Welcome to the Boom X Show, Laws of Money podcast. And we have a interesting, unique episode for you today. If you have been listening to prior episodes, you know that we have launched the Boom X Academy and all members who join at the free membership level are automatically enrolled in these podcasts companion course.
For each and every episode, we are building additional content because quite simply, there is not enough time in the podcast to dive deeper into substantive legal matters if you're interested.
Normally the content by definition in the companion course is not publicly available. However, we are going to make an exception today to give you a test drive. So you can check out the look and feel of the content that is in the companion course and decide whether it has value to you.
And once again, the companion course is additional content for each and every episode so that we can provide resources that we can not provide on the podcast. Today's topic relates to episode three. So we're going back into time. And if you haven't listened to episode three, I interview a elite attorney about his practice and the concept of family wealth and how the great families in America manage wealth, but also the definition of wealth and money in general.
And one of the great features or benefits of the companion course is that of course, as we try to teach students, legal concepts in little bite-sized pieces. There's no promos, there's no ads. There's no interruptions for a shout out to our sponsor. However, out of respect for podcast's theme song and Jack Tar, we will play the introductory song because I love it so much.
Welcome, BoomXers. Let's throw out the old playbook. It's time to tear down the traditional way of looking at your life and money and leverage the laws of money to our advantage. That's right. There are laws of money and those who learn and leverage the laws of money win. And sometimes win big. Stay tuned as asset protection attorney Darol, Tuttle, educator, and leader of the boom X nation shows us how. Beginners investors, entrepreneurs, fellow attorneys.
Are you ready? Are you ready? Let's arm this bomb. Now, here's the Boom X Show, The Laws of Money.
I know exactly what you're thinking. You are likely thinking to yourself, how can we learn the law? Lawyers go to law school for three years and they practice for five more years before they get the hang of it. At least that was my experience.
However, we are only talking about one area of law and that regards to the laws of money, estate planning, elder law, tax planning, business planning. Now that is a vast area of law. I can see, however, we're not talking about criminal law. We're not talking about civil procedure in constitutional law. If we bring those things up, it's just to share an anecdote and to have some fun, and we can have fun with the laws of money as well.
However, when deciding whether I should put the academy together or not, I thought, the thing is. The conversation has really been hijacked. The financial services industry has correctly identified that there are a massive amounts of people who are entering into retirement with masses of amounts of money and the legal services industry has abdicated the conversation and my belief is that the reason legal services has done so is just because it's not train to market. It's not trained to publish podcasts and whatnot.
There's certainly lawyers out there doing that. But lawyers who are running podcasts tend to speak to other lawyers. Those podcasts are business to business, lawyer, to lawyer. There's not very many out there in which we are trying to just have a conversation with you.
And that's unfortunate because the second reason I think that legal services industry has abdicated the conversation is because there's that lawyers are busy. Okay. I'm semi retired now. I had a successful career of which I'm proud and now, this is as much fun for me and as recreation for me.
And it speaks to my desire. When I started graduated from with my first college degree, my goal was to become a history professor. And if I go on these tangents about history, it's because, that's just what I want to do. It's interesting to me, it's very fun. It's fascinating. And it's always educational.
If you do not know where you come from, I do not believe in the expression history will repeat itself. There are empires rise and then they fall if the next empire comes along and rises and follow, look it repeated itself. Yeah. But it rose in itself and completely different reasons because it was a completely different culture at a completely different time.
Now, human beings only have a certain set of characteristics poured into them. And so of course there will be some similarities. However, when it comes to the law in particular, the law is based on stare decisis. That's a Latin term and it means, standing on prior decisions. And so the legal industry correctly, it's a great idea.
And it goes like this. If there's a conflict before a court between two parties, and we resolve it, whatever rule the judge applied or made up in that prior court case. We're just going to apply that. So we don't have to keep making up rules that will give consistency to people and they can rest assured that there are laws of money that way they know how to manage their wealth.
If you think about some of the great revolts in medieval Europe, in Britain, in particular, it was really about property rights, the great Magna Carta. Essentially a contract between the nobility and the crown to identify what their property rights were because they were uncertain when a law regarding property is established.
For the most part, we are loathed to make very many modifications to it. And when we do make modifications, they can be significant for the most part they're not. When George W. Bush came into office, the Medicaid look back period was three years. Well, through the legislative warfare they change it to five years.
That's not to me a significant change. There's still a Medicaid look back, period. There's still Medicaid that, announced five years instead of three and estate tax on the federal level goes up and down all the time. And so we just have to adjust, but estate taxes is here. It's here to stay and that's something that we have to plan for, especially if you're high net worth and people become angry or upset about.
Estate plans, I don't even want to have to do this once. Okay. Let's get back to reality where the world changes from time to time. And if there is an adjustment to your estate plan based on legal changes, it's not significant, we're making an amendment sometimes it's easier just to do a complete overall
Now episode three, which this lesson in the companion course speaks to. It was a interview I did with a buddy of mine who has one client. It's a famous family.
I can't say their name. I promised I wouldn't. But if I did say the name, you know the name and this family is on second or third generational wealth. And when you're at that level, what you can afford to just bring everything in-house like solid called it family office. And so the family has one or two, maybe more depends on the size of the family and what they're trying to accomplish, attorneys full-time.
And the attorney just has that one job that we worked for one family. And then of course they have their own portfolios and they had their own financial advisors and their own accountants inside. And by the second or third generation, of course, there's a lot of grandkids and a lot of cousins and a lot of nephews and nieces.
And then she's like the family of course is expanding. And the family leader three generations ago grew the wealth, but continued to run the wealth. It set it up so that it would run itself like a little money-making machine for generations to come. A family bank and two episodes ago. So this is episode 20.
What are we at 24 episode 22. I talk about the family bank. That exists only because of trusts. Now lesson one of the companion course, we spent time defining the words estate and we explained. that by way of review. I laid out the following terms, estate gross estate, taxable estate and net estate. You hear the word estate and estate planning, bandied about weekly, maybe daily and estate planning is about estate transfers.
The correct definitions of estate, which are contained in a lesson one points out that estates are created at the time of the death of the asset owner. They do not exist until then, unless you're in bankruptcy aside, an estate defines the assets that you no longer have control over because your dead.
The word probate comes from the Latin pro bowl pro Bari, which means to prove and assets must have title when I'm in a sense, estate, that term means the assets of a now deceased asset owner. The title of assets might be in your name outright. If it is in your name outright. Darol Tuttle owns a home. There's a deed recorded that says Daryl Tuttle owns the residence at 1, 2, 3 east main.
When I, the minute my heart, the second, my heart stops beating title is clouded. You can't take it with you. That's the first law of money. There's no title to the personal residence now. That's a problem. The law does not like that will not stand for it. Now what the law does is it imposes in the state and that's administrative holding area.
So that a personal representative or executor can be assigned to administer. That's what the lawyers call it. All of the assets of the now deceased asset owner, and then pay all the creditors, pay any tax, pay any final administrative fees and then distribute to the heirs. And make sure that they have legal title with the correct legal documents, that personal representatives deed.
That's the probate process. I pointed out that one of the advantages to probate everybody try it once to avoid probate. That's fine. However, there are advantages to probate in particular. That's the only way to permanently bar creditors. If you pass away. Everyone thinks of them. I'm like, I'm going to pass away at age a hundred and I'm going to have all my debts paid off and blah, blah.
Maybe you're still working or maybe physicians or even attorneys or contractors. Even after you retire, there's still a possibility until the statute of limitations runs of a malpractice lawsuit or a claim, a subcontractor or a customer brings a lawsuit.
The only way to put all of those claims to rest is through the probate procedures, the creditor resolution process, and living trust, and having all your assets pass through, transfer on death deeds and what the financial services industry does is transfer on death, beneficiary designation forms.
That's fine. Except you're not going to have a legal bar to claims in the future. And unfortunately, if the personal representative, my friends distribute the estate before claims are paid, then the personal representative is personally liable to the creditor. And it's only a four month creditor process, just open a probate, put, give notice to the world, send out notice to reasonably ascertainable creditors and after four months, that's it. The creditor's out of luck forever. That's the big disadvantage to probate avoidance.
Now in the second lesson, it's the episode. My dad died and I have a visceral conversation about that now that there's nothing legal about. The second episode is just me explaining how I feel. And however, in the Boom X Academy, companion course, it's mostly legal.
And I explained there that there are different types of the law has categorizes each property in different ways. There's real estate versus real property. I'm not going to tell you what the difference is because I want you to take the class because in the class, explain the difference between real property and real estate.
And then there's personal property, tangible and intangible right now. I'm recording my voice if I publish the voice on a podcast. And somebody purchases something because of my podcast. The money that was made was because of my voice. And I, I don't know if you knew this, but you actually have a personal property interest.
Your voice is personal property. Believe it or not. It's like intellectual property, a brand, a trademark. It doesn't exist in the material world. It's digital, but it's personal property and it can be transferred upon your death to somebody else. You can transfer rights to the likeness.
Try putting a product out with the face of Elvis Presley on the mug and making money off it and see what happens if you don't believe that an image can be considered personal property. And then on episode three, he went on. I just wanted to discuss and get the terminology. How is the word trust because the family wealth, these great families that create a money-making machine for the benefit of the family, a family bank that's generational.
The only way to do that is with a trust trusts hold assets for personal planning and personal wealth. LLCs and corporations hold business assets. Now a family, a great families made their wealth from business. So they have a mix. However, trusts are owning shares of a business and there can be complicated arrangements and configurations for the plan. The case design can be complicated, but basically those are the building blocks.
You're transferring wealth either through deed or contract through trust revocable or irrevocable and business entities. And those are the building blocks of a great estate plan. If you do it correct. Then not only can you imagine put it this way can you imagine this great family? I'm not going to say their name.
I can't, but just picture in your mind. Okay. Rockefeller, that's probably a bad example, John D Rockefeller, by the way. If he adjusted for a time value of money in today's value, he is three or four times wealthier than Jeff Bezos. That's how incredibly wealthy Rockefeller was. So choosing Rockefeller is probably a bad idea just because he was so big.
Kennedy, maybe Kennedy was a much smaller family, not as wealthy. And everyone knows that family just behaves differently than all the other families in America in a way. They just, they're just very close knit. And so family wealth is a term that is not monitored. Like when I say family with, I don't mean the money.
Just a way the family views itself. They are in it together. They have annual meetings, they bring up young family members. They let them know, they don't keep the wealth a secret. One of the things that makes me cranky and consultations is when clients just are very secretive about their wealth and they don't want the kids to know.
And that's just weird. It's very common, but it's very weird because you're keeping a secret from your children. They're going to find out one day and then just imagine what they think, like how weird was mom was living. Like she was a popper this whole time trying to act like she didn't have any money and she had 7 million dollars.
How weird. You're just, the only thing you're going to do is embarrass yourself after death. And the second thing is just imagine, had you included the conversation like the great families do and say, look, I might be the title owner, but that does not mean that I'm the only person with an interest.
I explained in episode 22 and 23, like this concept of remainder men. So when you create a trust, there's a trust maker or trustor or grantor. Now that's a job title. There's three different job titles based on different what I'll explain in a minute, but it's the person that creates it and transfers the asset into the trust.
Trustor is a medieval common law term, grantor is a tax term. And Trustmaker maker is the modern equivalent, like trying to use words that explains that Trustmaker. And then once the desire, the elements of a trust. The only thing you need to create a trust is an expression of that, that desire identification of a trustee, the person that manages it, a beneficiary, and then transferring an asset into it.
It can be a $10 bill and then the law imposes a trust. There's no paper signed. I'll trust real trust, have a trust agreement because we want to be very particular about and very granular, how we direct the trustee and the beneficiaries, letting them know what their rights and responsibilities are. But the law imposes a constructive trust.
If those elements are met, somebody gives money to another person for the benefit of another person. That's it. That's a trust. And the trustee is a person. That's the job title. The trustee is the person that's responsible who has legal title. So if you look up a trust let's say there's real estate.
That's a great example because real estate requires a deed to be recorded. Think about it. You can go to the county auditor and look up any real estate parcel in America. And what you'll see is that the trustee is named as the legal owner. Which is if you want to protect privacy, that's a great way to do it because the trustee, it could be professional trustee.
So if you see a big, amazing piece of property that you want to buy and there's big fences around it, and you can't really figure out, and the folks that own it are really into privacy and they have some kind of desire of their own to keep the world out. Then you can say, oh I'll just go look it up on account and find out who owns it.
If it says ABC law firm, as trustee of the ABC, mind your own business trust you, you have no information. You don't, you haven't learned anything. And because the beneficiaries do not have to be listed on the deed. What the beneficiaries own is what's called beneficial interest. In other words, they benefit from it and they definitely have an interest.
And they may or may not at one day receive all of the asset as their very own, depending on how the trust is drafted. But the beneficiary is not disclosed in the public documents. So there's trustor who creates it, the trustee who manages it and then, and has legal title, what a heavy responsibility.
And then there's the beneficiary. And there's a lifetime beneficiary. Those people who are entitled to distributions either mandatory or discretionary during the existence of the trust. And then when the trust terminates there's the remainder beneficiary or residuary beneficiaries. And those people are the people that are entitled to a distribution equally or unequally, depending on how many there are or whatnot.
And so though, so that's how you can bring in a professional team. Now if you're a small estate, of course, you're not doing a family office. Like the great families are, but you should still have that mindset. My point was, imagine Rockefeller, like if Rockefeller had just made all of that money and his estate plan was when I die, I just want it to distribute outright to my kids because I'm going to be dead. And I don't care.
I want you to let's be honest. With the Rockefeller family exists. Like we all know Rockefeller center and Rockefeller this and the trust and the endowments and the funds you like the Rockefeller family is still alive and well, and it's now an institution and it's very charitable and it has done great things that would not be the case had there just been a distribution to kids like Rockefellers.
I'm going to keep it a secret. The kids will find out when they, when I'm dead and I read the will and then they just receive a big check. I'm here to tell. Not only would the money had not grown, it would have been depleted within one generation.
And I'm like, did you really work this hard too? I grew up poor. I'll just, I'll share that. And I've had success and proud of myself and I'm the first person in the history of my family on both sides to go to college. Oh, that's an amazing accomplishment. Did I really just work this hard?
For my family to go back to work gloves within one or two generations, really. Why is that a mature and financial decision? And the only way I'm going to be able to help my kids is through a trust period. And if I just die and leave it out to them outright, because they're good, responsible kids it's a windfall for them.
And if you wrap it in a trust, And put some thought into how you want it. How long do you want it to exist? And when it's going to achieve and maybe look to the third or fourth generation, but get your kids to be emotionally attached to it and make an emotional investment into the trust. Then guess what? I'm asking guess what?
Guess what the money grows? Because if you have a collaboration from everybody, it just, everything's just better. And it's not only just the value. Fair market value of the monetary value of it all, but it's also the emotional value. Like at some point the money can do other things. There can be family projects.
There can be foundations established. There can be businesses that are created. There can be like we can, if one family member is having a hard time meeting their health needs. Then the, he needs to invest in that and here's a pot of money to do it. If another family member has an opportunity to create a business that the family likes and it could be profitable for the family.
Then there's a pot of money to make that happen. If one family member is a great artist, but artists make aren't really compensated the way they should be, because art's not as appreciated in this society, but your family thinks that there should be equality. Then we can supplement the artists' income.
So they have a quality of life. That's fair. And as long as all the kids are behind that, then great things can happen. I'm going to wrap it up because that's about all anyone should be able to listen to, but less than one was about estate. Estate is probate. That is a way we transfer wealth, debar creditors and through a last will and testament.
The second episode was about property. We talked about real estate, real property, personal property, tangible and intangible, and the law transfers wealth differently for all of those categories and make sure the difference. Episode three lesson three is just a brief introduction to the concept of family bank and also trust, like what are the components of a trust?
That was awesome. Log into academy because there'll be written content and some written references and of course we're building on our lexicon.
And that concludes this episode of the Boom X Show, Laws of Money podcast. I'm your host, Darol Tuttle. As a reminder, you can go to boomxacademy.com.
Membership is absolutely free and best of all, you can enroll in the Boom X Show companion course. That's all for now until next time, remember? Yes, you can learn and leverage the laws of money to your advantage.
