Michel Valbrun On Saving Money On Taxes, Opening Up a Trust, Best Write Offs | DSH #152

Now, even at CPA, CPAs don't even know how to help people save money on taxes.

Really?

Yeah.

Is it true Native Americans don't pay tax?

So

I'm not going to say they don't pay tax, right?

But they do have...

I heard that too.

They do, they do.

There are some benefits to being a Native American.

Yeah, to be to be a Native American.

So I'm Native American too.

You are.

I'm not going to go down that rabbit hole.

Not like when the tax code was created, there's over 70,000 pages in the tax code, right?

Right.

So if you were to print out the whole tax code, that's almost like

literally longer than that, right?

Probably to read it all, right?

You're asking if I haven't read it all.

Have you read it all or something?

I haven't listened.

Welcome back to the digital social hour.

I'm your host, Sean Kelly.

Here are my co-host Wayne Lewis.

What up, what up?

And our guest today, Michelle Valbrun.

What's in there?

How's it going?

What's up, man?

Tax God.

Yeah.

That's what I do.

Money making mitch, man.

Help y'all keep the bag is what I do, y'all.

So, yeah.

So, how would you help

athletes keep their bag?

How, how do, let's say, a lot of these cats are signing what?

$100 million?

$100 million deals, $160 million deal.

Granted, they're taxed in every city that they're playing, every state pretty much.

It's top 47%.

So

if they get signed for $160, but they're only making about 80,

80,

83 million of that,

that's what they take home, right?

Now, can they save on that?

47% that they're being taxed on?

Is it possible to save on that?

Or

could you save them money more so on a profit part?

But I would want to start with the tax part, the 47%.

Can you lessen that number?

Yeah, major.

So, yeah, what you're referring to is the jock tax, okay?

So, what happens is, as an athlete, you can get taxed based on the different states and places that you pay, right?

And one of the things that happened, the backstory with that is it's interesting.

So,

it was actually Michael Jordan, right?

So, Michael Jordan, he basically

originated from Michael Jordan.

So, Michael Jordan, you know, he was playing

all over the country, whatever the case is.

And basically,

long story short, they hated on him.

And basically, they started taxing all the states that he played, right?

So then they created this jock tax now where you're an athlete, you're being taxed on every state that you play.

So one of the things that you need to do, but what's really that if that's not the place you actually reside in?

I never understood that.

I understand the concept, obviously, jock tax, but why am I getting taxed on places that I don't reside in?

Yeah, the reason is because you're generating revenue there right so basically at the end of the day when it comes to when it comes to saving money on taxes like the irs their main objective is to be able to create revenue right so they're trying to generate as much revenue as they can right so if they can find opportunities to be able to tax you and be able to generate revenue now they can do whatever they want to do right so one of the main goals and one of the most important things that people need to do is understand how to proactively save money on taxes so when it comes to the athletes There's a lot of strategies that you could do, right?

Believe it or not, like when the tax code was created, there's over 70,000 pages in the tax code right

and yeah 70 000 pages right so if you were to print out the whole tax code that's almost like

literally longer than that right probably have to read it all right you're asking if i haven't read it all have you read it all or some of it listen

i read the stuff that you need to know so this is the thing about it right 90 the tax code believe it or not is actually showing you how to not pay taxes right less than 10 is actually telling you what you actually have to pay in taxes right so what people need to focus on is that 90%,

yeah, the not paying taxes part.

So, really, the big ways to save, and this applies to athletes, this applies to regular individuals, right?

Is there six big ways to save money on taxes, right?

So, the first one is deductions.

So, figuring out, okay, how can you maximize your deductions?

Deductions basically a tax write-off.

So, when people talk about writing off things on taxes, that's basically their spending money and it reduces their taxable income.

For athletes, this is, I'm strictly talking about the jock tax, right?

So, this is could be, so this could be applicable to athletes, right?

So, basketball shoes, yeah.

What?

So, basketball shoes

so that's not not not necessarily right so one of the things that happens with athletes is they also get paid w-2 right so with as a w-2 it's a little bit more challenging to be able to

can you follow exempt i guess well

you

probably found up on it like why

it it it it depends on on the specific situation the individual what i could say just generally speaking to the general pop population the public one of the things that you want to think about right especially as an athlete or someone who's getting paid as a w-2 right is that you want want to are you someone that doesn't have life insurance why leave anything up to chance in a worst case scenario luckily policy genius makes finding the right policy simple and their team of licensed experts are on hand to help you through it life insurance gives your family a safety net that they can cover expenses with so they don't have to worry about money while getting back on their feet i've had friends and family members that have passed away without life insurance it's definitely left us with financial instabilities even if you already have a policy it may not offer enough protection for your family's needs and it may not follow you if you leave your job.

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make sure that you have some kind of business.

Okay.

So the tax code actually favors business owners entrepreneurs.

Right.

Having an entity on the side, right?

Because what that allows you to do now is now you could basically turn your lifestyle into a tax write-off.

Can the NBA sign you as an entity versus an individual?

They generally,

based on my understanding, you'll come in as a, no, as a salaries.

Okay.

But can they, so they can't sign, if they were to sign, you would more be like on a subcontract because that's what mostly basketball players are.

Right.

But they're W-2.

Yeah, you'll get paid as a W-2.

Even if you come in as an entity, they can't sign you as an entity, right?

They could.

It's negotiable, I think, right?

I don't know.

I mean, I think you could be signed as an entity.

You should be.

I'm going to say it's possible.

I'm not going to say it's impossible.

Just generally speaking, I'm going to say that when you're coming into it, it's mostly you're getting paid as a salaried individual.

So, right?

There, you start a business and then you're right off.

Exactly.

Yeah.

So, what you want to do, and this again applies to W-2 workers at a job, right?

You want to go ahead and start that side hustle, right?

Having a business on the side, because now tax code opens up for you.

Stop right there.

Is it NBA depositing your NBA checks into that business account?

No, because it's

the reason why I'm asking is because it's a process.

So, I want to go step by step.

So, just in case people don't know, can that money from the NBA, whether it's hockey, NBA, NFL, baseball, can that money be directly deposited from the MLB or NBA to the business account?

Is that possible?

It is possible.

So it's possible, but generally speaking, it's still, it's going to be W-2.

Okay.

It's because basically the way it works with W-2 versus contractor is basically they control your schedule, right?

So you have to be here at a certain time.

You got to work these certain hours.

It's basically you are under the control of the owner, right?

So that's why you're getting paid, you're getting paid as a W-2.

and because of that now you have to pay payroll taxes on that so again like really the process is just i'm speaking generally speaking like of course on an individual basis we don't know every single person's contract or every single entity or whatever the case is so it depends on the individual but just generally speaking that's the way it goes where you're getting paid w-2 so what you want to do with that w-2 income is now start transfer transferring that over into a business entity right and then that business when you say transfer am i doing wire transfers to to to that account it could be it could be a wire transfer, it could be however you want to transfer that money.

Because, really, initially, when you're moving that money over from personal to business, that's considered a capital contribution.

So, now you're contributing to that account.

So, it's not taxable not to do that, right?

You're just basically like investing into that business, right, to be able to get it going, get it started, whatever the case is.

So, what you want to do is you want to figure out, okay, how can I be able to write things off on taxes now as a business owner?

Okay, right.

Now, the money's in account.

Now, we rock it.

Exactly.

So, now what am I doing to get write-offs?

Yeah, so write-offs, really, when it comes to write-offs, there's four requirements, right?

I call these tax-free requirements.

So tax-free is an acronym I came up with.

Tell people to remember.

So the first part of that free is for business.

Okay.

So the expenses and what you're spending money on, it needs to be for your business.

The next thing is our regular, right?

So it needs to be considered regular for your business.

Okay.

So it needs to make sense for your business.

So depending on the type of business that you're in, you need to be able to figure out what is ordinary for that business.

The artist calls that ordinary.

So for instance, one of my homegirls, she owns an ice cream shop, multi-million dollar ice cream shop all across the country.

She could write off ice cream cones, spoons, napkins, all those kinds of things.

If I try to write that off, right, I'm getting audited, I'm gonna have some issues, right?

Because I don't, it doesn't make sense for my business.

So, you want to make sure that it makes sense for your business.

The third part of that is essential, right?

So, what's going to be essential for you to operate your business?

The IRS calls that necessary.

So, necessary expense is going to be rent, utilities, employees, hiring professionals, all that.

All write-offs.

Yeah, all write-offs.

You're about a car.

Car, a thousand percent, right?

That could be ordinary, that could be necessary, or just the notes, the whole car.

I'll break down,

I'll break down the car because that's what that one's powerful.

Okay, and the fourth part of that is what I call economical.

So, economical just means it needs to make sense for how much money you're making in the business, right?

So, going back to that car, one of the things that 50 Cent did at the end of the year, he ended up owning a whole bunch of money, right?

We know 50 Cent, he's a rapper, he's a producer, he's multi-millionaire, right?

So, what 50 Cent could write off is going to be different from what someone else could write off.

Because 50 Cent has hundreds of millions of dollars, so he ended up buying five vehicles, wrought off all those vehicles.

Wow.

Because

he's a business owner.

He has these business necessities.

He was able to categorize that as ordinary and necessary for his business, right?

But if you're just starting off in business, maybe you could do one car, right?

Maybe you might not be able to write off the whole car, but maybe you could do mileage, right?

That's another way to do it.

So there's different ways to do it depending on the individual.

So those are the four requirements.

It needs to be for your business, regular for your business, essential for your business, and economical for your business.

So going going back to the vehicles, right?

One of the things that you could do is you're able to write off the full amount of the vehicle, right?

Again, if it's for your business, it meets those four requirements, you're able to write off the full amount of that.

So the vehicle does need to be paid off?

No.

Oh, wow.

That's yeah, that's that's so that's so that's so that's the yeah, that that's the secret, right?

That's one of the most powerful things in the tax code is what's called depreciation.

So depreciation is basically it's a it's a it's a cashless deduction, meaning that you don't have to put up money, you don't have to put up bread to be able to take, take it off, it's just based on the purchase price of the the vehicle so let's say for instance like one a popular one is a g-wagon okay yeah so the g-wagon heavy yeah it's heavy right so one of the requirements is the vehicle needs to weigh over six thousand pounds in order to be able to write off the whole vehicle right right it used to be a hundred percent now they brought it down to eighty percent right so do you know why because one of the things that happened is so when trump was in office he came in he made like the biggest changes in the tax code for the past 30 years, right?

He did a whole bunch of things to benefit entrepreneurs, business owners, real estate investors, right?

Trump's out of office.

It's not a political discussion.

He's out of office.

So now they're trying to bring that stuff back.

So now they're trying to change it back.

But he got it to a point where you could do what's called bonus depreciation and what's called section 179 that lets you write off 100% of the vehicle, right?

So now they're bringing it back.

And bonus appreciation is

prior to the car depreciating.

Bonus depreciation allows you to be able to write off basically 100% of the car.

Yeah, helps it, lets you accelerate the depreciation, right?

Because like I said, on one of the dope things about depreciation, this applies to homes as well, like investment properties as well.

Manufactured homes, too.

Right, yeah.

So what's dope about it is that

it's a cashless deduction for you, right?

So you don't have to put up all the bread.

And again, you're able to write off the full thing.

So let's just say, let's just keep the math simple.

Let's say 100% of the vehicle, right?

So let's say 100% of the vehicle.

You get a vehicle that weighs over 6,000 pounds.

Let's say you're able to write off 100%.

Like I said, it's 80 now, but let's say you were able to write off 100%.

Even if you put down 10%, 20%,

again, if you're using it 100% for business purposes, boom, you're able to write off the full amount of that vehicle.

So that's how that goes.

So really, again, the thing is you just want to make sure you meet the four requirements.

It needs to be for your business, regular free business, sex-free business, and economical for your business.

And then that's one of the ways to do it.

And then on top of that, you could do the gas, my bad.

You could do the gas, the maintenance, the everything else that goes into maintaining that car for your business.

So doing, and let's say an athlete does all that, right?

Family, payroll, everything.

When he sits down with his tax guy or CPA at the end of the year, he'll get a tax return.

Based on the 47% that they took from him, he'll get a portion of that back because he has deductions.

Bingo.

So this is for after they take the 47%.

This is how you recuperate those funds.

A thousand percent.

Okay, so I just wanted to make that clear for viewers.

Yeah, so just to and just to even piggyback and clarify that more.

So what happens is during the year, right, especially if you're W-2, you're automatically getting paid, you're automatically paying taxes during the year, right?

So at the end of the year, if you could show, like, yo, I paid this much, but based on all these deductions that I have, y'all need to give me some money back, right?

So that's that's what happens when you really the tax return is just like a true up of what you ended up owing, right?

So what happens is one of the biggest issues is that people think that the best time to save money on tax is during tax season, but it's too late.

The first time I save money is during the year.

It's during the year.

It's tax planning.

Now being proactive figuring out like if you didn't know how to ride off the vehicle during the year, now we're in 2024 and you try to tell me, like, yo, can I ride off the vehicle for no, bro?

You didn't,

have you seen cases where they took 47%, and then at the end of the year, the person got the 47% or 30% that they took back the whole entire thing?

Yeah, it's possible.

Wow.

So, check this out.

So,

that's technically not paying taxes.

No,

you can get it down.

Like, so one of the things Grant Cardone did it too.

Grant Cardone bought a jet, right?

He bought it, yeah, he bought the PJ, right?

So

the jet, I think, I forget how much it was, but over

a million dollars, yeah, over a million dollars, right?

I think 20, I think.

Yeah, something said over a million dollars again, met the four requirements for business, regular, essential, economical for his business, that business that he owns.

At the end of the year, literally, at the end of the year, he went, bought the whole jet,

basically wrote up, got a big deduction, got money back.

So my thing is, what happens the following year when you accumulate more?

Are you just doubling down on spending and put outs?

Or

what's that?

I mean, or again,

are you just doubling down?

Like, okay, I'm not.

No, not necessarily.

So, deductions is one way, but there's other ways to be able to move and transfer your money to be able to save money on taxes.

But basically, it's just it requires like consistent planning and looking at your situation here.

If you're gonna make more money, then now you gotta figure out other ways to be able to

reduce how much money you pay on taxes, right?

So, I'm not gonna say that every year like you're going to pay zero money in taxes you're going to get money back especially as an entrepreneur and a business owner just understand that you're probably may end up owing some money on taxes the biggest thing is like figuring out how to avoid avoid yeah illegally avoid paying taxes yeah and avoid is key right because

evasion

yeah you avoid yeah yeah he knows you understand so like yeah you got tax avoidance you got tax evasion yeah tax avoidance is is legal right that's basically reducing how much money you pay in taxes tax evasion is when you're saying you make less money than you actually made or you say you're spending more money in deductions than you actually did, right?

That's tax evasion, right?

That's what you can get in deduction.

You get audited, and then they find out you're not, everything was a lie, but the likelihood of them auditing you is

not likely, but they will at some point.

Yeah, is it true Native Americans don't pay tax?

So

I'm not going to say they don't pay tax, right?

But they do have.

I heard that too.

They do, they do.

Um, there are some benefits to be a Native American.

Yeah, to be to be a Native American.

I'm Native American too.

You are.

I'm not going to go down that rabbit hole.

But

yeah,

I'm not going to get the people in trouble with that one.

But no,

there's different things.

There's different exceptions and rules.

And like I said, that's what's so dope about it.

It's like 90% of the tax code is telling and showing people how to not pay taxes, right?

Everyone's thinking about, oh, I got to pay all this money in taxes.

And if I don't pay money in taxes, either that makes me like unethical or I'm breaking the law somehow.

yeah but that's not the case like the wealthy and and and the rich understand like you can use the tax code yeah you could avoid it right because why like the the the reason why i push and tell people to do that is because i feel like you have a moral obligation to keep as much money as you can now you can use it for your family now you can use it to give back to the community use the money the way you want to now you can use that to reinvest into the business and be able to provide jobs for people right you could get into real estate right and provide housing for people right so that's why it's so powerful to understand, like, how to be able to proactively spend money on taxes.

What would you say would be a nice amount of

entities to have attached to you as a normal person, not even as an athlete, just like the normal person walking around makes a decent amount of money.

How many entities should he or she have attached to him?

Yeah, I wouldn't even go based on a number, but based on the different types of ways you can go ahead and create entities, right?

So you're going to have one entity for an active business.

Okay.

So like, let's say you have a consulting company, whatever the case is, you're going to you're going to want to have a separate legal entity for that right a legal entity is going to be what's called a llc limited liability company or a corporation right those are two yeah that's those s-core i'll talk more about the s-corp the s-corp is actually a tax entity yeah so that's how you're taxed but the legal entity that gives you that legal protection llcs corporations can do that right then you got your passive type of activities passive activity is going to be you investing into real estate for instance right so you're going to go ahead and invest in real estate let's say you do buy and holds or whatever the case is you want to go have that separate separate entities

yeah three you just said okay yeah so now we're at three right and then you could also have you can create more

different more complex types of entities depending on your situation but i'll say the average person like having an entity five yeah

you think the number is five i i think you should at least have five entities attached to you whether separate standing or you know um fictitious and uh entities or i think you should have five different entities attached to you yeah five eins

I wouldn't put a number on it, but there is a benefit to being able to do that.

Because, like you said, even with the EINs, now that opens you up to being able to get business funding, business credit, and now reduces your risk now, right?

Because what happens is now with these legal entities, right?

Someone tries to come after one business, they can't come after all the businesses, right?

If you got it structured the right way, if you're doing the right things, you're not commingling funds and mixing things and trying to finesse too much, like then now you're able to go ahead and have that legal protection.

So that's that's super key.

But going back to the S-Corps, that's super important.

I want people to understand this too, right?

So we talked about legal entities.

You got the LLC and the corporation.

Those are legal entities.

That's how you're basically legally structured with the state.

Right.

Because most people get those confused LLCs and the corporation confused with the S-core.

A thousand percent.

So explain the difference between the three.

Yeah.

So basically what happens is you have the legal entities and those legal entities are basically registered with the state.

Right.

Then you got what are called tax entities.

That's how you're actually taxed.

That's what the IRS is looking at.

So that's why, for tax purposes, LLCs are considered disregarded entities.

When people are new in business, they're like, Why is my entity considered disregarded?

Something wrong?

Like, no,

they don't even see it.

It's not even, it's, it's basically

disregarded for tax purposes.

But then you have your tax entities, how you're actually taxing, you can be taxed as a sole proprietorship, right?

That's usually when you're in business by yourself, partnership business, and more than one person, the S Corporation.

Okay, so the S Corporation is going to be different.

One of the benefits of the S Corporation is now you're able to avoid self-employment tax.

Okay.

So self-employment tax, the tax that they pay, basically the tax that you pay, which is 15.3%

on the profit of the business.

Right.

So let's say you didn't have an S corporation.

Let's say you make $100,000 in profit in your sole proprietorship.

15%, 15.3% of that, which is Social Security, Medicare, all that kind of stuff that's included with that.

Now you're paying $15,300 in taxes for your sole proprietorship.

But now if you go ahead and switch over to that

S corporation, what happens now is that instead of being taxed on the profit of the business, you're being taxed on the salary that you pay yourself.

So, that's one of the requirements.

That's important for people to know.

It's like as an S corporation, you have to go ahead and create what's called a reasonable salary, right?

Reasonable salary is just basically, if I had to give you a number, a good start to consider is 30% of the profit of the business, right?

Minimum to start looking into, but you want to make sure you work with someone to like really crunch the numbers to figure out out for you but then what happens now is

because you're only paying yourself the self-employment of 1543 percent on the salary you basically let's say you pay yourself half of let's say you pay yourself fifty thousand dollars now you're paying you reduced your tax bill by seven thousand right you basically cut it in half because now you have that s corporation so that's one of the benefits so the time when people need to switch over to the s corporation is when you know that you're going to make more than fifty thousand dollars or really forty thousand dollars in profit is when you need to switch over to the s corp right if you're just starting off you don't think you're gonna do forty thousand dollars in profit it may not make sense because it's gonna be expensive for you right now you got to pay fees you got to put yourself on payroll like it the tax return is going to be more expensive for you to go ahead and process so that is when you want to make that switch and when do you attach a 501c right when do you attach that and then start to allocate money there because none of that money can be touched when do you do that or it's no better time you can do it whenever you want as long as they approve the 501c yeah 100 100 so yeah you know the 501c is right

yeah so 501c3 non-profit entity yeah you want to make sure that you're starting it to be able to you know have some kind of charitable you know justified like not necessarily a tax strategy not if people but it kind of is a tax strategy it

i mean i was saying

let me say this

no check this out no no check this out so it there's tax benefits i'm not gonna call it i'm just gonna say a tax benefit that's a better word

because we're on camera in public i'm gonna say

is there's some tax benefits, tax incentives to benefiting the community?

Why?

Just like anything, right?

The tax code, what the government realized is that the tax code, they can use it as an incentive system.

So if they want you to do something, they're going to go ahead and create incentives for you, right?

So right now they're really pushing hard on the electric vehicle.

So now they want people to pay, now they're giving people credits for electric vehicles and they want people to go ahead and invest in real estate.

Why?

Because as a...

a real estate investor, you're providing housing.

That's one less person that they have to put in public housing.

As a business owner, you're providing jobs.

It's one less person person that they have to pay unemployment to, right?

So you want to see what those benefits are.

And the nonprofit, yeah, of course, it's going to be a way for you to be able to help the government out by going ahead and putting money into that.

So yeah, that's that's something that you, if you have a heart, you know what I'm saying, to go ahead and contribute.

Is it true if you set up a trust, put all your assets, your real estate, LLCs in it, and you get sued, they can't go after that?

It depends, right?

So when it comes to trust, there's different types of trust out there, right?

So you have

You have what's called a living trust, right?

Which is revocable trust.

You have an irrevocable trust, okay?

So the revocable trust basically is a living trust.

Honestly, for a lot of people, that's what makes the most sense.

At least that's a starting point.

The revocable trust is basically what happens is one of the benefits, the biggest benefits of the trust, not even getting into tax.

We're going to talk about the tax piece with that.

One of the biggest benefits of the trust is that if you just have a will, now you're going to have to go to probate, right?

So when you die, when you become incapacitated, what happens is you got all this money.

You got all these these assets, right?

People are trying to figure out, yo,

where's this money going?

Like, who's getting this, who's getting that, right?

A whole bunch of families get into arguments because they don't know who's going to get what, right?

So, what happens is now you got to go through a court process called probate.

Probate is basically, you know, people are fighting for years, they're spending all this money on attorney fees, lawyer fees, or whatever the case is.

And the crazy thing about that is because now it's probate, you're going to court, and now it becomes public information.

So, now everybody can see, oh,

you got this home.

And, right?

So, then what happens is, and what's really crazy is that sometimes, even with that,

because now it's public, right?

There's literally people for their job, like people make a living, like literally just posting up by probate, um,

um, hearings or whatever the case is.

And they hear about, oh, this family can't pay for that, the property tax on the house.

I'm taking it, I'm gonna take that and then flip it, right?

And I'll just pay the little taxes on it, get those deeds all day.

Yeah, wow, it's crazy, it's messed up, right?

Paid a property tax for 6K and then sell it for 12.

Whoa, just transferred a deed over somebody

for 12.

Yeah, it's crazy.

So, and the create, and the thing about it is, right?

Even some of the most,

and this happens, unfortunately, like, even like Prince, right?

He died without a will.

Like, there's a whole bunch of celebrities and multi-millionaires who even, I think, you know, rest in peace to offset.

I don't think he had a will.

He didn't think he was going to die.

That's yeah, take off.

Take off.

Yeah, take off.

Yeah, no, you, but we're not thinking about that, but we just, I mean, we just got to be prepared.

We got to be positioned, right?

right?

So

with that, like I said, that's a revocable trust, right?

So it helps you be able to avoid probate, which is, again, you don't have to go to court.

It's all documented laid out for you.

And then you could basically allocate it.

And you could do what's called directives, basically saying, like, you can get really specific on how you want to do it, right?

So one thing that you want to put, like, I got a daughter now, right?

So one of the things I could say is like, hey.

When I die, right, my assets can only go to her.

It's not going to go to her man.

I don't I don't know who this person is like she's gonna get all of it right, so that's that's something that could you could be that specific right you could say that hey I don't want my kids because I know my kids are are crazy They're gonna they're gonna blow the money whatever the case is I want to make sure that they go to college I want to make sure they get it like before they can get the assets or whatever so you can get really specific on how you want to do that That's a revocable trust.

Then you have the irrevocable trust

Irrevocable trust is basically and and it's it's a lot more complex right and doesn't make sense for everybody to go ahead and do this but the the irrevocable trust is that's when you're able to save money on taxes because

now you're basically in a position where they, you know, the same

control, own nothing, control everything.

That's what they're talking about: the irrevocable trust, right?

So, with the irrevocable trust, yes, you can same thing, you can go ahead and put assets in it, but now you don't necessarily on paper, you don't own the trust, right?

Someone else, you have a trustee, someone else that controls that, and then you can go ahead and start pulling out money like through annuities, whatever that you have to pay taxes on.

But now, in that case, that's what's going to give you the protection, right?

So, and then you can get even to you can get even more.

You basically have assets, but it shows zero on paper.

Yeah, so you'll still, you'll still remember.

You have to trust your trustee, though.

Yeah,

once you sign it over, bro, it's no longer, it's really not yours.

Yeah, it's irrevocable.

It's basically irrevocable.

Plus, you can't change it.

No, you can't.

No, no.

That's like,

so they can run off with it.

They can take everything from you.

You can lose everything.

So it's got to be like your mom or brother.

Not even that.

Moms take stuff.

Brothers take stuff.

Girlfriends take stuff.

Yeah.

It got to be, it had to be somebody that you have either the battery to their heart monitor.

So if they take it, you can press the button.

But you got to trust them.

I mean, really trust them.

Even some people assign their attorneys as their trustees.

Trusted attorneys.

You want to make sure it's like a separate entity, like some kind of like business, like maybe attorney or something like that, that's going to be, that's going to oversee it.

They're basically in control of that.

And with that, yeah, like I said, like I even had one client, what, right?

They, you can get really creative with this, but there's, like I said, there's different types of trust.

But I had one client,

they just won the lottery, whatever the case is, right?

Wow.

Won the lottery.

How much they win?

They won a million dollars.

Literally, they were making.

The scratch-offs?

I forgot which one it was.

Because a million is not a lot with lottery.

Yeah.

You only paid five bucks, so I mean, yeah, that's it.

Well, that's not, but that's not like the mega jackpots.

Yeah, when you say lottery, I'm like, 16, 30.

But he was making less, I think he was making less than 100K or whatever the case is.

So, like, you know what I'm saying?

This is big money.

And they basically took all of it.

So they ended up getting half of it.

Because when you basically decide to get like the full distribution, you get 50% of that's taxed or whatever the

right.

And that's another thing.

I'm cool with that.

I would much rather take that.

Right.

Because you might end up, you know, lottery winners die.

for some strange reason.

Yeah.

So, but what one of the things, one of the benefits of the irrevocable trust is that you're able to be anonymous.

So what they did was, he's like, I don't want nobody to know I won this planning.

And what state, though?

Because every state you can't be anonymous.

California makes an announcement, Ohio makes an announcement, Texas makes announcements.

So, yeah, you're right.

So, it depends on the state, but what he did was he got with an attorney.

And this is like when we're going talking about trust, whatever the case is, it's more of like a legal concept as well.

So, you want to make sure you work with a state planning.

It's crazy.

So,

but look, let me ask you this

before you start.

So, if I win the lottery, am I starting the trust immediately or am I doing it before I win?

Like, when is a good time to start the trust?

And then am I telling the lottery to stay lottery to transfer the money to the trust?

Yeah, so you can do it.

You can do it after the fact.

Okay, okay.

But just don't make the announcement.

Yeah,

it's called like a transactional trust.

Okay.

This is what it is.

So basically, it's transactional.

It's a transactional trust.

Yes, it's basically transactional in the sense that they go ahead and move the money in there so no one knows who it is.

On paper, it's like the attorney, you know what I'm saying?

Like really moving it so no one really knows what's going on, who has it.

And then from there, then they go ahead and transfer the money.

And this is before you give him the winning ticket.

So as far as the timing is concerned, I believe, yeah, I believe so.

Yo, that's crazy.

I'm learning.

I'm learning so much.

Yeah, I'm learning so much.

So it's called a transactional trust.

Yeah.

So you do that.

immediately after winning the lottery and it looks just like a bunch of paper scram like a transaction to

a synonymous person yeah you wouldn't yeah so even when they announced it it'll be like the williams Trust Fund.

It wouldn't even

be their name, right?

To keep it even more.

It'd just be like random, like some guy want it.

Yeah.

BCG Trust.

One the library.

And you don't know who that is.

If I won it, I would be anonymous for sure.

No, for sure.

Yeah, you don't want that.

You don't want that pressure.

You know what I'm saying?

No, that's crazy.

Yeah, so that's another benefit of

the trust as well.

Transactional trust.

Yeah.

What's the most you've helped someone save?

The most

over a mil

I've been able to show someone, yeah, about like 1.2.

This is this is the thing about they got back or that you saved them.

I was able to save them in like tax savings or whatever the case is.

So, this is the thing about it is like, obviously, the more money that you make, the more it's going to be, right?

So, it's really just like percentages, right?

So,

the impact for one person is going to be different for another person, right?

So, if I'm showing you, like, hey, these are all the write-outs that you get, you know, 30% of 10 million is going to be different for 30% of 100,000.

So it's really just

percentage-wise, right?

Based on, based on how much money the person makes.

But a really key thing with that is like when it comes to, again, saving money on taxes, that tax planning piece is really important because, you know, again, and this is the thing about it, right?

I'm a CPA, right?

So certified public accountant, that's like one of the highest.

standards that you can go ahead and get in the accounting field right so i'm basically tough to get yeah it's tough right there's less than one, you have to get a bachelor's, you got to get a master's, you got to work under a CPA for two years that has less than 50% passing rate.

Less than 2% of CPAs are black.

So it's like, it's like the highest, basically the highest level, right?

But congrats, brother.

Appreciate you.

Congrats, man.

Congrats on that.

That's love.

I appreciate that.

So, yeah, no, it's, it's, but the thing about it is, even as a CPA, I'm telling y'all, like, right now, even as a CPA, CPAs don't even know how to help people save money on taxes.

Really?

Yeah.

So this is the thing about like as a CPA.

So what are CPAs actually well i know what some of you guys are good for because i've done dealt with a lot of phenomenal cpas but right the fact that most people have that misconception that you guys are supposed to save them um they always apply their cpas no and is that a luxury

being

knowledgeable about taxes being a cpa at your level no a thousand percent like because one of the things is like From my perspective is the CPA exam really prepared you to work in corporate America.

So basically you're just working within businesses, whatever, but they don't teach you and show you how to help business owners save money on taxes, right?

So I had to invest like over a hundred thousands of dollars in myself, like learning from people, top tax attorneys and all these different things, right?

To be able to learn this information to help people proactively save money on taxes, right?

So I came up with this thing called the tax elite.

It's another acronym that help people like to help people like really understand who you could work with because the CPA is not enough.

Right.

Right.

So

as with the tax elite, the first part of that is E, education, right?

So did they go to school for a counter tax?

Did they do do that?

That's a positive thing.

But then also, when you're working with the CPA, they need to be educating you on how to save money on taxes.

So that's another thing.

A lot of people, they just give their tax return to expect that the CPA is going to save them money on taxes.

It doesn't work that way.

They need to be like, yo.

Wait, I see you got this and that going on.

Like, this is how you need to move that.

Like, it needs to be a conversation, whatever the case.

That's, you need to be able to expect that.

The next thing is L, legal representation.

Legal representations, can they represent you in front of the IRS, right?

So if you get a call, if you get audited, you don't want to be taking that call, right?

Because one of the things that they understand

exactly.

And they do it because they know you don't know.

So they're going to start asking you questions

in the psychology, right?

They're going to play nicely like, hey, how you doing?

Yeah, we just noticed that.

You know, if you and start asking you questions, and that next thing you know, you're going to overshare whatever the case is and say things that you're not supposed to like.

Ah, we got him.

Let's go.

Right.

And now you're going to get hit with another tax bill.

So legal representation.

You don't want to make sure that you have a CPA.

CPAs can represent you you want to make sure you have a CPA to go ahead and represent you eyes integrity it's the next part of the elite so eyes integrity integrity means that someone that's following the tax code doing things legally and ethically you don't want to have work with someone that's telling you to claim kids you don't have like come on like it's crazy like that's this is what people really do in real life like you know what i'm saying so like you want to make sure

yeah so you want to make sure that you you work with someone that's doing things legally and ethically t is training are they constantly getting trained up on the latest and greatest tax information tax code that's going to be key And last but not least, experience, right?

So one of you want to look at years of experience, like how long they've been in the game.

So I've been in the game for over 10 years, but also you want to work with someone that has experience with your specific situation, right?

Do they have experience working with real estate agents, real estate investors?

What type of real estate investing?

Are we talking about wholesaling?

Are we talking about fixing flips?

Are we talking about buying holes?

Like, are we talking about these?

Like, what are we talking about specifically, right?

So that is going to be key because every business, like I said, has different requirements.

So what's considered ordinary what's considered necessary there's some kind of benefits with a particular industry so that's gonna be key so like making sure you're working with the right person like I said the tax elites is who you need to be focused on now what would you say the best places

just to kind of touch bases on that are the best places to incorporate and then create non-profits and outside of the US too right yeah so there's there's a couple of places that give you some more benefits as far as like registering you got Wyoming it's gonna be Nevada is actually good.

So, Vegas, yeah, Nevada is good.

You got Delaware that gives you some

tax incentives,

really, more of the anonymous

type of benefits as well.

Outside the country, man, you got Puerto Rico, you got Turks and Caicos, like a lot of the celebrities I've never heard of Turks and Caicos.

Yeah, you got Turks, you got Turks, Dubai, it has some crazy tax benefits as well, incentive incentives.

So, yeah, but again, you want to make sure what about Mexico, Belize?

So,

I would say say New Mexico, New Mexico, yeah.

Not actually Mexico.

Nah, well, I mean, as far as like benefits, as far as saving money on tax, because

it's a different country, you know what I mean?

So, like, you're gonna, it's gonna be, it's gonna be beneficial for you.

But, um, but I would say, again, you want to make sure like you talk to someone about your specific situation because I don't want people to like just jump out there and start, you know, getting these entities or whatever the case is going to make, like, it needs to make make it make sense or whatever the case.

If you're just starting off, like, you could literally just go ahead, start it in your state and where you're where you're located.

That's the ideal way to do it.

And then, as you feel like, or as you start moving up, then you want to start, you know, looking into those different strategies to be able to help you save.

Why do you recommend all parents pay their children a salary?

Oh, man, that's like, so this is the thing about it.

So, when it comes to the money that we spend, right?

Some of the

what we spend, a lot of people spend the most of their money is on their kids, right?

Kids are expensive.

Like I said, I just have a daughter, and you know, it it it's it it costs, right?

How early should you start paying a salary?

That's a good question.

So,

what I would recommend, what I generally recommend publicly is because there's a court case, and in that court case, there is basically a parent that paid their seven-year-old through the business, and they were cool with that.

So, anything younger than seven starts to become a gray area.

So, people, I know people do it, and they say that the child is a model, and they try to do it that way.

I personally recommend seven years and older

is when you want to look at that based on the court case because the tax taxes when it comes at the end of the day, tax is really law, right?

So what I tell people all the time is in order to change your tax, you got to change the facts, right?

So it's based on the facts of the situation.

What's the facts?

Okay, you have your kid now is an employee, so that's the fact.

So now with that, you're able to pay them up to the standard deduction amount.

So whatever the standard deduction amount is for the year, this year is $13,850.

You go ahead and you could pay them up to that amount.

And based on that, they need to be performing legitimate services for the business.

you need to make sure they have a job description you want to record the hours the hours need to make sense so basically with the hours and just because you know your kid let's say for instance you have your kid cleaning cleaning around the house or whatever the case is you can't pay them a hundred dollars per hour right so you want to make sure you do research and figure out like what makes sense for how much work that they're doing right so that's one of the key things there and then also you know you just want to make it look you want to have the documentation tight yeah on that right so you want to make sure it's it's it makes sense and one of the best one of the dope things about that is now the kid is able to have earned income because they have earned income now you can go ahead and put that into a retirement account let's say you put it into a roth ira

let's say you started at the age of seven right and let's say the the rate of return on that happens to be like 10 or whatever the case is you can even go lower than that but just hypothetically speaking let's say the rate of return over a 10 year period they uh from this from seven to 18 right you go ahead and bring that out by the time they're 18 they have over a hundred thousand dollars in their bank account right from from from going ahead and being able to do this.

So that's why I always push, you know, being able to pay your kids through the business.

One, it's a tax deduction for your business.

So you save the money, you're not paying taxes on it, right?

That's a tax loophole.

So is it okay if you pay a seven-year-old $100,000 a year?

Nah, bro.

Nah, bro.

So, well, like I said, one, it's up to the standard deduction of $13,850.

And then to be able to not pay taxes on that.

Okay, so I want my seven-year-old to, my seven-year-old makes $100,000 a year.

What's wrong with that?

But they can.

What I'm saying, they can.

I'm not saying you're not allowed to.

What I'm saying is that the tax benefit that I'm talking about the $13,850, that's the max that I'm going to say.

That you don't have to pay tax.

Anything over than that, then they're going to.

That's how you pay price.

So the kid doesn't have to pay taxes on that $13,800.

Wow.

I never knew that.

Because I got a little allowance when I was a kid.

Yeah, so that's the thing.

One of the things that people need to think about is not if you can write it off, but how can I write it off?

Okay, and how many kids can you put on that $13,800 salary?

How many employees do you want?

If you got five kids,

you're able to pay them each $13,800.

But yeah, but remember this, right?

Again, it's the economical piece.

Like, how much money does your business make?

So if your business only makes $5,000, like, you know what I'm saying?

It's got to make sense.

Yeah, you can't.

It has to make sense.

And it has to make sense with the age, too, right?

So I'm not going to tell you to jump out and pay a seven-year-old $13,850, right?

Because

the Math 8 math,

it's going to be a little bit harder.

But like, if they're 15, 16, and they're your graphic designer, social media manager, we lit.

13,000, like go ahead and pay them the whole 13,850.

Now, what's this health insurance thing I see people doing where they're taking out loans against their policies?

Yeah, so there's different policies that are out there.

Health insurance?

Yeah, people are opening up health insurance accounts, putting money in it, and then taking money out interest-free, right?

Yeah, so one.

Is that cure credit?

So

I would say this.

So on the health insurance piece, I'll just say that's really more of a life insurance type of strategy.

So generally speaking, people will do that with life insurance.

So life insurance, if you get like a whole life policy, whatever the case is, there's policies that are out there that basically you're

basically able to borrow against the cash value of that, right?

So one of the things actually that's interesting is that Walt Disney, like that's how he, one of the things that he did to be able to start Disney Worlds, he's able to go ahead and use that.

And because loans are non-taxable,

then yeah, you're able to go ahead and borrow against that tax-free, right so again but that's life insurance but i yeah that's life insurance life insurance loans are non-taxable but anything you get from the bank the bank is that's that's the deduction especially if you're a delinquent on it right if you the banks write it off they have an insurance policy on every loan yeah right yeah so for the banks yeah if they write it off then that's yes it's then yeah it's basically a loss for the bank yeah yeah that loan stuff is nuts though because people would take money out buy a house with it and make more money yeah so one of the things you could do so this is this is a really um dope strategy that people can but it lowers your face value, right?

Your face amount if you take a loan out against your whole life.

So, yeah, yeah, so basically, what one thing that you can go into like the borrowing, right, and being able to get homes, right?

So, one thing that someone could do, right, potentially be able to do is, like, let's say you're working at a job, right?

You have a, you're working on a job, you have your 401k account, for instance, right?

you go ahead become a business owner, you go ahead and switch that over to a solo 401k, right?

That's the 401k for business owners, right?

One of the things you could do is you can borrow against that retirement account, right?

So you can borrow, I believe, up to 50% of that account.

Now you can go ahead, use that money, be able to buy property, right?

And then basically, and then basically be able to use the money, the cash flow from that, from that, from that property, go ahead and pay down the loan.

You get tenants in there, they're paying down the loan, whatever the case is.

So yeah, that's another way to be able to do that.

And that's the 401k, right?

You can do that with, yeah, the 401k.

You can borrow what is it, 60% or 50?

I'm going to say, I'm going to say 50%.

It could be more, but I'm just going to say 50.

I don't want to misquote and get people jammed up.

Michelle, what are you working on next?

And where can people find you?

Yeah, man.

Always got something going on.

It was very informal.

I actually really enjoyed this.

It was always taxing.

Some people may say it was boring, but I liked it.

Nah, listen, like, I didn't even, I scratched the surface on it.

Yeah,

we can really go with it.

One of the things, one, before we, I want to share this because this is super key that I want people to understand, right?

Before we, before we wrap up with this, is like, understanding tax is like literally literally your biggest ROI to increasing your wealth, okay?

Because

again, people don't realize this, but like tax is destroying most people's wealth, right?

So think about this, right?

When you make income, you pay income tax.

When you

buy something, you pay sales tax.

When you buy property, you pay property tax.

When you sell the property for more than what you pay for it, you pay capital gains tax.

When you die, because they taxed you to death, now you're paying death tax, right?

And you add up all these different taxes that's over like 52% of your income.

Like, people are not even aware of this right So basically every dollar that you're making is 52 cents ten dollars five dollars and ten cents a hundred dollars like it goes on and on right, but the biggest tax that people don't talk about is what I call ignorance tax

and ignorance tax is a tax that you pay by not understanding the tax code by not working with the right professionals so for the listeners for everyone out here like I begging y'all like really make sure you take this thing seriously and you know understand how to save money on taxes because too many people are overpaying in taxes and there's a lot of ways to be able to save save.

Like I said, the tax code, most of it is showing you how to save money on taxes.

So that's going to be keeping it.

As far as what I'm working on, man, yeah, like I got a couple of things.

So one of the things I started is now I'm actually coaching and helping other people become what I call the tax elite.

So helping people now,

helping their clients be able to save money on taxes, right?

There's seven over 7 billion people.

I can't work with 7 billion people, whatever the case is, right?

So I want to make sure I help the next generation of accounting and tax professionals.

That's one thing.

I also have an e-book that y'all definitely need to check out.

So it's called Tax Wealth Secrets

ebook.

We're going to have the link in the bottom

in the description.

Make sure you guys tap into that.

Got a special discount for the listeners.

So you guys go ahead, taxwealthsecrets ebook.com so we can go ahead and pick that up.

And yeah, just again, just continuing to educate folks and helping people save money on taxes is what I got going on.

So

yes, sir.

Oh, yeah.

I loved it.

All right, guys.

If you need help saving money on taxes, hit my man up.

Thanks for watching.

See you next time.

Peace.