I was in one of my mastermind groups discussing wealth, trusts and how assets are structured. I was thinking I have written something about this topic, so I went back and found a family email I wrote but it wasn’t anywhere online… Well, copy, paste, here it is from 2021, enjoy:
Every few years reporters come out with another big story on how rich people are avoiding,
manipulating, hiding, storing money or not paying taxes etc… The Paradise papers, Panama papers and now the Pandora papers. They make headlines for a few days, how horrible it is for these politicians and wealthy people to avoid what the everyday joe pays, then it disappears for a year or two. Everyone scoffs and say that’s a shame and go about their business. Why don’t these people go to jail or pay fines for their crimes? Because 99% of what they are doing is totally legal and what they are doing is very smart. It is called
good business to save money. Just like the everyday person uses a coupon or shops at a store when there is a sale, they are saving money. They just know how to do it much better than you and on a vast scale that most people cannot and will never even try to comprehend.
The news loves to report on bad things to grab your attention. People love to complain and point fingers, it’s just in their nature or maybe how they are raised, the people they are around or exposed to? Blame the other guy for your problems but they just keep going about their days doing the same thing over and over every day.
Can you do what these billionaires do? Maybe not right now but you can learn from them and instead of pointing your fingers, maybe take some notes. Every time I talk about business, people say but you have to pay taxes on that. Oh, all your profits will be gone with taxes, it’s just not worth the effort. I just smile and laugh to my-self, would you rather pay 0 taxes on your 0 dollars or taxes on your $100,000 dollars? Haha, I just don’t understand the thinking so if you can explain it to me, please do. I’ll gladly pay taxes on $10,000 , $100,000 or even a million dollars. The entire IRS tax code is an instruction
manual on how to save money! Most people see it as this bad thing they have to pay but that’s just not the case. Don’t be the guy pointing his finger, everything in America was built on small business, including the tax code. Why is everyone trying to fight it? George Washington ran a small whiskey business, Thomas Jefferson practiced law, Abraham Lincoln had a general store, Andrew Johnson had a tailor shop, Truman had a clothes store. From the founding fathers to modern day, many politicians have had small businesses. The people who write the laws and run the country are businessmen and women. You don’t have to have a gigantic corporation, a six-figure income, be a stock trader or even have a goal of being wealthy to use the rules that are in front of you. I just ask that you try to see it from a different angle and maybe you might want to step out of your comfort zone and participate.
I can show or point you to others, that can show you how these rules benefit you. How you don’t have to just be part of the crowd pointing, up to you. It’s always up to you.
Want to go deeper down the rabbit hole?
Here is one small thing the Pandora papers teach us:
At the base is the LLC, we could use it for a small business, if that business grows to say $50k we could incorporate or form a corporation and draw a salary. A good business accountant knows all the rules. I included a link to Mark Kohler’s practice below.
In the Real-estate case an LLC can hold several properties say 3 or 4, then another LLC is formed. This is for several purposes.
Lawsuits – If something does happen and a lawsuit is filed, say property ‘A’ didn’t maintain the sidewalks and someone falls and gets hurt. The LLC holding that property would be responsible for the damages and only that company. Not the other 5 LLCs we have holding property. Not our personal bank account that we buy groceries with. We don’t get touched by it.
The corporate veil – if done properly your name is not associated with the property, it is owned by a company etc., so you are not involved personally.
This is easy we can do this!
The pandora papers take it to a whole new level. So, if the companies on the bottom have contact with the public. Say a storefront, real estate office or even a Law-firm. That is where any lawsuits would happen. That’s all that company is responsible for. They don’t own the building or Real-estate etc. in the illustration we can use assets like factories, houses or cars. These are held by the Holding company. Its whole purpose is to hold things. The holding company has hard assets and even other companies under its name. It never talks to the public though, so is more protected from litigation etc.
The level above that is your trust. Your trust owns the holding companies that in turn owns hard assets and other companies… The trust may control the purse strings. Where the holding company just holds assets. The proceeds are fed to the trust so it can hold the money… make sense so far? The trust is also like the instructions for the whole system, it dictates what the companies do, and it controls where the money goes. It is like a living entity; businesses are referred to as people in practice since they take the place of a living person.
The trust is protected again at another level.
- It doesn’t deal with the public
- It’s doesn’t own the large assets directly
- Doesn’t deal with payroll, healthcare or HR issues.
The trust is controlled by the trustee. This person or persons i.e. board would dictate the rules and make changes as needed.
On top is the beneficiaries, what are they for? What do they do? In reality they don’t have to do anything. They may make withdrawals from the trust or take a form of a paycheck. They may be investing money into the trust in the form of assets, money, life insurance. They might live in a house owned by the trust or drive a car owned by a holding company. They may actually be a trustee! In reality if done properly the beneficiary at the top would own nothing, not a car, bank account, or even the clothes they wear. They are just a beneficiary of the trust, subject to the rules dictated to them, living their lives but and this is a big but. They control everything.
The object is not to have the most wealth, fancy cars or house. The object is to control it.
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This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk.