Comments & Reflections:
I have been reluctant to make postings for many various reasons.
• Often I state something and I am questioned by “arm chair quarterbacks”
• I am asked for legal advice and I feel guilty for not taking time to respond, but neither should I.
• The information shared is ad nauseam — I have shared over and over during the years and yet the same questions keep coming up. . .At some point I have to realize that “Some Will, Some Won’t, So What”.
So this will be my last ever public posting. I will state upfront – I am not going to be monitoring for questions and if asked questions I will not answer. I am going to be clear, concise and correct — so if you do not get it — you simply do not get it.
What is all this talk about paperwork?
I have stated over and over – why is anyone so head strong in running into taking an event “The Exchange” that could possibly be a non-tax event to the individual and make it one meaning a tax event?
The jury is still out on whether this will be taxable. There was a well reasoned argument made years ago by a contributor to this site that gave the Tax Regulations and Revenue Rulings and even code citations which I totally concur. I think her name was Bond Lady.. She did a marvelous job in correctly analyzing the legal issues just like a lawyer would. .
Secondly, on various sites – others have heard via government sources etc., this is not going to be a taxable event and specifically I am relating to the “Iraqi Dinar” And I have stated over and over in my many overseas travels upon return to the United States when I personally convert currency obtained in a foreign country I have never in over 20 years incurred any taxable income upon exchange. . I am charged a processing fee but never a tax. . .
So back to my original question: Why take an event that could be non-taxable and make it taxable?
Your probably wondering what is he talking about? I am talking about running into a bank and shoving Trust Papers or Foundation papers or Limited Liability Company papers into a the bankers face and desiring to exchange into one of those “Taxable Entities.”
Trust: Has anyone here even have a clue how these things operate? Do you realize that there are many variations of Trusts” For example: Revocable Trusts ——> (Sole Settlor, Co-Settlor, Complex, Simple) Those are the types of Revocable Trusts, Irrevocable Trusts ——> (Crummy Trusts, Complex, Grantor Annuity, Grantor Lead, Charitable Remainder Unitrust, Charitable Remainder Lead, Charitable Remainder Annuity, Minor Complex) These are just a sampling.
And there are variations on all of those, those with sprinkling powers, and generation skipping powers, protectors, advisors, reversionary. The list is and can be as creative as the Creator designs but must be in compliance with Trust law in the state of domiciliary jurisdiction. What does he mean by using that big word?
Domiciliary means the state where the trust is put into effect. There are no Common Law trusts that operate across jurisdictional lines. I mean — a trust created in New York has things unique to New York law same about Virginia, Florida, Louisiana, Texas, Oklahoma, Nevada, meaning all 50 states have their very own Trust laws that govern Trusts that call upon that state in the document.
You have to name a state when one is drafted so you know where to go when there is a problem. You have to have some law to grab ahold to enforce provisions. Common Law Trust — What the heck is that? Is that like Common Law marriage? Is that like almost pregnant? I am being sarcastic because my question begs a sarcastic response. . A trust must state a jurisdiction to be valid. It cannot be created under the laws of the United States. It has to be created under the laws of a STATE.
However the biggie here why did I mention Trusts at all. Because a Trust is not a Piggy bank for you to dump money into with the thinking your avoiding taxes. As a matter of fact an irrevocable trust that is not charitable. Is taxed at the highest individual rate.
Money going in is immediately designated as a gift and any amount over and above your unified credit will be TAXED. There are no freebies. So just imagine you go into a bank all smug and ask a banker to first open an account for this Trust. If it is Irrevocable you need the Trustee to be there – if you’re the trustee acting for yourself there are conflicts all over the place.
As a matter of fact the IRS if they look at it and trust me they will — will “smell a rat” They will unwind the whole thing, audit you and tax you anyway along with penalties and interest for attempting to “evade income taxes” And that is the word they will use. . . By the way did you apply for a tax identification number for your irrevocable trust? Your social security number will not work. . Have you been filing yearly paperwork on the trust since you set it up? Oh you forgot!!!!! Shame on you your already in violation of the law.
So why risk it? Because you heard some guru say you need a trust and you went to a seminar and got some generic trust forms filled them out and Presto you have a trust? Have you ever considered all the ramifications? Do you really understand the document? Trusts are audited at a higher percentage than individuals. So why would you if you are in a possible No-Tax situation upon exchange, then exchange directly into a Trust creating a gift tax which you will have to pay taxes on? Hmmmmm?
Foundations: I know I have stated over and over about this so I am going to do it again one last time. As with trusts there are many types of Foundations. I have two books on these wonderful creatures and I have a whole set of CCH Reporters that I still manually update with the updates that are mailed quarterly.
I hear all this stuff about setting up a foundation. Did you know these things have to be approved by the IRS before they are legit? Did you know that? Did you know they have to have their very own tax identification number? The last foundation I created I charged 10,000 USD and believe it was not enough after all the paperwork and questions I had to answer for the IRS before they received their declaration letter.
Do you have one of those a declaration letter for your Foundation? Did you know that once you put the money in them you cannot use that money to go buy a house a car, clothes, take a vacation, buy groceries, buy gifts? Did you know that?
You see a Foundation has to have a governing document that has to be first approved by the IRS. There has to be provisions for dissolution and any proceeds must be designated to another foundation or charity? Did you know the foundation has to have a Board of Directors? Did you know the foundation has to file yearly paperwork with the IRS division in Baltimore, Maryland the main IRS office in the United States that is set up to “police” all foundations and charities in the United States?
So how many of you are thinking you are going to designate a foundation and have those monies exchanged directly into the foundation? Guess what the moment you do you have created a tax. Remember you can only give so much a year? Did you know that the foundation then has to file paperwork with the IRS saying where the gift came from? In that paperwork will be your name your social security number. Don’t you think the IRS will have a lot of questions – where did you get the money to do this?
And they they will start looking at the documents that have not been filed with the Baltimore Office and guess what? They are going to unwind that creature and your going to be audited and will have to explain your motives. With the IRS your guilty until prove innocent and during all this process guess what else? The IRS has frozen all accounts of the foundation while they try and unwind that baby and you have no money to fight them. Amazing huh? All because you were trying to avoid taxes because you think that is what rich people do Same with Trusts Most folks think this is what rich people did.
Guess again — most rich people did not start off rich. Most rich people had the money first and then sought advice from a multitude of counselors before making any decisions. They did not start of rich.
There are Private Foundations and Public Foundations. I have stated over and over. It is not recommended anyone set up a Private Foundation unless he/she is worth liquid over 500,000,000 USD. Because before you have that much extra liquid capital around the tax incentives are not there. Additionally Private Foundations limit the percentages you can donate into it on a calendar year and cash is treated different from other property. The governing documents must be approved by the IRS. .
Public Foundations: Again same thing while the law is more generous the public foundation is now responsible to the public. . therefore the IRS is going to make sure there are no shenanigans going on “self-dealing” huge salaries paid, huge expense accounts.
You can thank the Clintons and that former Congresswoman in Florida for all the extra scrutiny because the old gal in Florida is now in federal prison and I have a feeling a very strong feeling that the Clinton Foundation before too long is going to be experiencing a lot of pain. . . foundations are not your personal piggy bank.
They have a purpose and it is not to enrich the Donor/Creator. They are tools used by Wealthy people who have decided to do some philanthropy and have set up an organization to do that. However again they did not have the wealth at first. The foundations were only created after the fact. Get it Jack?
Limited Liability Companies or “LLCs”
So you have an LLC and you run into the bank and you have the banker exchange into the LLC. Wow all of a sudden every dollar that goes in will have to be reported at the end of the calendar year as money to the Members. That will probably be you. Guess what? The LLC by law will have to file a schedule with your name and social security number on it and suddenly you have a lot of passive income hitting you which is taxed at a higher rate. So you have in effect taken possibly non taxable money and made it taxable. Wow! You said your capitalizing the LLC. Yeah to do what? What is it’s stated business purpose?? Hmmmmm?
So we are back to the same question: Why take monies from the exchange that right now stand a good chance of not being taxed and put in an entity removing all doubt and creating a tax liability? I guess you want to be a glutton for audit, hey the folks in California, New York and other high tax states will love you. . along with the federal government because why you are trying to fight your way out of the mess your have created your funds are all frozen. . your presumed guilty before your presumed innocent. . .
Wow – a double whammy your guilty of something and trust me they will find something and you have no access to the Big Kuhuna account to fight it because the IRS thinks there has been some fraud going on so they are going to freeze you out and ask questions later.
All along many have been telling you — “how many of you will lose it all within 6 years?” Just like 95% of all lottery winners. You will have nothing to show for it — all these years, all these tears and for what? You listened to some guru or seminar person and you think you heard one thing when they probably had some disclaimers out there but you heard what you wanted to hear and you think this is what Rich people do or did.
Remember I said Rich people did not start out rich. All these things above were set up after they had their money, after they sought legal counsel, good counsel from various professionals. Where questions were asked back and forth and all things were weighted and balanced to come up with a custom plan to fit that one particular rich dude.
How many folk out there right now if you walked into my office today and said I need help could answer these questions:
1. How much money do you have? Don’t give me a speculative amount I only deal in fact not speculation. How much? Guess what not one of you can answer that question.
2. What are your objectives? If you say to avoid income taxes. You need to go get measured for a federal prison uniform. . . That is not right answer. So what are you objectives short and long term? Can anyone answer those questions right now today? I think not because none of you know how much you will have. No one knows the rates, if there are contract rates what will it be? Will everyone get the same or will you have to negotiate?
You see no one can answer the first question which means we have a hypothetical and if you think you want to avoid taxes and that is your reason. You are in a heap of trouble because that is a naïve answer.
I will say it one last time. Even Mother has no idea how much he will receive. I have no clue I have ideas but no clue. I am not wasting any time even speculating on what I will do because I have no factual numbers to work with. What will Mother do? Mother is going to go exchange. And this is what I am going to do:
1. Exchange into a Broker Account in my name. Why would I do that? Hummm let me see the bank I choose will have a Private Wealth Division. That division will have brokerage accounts. And that side of the bank which is not connected with the “Retail” side of the bank has a higher fiduciary duty to me the depositor. . They are held a to higher ethics and higher standards.
2. Secondly, I want this money all liquid for awhile so I am going to even though I do not think there will be taxes I am going to set up a separate tax account anyway and I am going to dump 40% into it just to be safe. Those monies will be invested in a tax free account. I want to be a Good Steward and to be a good steward the monies need to be safe for possible payment of tax liabilities and they need to be readily marketable and liquid.
3. Then I am going to take 6 months and plan carefully. . I am going to meet with several people, I am going to ask questions based upon FACTS. And we are going to execute things in a proper sequential way so that I cover everything. And right now today at age 53 even having spent my career in trust and estate planning that is how long it will take. I am not going to do the work myself. I am going to hire it done and I am going to hold people accountable. . .
4. During that 6 months I am going to fall off the grind, new iPhone, new computer new, iPad. Going to take a long vacation and just think. Not going to Vegas to roll the dice — I am not a gambler — As a matter of fact I am going to be even more strict in my business dealings, I am going to be come the Grand Inquisitor with all advisors all business matters. You know why? Because I have represented wealthy people my entire professional life and they never ever make quick decisions and they ask a lot of questions. I am going to mimic success and you should do the same.
5. I am going to re-read “The Richest Many in Babylon and The Millionaire Next Door. Those are the only two books I recommend other than the Bible. All these other books I have heard about are propaganda pushing an agenda pushing conspiracy wacko theories. I am going to make sure every day I take the time to read solid financial papers. The Wall Street Journal, Financial Times. Papers with no political agendas that report FACT not opinion.
6. I am going to become recluse, work on my golf game, spend my time with my sweetheart and my loved ones. See more sunsets with a glass of ice tea see more stars at night, work on becoming better in my spiritual life, more physically fit, and continue working on my mental awareness and acuteness because I want to be smarter. I am not going to stop learning and neither should any of you.
I know I am stepping on a lot of toes of gurus out there who bring on financial advisers and all for a fee mind you. They want you to call them and write a check and “Sell you something”. Never meet you one on one, never thoroughly understand your situation and make decisions based upon solid FACTS meaning how much you got Jack?
Without that answer you are wasting your time, your money and your energy. And if you are one of those getting your paperwork in order which includes a Trust, a Foundation or LLC. Well . . . Your on your own! Good Luck! At some point your going to think about to what that crazy “Mother” shared and said that ding bat crazy old fool was right!
What do I have to gain? Nothing? Am I giving specific investment advice? Specific legal advice? The answer is no. I am giving practical realistic advice based upon FACT. . . And having been an attorney for nearly 25 years representing some of the finest wonderful people who blessed me first by sharing this opportunity with me and secondly by being my close friends who have mentored me.
And guess what they are all wealthy — how many of them do you think are running into the bank with a Trust form found on the internet or Office Depot or some online guru or site? How many of them are taking foundation paperwork in? How many of them are dumping into an LLC? Zip Zero Nada.
I wonder why wealthy people who have so much money are not out front leading the charge to gather their paperwork? Hmmm. Perhaps it is because this is all speculative and even they have no idea “HOW MUCH”. Again I am doing what wealthy people do. For some reason they have a track record — how do I know — I am their attorney.
And they all know when this over I will still be their friend and there for counsel and to play devils advocate but I am closing the doors. . .shutting it down. . Why would I need to continue? Why in the heck would I risk my new fortune to answer questions of newbie millionaires who keep asking the same questions over and over? I will not need your money I certainly will not need the headaches. . .
Again not taking or answering questions.
I am sure I left out something. Oh Dong and the other misfits currencies. Dong, lets see if I go into my bank today and exchange even if it is on par with the U.S. dollar I am exchanging hmmm no tax. I am still going to plan like there is 40% set aside safely.
God bless you all always. You can ignore the advice given and do whatever you want — no skin off my nose. Some will, some won’t, so what! My advice is free — when this happens I am gone. And I have simply shared what I am doing and what real wealthy people are doing. .
With my warmest personal Regards
[Dinar Detectives Notice: All posts are for informational/entertainment purposes only and are the opinions of the providers. They are not legal, tax or investment advice. We strongly encourage everyone to do their own due diligence and seek professional tax, legal and investment advice.]