million dollars per couple right now everything above that's taxed at 40 percent plus many states They lever their own taxes on top of that as well. So that erodes significantly into that wealth. So our structures are designed to actually protect and preserve that wealth from the generation skipping tax so they don't lose that. So that's one of the methods that most of the wealthy lose their wealth from just the death tax, the wealth tax, or estate tax. So the other thing is divorce. In many states, you know, they're 50-50 states. So if you're wealthy and you go through a divorce, doesn't matter if you have an LLC, trust, a really good attorney is going to find a way to turn those ⁓ over with the judge and you're going to lose those assets. And you go through something like that, it's a reset on your finances and it really sets you back. So again, it's much better to protect yourself on the front end so you don't get taken advantage of on the back end. Joe Abreu: seems like we know how to transfer ⁓ our onto the next generation, but ⁓ what to wealth by the third generation if we don't structure it properly? Cliff Morgan: Usually by the third generation, 90 % of the wealth is gone. And again, that wealth is gone, know, typically due to the divorce that they go through, the estate taxes that they have to pay in inheriting that. So it's going to reduce drastically what they have to work with. And then lastly, by the third generation, they're blowing everything because they don't understand how to manage it. So what we like to do is create true wealth preservation systems that help provide better preservation of their wealth and through specific structuring of how they actually manage their funds. Permanent life insurance helps a lot because even if they blow all the money they have, they still have the permanent life insurance that's in there. So when they're gone, that's going to replenish what maybe they wasted or blew or lost. Many times by the third generation, they only have about 10 % of that wealth left. And we really work hard to change that. Joe Abreu: a higher level, what are the core components inside of the Cliff Morgan: Well, it's non-grantor and irrevocable. So by being non-grantor and irrevocable, it's truly a separate entity from ourselves. It gets its own EIN number. It is its own entity outside of us. The settler creates the trust. They fund the trust and then fully resign their position from the trust. So it is truly a non-Grantor Trust. And this is not something that's new. These trusts have been around a really long time. It's just most people aren't familiar with it because most people are used to having a Grantor Trust. Now when you have an irrevocable Grantor Trust you talk to a financial advisor or a fiduciary, they'll say, ⁓ well, you don't make enough money where that makes sense. Typically, you need to have a net worth of at least $10 million before that makes sense. ⁓ that really is true for an irrevocable grantor trust. But for an irrevocable non-grantor trust, that's not really the case. So it allows people to actually come in at a much point of wealth accumulation than it would having to have an entire $10 million net worth coming into that. And other that really makes it unique is the fact that it has a spendthrift provision. And that spendthrift provision protects the trust from its beneficiaries. So a beneficiary can never sue for a distribution from the trust. So, and this is also important because let's say that the trust ever is sued. Let's say it's found and it's sued, okay? Number one, the trust is actually private. It's not registered with the Secretary of State. So it's not something that can easily be found. So the only way someone's gonna find it is if you disclosed it somewhere, okay? Let's say that they did find it. The judge is gonna order you to appoint a beneficiary to the trust. Well, one, they can't do that because by the way, the trust design, you can't force anyone to appoint a beneficiary to the trust. But let's say it happened and then it was a creditor. That creditor then would go and sue the trust for whatever is owed. Well, the fact that trust has a spendthrift provision, can ever be forced from the trust and it it's discretionary. So the trustee never has to make a distribution to a beneficiary. Let's change gears a little bit. Let's say that the beneficiary is going through a bankruptcy. There's provisions in the trust that if the beneficiary is insolvent, there's no distribution that is made to that beneficiary. So we're not going to them. So if they're going through a bankruptcy, there's nothing that through even a bankruptcy of the beneficiary, they can't take anything out of the trust. So it truly protects the trust both on the front end and the back end. Joe Abreu: one of the concerns that I hear the most is in the revocable, irrevocable is that lack of control because if you lose the then I can't recover those assets if I need them or dispose of them It seems that this trust system ⁓ find a way that. Cliff Morgan: That's a really good point, Joe. I'm glad you brought that up. Because when you're talking about an irrevocable grantor trust, you really don't have control. So usually the grantor yourself, you're the one that's actually putting the assets into the trust. And then you have a third party trustee. It's typically going to be a bank, attorney, or a family member you're currently on good terms with. And every time you do something, I don't know if you remember the game that we used to play when we were kids called Mother May I? But every time that you were told to do something, you always had to ask, mother, may I? And if you forgot to do it, you were penalized for it. It's the exact same thing with an irrevocable grantor trust. If you don't ask permission before you do it, you're heavily penalized for doing it. And then when you're talking about an irrevocable grantor trust, the grantor is the one that's typically taxed in that structure. So the one that puts the assets in there. And by the way those trusts are designed, they're taxed at a very compressed rate. So it's somewhere give or take a few hundred dollars, around $16,000. That trust is going to be taxed at 37%, the highest tax bracket. That's a significant amount. So by going into a standard irrevocable grantor trust is actually going to put them in a very unsavory position. They're going to pay a lot more in taxes than they may have otherwise. ⁓ By putting them in an irrevocable non-grantor trust, We actually create that separation since it's irrevocable and non-grantor. Taxes are filed on a 1041 tax filing form. It's complex trust. The trust itself is served the taxes. The trustee is responsible for computing and filing the taxes on behalf of the trust on an annual basis. So taxes are still filed. I'm not going to give away too many secrets, but by the way, the trust design is allowed to hold the assets in tax deferral until it's distributed. Now, when income is distributed to a beneficiary, that beneficiary pays ordinary income tax on that distribution. So that's when the taxes are served. So it's not tax evasion. It's tax avoidance, the same thing the Rockefellers did with their trust. They want to legally defer their tax obligation for as long as possible, which reduced what they pay. And unlike when you're talking about deferrals with an IRA, an IRA requires Joe Abreu: Okay. Cliff Morgan: that you take RMDs at age 73 today, which is required minimum distribution. You have a hard threshold where you have to actually do that. And by the way our trust is designed, there's no hard threshold where ⁓ have to distribute anything from the trust. And we're not passing the trust from one generation to the next generation, we're simply swapping out the manager of the trust itself. There's no GST or generation skipping tax. ⁓ So we're not paying any tax on the grandchildren once they take over operation of the trust because we're just simply changing out the management of that trust. And the trust today are designed to operate for really long time in a lot of states. So it can be in states, it be as little as 21 years because of the law of perpetuities or the rule of perpetuities. So we have a provision in the trust where you can renew the trust every 21 years. Other states, They allow you to have 300, 360 years that you can actually have the trust in existence. And there's been a couple of states that have actually changed their laws. Florida recently, where they allow trust to go well beyond 300 years, now to 1,000 years. So they recognize by changing the laws, they're attracting families of higher net worth to those states to actually hold, manage, and maintain wealth for many, many generations. And I feel certain that many other states will really come on board and do the same thing Coming back to what you're talking about with the revocable trust Revocable is very different than irrevocable trust. So a revocable trust really doesn't give you any asset protection or tax benefits When you file your taxes for a standard revocable trust that goes on your 1040, there's no special form for that and if ever sued a can absolutely order you to turn over any asset that's actually stored in that revocable trust. a turnover order that will tell you just to revoke the asset out of the trust, then you have to turn that over for judgment. really offer any significant protection. What it does though is it allows those assets placed in revocable trust to avoid probate upon death. that can really save families a lot of money. Now, while our trusts do actually legally avoid probate, it's an by the way rather than a really major draw to what we have. And we do have methods where we can help clients legally avoid probate without even having to do a will. And in many cases, a lot of families use what's referred to as a poor over will to... pour over any and all assets that are held outside of it into a trust structure after their passing so that it encompasses everything but then that pour of a will anytime you have a will it becomes public record upon the death of the individual that wrote the will or had the will drawn up so we want to avoid that because we don't want it to be contested and the average probate cost for the ones that inherit probate about three to seven percent while it doesn't sound like a lot if you have a really big estate like I mean a big estate that could be millions of dollars and you rather keep that in your pocket or would you have to pay that to the courts I think most people would rather choose to keep that in their pockets so I hope that gives you a little clarification from the differences Joe Abreu: Absolutely. Sure. does the tax efficiency kick in I'm at a certain tax rate today. I set up this trust and when does the efficiency really kick in? Cliff Morgan: Well, of my clients are able to actually see the tax benefits within 90 days because many people are used to filing their taxes on a quarterly basis. So we're to significantly save them money. if we're able to change how they're structured, even in the same tax year, then instead of having that go through their old entities, we divert a lot of those funds or even change the way they're structured. And oftentimes in 90 days we can show them a cost benefit. So instead of paying a quarterly estimated payment, they may not be required to make any more quarterly estimated payments. It's literally a shift of what you're doing. So instead of it becoming a liability, you're actually having to pay that quarterly estimated payment. You have that to Uncle Sam so they can earn interest on your money. You're now taking that and putting that into your own structure for wealth preservation and growth. Joe Abreu: where does the asset protection come into play? Cliff Morgan: Well, the asset protection comes into play between the fact that the trust is irrevocable and non-grantor. So we're truly creating a separate entity from yourself. And those two together are crucial for separating yourself from the trust. So now the trust is its own entity. And then secondly, having the trust with the spendthrift provision protects the trust assets from its beneficiaries and any lawsuits from their beneficiaries. Joe Abreu: what net worth should people start thinking about using this of structure? Do you have to be multi-millionaire, a billionaire? Where do you have to be in order to consider this? Cliff Morgan: Well, for most people, they're able to really see significant benefits. If they're a 1099 income earner they receive K1 distributions and for that portion of their income, they're paying least $50,000 a year in taxes, we have an opportunity to make a pretty substantial impact in what they actually pay in taxes. If you're not at least that in taxes, then it would have to be someone that would have a very significant concern. with their assets and just really want to be able to protect them what we have is truly superior in its design for asset protection. you don't to be a millionaire. I have several clients who make six figures. I have several clients that make seven and eight figures that are in our trust structures. And it just really depends on their circumstances. Now, if it's W-2 income, We really can't do a whole lot with W-2 income unless it's pretty significant W-2 income. Like if they're earning six or $700,000 a year in W-2 income, we utilize different structures for that that can greatly mitigate what they pay in taxes. We can eliminate them, but we can significantly reduce that. So mostly it's going to be for people who are 1099 or K-1 income If they have W-2 income and it's from their own business, like an S-corp, the S-Corp has profits and they're distributed via K-1 from their ⁓ S-Corp at least once a year. And those circumstances, if there's $50,000 or more taxes applied to that distribution, we typically can make a significant impact on that as well. Joe Abreu: If someone is building a business today, just starting out so they don't have a lot income, they don't have a lot of assets, what should they be doing at the early stages? Cliff Morgan: really thinking about how you're going to structure yourself today and leaving it somewhat flexible for the future. I would say you want to find really a good, if you're not in a position where you qualify for our structure yet today, you want to find a really good CPA. And there, unfortunately today there is a massive shortage of CPAs and enrolled agents. And in my experience, just interacting with a lot of CPAs out there, only about 10 % or less really understand advanced structures. None of them understand our structure. we usually have to educate their CPAs on our structure because they typically don't work with them. But you want to find a good CPA to get started with that understands business structuring, tax asset protection, and really work with them. And until you have assets or a business, CPAs usually aren't really necessary they're not meant to be a glorified tax preparer or tax filer. They help you organize and structure. And when you're ready to actually graduate and move to the next level, having someone that working with already that is open-minded and willing to understand other concepts that maybe they haven't been exposed to, really important for helping us transition those clients from where they are today into where we can take them to drastically reduce what they pay in taxes while providing that superior asset protection. Joe Abreu: In your experience, the biggest mistake you see high net worth individuals make? Cliff Morgan: Will? When you're talking about people that first are coming into their wealth, a lot of times they don't really understand how to preserve and protect it. They invest their money in ways where it's high risk and when it's gone, it is totally gone. Can't do anything for them again. I see them using Structures that they believe are going to provide superior asset protection but when push comes to shove it really doesn't they lose a portion of their wealth due to divorce ⁓ litigation and of the things that we do to stave off and a lot of the wealthy do this too and and you have gurus out there who say that it's really not a good idea. of the things that we recommend is permanent life insurance and the reason for that. If the permanent life insurance is designed properly, it's designed for high cash value accumulation. May not be designed for a really high death benefit, but it can be designed for high cash value accumulation as far as a law will allow. And the reason for doing that is it gives you an opportunity to use the same dollar twice. So you can borrow against the policy. You can take those funds and you can invest that into an investment. Now if that policy is held in our trust structure, when the gains come back into the trust, the trust absorbs those gains per the Internal Revenue Code. Now imagine if you're able to invest your money not only are you able to invest it and it grow, But the money that you originally had is still growing at the exact same time. And when it comes back, you don't have the tax obligation because the way the structure is designed, where it defers those taxes, gives you a lot more money to work with so you can grow your money so much more quickly. what I would say is that a lot of the high net worth individuals, especially when they're first new ⁓ they're just becoming high net worth, They haven't really learned how to leverage their money properly and use the same dollar twice. The gurus will say that, well, when you do permanent life insurance and you borrow against that policy, you're borrowing your own money. That is 100 % not true. By the way it's designed and through the Internal Revenue Code, it's life insurance. You cannot borrow your own money from it. You can withdraw from your policy. And if it's a standard life insurance policy, you're not. Taxed on the money that you put in as principal, but once you've depleted the principal it starts to tax you on the growth that policy But instead we recommend borrowing against the policy. So really the policy access Collateral and when borrowing funds, it's coming from the insurance carrier not from your own policy So your money has never touched it actually remains in the policy and continues to work for you And that is true wealth accumulation when you can make that same dollar or twice. Joe Abreu: sounds that at every level, either you're starting out or doing exceptionally well, high net worth, it seems your role mostly, it's about education. You're educating these individuals wherever they are, meet them there ⁓ and then you them how to move on to the next level. Is that what you would say? ⁓ Cliff Morgan: It really is, you know, we don't specialize in retail investing. don't do the stock market. We don't do mutual funds. We that to the fiduciaries, financial advisors. What we do is we help take them to the next level. So we're not looking to replace any specialized advisors that they're currently working with. As a matter of fact, they love working with us because once they realize that they're able to keep more of their money because they pay less in taxes, that gives a financial advisor or fiduciary a lot more money to work with. And they typically will make one to one and a half percent for assets under management, AUM. So if we're giving them more money to work with, they love working with us. So we're an entirely different structure of management and solutions than a fiduciary financial advisor would be. Joe Abreu: I guess you can really set it up as a coordinated system. not in the sense of a trust, but that you can work alongside the whole team continuing to grow the wealth for this individual. Cliff Morgan: We're not looking to replace the team that they have we're looking to enhance their life we're looking to enhance their wealth preservation and mitigate Dramatically what they pay in taxes legally Joe Abreu: without sharing any names, do you have any great stories of anything that you've settled or structured for someone that's improved their life tremendously? Cliff Morgan: Sure. So I have a couple that come to mind. I have one individual. We were in the second half of a tax year and they hadn't taken the distribution from their S-corp yet. Their current CPA has suggested that they actually take it as W-2 income, which is pretty standard instead of doing a K-1 distribution or 1099 income. So We said, if you actually did it a different way and could change how you receive those funds and greatly reduce what you pay in taxes? So they were very intrigued. We had conversations. And it wasn't just me having a conversation. We have a team. So I got one of our teammates to have a meeting with them who is an agent. They're very specialized in what they do. An enrolled agent is a little bit different than a CPA. They're appointed by the of the Treasury versus being appointed by the state. They're highly specialized in taxation. And we had that conversation first to understand the circumstances, situation, look at where they are and what they're doing, and then be able to confidently say what the expectation would be by moving them into our structure prior to the end of the year. Well, needless to we were able to save them a significant ⁓ in taxes. They paid almost nothing on that distribution. So that was one. We had another one. were in the last quarter of the year. And by no means do we ever want our clients to come to us last minute. Because while we can save them some money, they're leaving a lot of money on the table. It's much better to be proactive. Take advantage of this early in the year rather than wait for the end of the year. But he came to us at the end of the year, last quarter, before he had to make his last quarterly estimated payment. And he said, Cliff. I really don't want to make this payment. He said, is there anything you can do make it so I don't have to pay this? And we got one of our teammates on the line, understood his where he is, evaluated what he was doing. And ⁓ they able confidently say, there's no need to actually make that last quarterly estimated payment, provided that you actually move into these structures. And not only was he able to avoid paying that, he also got a tax refund for that tax year. So we were able to give him a little bit more back and he was pretty excited. It was almost the same amount as what he was gonna make in his last quarterly estimated payment. So he was really excited about that. know, a lot of my clients, when I work with them, it's not just providing them a trust and moving on. You know, I provide a true concierge service for my clients. It really excites me to be able to design something very specialized and unique and be able to provide support for them on an ongoing basis. between myself our team, we truly provide something unique for them that puts them in a much better place than the average person today. Joe Abreu: Well, those sounded like a score to me if you don't have to pay taxes and actually get a refund. Yeah, that's great. you know, that brings up a question. If someone you today, how long does it take to generate or create this trust process? mean, this reached out to you at the end of the last quarter and you were to do that. So that means that it's not something that years to produce. It's something that you can work within. How long? Cliff Morgan: Right? That's a good question. Literally, I have done it inside of a week. Now, they typically won't get their trust book that fast because the trust book actually takes a little bit of time to actually finalize and produce. But we can get them enough started to where they can get their bank accounts open. They can start moving things and getting things done and get the governing documents to them at a later time. we've it of a week. And we really don't like to do that. Really pressed. We have been able to pull off some amazing things with our team. Joe Abreu: if the business owns real estate, can they transfer the real estate as well? Cliff Morgan: 100%. Yeah, there's a couple of different ways to do it. So if we're talking to residential real estate, that's easy to do. You can actually just transfer title into the trust. If it has a mortgage on it currently, we use a different method for that, to just simply transfer you into the trust. If it is commercial property, many times we that commercial property is held inside of an LLC. We can actually make the trust the member of the LLC. ⁓ so that the trust in essence owns the asset, but the asset is technically held in the LLC. So it gives a lot of protection and control. And then there's different ways that we can provide filings from the trust to that LLC if necessary to protect it from turnover orders. Joe Abreu: And I'm sure one of the questions that listeners are going to want me to ask is, this trigger an audit? Because that's one of the biggest concerns people have. You know, I'm going to go ahead and make these moves, but all of sudden I'm paying X number and then all of sudden ⁓ you've to get me down to I don't have to ⁓ make additional payment. Will the IRS look at me now and say, wait, you know, flag, something has to get done here. Cliff Morgan: Well, that's a good question. So our trust has been around now for, I don't know, since 1950s, let's say early mid 50s. There's ever been one audit that's ever been done from someone who's actually followed our process. There's been a couple of audits for people who have tried to do fraudulent things with our structures that were not advisable, but they chose to do it on their own. But for those that actually follow our process and what we actually recommend, there's been one audit. And it was a business trust. It was in 2018. And the audit lasted for several years. And 2021, April of 21, there was a letter that sent out. There was no change in the tax filing. So they, in essence, evaluated the extraordinary dividends that were passed through from their business trust to their beneficial trust. And after that there was no change in the tax filings. So it has been challenged and passed with flying colors. When you're about what's most at risk, most people actually set themselves up where they file a schedule C every year and schedule C are at highest risk for an audit today. A 1041 ⁓ trust tax filing at the lowest for an audit today. So if audits are something that concerns you, we can help you structure yourself in a way to where we can greatly reduce that chance of an audit so that that's not something that is constantly weighing over your head. Joe Abreu: Excellent. It seems that that 2018 audit was actually a pretty good thing that had happened because that solidifies and confirms that the process works. So you get the opportunity to talk to so many different people and educate at different levels. you understand the different mindsets that are out there. But what's the difference of the mindset of an individual that preserves wealth and the individuals who end up losing it? Cliff Morgan: It does. So the individuals that end up losing it that I see most common are those who come into sudden wealth. They truly didn't earn it. So maybe it was through inheritance they were never really taught basic fundamentals or wealth fundamentals. It was never properly passed down. They come into wealth and they're like, ⁓ my gosh, I'm rich. And they go out and they buy this, they buy that, they invest in this and they invest in that. They really don't understand what they're buying or investing in. Usually in less than five years, they are worse off than they were before they ever came into their wealth. So if I could ever really help people understand what is so crucial and important to know, and even with my own trust, I do this with my beneficiaries, it's a transfer of knowledge. not enough to make sure that you leave something behind for them. You know, it's biblical. You want to leave something that covers your, your children's children, okay? if you just leave something that covers your children's children without any education, they'll never hold on to it. So it's truly important to help them understand the fundamentals of what it took to earn it and the fundamentals of what it takes to keep it. And without those two, it will never last. So to just build grow and develop that and pass that on, With no education going along with it, it's just not enough. So that financial education is crucial if you truly want that wealth to be preserved ongoing. Joe Abreu: That's right. before we close, I want to find out ⁓ should reach out to you, aside from a recent lottery winner that we just found out that should be contacting you immediately. Cliff Morgan: Well, even a recent lottery winner, I've had people come into sudden wealth and who have reached out to me to preserve their wealth, but it doesn't necessarily mean it's going to keep their wealth because that's truly up to them, but I can help reduce what they pay in taxes. But I would say anyone who is paying at least $50,000 a year in taxes or has a net worth of a million dollars or more, I would say Someone that pays a lot in taxes and doesn't really want to, or maybe they don't want to have to do a 1031 exchange. So a 1031 exchange is another example of something that's quite painful to go through. when you sell a property, you're given 45 days to identify two or three target properties. And ⁓ the of disposition from your original property, you're given a full 180 days, including weekends and holidays to identify and close on The property that you're transferring that 1031 exchange into you have to have what's called a qualified intermediary in between hold those funds for you because if you take possession of those funds in between No, lower qualifies as 1030 31 exchange So so many hoops you have to jump through and today with real estate being Difficult to come by for some people because in many cities inventory is still pretty tight. This is really good alternative It's much better than a Delaware statutory trust, deferred sales trust. It gives you full control over the entire process. You never lose control and you still defer those taxes. Again, those taxes are not paid until it's distributed to the beneficiary. So I would say anyone that's in those circumstances, again, I would just recap and say paying more than $50,000 a year in taxes or more as a 1099 or K-1 income earner. Has a million dollar net worth or above or maybe in a really tight situation and a 1031 exchange is probably not going to be the best option for you and you really don't want to pay taxes those are going to be the best people that can reach out to me and usually have tremendous success with them I would also say to add on that if you a small business and you're looking at selling your business ⁓ We can actually structure your business inside of our trust structures and we work very well alongside with LLCs and S-Corps that we can package your business and make it much more profitable for you to sell your business. So I would say any of those circumstances would be a very good reason to reach out to me. Joe Abreu: Okay, so one question I do have on a 1031. Going back, you had mentioned that in a commercial situation, you would have to trust become a member of the LLC. Does it change depreciation? Does it impact it in any way, shape or form? Cliff Morgan: Well, if it's in an LLC, you can still take depreciation. If you move it into our trust structure, depreciation won't exist. So we typically do recommend for commercial properties to continue to hold that inside of the LLC. You still take your bonus depreciation inside of the LLC and offset some of the taxes in there. And then we can offset some of the other taxes inside of our structure and provide that asset protection. Joe Abreu: probably isn't ready to speak to you now? Cliff Morgan: I would say if your income is primarily derived as W-2 income and you're not at the $600 or $700,000 threshold per year, it's probably not going to be a good fit for us to work with them right now. For some of our advanced structures that we do, for example, someone has an old 401k or 403b, maybe from previous employer. we actually can help manage the process of moving that and reducing what they pay in taxes. It just won't necessarily be with our trust structure. I would say for those individuals, if you're earning about $350,000 a year as a household or more, that's a really good candidate for us in retirement funds. If they're liquid, I would say at least $250,000 in retirement funds. We can also do significant things that can reduce dramatically what they pay in taxes. It just won't necessarily be in our trusts. Joe Abreu: someone wants to explore this process, what be the first step? Cliff Morgan: So the best way to reach me through LinkedIn. So if they go on LinkedIn and they search for my name, so do a search under people, search for Cliff Morgan, and then under company, put in my company name, which is Net Worth Accelerant, it'll bring my profile right up. And then click on that. There's a link there where they can do a complimentary 15 minute consultation. And anyone that mentions your name or your show's name, Glovisor, I'll give them a complimentary, if they qualify, they'll be provided a complimentary net worth analysis, which is normally a $3,000 value. Joe Abreu: Well, that's a great deal. I'm sure a lot of people would appreciate this. So make sure you Glovisor down and let Cliff know that Glovisor is here for you. Well, thank you so much for us and sharing your experience with us. Very excited. think that a lot of people will the to learn something new and now see there are other opportunities available to them from the traditional trust that we've heard about. And thanks to you, we now have that opportunity to explore it. Cliff Morgan: I really appreciate having the opportunity to come on your show today. Joe Abreu: Great, thank you. Till next time.