0:02 Who are [music] you and where are you going? What do you want? [music] Hello and welcome to Trust and Estates Weekly. I'm your host, Kevin Bemel, and I'm here every Monday at 10:00 a.m. Pacific time to talk about estate planning and trust and probate administration, mostly from the perspective of professionals in the field, uh, like myself, my my my guest John, who I'll, um, I'll introduce in
0:39 just a moment. Uh but also for those of you who you're not professionals but you may find that you know you've been appointed the executive under maybe your parents will and now you've got this big huge you know task that you have to do responsibility you have to fulfill. It can be pretty daunting. And so hopefully you'll get some information from this show that'll help you understand better what you need to do and and allow you to communicate better with your various advisors, your lawyer, your accountant, your financial experts. So without
1:15 further ado, I want to introduce my guest, John Rabbino. John and I go pretty far back. We we are Navy colleagues. If you look behind him, you can see that that John uh spent spent his time in naval aviation, which is the soft spot in my heart in the Navy, that and the Marine Corps. And uh among the many things we did together, I had the privilege of uh of giving the um uh invocation and benediction at John's retirement ceremony at the Naval History Museum uh in in Washington DC. Um so you
1:51 know close friends really brothers. Um but but also um when when John made the decision to u to to you know retire from the Navy uh he ended up uh going full-time into what before that had been a part-time real estate business that he had started with a partner. And um it's it's it's really been a pleasure to to watch that business grow, prosper. Um, you know, John is like my cool younger brother. [laughter] You can tell, right? So,
2:27 but but John and and you know, John hasn't um he he was on one of my other shows. Uh I think you were on Business Lessons from the military, I think, or something like that. One of the other, right? Yeah. Um and he talked about his time as a as a naval aviator and um it was a very popular episode. Um but so John, you know, since this is your first time on Trust and Estates Weekly, why don't you give the folks a little bit about a little bit about your background so that they can understand, you know, more of who you are and and uh you know, you know, kind of your get a get a sense
3:04 of your perspective, I guess, is the best way to put it.
3:06 >> Sure. And and I am so honored to be back with you, my friend, and my brother. Um, yes, we we go back a ways and um, you know, I I made a lot of big decisions thanks to your mentorship and your guidance and your counsel. So, I really appreciate that. You know, you have a special place in my heart and um, you know, you you do some amazing things and you've you really helped me blossom when I was getting ready to to transition out of the military after 20 years back in 2017. I can't believe it. Kevin went on nine years and um had already owned the business like you said for about about
3:41 four or five years and it was going really well and it and it made my transition a lot easier thanks to your insights thanks to your mentorship. So you're a big part of that and a lot of my successes from that point on have been kind of nestled and helped through your your guidance. So I appreciate that. But yeah, I've been you know a a real estate investor for over 20 years and it's crazy I think about that sometimes. I uh started out about 10 year mark of my career back in 2004 2005 investing in real estate property kind of more on the active side where I was partnering with builders and I was
4:16 looking for property and always had that entrepreneurial sense the in my blood in my in my inner core. Uh come from a family of uh of a mom and dad who were both entrepreneurs. My father owned a construction company for 20 30 years. My mom was a 30-year school teacher, but she also was a psychiatrist on the or psychologist on the side. She did family therapy.
4:40 >> Yeah. And then uh she came from a large family, 13 in her family. Her father was uh 13, no, eight, eight years old when he came over from Italy uh as an immigrant. Uh started his own business as he got older. Married my grandmother. They had 13 children, seven boys and six girls. and and uh my grandfather and the seven boys were all entrepreneurs. Six of the boys opened supermarkets and one of them opened a riding academy in Brooklyn, New York that has 300 horses and you know so always been around family and and the daughters were always the accountants and the and the
5:15 bookkeepers and making the making the dinner and taking care of the kids. So I've got that aspect of both sides of my family. But I've always had that, you know, charisma in my blood. My dad was a Marine. He was force recon back in the 50s. He served in Korea and he was my hero. Always was and always will be. And so that that generational kind of, you know, motivation, that entrepreneurship carried over and um brought that with me into the military as a leader. Loved being a leader. Uh serving my my troops and my soldiers, my airmen who did an amazing job and and just, you know,
5:51 being personable with them, growing relationships with them. And that carried over into my business career. Um my last five or six years I served on the Navy headquarters staff which again God always has a good plan for me and I got to work with admirals and generals and and senior executives and it and it really shaped me on how to be a professional writer, how to be a professional speaker, how to communicate in a way that it resonates, it's succinct, it's concise, it hits to the points and and I can carry that conversation. So, the the soft skills, which everybody hears from the military, were invaluable and what I learned over my 20-y year career. But as a business
6:27 owner, you know, it's been uh it's been amazing. Uh first learning how to be a business owner from a schedule standpoint where every day I knew where I needed to be from a flight schedule and on the military side, but then as a business owner, it's like, hey, I've got the day. What do I do now? So, it was kind of a bit of a transition, but I learned. And um a as I continued on with my career, I had the right people around me, always making sure I had the right team of professionals. And one of those professionals was an estates attorney and a trust and a trust and a planning attorney because I had to deal with my mom and my dad's estate when we moved
7:02 them from New York back in 2021 to Virginia. And so in a very short period of time, uh about six months, I had to move my mom and dad who lived in New York for 50 years and in a house that they were in for 50 years. They were there whole lives and I had to move them down to Virginia. And so get the house on the market, the emotional, the psychological, all of that stuff. And then, oh, by the way, I find out that my dad's got all of these assets and they're all over the place. bank account here, an IRA there, annuity here. Uh the
7:38 house is getting ready to be sold. You know, they were going to make a lot of money on that. Where were we going to do that? So, you know, it's all at once. And when I got with the estates attorney, um it it was talk about drinking out of a fire hose. It was like trying to gulp down on a fire hose just coming at you. And so, that was an unbelievable experience. Not only did I learn so much, but I also got to see how how smart my parents were on how they planned their life, right? And so, like, I never got into my parents' finances. It wasn't in my business. But as I got
8:13 older and my dad realized, hey, you know, you're going to be kind of the executive of my of my estate. You got to start learning all this stuff. Um, it really opened my eyes to how wellprepared my parents were at a very young age. let's say 40s, 40s, early 50s. Um, and and how they had everything in order and how they had these investments in place and how these pensions were set up.
8:36 >> And that was great because they had a ton of assets, but the problem was they didn't have protection. And that's where the trust came in. And that's where we have to really talk with my dad to say, "Dad, you and mom accumulated so many assets through your life. Why do we want to go through the hassle of going through probate? Why do we want to go through the hassle of dealing with the courts and paying the taxes? let's get the trust up and running now so that everything is controlled under this document and this vehicle. So that was my first real kind of personal intimate kind of connection to a trust
9:08 >> um with our business. We have a lot of investors. I'm gonna I'm let's [laughter] go right there for a minute because I want to this is this is such an important topic and I've had
9:21 >> you know a a lot of attorneys on the show
9:25 >> who emphasize the need for people to do estate planning and one of the big hurdles in fact I I just did a show yesterday actually in this case it was with an accountant and his his he was explaining h how foolish so many of his clients are because he'll tell them you need to do an estate plan and they just won't do it. So talk if you as as as the um person who would um how do I phrase this?
10:01 You would you're the one who has to deal with whatever situation is left behind. the the wellorganized one or the mess, right? I I only see the messes.
10:14 >> Yeah,
10:15 >> that's why people bring me in, right? So how did h how did you handle you know con instance convincing your parents look for for however you did it to to take this step because it so many people don't want to do it and and we think well anyone who's got a lot of wealth or a lot of assets of course they're going to do it they're so smart they've made all this money but I can tell you from my own experience people with a tremendous amount of wealth they'll die in test state.
10:48 >> So talk to us about that from the standpoint of the, you know, adult child.
10:54 >> I'm not looking for you to give any, you know, personal information, but just kind of how did you how did you because I I've met your folks.
11:02 >> Yeah.
11:02 >> They're lovely people, right? That's right.
11:05 >> And but you know, I don't mean this as a critic, but you would never know. They're just
11:11 >> regular old folks. Right. So
11:14 >> Right.
11:15 >> Yeah. I mean, Kevin, it it's it's really an awareness thing first, right? Knowing what it is, getting to the point where you're willing to get comfortable with it, to understand it. My dad was always always would say, I want to make life easy for you and my two sisters, right? That was always his his plan. Like, I don't want to make things difficult when mom and I pass that you and your sisters have to deal with a lot of headaches. And so with that in mind, when he started to give me push back on the trust, I had to sit with them and say,
11:50 "Dad, listen, this trust, it's your trust. You're the grantor. You own this trust. If you want to really make things easy for my sisters and me and I and you and mom want to make sure we don't have to deal with a lot of the headaches that a lot of families have to deal with, you have to get this set up because it's going to make it a lot easier for us and it's going to protect your assets and it's going to be in the family's name. And so that kind of he started to slowly come around. And then when he finally came around, he was calling everybody up and telling them how great a trust was.
12:26 You [laughter] know, here I am trying to get this stubborn guy to come on board and now he's telling everybody in my family, you got to get a trust. You got to get this. So it was pretty funny. But at the same time, you know, I use that not to try to, you know, persu well persuade him, but in a loving way that look, if you really want to make it easier for us to to digest a lot of the headaches, concentrating more on remembering you and your legacy when you pass, let's get this knocked out so we don't have to worry about anything. And then everything is protected. All your assets are in there and you don't have to worry about anything anymore. So that was a
13:01 big way of getting him to understand that and uh it it was it was u yeah it was hugely uh helpful. But then just again
13:11 >> interject here. So really and this is me as kind of an outsider.
13:16 >> Yeah. you took the time to understand your dad's values, your dad's perspective, and you approached him from from in that way as opposed to um saying, well, you know, I think X, so therefore, you know, you have to do
13:36 >> Right. Right. Yeah. And that's and that's a hard lesson because my dad was a very hard pressed person. He was a Marine. He served in Korea, you know, it was his way of the highway. I mean, 85 years old, he's outside, you know, watering the lawn and cutting the grass. It was his world. And here I am now, his son, who, you know, is telling him, "Hey, you need to do this." And it was hard. It was a hard pill for him to swallow, but when we did it in a way that he still understood it, that we did it out of love and care and to just really follow his wishes, he definitely was more inclined to to kind of, you
14:12 know, come on board with that.
14:15 >> Got it. Got it. Makes sense.
14:17 >> Yeah. And I mean, so um just that was like the front row view of sitting at a movie, you know, and learning about a trust and how the estate documents work and and the uh the healthc care documents and everything, you know, and and um you know, not only that, but like my dad was entrusting me with this to to care for my mom. My dad passed, it'll be three years this March. And now my mom who's 5 minutes from me, you know, it's an ir a revocable trust now, but I mean everything was in place. So that mom was protected. Mom had the assets.
14:52 >> No, no insider, nobody's hands coming from the outside in to touch that. And and I coach a lot of folks. I do a lot of coaching and I and I talk to folks and I say, "Look, you know, it's great to have assets. you know, you want a lot of assets, but like when you get to that point, whether you're 20 or you're 70 to that point where you're like, you know, got a lot of assets here. I've really got to take care of myself and protect those, right? And and that's a question you've got to answer when the time's right. But it's definitely a question you have to answer and you have to be ready to do. So, um getting educated,
15:27 educating your kids, like I'm educating my kids now to tell them, hey, this is why we're doing these things. This is why we're going to have a trust. this is why we're going to protect our our assets. And then kind of to see how the trust and is used in an investment world like how our investors who are using their trusts to invest in our real estate investments is amazing where they could bring their trust in and they can invest through the trust. The trust can actually be a living breathing document and an investment entity that can come in and invest in our deals. That's amazing. So, let's take a quick break and then I want to pick up on that because that's
16:02 actually really why I wanted to have you on the show because this is a perspective I think that a lot of people they don't hear. So, we'll take a quick break and be right back.
16:11 >> Sure.
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16:52 or visit magnumprops.com. So, so John, you know, I think most people have this idea, okay, I'm gonna I'm gonna do my estate plan and I get my, you know, three- ring binder from my lawyer. It's got all the documents in it. Put it up on the shelf and I'm done. Right? But that's and and maybe I'll get it reviewed every you know year, three years, five years or you know if there's some big event in my life I'll have but your perspective is very different. So
17:27 so yeah talk to us now about how your clients actually use your trust. That was a great way of putting it as a as a living you know vehicle as as a living part of their financial lives.
17:43 >> Yeah. I mean, a lot of these folks already have a lot of their liquidity and and cash and and bank accounts already in the trust. It's already titled into the trust. So, it's very easy for them to take u those funds, a portion of their phones, whatever they want to invest through the trust and keep everything in the trust so that the investment is coming in from the trust. It's investing as the trust and then the funds coming out and the distributions and the profits are going right back into the trust. So there's no break in any type of system there from the vehicle that you already have. You have
18:18 the cash in there from the bank account goes into the investment makes your profits comes back in and there's there's no like you know there's no breakup in that process and it's so easy it's smooth and uh it's pretty seamless to be able to use that and folks love that because we we have that as a as an option. A lot of a lot of investment companies do. So there's no need to take the money out of the trust, put it into another vehicle, invest it, take it back out into that vehicle, title it back into the trust. That costs a lot of money from an attorney standpoint. So again, the fact that we're able to
18:53 utilize that as a vehicle in the investment is it speaks fathoms. It's amazing.
18:59 >> Well, and so then you really become an avenue through which they can continue to build wealth, but they're they're doing it within the trust. So it again it's all protected. Um I mean you this sounds like you know like the Rockefellers right? But you don't have to be you don't have to be a Rockefeller to do this kind of thing right?
19:19 >> Yeah absolutely. Yeah. And if you have a another grtor and it becomes an irrevocable trust. It doesn't matter because the that that tr that investment still going and it's inside the trust. So, I've had some investors, unfortunately, one or two that have passed and, you know, we need to get a will. We've got to get all the legal documents just to make sure, and then we've got to send the funds back over, change the names over with the trust. Everything stays as is. And you don't have to worry like if you've got the other grantor in that trust inside of
19:54 the trust, you don't have to do a beneficiary agreement. you don't have to do any type of protection of anything happens to that individual and if there's beneficiaries and both granters happen to pass and then investment still going under that trust. It just goes down to the executive as you know and then it's managed as a a trust investment not you know mom and dad investment that unfortunately had passed and now it has to go through probate.
20:18 >> Right. So let let's let's backtrack just a minute. You talked about where you had a couple of clients who passed away and they didn't have a trust. So now all of a sudden the investment they have with you is is is having to you know go through probate before it can go on to the air. So talk about that process from your perspective as as you know the one responsible for you know fulfilling whatever you know court orders or such you know are being issued by the probate court because I think again people don't
20:54 appreciate the details of okay I'll go through probate whatever right there's a lot of work that goes on behind it and you've been through that
21:03 >> yeah abs actually the good news though is that of those two people that have passed, they did have their spouse on as the beneficiary, which was huge.
21:12 >> So, that would have been much bigger of a headache if they didn't. And um if that was the case, yes, you're absolutely right. Well, we just needed in that case as a copy of the will that showed we had the beneficiary on there. But yes, I mean, if we didn't have the spouse or a beneficiary on the investment, that would have been a big headache because we would have had to deal with federal law statutes and and state law statutes and then the properties in one location under an LLC that's in a different so now it becomes a huge headache. You're dealing with multiple state municipalities for an investment under an individual
21:47 that passes without a beneficiary in a trust. Now it becomes a big headache. And so, uh, we've got to follow the law on that instance where we'd have to go and consult with an attorney to move that into a a vehicle and then the person that would take over would have to go through their side on the legal side. So, now you're creating this big big ball of uh knots to make it a really challenging uh um kind of situation. So, we usually recommend that for our investors just so that it's available and a lot of them love that to have that as an opportunity. Yeah.
22:23 >> So, so this is interesting. So, they you can act when on on an investment with your firm, you can like with you know, Maril Lynch or or Fidelity, you could an investor can appoint a beneficiary on death as part of Oh, very interesting. So you have that on our our legal documents that you know we always recommend a single individual uh investor who's coming in to at least have one or two beneficiaries uh you know recommended to be a spouse or a child or Mexican. Um whereas if they're investing as a joint owner under a trust
22:59 or under an LLC, we know that there's others that can come in and act with authority for that for that entity.
23:08 >> Right. Right. Right. And the entity itself is not going to go away merely because one of its
23:13 >> grtors or one of its members died or something. Don't have to worry.
23:16 >> Not at all.
23:17 >> Yeah. Yeah. So with our company, you know, it it's um unique. Um and I also have experience and we could talk about this separately, but like how and I'm not sure if you covered this before with your listeners, but the the power of a trust with a with a 1031 exchange is is unbelievable. And I would love to share just a little bit of that because we deal primarily in passive investments and you can use your trust to invest in a passive investment, but just like any other type of entity, it's going to realize a tax when it completes and so
23:52 that tax will be either, you know, assessed through a social security on a trust or under the EIN, it'll transfer and pass down. Um the 1031 is pretty unique. Uh and and the experience I have with it is um if you have investors or you have clients that own investment property and they want to uh liquidate and and move that over into a 1031 which is a like in investment. They take the principal and they take the gain and they move everything over into a like investment. Um they can do that through a trust. They could do it under a
24:28 revocable trust. They can also do it under a separate vehicle which is called the Delaware statutory trust which you know and so the beauty about that is as the as the investment's moving over with the trust into a 1031 like investment you can continue to do that all the way down the road and then when the grantor passes and it goes to the beneficiary there's a step up in basis which basically eliminates all that back tax that's been deferred. What a powerful tool for investment uh to have that.
25:00 >> Right. So and and just just for people who are not familiar with um what you're talking about. So um it's it's called a 1031 tax deferred exchange. It ref it's in reference to section 1031 of the internal revenue code
25:15 >> which gives the rules for how someone can in essence sell a particular type of property and reinvest in a property of a similar type and defer any capital gains taxes that would have been due on the sale of the property. And there are you know there are rules about you know whether it needs to be done simultaneously or not whether the two transactions have to close simultaneously and if they don't there's certain time you know timelines that have to be met etc. But you're right
25:50 it's it's an incredibly powerful and when combined with the current estate tax exemption which now is $15 million for a person or for a married couple they'll they'll get 15 million each. So effectively $30 million.
26:06 >> You're building up this gain through the successive 1031 exchanges, but but in the end, you know, you your your heirs get a step up in basis. And so all of that gain in essence becomes tax-free at the point where the you know, the the the grtors pass and now their heirs are taking the property.
26:26 >> Yeah. And this generation right now, and we've been seeing this over the last few years, is probably one of the largest generations that will see a transfer of wealth possibly in our country's history. And so, a lot of folks who are getting to the point where they need to liquidate and move something over into, let's say, a passive 1031 where it's managed by a registered investment advisor or financial adviser. they're still getting that same type of return in a passive sense without having to deal with the headaches of a of a home or maintenance on a property or a tenant that calls up at two o'clock in the morning. Right. Right.
27:00 >> So, it's it's pretty it's pretty neat that a lot of um folks that have had properties for 20, 30, 40, 50 years that have immense equity. And I saw that with my parents. I mean, they bought their home in mid1 1970s for $60,000 and they sold it in 2021 for 1.25 million. So that type of equity we're seeing and and even more so with a lot of these um you know generational folks that have been baby boomers have had homes for so long and have immense equity they can protect that for themselves especially if it's an investment property.
27:33 >> Right. Right. Well and but it's interesting because to use your parents' homes as an example um you know they had ostensibly about a $1.2 million gain. I mean, ex, you know, take off cost of sale and all that, but these days, even as a married couple, the transfer, if even if they were going to buy another personal residence, they would only be they would only have between the two of them a half a million dollars exempted from capital gains, right? So
28:04 >> um it you know again the and if you're not going to
28:08 >> you know make it a personal res if you're not going to sell your personal residence and buy another one that automatic is not available to you at all. So
28:16 >> that's right.
28:17 >> You know, I'm just curious, do you see people who have that they stand to have that kind of gain from selling a personal residence and rather than selling it as such, they move out, they convert it to a to an an investment property and then use a 1031 exchange in order to essentially defer taxes on that gain. Have you seen that kind of thing?
28:39 >> Yeah, it's pretty unique. So there's certain laws. I think it's uh you have to live in the property. I think it's two out of the last seven years to be considered to for it to be considered a I believe a primary residence and so
28:54 >> yeah so you know you just got to be careful with that on the primary resident side. Um like my folks when they sold they got that half a million dollar exemption and then of course you know you take into consideration the maintenance and everything. So they still had a pretty sizable tax, but not as bad as it would have been, you know, granted if they didn't have those benefits. But yeah, on an investment property side, these are the things that folks should be talking to you about. They should be talking to their accountant about. they should be talking to their uh attorneys about because um again there there's the opportunity to really leverage investment properties
29:32 and investments in general through this these programs because you can you can sell a stock and have a million-doll gain and there's places you can put that in uh without paying a tax right away. it could be deferred for a few years like opportunity zones. That's something we do or some other type of tax incentivized uh u vehicle that allows you to protect that. But with the trust, it just opens more doors to allow you to use that in a way that it's not available to an individual investor who's investing in their personal name or or even an LLC. You know, it's just
30:09 it's amazing the power that the trust opens the door. The trust I think most importantly is the protection of the assets, right? First and foremost, but when you have these other things that come with it, it's nice to have that.
30:23 >> Absolutely. Let's take another quick break and and we'll we'll talk more.
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31:08 searching. So, I mean, it it's interesting because lawyers focus almost exclusively on the the trust's ability to protect assets to keep uh an estate out of probate. Uh and and and of course that's that's very important, no doubt. uh but but your focus really has been on on the wealth building aspect of the trust. So
31:44 talk about if if you can some of the actual experiences that you've had working with clients who are using their trust as an investment vehicle to give people some ideas maybe of uh of of of what what they can do that will benefit themselves. Yeah, I mean, you a trust is and and estate planning as part of your overarching strategic plan when it comes to building your wealth and going down that path towards financial freedom. So, uh I use it primarily when I talk to
32:20 folks as one of the foundations of wealth is what I call it. And and I call it that because what we want to focus on first is education and awareness. We want to make sure that you have what you need to pay the bills and cover your budget costs and and your income coming in. We focus on getting rid of some debt to make sure that you have more staying in than going out. We look at some insuranceances. But then the next part after that is, you know, we're starting to build assets now. So, we've got to get to a point where we say to ourselves, hey, I I need to protect these first and foremost if, god forbid,
32:56 anything happens to me for my family. and making sure that it's available so that as I grow these assets, I don't have to worry about liability. I don't have to worry about probate. I don't have to worry about my family dealing with a lot of those headaches that the Tom Petties of the world that unfortunately had to live or the Retha Franklin or the Michael Jacksons or the princes that we, you know, you read these stories about these people and you're just like, "Wow." I mean, it's it's crazy. But from an investment standpoint, again, having that trust, you're going to now be able to do things um that uh uh enable you to enjoy the
33:31 benefits of it where you can bring it into an a passive investment, an alternative investment. Um you can utilize it for potential investment in venture capital. Um so now just it it opens the doors to what I call the accelerators of wealth. and in a way that you're you're kind of doing multiple things at the same time of benefit. One is you're um still making a return on your investment inside the vehicle. The second is you won't have to worry about standing up different LLC's and businesses and and all these
34:06 different things. You can do it under that trust because it's going to be protected. And then the third is that you know your tax incentives on on a trust are also very you know very great because again like we talked about whether you do it under a 1031 or you do it under some sort of tax incentivized program but trust is again going to be able to give you the freedom the flexibility and the power to do it in a different and distinct way from just a regular investor that's coming in and their own name and under under themselves personally. So there's so many added benefits mostly I would say
34:41 from the protection of your assets but also from the growth of your assets the continued growth and in a way that you know it's um it's exciting I think and incentivized to be able to grow those assets even more so as they're protected inside of the vehicle itself.
34:58 >> Um I'm just just curious what percentage of your investors are actually investing through a trust. Do you have a sense of that?
35:07 >> Yeah, I mean I would say between 10 to 20% uh on on a specific investment in any given day. I would say some of um some of our older investors or I mean older you in their early 60s to maybe as late as their mid 80s.
35:22 >> Um yeah, I know I'm getting there too, brother. Um but yeah, at the end of the day, what's what's nice about it is um there's a there's a transition plan for the for the kids, right? And um again, we work with those folks to to make sure that they know that, hey, even if, god forbid, something happens to you, this investment is going to do well and and you're going to leave it for your kids. And most importantly, it's not going to be a headache for you. It's not going to be a headache for us, and it's not going to be a headache for them
35:51 >> because it's just going to transfer right through.
35:53 >> Yeah. Now, so talk, if you would, um how would you handle a situation? Let's say you've got an investor who originally just invested. Maybe it's a married couple. They invested just as, you know, Bob and Sue, you know, a married couple, right? And and now they maybe they've seen this show and they said, "You know what?
36:16 >> John has said this to us a number of times. This is the first time we've heard it, right? We we we need to set up a trust." Okay, so now they've got their trust,
36:24 >> right? But their investment is is
36:27 >> still in Oops. still in their name. So,
36:31 >> yeah.
36:31 >> What is the process going to be for them working with with you or your staff um to actually use it now as an investment vehicle as as opposed to, you know, it it just kind of sitting there like say with the with the you know, the binder on the shelf?
36:50 >> Yeah, sure. I mean, so, um, we've had this happen, uh, with some of our investors and, um, obviously we have, uh, uh, my business partner in our business is an enrolled agent, so he's a fairly licensed CPA. He can hand he's licensed in every state. He can call the IRS on his client's behalf, so he's got some uh, special perks there. He does all of our tax returns. He also offers um, insights and and can handle that. It's really a question of hey, how is the tax treated in the in the in the years prior to the trust, but it's very easy to transfer it over. We usually do a memorandum of uh of the record to
37:26 change that over from an individual to the trust. We have that as a formalized document. Um we we sign off on that. The investor gets a copy for their, you know, record, for their state's record, whatever they're going to have for their financial documents. And uh and it's pretty easy to transfer it over at that point. Um, and then my business partner handles the the tax portion of that to make sure it's transferred over properly, which is really not that difficult.
37:53 >> Okay. So, so, so it is a pretty simple thing to just have it um
37:58 >> to to fund it into the trust and then after that the I know because I have investments with you. So, then the K1s after that will come in the name of
38:06 >> come in the name of the trust, right? And if the trust has an EIN, we have it under the EIN. if it's under social security. Pretty straightforward and again it's treated as such uh for that new entity going forward.
38:20 >> Okay. So so then you're you know I I know um last year yeah the well I forget anyway. So let's say an investment is one of your investments is closed out. Okay. So now it's distributed to you know to in this case it would be their trust.
38:41 >> So um you know presumably they have a bank account in the name of the trust. So that's where the funds that's where you send the funds. Okay. And now the next opportunity with J investments comes around.
38:55 >> They can just turn around and
38:57 >> y
38:57 >> in essence reinvest in that new investment. Huh.
39:00 >> Yeah that's correct. and and we have an investor portal, you know, that basically tracks um all the investments in the entity's name. So, we have actually had investors that invested in their personal name or they've invested in their trust. And so, that entity is is who is basically going to be the uh the uh the investor on that specific project. And then um the the investor can set up their uh dis direct deposit AC documentation and everything on our portal which is encrypted and totally protected. So we can send funds out to
39:36 the trust or we typically can do a bill pay uh check that gets sent in the trust's name to the bank account for that individual to then deposit it.
39:45 >> Okay. And and since we're we're talking kind of the nitty-gritty here and we just have a few minutes left.
39:51 >> Yeah. Um, as I understand you can also because this is part of I think estate planning as well. You can also um people can invest their um retirement funds 401k IRAs but can talk about that for a minute as well. Yeah. What you do is you set up a vehicle called a self-directed IRA. And if you have a Roth IRA or a 401k solo, there's a couple of others there as well. Um, you can you can transfer over some or whatever amount
40:27 you'd like from the IRA that you have that's in the market with your financial advisor or through uh Charles Schwab, however you have it set up. you can move a portion of it or all of it into a separate vehicle that's set up with a custodian, a self-directed IRA custodian under a separate bank account. And then uh pending who the the self-directed I custodian how they handle that. Some are very very um uh engaged. Uh others are allow you to have what's called checkbook control where you can actually decide where and when you want to use
41:02 those funds. And it's pretty straightforward. You can wire the funds, send a check in, and then again, that entity is set up for us and most likely other investments similar to us as the self-directed IRA entity, which is a business, an LLC. And that business will be the entity under the self-directed IRA to invest. The nice part about this is that the self-directed IRA set up is either under a 401k solo with the deferred funds or a Roth IRA treated the same way it would be with
41:37 the traditional sense as well as the self-directed sense. So any taxes, anything that comes in from an investment inside of a self-directed Roth IRA is treated just like it would be making profit in a traditional Roth IRA. So no taxes um from a an income or a gain perspective. There are some very miscellaneous taxes that can pop up which are called uh unrelated business income tax or uh unde undefined debt unrelated debt and finance income or UDFI. Those are a
42:12 little bit kind of minute at times. And it depends if you're investing, let's say, in a triple net lease deal, that's a McDonald's, that's a business on your real estate property that's drawing off cash flow. There's a business there. So, you may realize some of those minor taxes, but no income tax from a standard perspective, and no gains, long-term or short-term capital gains. either it's deferred under the 401k solo self-directed or totally taxfree under a Roth self-directed.
42:43 >> Right. So, this is this is another aspect when people are planning and and and executing on their estate plan that absolutely they would keeping in mind. Yeah.
42:53 >> Yeah. And it's nice too because a lot of times folks would be like, "Well, I don't have that capital in bank or the trust has got monies out and doing things so it's illquid, but I've got a half a million dollars in my Roth IRA and I'm 52 years old, so I can't touch it." Well, if you want, you could take 25, 50, 100 grand and bring it over to a self-directed and then you can have those same funds available to use for investments inside of alternative investments.
43:20 >> Gotcha. Gotcha. Well, John, this has been eyeopening, I think, for for many reasons. And and as I was saying in the beginning, you really bring, you know, as a non-awyer, non-account professional, right? You really bring a different perspective and and one that's not often heard when people are talking about estate planning and and probate and trust administration. So, I I I really appreciate you uh taking the time.
43:51 >> It's my honor. My honor,
43:53 >> I I have to say, you know, as long as we've known each other, you shared a couple of things about your your background, your your um uh I guess they must have been your great uncles who who opened supermarkets.
44:05 >> Yeah.
44:06 >> So, my paternal grandfather, he opened the first supermarket in Lacrosse, Wisconsin that had air conditioning and automatic doors.
44:15 >> Oh, that's amazing. Good for you.
44:20 >> Yeah. You know what? It's just it's funny the the connections you have with people that you don't realize you have.
44:28 >> I do find
44:30 >> on this show, you know, people will that I've known for a long time, they'll share things that for whatever reason they I've never heard before. So,
44:38 >> yeah. And you got a chance to meet some of my mom's sisters and some of the family at my retirement. And uh it was an amazing event. And again, I I owe a lot of the things I was able to do to your to your mentorship. you really got me moving in that direction. You gave me that ump. So, I'll I'll be eternally grateful for that.
44:55 >> Well, I have to say you have a very brave family because as I mentioned [laughter] when as I mentioned at your retirement party, you know, they handed a rabbi a mic a microphone, [laughter] right? With no restrictions at all.
45:07 >> That's all right. You were one of the family that night and we we made you a family member for now on going forward.
45:12 >> Oh, great. Well, so I gotta make youoteote as well.
45:16 >> You got it. if you'll hang tight for a minute while I wrap up the show. We'll talk for a second offline. So,
45:21 >> that sounds great.
45:22 >> So, folks, um I I I'm not even going to ask if you got a lot out of this discussion. I know you did. So, uh if you want to get in touch with uh with with John, he won't make this pitch because he's he's too modest. But but um I will put all of John's contact information in the show notes. So, if you have questions or if if you're perhaps looking for some investments, ways to potentially um increase the return you're getting currently or you're looking to diversify, get get
45:57 involved in some more real estate or something. I know John would be happy to speak with you. Um, as I said at some point in the show, I'm a longtime investor with John. Uh, you know, I, you know, future what do they say? future uh returns or not.
46:13 >> Performance is not guaranteed from past performance. So you
46:16 >> past performance, but I will tell you um the the the investments that I've had with with John have done very well. I I couldn't be more and this is coming from a guy who's been in real estate for a long long time. So uh you know on on that basis, I can tell you that uh and I know by the way I know John's partner at JID, David, as well rock solid guy. Um and uh you know Dare I say this, you know, like like the smart guy that he is, he got himself a Jewish accountant. So,
46:45 >> yes, I did. Oh, yes. [laughter]
46:49 >> Very happy.
46:50 >> Let the accusations come. It's all right.
46:53 >> We were in the military. We can take it. But, uh,
46:56 >> that's right.
46:56 >> But by by all means, uh, re reach out to John. Um, it is
47:02 >> his pleasure to help you learn. If business comes from it, that's always a nice thing as well. But, uh, I I know where John John's heart is. And, uh, uh, let's see. Tomorrow at 10:00 a.m. Pacific time is my show, Business Lessons from the Military. Wednesday at 10:00 a.m. Pacific time is People Making Money. And then every other Thursday, join me at 5:00 PM Pacific time at Jiggers's place for a cocktail and a schmoo. We talk about all the things that are not related to finances,
47:37 relationships, values, God, books, movies, all those things that add a little bit of spice to life. So, um, lots of other times for us to be together during the week. And, um, if you are watching this on, uh, or listening to this on Spotify or Apple Podcast and you like it, hey, leave me a review. I'd really appreciate it. I'd love to be able to I'd love to have your help in uh helping me build the audience and helping more people. So, uh John, one last thank you before we go. Thank you so much, brother. It
48:11 >> was an honor, brother. Thank you so much for having me. I enjoyed it.
48:14 >> Yeah, you're absolutely welcome. Signing off as I always do. Marie darling, you are my bell. Courage at all times, my friends.