•The signing of a Non-Disclosure Agreement – does not bring criminal sanctions for breach only civil sanctions as spelled out in the Agreement. Read the agreement if you want to know the sanctions.
•Loose Lips Sink Ships
•Never go into a Trust with the attitude or stated purpose of avoiding income taxes. The reason why is that today’s IRS considers avoidance the same as evasion. No attorney/financial planner/CPA ever sets up a plan for tax avoidance. They set up plans for (Planned Giving, Asset Protection, Estate Planning, Business Planning) the ramifications of each of those can sometimes and more likely than not brings about some tax savings.
(Remember: How many times have I said, “Be as Wise as a Serpent & as Harmless as a Dove)? You want to bring scrutiny on yourself – go out and advertise you set up a trust to avoid taxes.
•Trusts pay the highest rate starting at $12,150 income. The ideal is to shift that income to a beneficiary that is in a lower bracket. However, the beneficiary will pay taxes on what is received and the trust will pay taxes on any accumulated income over 12,150 at the highest rate.
You have to work the math to make this come out right or you are getting hit with personal and then taxes on the trust plus all the fees and interests associated with generating the income. Don’t just assume a Trust is a panacea for tax avoidance.
•Most trusts are set up by wealthy people to reduce or eliminate “gift” or “estate taxes”
•The use of Family Limited Partnerships are a tool used by many to maintain control of assets during lifetime while gifting various property rights to heirs while the General Partner retains the power of disposition of the assets.
This allows a concept called “Discounting” of property because any property (real estate, corporeal, incorporeal, cash, brokerage account) each one has a bundle of rights that when broken up allow the gifting of a component of those rights at a discounted rate. (This is very complex – as the commercials say on TV – Do not try this at home by yourself)
This involves CPAs, Attorneys and Appraisers to perfect. It is however how the really smart savvy wealthy move assets from one generation to the next without incurring estate or gift taxes while maintaining control and disposition during lifetime.
•Limited Liability Companies. Any income generated within an LLC through a transaction – definition of a transaction is important here and you do not want to get in a spitting contest with the IRS because their definition will rule the day.
So if you exchange within an LLC then 100% of the proceeds will be subject to your personal income tax rate because all the income will come to you at the end of the calendar year of the LLC. Whereas doing the exchange personally, the jury is still out on whether the exchange will be taxable.
I know there are many who insist there will be taxes but I have not seen anything to say there will be – the last time I was overseas and came back and exchanged currency no government agency charge me any taxes on the exchange. In the abundance caution do what Tony & Ray have suggested (set aside estimated taxes) If we are lol fortunate there will be no taxes.
•Understand what a trust is: Understand who can be the Trustee who cannot be the trustee. An irrevocable Trust is not effective unless the Trustee is independent of you meaning arm’s length and not related by affinity. Not what a Grantor / Settlor is, Trustee or Trustor, Beneficiary. No what separates them, their duties and responsibilities. No the governing law in your state.
•There are many trusts but they all do different things.
•Seek counsel from your Wealth Manager, Private Banker, Financial Planner before you go out and create a bunch of entities. Unless you are “expert” how do you know what you need? Right now you have no idea how much money you will have or the type of assets so what are you thinking.
•Ray and Tony said plan. What they mean is know what your going to say. Be humble and not condescending to the bankers and or professionals. But by the grace of God you would not know about this. So be respectful.
I think the key to having understanding is realizing no one knows everything and if you are willing to humble yourself, ask questions and take your time you in partnership with your advisors will come up with a plan that is unique to your situation. That when truly perfected after much thought and implementation will run like a well oiled machine because everything will be cohesive and work together to maximize the stated objectives and goals.
I applaud Ray and Tony for working to educate everyone. You know more than you think you know now.
However, when you start to implement now without any assets and without someone playing devils advocate and running hypothetical situations, meaning tax scenarios, or liability scenarios then all you are doing is creating things you may or may not need and if you use them you will more than likely have to go back and amend. And amendments cost as much as original filings.
I once had a client come into my office and say Mr. _______________, I am 67, my wife is 62, I am worth XYZ I need this and this and this.. I looked at him and said then why do you need me, go out purchase the forms call Legal Zoom and do it yourself. Don’t waste the professionals time being a know it all.
The client’s wife was much more savvy or judicial than he was and apologized for his pretenses. In the end he did not need everything he thought he needed to accomplish the objectives.
And there were some things he had not even considered. Again trust the advisors where you live in the jurisdictions you each live in. What works in North Carolina may not work in Florida or North Dakota or Idaho. Each state has its own Trust and corporate law.
So trust your local people there are good people and your Wealth Manager or Private Banker will have people they trust and remember these Wealth Managers and Private Bankers have a self-interest in helping you preserve and protect your wealth and grow it.
You must use a Bank in South Dakota to manage the assets. And last time I looked there is a limitation on what can be initially used to fund the Trust. So you cannot simply go form a Dynasty trust and say you have one.
You must follow the codified law in the state that allows them. The Trusts have to be domiciled in those respective states, they can have beneficiaries outside of those states.
Lastly I am not open for business I do not want any clients. I am here on the field of play and will be here until the score board reads “We Win” or until I sink the last putt on the 18th green. I will do my best to guide and direct intellectual “thought” on certain matters. I cannot answer every PM.
And if I think the answer has already been given I will merely suggest by my silence that the answer is in the forum. And many times it is by others – I suggest you go back and read some of what Ray has shared and OKRocks/Daz and others.
There is no one size fits all. That is my biggest beef with a lot of things. I do not believe in generic instruments for customized situations. And I grew up with a Father who said if you do anything do it right the first time not “half- _ _ _). You can fill in the blank. And as an attorney my first rule of thumb is “Cause no harm”.
Best to you all. Mother, Esq.