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 leveraged 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.
There are three different ways to look at, to view, to conceptualize money. The first I believe a model of planning that goes back to the middle ages. The oldest, the most traditional I believe is now based on a false premise.
People disagree with me. You are free to disagree with me. Because of its antiquity, this particular model is the one that all lawyers know, and it is simply called at estate planning. The second view of money is called asset protection and the third and final view of money, I would call generational family wealth planning.
Estate planning and I just had this mental image. I just cannot help thinking about William the conqueror. We’re not going to go year by year, but in 1066, a gentlemen, that was really a Viking. His great, great grandfather was a Viking named Rollo who had invaded and conquered actually Paris, if you’ve ever watched the great, just absolutely amazing history channel TV show on called the Vikings, Rollo is a character in that show.
And of course it’s, Hollywood, so they have to glam it up, but there was actually a Viking named Rollo and he conquered Paris and he was such a pain after he had. The approach back then, meet the Vikings, if you can. And if you can’t cut a deal with them. And so the deal was, they gave Rollo the Viking land of his own.
You can be like a little king of a kingdom out there on the ocean. It’s a nice view out there. You’ll love it. It was a long way from Paris and it was called Normandy. We call it Normandy. Now Normandy actually means land of the north men, land of the Vikings. And so they sent out Rollo out there and century generations later, he his grandson.
Great, great, great grandson was a guy named William. Now, William executed, essentially. What is a reverse invasion of Normandy? It’s just ironic up later. Allied forces from England to Normandy, 1066, it was exact opposite. So this reverse invasion of Normandy occurred and William was able to bring all of England together under his rule.
And that, that had been accomplished before. But this was the last time England was brought under one kingdom and it essentially it stayed that way ever since. And so that’s a very impactful moment in history. With his buddies, the invasion force. He also brought with him like the French view of law. So some archaic French legal concepts.
Once he had conquered all of England. Of course, the first thing he does is say, look, I have a low GL title to all of England. And what that means is I have a divine right. To all the land. And I do admit that I have a problem here. I, myself personally can not go around him. I don’t even know where the land is.
This is not, there was no Mr. Google, back in those days, you couldn’t look up a personal number. And actually one of the first things that he did was to send out. And create the very first English parcel system. And there is a as called book of the dome and it’s in Latin, but it’s a description of all of the land in England, which is a remarkable feat.
That’s pretty impressive. You have to admit it. So he came up with a grid parcel system for all of England. He gave estates to his closest allies, his invasion force buddies that they had taken from the then English inhabitants. And yeah, we’ve got a new parcel system and I’m going to give, let’s say black horse Manor to Lord Fred now, which is all great and fine.
Except that a low GL title, that whole concept is I will parcel out to Fred this particular piece of real estate. And he will have some ownership rights. Now notice I said it’s this is the first time in history in which the law looked at real estate as having a bundle. That’s what law professors call it a bundle of rights, and we could split out the different types of property interests.
And the concept was you have full use and even title of the land. However, If you do not have a qualified male heir to pass the estate to at the end of your life, then it reverts back to me, the king under a concept called escheatment. Now escheatment is another French archaic word. I am now recording this from Tacoma, Washington have made a trip to back to the United States from
Puerto Rico while I was on Christmas vacation or shortly thereafter you, as I indicated in my last episode of swarm earthquakes, quakes devastated the area and Puerto Rico in which I was intending to relocate. So I’m waiting to see what happens down there in Puerto Rico.
And if there’s anything to come back to But in Washington state, there is a revised code of Washington statute. It is literally entitled escheatment, which I think is just so cool. Here I am, I just have a degree in history and love it. And, but really when do you get a chance to talk about history?
I’ve got a podcast and oh, by the way, escheatment is a concept originating from William the conqueror that still exists in the law today. That is so cool. And it simply means in the law today, if lawyers say, I have said, if you don’t have an estate plan, that’s okay. The government has one for you.
That happens to be 100% accurate. It is rare that escheatment occurs, but it does occur. State governments have in their possession today as we speak about $65 billion in unclaimed property. Now, unclaimed property is a slightly different issue. Unclaimed property occurs. I believe anecdotally from Alzheimer’s, Dementia.
I have observed in my own practice clients as they age, literally forget they own property. And so when they pass away, they forgot kids have to come in, that there is no information sharing before the death. So how do you know and kids do the best they can. It goes through mom and dad’s file cabinet and try to find the account statements that they can, but as we move more and more towards an online environment, that problem will get worse.
Now, escheatment is dying without a last will and Testament. Without a trust without heirs. Like you don’t have no children. Now, the law says if someone dies without an estate plan, then we will follow what the government of that particular jurisdiction decides where the assets will go. States do it differently.
Some states are community property states, some states are not. And so think about it. If you’re in a community property state, and you die without a Last Will and Testament. There is a mandatory distribution to the community spouse, half of his or her community property share of course is as hers, but there’s also a mandatory distribution to the surviving spouse of the community property in even separate property.
FYI, if you have kids from a prior marriage, without a written plan. It is technically correct that the government’s plan might differ from what you intended. But what if there’s no, no surviving spouse and no children. Where does the estate go? If I’m going to go into the intricacies of what they call the intestate statute, that’s not the point.
The point is if they exhaust all the statutory heirs, your estate goes to the government and it’s just added to government coffers and yay. They make a lot of money and it is so cool that originated from a dude that is coming across the English channel, bringing that word with him escheatment. Now here’s the point?
English law eventually became American law. Escheatment came across the ocean to America on the Mayflower. British common law has made its way to Washington state, to Alaska, to Hawaii. It’s at staggering that the human mind can conceive of a legal concept and hang onto it so tightly for that amount of time.
But estate planning is based upon the premise. Or focuses on a estate transfer. That’s his purpose estate transfer. And back in William the conquerors days, the average life expectancy of a male was 25 years old. Let me think about that. That’s astounding. Like what kind of decisions would you make out of high school?
Let’s say you’re 19 years old, it’s a SIG, an Aiden 20 to 20 years old just to be use even numbers. So I’m 20 years old. I have another five years to live. Why go to college by the time I graduate, I’ll be dead. I think you just make a completely different set of decisions. The law is reactive, not proactive.
It looks back in time for guidance on how to resolve current day conflict. The law is not innovative. It does not look forward at one second. Physics, by the way, is the only science or study in which the future can be accurately predicted. I’ve said that before, but the law is not. Now, this is important because man, it took a thousand years for life expectancy to double to up to 50 years.
In the early 19 hundreds, believe it or not in the early 19 hundreds life expectancy for an American man was 49.7 years. And I’m 55 if I lived in 1920, I’d be dead by now. However, modern science if you look at the innovations in science, vaccines, polio, vaccines penicillin it’s astounding that life expectancy has now increased for an American male to 84 years old.
And there’s indications that there will be a big jump as it was like these Google billionaires. I don’t think they’re as smart as they think they are. They’re trying to expand human life to 250 years. That is like the worst idea ever. Can you imagine you’re 200 years old, I’m tired of being a lawyer.
I’ve been a lawyer for a hundred years. I think I’ll go to medical school. I’ll be good at, torture ourselves like that. But human life has now expanded to let’s give it like 85 years is a good shelf life for you. Estate planning law has not caught up. Estate planning law is obsessed with one thing when you die, where do your assets go?
That’s it. And it’s lazy. A last will and Testament. The trigger event is your death.
Normally the last will and Testament, which is past. I think, I don’t know who you are. If you are married and listening to my voice, I can almost bet you, unless you just hired me. I can always bet you, if you have an estate plan at all, it’s the last will and Testament. If I die, everything goes to my spouse.
Wow. Okay. That’s great. Except that let’s have a leap of faith here, let’s suppose, you’re you plan on living? Some people who are really on top of it and really proactive come to me in their sixties. Rarely do I have clients who want to have an estate plan in their forties or fifties? That’s like why?
I think 70% of Americans have no estate plan. It’s crazy. But if you come to me in you’re 65 years old, let’s just take a leap of faith. Let’s just go out there on a limb and say, you’re going to live another 20 years. Picture your 85 year old self. If your spouse is near your age, when you pass away, she’s going to be 85 too.
So let’s just give her everything transfer title easily. Let’s use a revocable living trust to avoid probate. They’re pedaled by attorneys left and right sold like roasted peanuts at a baseball game. California, everybody has a revocable living trust. Now the problem is. When the assets pass to the surviving spouse, she’s 85 years old.
She falls, breaks a hip. She gets all the timers. Now everything’s at risk everything’s at risk because the single biggest threat to your estate is unreimbursed medical expenses. I once had a client pay $30,000 per month for long-term care. Let that sink in. Per month. It is rough being an attorney. These people come into my office and they, it’s not even you, if you’re older listening to my voice, it’s your children.
They come into my office and they are stressed out and their mom just passed away. And dad died five years ago. I don’t know where anything is or they come into my office. Mom’s she broke her hip and she’s in the nursing home. And my dad now he’s at home and he’s starting to forget his name and I just don’t know what to do Darol.
And of course we go through it step by step from the beginning, and we discover that in most cases, the parents had absolutely no plan whatsoever. Now I personally, this is the modern era. They have been bombarded by messaging about long-term care insurance. Yeah. Medicare simple events and all of these things.
It can be overwhelming. It can be extremely misleading and confusing, but at the same time, if you do not have a plan, I don’t think it’s fair to say it is fair, but it’s not sequentially correct to say the government has a plan for you. Your kids have a plan for you. They don’t know what it is yet, but without some organizations.
And so I’m, pre-planning your kids just have to make it up. I know that cause I see it over and over again, that becomes extremely expensive. And the estate erodes, there are 3, 1, 2, 3 models of planning estate planning does absolutely nothing to help preserve your estate for you while you are alive to meet the threat of unreimbursed medical expenses is to transfer estate planning. The trigger event is your death. Asset protection on the other hand has a different focus. The focus is to think about it. Let’s protect assets of our clients. You, the listener, your family let’s protect your assets, your wealth for you during your lifetime.
So that you don’t lose everything to the four. One of the four categories of wealth erosion in the United States today, which are number one, unreimbursed medical expenses, number two, tax unnecessary taxation, government regulation baloney, number three, family mismanagement. This that last one, family mismanagement during your lifetime.
I put it at a close third. Next to maybe taxation or medical expenses after you pass away, that is the number one loss to your estate. And then fourth is lawsuits, which mostly affects businesses. 1, 2, 3, 4, the threats are out there. I it’s depressing actually. One of my people sometimes say I’m intense.
Which I did not know, actually I did not know I was intense. It’s a, it’s an outrage that hardworking people are losing hundreds of thousands of dollars because of this ticking time bomb out there that they know about, but they have no idea the likelihood and the extent of the damage. Asset protection is about leveraging the law to position assets so they are not available to creditors in an intelligent way, with a goal of preserving your wealth while you’re alive. Which also meets the estate planning goal. Because after you pass, we all get a term there’s more of this state to leave and transfer to spouse. And then children, we have to take a break, just hang on.
We’ll be back right after this.
Hey, BoomXers, Darol Tuttle here. We all want to take care of our families. Being a hero to our families can sometimes be a little bit intimidating, conquering the paperwork, understanding the account statements. What is the first step? For years, I would say you have to meet the laws requirements.
You must first start with legal documents. Well of course I would say that I’m a lawyer, but now in hindsight, I realize that meeting the law’s requirements without the proper system in place to, in a sense have a place for the legal documents to exist and reside along with your financial information, along with all of the important information about you and your plan to build family wealth is meaningless, but where to start?
Start by first organizing and conquering paperwork clutter. That’s why I put together the BoomX Vaults and Everplans system. This online and completely secure digital portal allows you to upload all of your important information. Your financial information, your legal information, your legal documents on top of it, I’ve added the ability for you to add family members, decision-makers to the portal, the financial command post, shall we say so that when the time comes, everyone has the right information at the right time.
Let me show you how the boom X Vault Everplans system work. Go to boomxshow.online to learn more. I have added helpful step-by-step guides, checklists, and then on line community that’s boomxshow.online, boomxshow.online.
Welcome back to the Boom X Show laws of money podcast.
There are 3 1 2 3, 3 models for planning.
First is the government’s plan. If you have no plan, it is true that the law does have a plan for you. I don’t even count that as a plan because the thing is like the fourth episode of the, of this podcast. What a great, like that is like an overview.
That is a place to start. The first episode was I’m Darol, Hey, how you doing? This is how it works. Sort of thing. Like this is who I am. The second one was very powerful and moving episode, which surprisingly has opened up a lot of dialogue. I received a lot of emails about that episode.
People sharing similar stories and thanking me, I sat on that podcast episode for seven months, debating whether I should release it. It is about the death of my father. I did not have a close relationship with him. And I say so well, it turns out I’m not alone. And people have been holding back their feelings about these relationships that they’ve had for so long.
And so I hope that particular podcast episode, at least serves the purpose of a chance to like, think about and say, it, it is okay. Not to have entry to express how I truly felt about a family leader who failed. But the fourth episode is like, what is the purpose of money? What is the purpose of wealth?
And when any time that you approach something, you have to have a swim lane. What are the parameters of my deal before I can even get to like retirement planning concepts that are out there. You’re being bombarded by messaging from the financial services industry about all these things that you’re supposed to do that will ultimately lead surprisingly to a sales pitch about a mutual fund.
But, how, what is the time horizon for your money? What are you trying to finance? What is your vision? What is your goals? Most people don’t candidly cannot answer the question. What is the purpose of your money lady? And so they have a very odd relationship with their wealth and they’re seeking guidance on how to put it into perspective before they can come up with a build up a return. That’s that? That’s why I think retirement plans, the retirement blueprints and road bumps and all this stuff that you see out there. It doesn’t resonate with people. Now, if you had a framework, there are three choices. One would be, I have to pay for my retirement.
It’s meaningless without legal protection of the assets against the four biggest threats to the estate. That’s the part the financial advisors a don’t understand. They’re not licensed to do anything about it if they could. And it’s 100% of what matters like retirement account planning exists only because the law lets it exist.
The solution and that protection of retirement accounts is not a mutual fund. It is not Schwab. It is not any financial services chassis stock market on the planet. It is 100% in the wheelhouse of the law. The answer comes, they’re not an annuity. Sorry. That’s just the way it is. Legal protection is asset protection by the use of, and leveraging of the legal provisions within the law.
And think about step-up in basis, the most generous provision on the entire at state tax code and the tax code period. And how many people even know what that is. It’s astounding to me. Did you know that in a separate property state? But 19, is there that many community property states, the rest are separate property states step-up in basis is the most provision of the entire tax code.
Here’s how it works. An asset that has been appreciated and is left when the asset owner dies to anyone. The new capital gains tax basis jumps up to the well adjust to the fair market value of the asset at the time of the asset owners death, which means if I would go out and buy a property like a cabin in the woods for a hundred thousand dollars in 1950, after the war and die today, I leave that cabin in the woods to my son and it’s worth a million dollars.
If I had sold it the day before I die, I paid capital gains tax on the gain. $900,000. The difference between my purchase price, a hundred and fair market value when I sold it the sale of a million, but I leave it to my son. Ben, the question is what is his capital gains basis? Is it the hundred thousand that I paid or fair market value at the time of my death?
The rule is fair market value at the time of mine, he just avoided a massive estate or a capital gains tax. Now and if I’m married, of course, I’m not leaving it to Ben. I want it to go to my spouse. Then the question is how much of it is like it’s a community property asset. I bought it with my spouse in 1950 community property in a community property state.
But what if I live in a separate property state, the answer is half of the assets steps up at the time of my death. That is not the rule in a community property, state. Believe it or not, in a community property state, the rule is different. The step up is for the entire asset. Now, if you understand the nuances of what I just said, You’re jaw should be dropping onto your desk and you should be thinking O M G are you kidding me?
So I can avoid capital gains tax on an appreciated asset for the entire amount. And all I have to do is kill my husband. Yeah. Okay. The downside of this wonderful presentation is somebody does have to die for this to occur, but in a community property state, it’s the entire asset in a separate property state. It is not.
And so that begs the question. Could you transfer an asset into a community property, jurisdiction, like a trust? Could you create a trust in Washington state if you were in a non, in a separate property state and leverage that rule? What a wonderful idea. That’s astounding that we could actually think about repositioning an asset to leverage a tax law, just based on the nuances between separate property and community property, voila! It should be like harpsichords and harps and angels in heaven, sink, whatever that side effect is, I’m going to try to find one.
That’s a great example of using your noggin to leverage the law, to enhance your estate, step-up in basis. That is the difference between simple estate transfer, revocable living trusts that are peddled to your detriment left and right and asset protection. By the way, listen to me, we got to take a break.
However, just listen to me. If you’re on the treadmill, listening to this, get off the treadmill, pay attention. There have been two court rulings in the last five years that are very troubling. Both of these court rulings have stood for the proposition that transferring a personal residence into one of these revocable living trusts that you might have.
Renders the personal residence changes its classification from an 100% asset protected exempt asset to a non-exempt countable asset for Medicaid purposes. What that means is like a trust can serve different purposes. Who cares? We name it. We want to know its purpose. Revocable living trust tells you nothing about the purpose of that trust.
That’s why people become confused about the word trust. So a trust is just a legal construct to hold personal assets. That’s it. It’s analogous to a limited liability company, a business entity corporations, an LLC owned business assets.
Trust own personal assets, a revocable living trust avoids probate. Why don’t we just call it a probate avoidance trust? Unfortunately, it’s also a blow up Medicaid for your spouse trust. These two court rulings have caused at least in one jurisdiction for the Medicaid agency to pass a rule, an eligibility rule that says makes me mad that says.
That personal residence inside a trust counts must be spent down. Teaching point, stay current in the law, protect your assets, position them so they are titled so that they are exempt or can not be reached by a creditor. That’s the basic premise of asset protection. It’s important. Memorize that estate planning, asset protection.
When we come back from the. We’ll go to the third important model philosophy regarding money. And that is generational family wealth enhancement planning.
We’ll be back right after this,
This just on December 20th. President Trump signed the most important legislative act affecting retirement accounts in the modern era as part of the year end appropriations act the secure act. We’re assigned without fanfare and caused surprise and alarm in the estate planning and retirement planning industries.
While the intent of the act was to enhance retirement savings among those Americans who had not planned. A negative consequence of the legislation is a rule that drastically shortens tax deferral, other retirement account for the benefit of the second generation retirement account owners, children. Experts in the industry comment that this is the fourth illegal change affecting wealth in America and does cause concern among them. To get the latest on the secure act, how it impacts you, your family and your estate plan.
Join us for the new Boom X Academy, asset protection, legal update and analysis. This new series will present, live and free in a webinar format. Every Thursday to register or to learn more about the Boom X Academy, asset protection, legal update and analysis, please simply go to boomxshow.com. Once again that’s boomxshow.com.
And now back to your host and the Boom X Show laws of money podcast.
Welcome back to the Boom X Show laws and money podcast. I am in the boom X media production studios in Tacoma, Washington. It is a dark and rainy day out there. And I have to say there is not many times that the law is I’m not gonna say boring because it is indeed fascinating to me, at least.
However, it is not very often that the law changes. My clients sometimes express anxiety, like what we had just paid you for all of this work that we have done. It’s a great plan Darol, but what if the law changes? My answer for 20 years basically has been relaxed when it comes to wealth and money, the economy society, we need stability.
I practice one of the most stable, boring areas that you can imagine. This is not like intellectual property with technology and innovation, copywriting and all of these things. And that usually is true. And it usually, the more anxious of my clients appreciate my calming effect. When I, a probate goes back to the middle ages as the concept of a trust low and behold, there has indeed been a change to the law.
What is bothering me so much is that? It is the fourth change in my view of consequence in five years. And I’m admit some of the changes in the past have been subtle, very, just like very subtle shifts in the law as to asset protection regarding retirement accounts in particular, and also a personal residence.
And those are the two most important most wealth in America by families, middle-class Americans or even upper-class Americans, not the super Uber wealthy, who cares about those guys. It about us, the people, these subtle changes have caused me at least concern. A lot of concern, but I got you covered.
Let’s just go over like the background of the secure act briefly. It is true that I am conducting live webinar every Thursday. I hope to do it indefinitely, but the concept being, look, you need to be able to answer. This is like serious, I think. And I’m not going to say it constitutes an alarm, but I will say that estate planning attorney that the higher level, we’re all freaking out about it.
And so the time is now to meet with your attorney and hopefully be able to be conversant with him or her in an intelligent way, a great way to do that is to listen to this podcast, but also to ask your question at the webinars on Thursdays. And there are varying times because my listener base is across the United States.
So go to boomxshow.com for the schedule and to register. I won’t be able to lay out solutions here today. And we’re almost out of time. But at the webinar, we can talk about the five different workarounds that were proven strategies that, the tech industry would have call it a work around.
I call it let’s fix, let’s fight the negative impact of the law with first of all, understanding it the second of all leveraging other provisions in the law and borrowing from the playbooks of asset protection and tax planning. No. If I earn at least mitigate the negative consequences that these changes have made, why work so hard if you’re the family leader or maybe even the second generation.
I look at John D Rockefeller. I had been reading a bit about the family, actually a lot, a bit about family wealth, like great families. How did they do it? All they did was develop, evolve, invent a different way of viewing first of all, family, the cons, the construct of a family, but the longevity and time horizon of wealth. J D Rockefeller is the first and his family is now his legacy as much more.
Much more so than, or at least as much as his great wealth. And so the webinars series is for solutions, but let’s spend some time talking about what that, what the heck happened. I What is the secure act and why is it impactful surprising about the secure act? Was I admit being a little bit distracted as I was doing a lot of things in December, as we all were, and I was a little bit asleep at the switch.
I did not know that the secure act had passed. And for good reason, really? I’m not, I’m going to give myself a break here because it it wasn’t like Obamacare, which, everybody’s up in arms about that. So funny Obamacare is basically, there’s a lot of nuances to it that people just don’t know about.
And if they did, who would disagree with. But it’s basically just that shocking premise that, okay. How about we come up with something Medicare for people over age 65 is worth great. That is a stable well-respected program. And if you’re over 65, you have Medicare most likely, and you there’s no such thing as the perfect plan, but it’s pretty close. And so Obamacare is the staggering proposition that, Hey, what about people under 65? That’s it? That’s all it is. No, we get, I look, I’m an I’m not, I don’t care one way or the other about blue state or red state or this, that, or the other thing as an attorney though, I’m pretty adamant about the biggest threat to wealth is unreimbursed medical expenses. If you don’t think that’s a problem and important, it needs to be fixed.
You’re not, you don’t get to complain about it later, but when you come to my office and you’ve been complaining about Obamacare for the last 10 years, but now you’re whining because your wife fell, broke her hip and you’re paying $30,000 a month.
I’m sorry, but that aside, the human element of really truly understanding the complexity of law, the law aside, medical expenses, man, that’s a big deal. It, it was used. Obamacare was used to stir the pot, get people worked up about politics and to act like they cared about something. That or confused them to think that they were opposed to the radical concept of affordable medical care when the truth is whatever. The tax bill, that was a big deal.
We all heard about it for days and weeks, but the secure act, man, there were not a peep about it. Just pass secretly, covertly and it was 100% to do with your retirement. Now wealth and retirement accounts, IRAs, your 401k, your 403 B your steps, whatever version of a retirement account you have.
I will use the term IRA, individual retirement account. Just it’s easier than saying retirement accounts. IRA, any type of retirement account, most notably IRAs and 401ks.
The legislation impacts IRAs. And what’s really great about me. There’s many great things about me. There was a lot of things about me. I like, I happened to have a list of character defects so long. It’s like the yellow pages, a character defects right here, but there’s some good things. The only thing that you need to worry about or think about the secure act.
There are some changes to this gear act that are beneficial, that the purpose of the secure act is to help people who have not yet saved anything for retirement, because that turns out to be a lot of people. And there is a ticking time bomb as a society for people who just can’t seem to make enough money. Because there has been wage stagnation for decades. And so they’re screwed.
And so secure act is essentially a really lame, minimally helpful piece of legislation that helps people who have nothing may be sorta make that easier for them. Now, for people who have money which candidly would be my demographic. For those folks, there’s nothing but bad news period. In particular the rule that has changed is that second it’s like, God, you have to be disciplined it. If you want to be serious about money, you have to be disciplined and you have to study and you have to work extremely hard and you have to connect the dots.
There is no retirement planning in three easy steps. When you see that on Instagram, ignore it. This is the second legal blow that retirement accounts have taken as applied to your kids, the second generation. If you take out from your retirement account, what is called the required minimum distribution.
If you only take that out every year, which describes 90% of my clients. And have just like a modest rate of return over your retirement. You are mathematically guaranteed to have an account balance leftover on your retirement account. When you die, this notion that you had to have a million dollar retirement account to fund your retirement.
In most cases is baloney hogwash. You will have likely a retirement account balance and it could be the second most important. And in some cases, the most important asset in your entire estate possibly behind your personal residence. And so your children likely will inherit an IRA from you in that case.
Now, there are billions of dollars. That’s about to transfer. I think actually the number is over a trillion. That’s going to transfer to children. A lot of it in retirement accounts. Now, at this point, the earlier conversation that I had about the three models becomes very important. If your model is estate planning, just like level one in my view, lazy planning in which is look, I’m dead.
I don’t care. Let the kids have it. See ya. Very odd. During your lifetime, you did care, but a lot of energy into building this asset, a lot of energy. In retirement, cost-conscious simple person. And it turns out you personally did not benefit from all of that effort because it just worked out. You made social security, your expenses were low, everything was paid off.
Yay. And then just to be so lazy to say, okay let the kids have it. I’ll fill out the beneficiary designation form and they can inherit this IRA. Now kids are like Banditos man, that they did nothing. They just were born and they get this major inheritance and statistically it, and what I’m seeing is the money’s just gone quickly because the kids just, even if they are, oh, no, my kid’s responsible.
Yeah, he is until he gets a $200,000 IRA, that he didn’t work for. And at this point, the day that the shift to the wealth, the categorization, the Def cons of threats to your estate changes like during your lifetime, as you age, the number one threat to your wealth is you, your health unreimbursed medical expenses by Barnett. At the inheritance point it’s not unreimbursed medical expenses, just obnoxious mismanagement, because it’s passed on without a set of rules. Children don’t even know and often how you invested or why you invested that way. And sometimes you don’t know a bond from a mutual fund. Financial literacy, and that second generation is a serious problem.
That is. The first blow to asset protection of retirement accounts was the Supreme court ruling versus Clark and or Clark versus Rameker rather. And it’s Supreme court ruling about whether an IRA, any retirement account was creditor protected in a bankruptcy. Now, but before you switched the dial, because you heard the B word bankruptcy, let me explain how that works.
The number one reason people file for bankruptcy is medical and in particular cancer and in particular even if they recover the financial toxicity related to cancer, even if the patient cancer is in remission and the person recovers and lives a full life expectancy. The drain on unemployment and how from cancer is the biggest factor regarding bankruptcy. And bankruptcy is look, we got to help this person get out from underneath the swarm of creditors that occur even if the person is insured, medically.
I know this, I was interviewed by MPR of all places. And regarding research out of Seattle cancer care Alliance and financial toxicity related to this particular disease. And so do you know, with 100% certainty that your kids will not marry the wrong spouse, who is a rockstar drug addict, or enter into risky real estate investment opportunities offshore that goes south. Rose through a stoplight, hits a school bus full of children. The bus catches on fire, all of these things that can happen down the road that seem wild and crazy and are, but then there’s the just does human frailty when it comes to disease. If those things can happen to you. When you own a retirement account, the bankruptcy code gives you a safe Harbor.
That asset is protected. Need not be spent down, cannot be reached by creditors, which is amazing. The question was what about inherited IRAs? Does it count as a retirement account, as a safe Harbor, as an asset protection safe Harbor in that fact pattern Rameker the court ruling was Nope. Ding ding.
Oh, wow. So now what was asset protected in our marvelous way for kids? That’s a legal shift that is a tremor beneath our feet. The second big blow was secure act enacted in December effective in January. Now, so the new rule is when kids inherit, basically they get taxes deferral for 10 years, not their life expectancy, which was the prior rule.
And the reason Congress did that is because they want money. They want to get the money back into society. They want to get their tax money, they are trying to keep retirement assets. They want to get back into the game, which is a major blow to your wealth, if, and only if your goal is to build wealth for more than one generation. A state trap, like secure act is no threat at all to simple plans that are that focused on estate state transfer.
I have the asset I’m dead. Just get it to the kids. Good luck. Okay. Oh, that approach is just fine. It’s lazy. It’s simple minded. And the assets will be gone very quickly, but they’ll have fun. 10 years, 10 years spend down on all your account, that is fine. I believe in enjoying life, nothing wrong with them.
Audi S five Scott, 330 horsepower supercharged can go really fast in that thing. However, If the idea is generational family wealth, then what about grandkids? Because if we changed our thinking and thought more like a Rockefeller or a Kennedy and their concept is amazing, a Rockefeller invented this idea of family wealth.
And the idea is it goes to bring the family together. We got the money, I can pass it on in a lazy way and in a parish quickly. Or we can bring it together into our family. Define family is people on our side who have our values, not just immediate family and finance, what our family wants to work on. If our family is enthusiastic about bike racing, let’s finance that.
And so how does the family promote and live the bicycle racing lifestyle for generations? And really tell me that a really close I’ve seen it. I’ve seen bike races with three generations of racers at the same race. I’ve always envied it. A family that tight and that close the estate planning doesn’t do that. Asset protection doesn’t do that.
The estate, but generational family wealth planning does that. Generational family wealth planning absorbs all the law strategies, trust and techniques of estate planning and asset protection and uses additional legal strategies to include business entity and family governance planning to make that asset last for seven generations, the thinking of a medieval man at 20.
Who is only going to be 25 years old is short-term makes completely different decisions than the same man would make in the modern age who has a life expectancy of 85. You will make completely different decisions about your estate plan. If you stop looking at it as passing wealth at your death, and think about asset protection during your lifetime.
And then if you’re so if such a visionary as to protect retirement accounts and wealth for more than just the next immediate generation. You will make different decisions about trust. What kind of trust will I use? What will the provisions be? What will be the overall plan, completely different decisions.
The three models that you choose, decide which actions you will take as regards to secure act. Estate planning, do nothing. Asset protection, standalone retirement, trust, family, wealth planning, probably that is cascading generational dynasty trust. You don’t need to know what those things are right now.
The teaching point is three different models, three different views, three different decisions, three different types of estate plans.
That was pretty good. Trying to get it under an hour to describe the philosophy and 30,000 foot view of a major piece of legislation that was just passed. And I think I did it before I let you go just to reminder. You have a lot going on at boom X nation right around the time that the secure act was enacted, actually the exact same time.
Boom X nation website launched the idea behind boom X nation was to rather than create yet another social group on Facebook. How about a group away from the poisonous pond of Facebook. Facebook doesn’t need to own everything. Like the only place where conversations can occur. What I don’t like about Facebook is the distraction of negativity related to politics. People think that people who think they’re talking about the law, but really aren’t. And so I created a safe environment for you all away from the bullies.
And you can register for free for an account. Now, candidly we need some energy going the momentum. So be one of the first brave ones to log in, create account at Boom X Nation. So we can start form discussions about these changes. There’s also an academy. I am adding content to create educational courses.
Some will be free, some will be tuition-based and of course there’s the podcast. So boomxnation.com. Boom X Academy and Boom X Show are all on one website chassis, one place to go to get the latest, check it out. I would appreciate it. That’s all I had to say for the good of the cause.
