#579 Tax Hacks the Wealthy Use (Attorneys Break it Down)

In this episode of the Main Street Business Podcast, Mark J. Kohler and Mat Sorensen take on your toughest tax and business questions in an open forum style. From setting up the right business structure to handling a home office deduction the smart way, they give you the tips you wish your accountant and attorney actually explained. It’s smart, fast-paced advice that real Main Street entrepreneurs can put into action.

Here are some of the highlights:

• Mark and Mat discuss the benefits and drawbacks of not getting married and having a revocable living trust.

• Mat shares his experience of owning real estate with a partner without a revocable living trust, emphasizing the importance of a buy-sell agreement.

• Mark discusses the benefits of having an estate plan and provisions to take care of each other in case of death.

• The options of treating the rental income as a gift or claiming it as rental income and expenses.

• How an LLC allows for de minimis expense accounting, which can be beneficial for startups.

• Emphasize having a home office deduction to qualify for other business-related deductions.

• Importance of planning for the distribution of assets in a trust to minimize tax implications and ensure the beneficiaries' needs are met.

• The limitations of umbrella insurance and focusing on proper insurance and asset protection through LLCs.

• Advise being transparent with the spouse and choosing the right type of lawyer to minimize conflict and costs.

• Grab my FREE Ultimate Tax Strategy Guide HERE!
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Episode Transcript

Speaker 1 (00:00):
Welcome to the Main Street Business Podcast with
your distinguished hosts, mark JKohler and Matt Sorenson.
Both are bestselling authorsand have over 25 years of
industry experience, with 10,000client consultations, making
them the leading tax and legalexperts in the nation.
Together, they'll unpack themost complex tax, legal and
financial strategies crucial forsaving more, stressing less and

(00:22):
building generational wealth.
Crucial for saving more,stressing less and building
generational wealth.
Today they're your personaladvisors, ready to break it down
for you and make the tax andlegal game easier than ever.
Here is Mark and Matt.

Speaker 2 (00:34):
I would say 80% of the time married filing joint.
You're going to save taxes too.

Speaker 3 (00:39):
You're getting jack squat.
You have nothing right now 180grand.
This year is subject to 15.3%in self-employment tax right out
of the gate.
The smart thing to do is tofocus first on the assets and
who's getting them.
Second, think of the taxconsiderations.

Speaker 2 (00:55):
Are there any advantages to mining the Bitcoin
in the LLC or S-Corp and do youhave any tax strategies or
general advice when it comes tomining Bitcoin?
Any crypto mining you're doing,you're going to want them.
Welcome everybody to anotherepisode of the Main Street
Business Podcast.
Excited to be here with youtoday.
This is the People Show.

Speaker 3 (01:15):
The People Show, where the people ask their
questions and we are the twoguys just giving you answers.
They're free, it's for you, butthey're worth more than that.
At least you know pennies onthe dollar.

Speaker 2 (01:26):
Yeah, it's.
I guess people show meaningit's for you, the people.
Yeah, just trying.
I'm excited to be here.
We are both tax attorneys, beenin the business now for 20
years plus doing small business,consulting, estate planning,
business planning, assetprotection, self-directing and
retirement accounts.
We try to bring all of theseforces to bear for you trying to

(01:47):
live the American dream.
We need to do more of thesepodcasts with the open forum.
We've just got so manyquestions today.

Speaker 3 (01:53):
Yeah, and Mark and I have done the 10,000 hours with
clients across the countryanswering these questions,
obviously charging for our timeproviding these services, and we
do it every day in our law firmwith our team at KKOS Lawyers.
So let's dig into the questions, though, and I mean I can be
lead off.

Speaker 2 (02:09):
Twitter or you know.
Yeah, you go for it.
I've got an interesting onehere, Okay.

Speaker 3 (02:13):
This was from K Tyler 98.
Mark and Matt, thanks for allthe information you provide on
the podcast.
It has definitely helped us inour journey through the small
business ownership maze.
My partner is a realtor and I'ma mortgage originator.
The realtor partner purchasedan investment property, loan and
title solely in her name.
After closing, the investmentproperty was transferred to an

(02:36):
LLC.
Llc owns solely in her name aswell.
We have no plans to get marriedor have children in the future.
We do not have a revocableliving trust, but based on what
I've learned listening to yourshow, that should probably be
our next move.

Speaker 2 (02:48):
We'll come back to that sounds like they've got a
little woohoo going on.

Speaker 3 (02:52):
Yeah, we're not getting married, but we are
together and that's okay youknow it's very, you know modern
very modern you know they'regonna.
I don't, I was gonna saythey're in a committed
relationship.
We don't know that yet.
Yeah, but they're in acommitted relationship.

Speaker 2 (03:04):
We don't know that yet.
Yeah, but they're in arelationship.

Speaker 3 (03:06):
This is a story that's unfolding.
I'm excited here.
Keep going please.

Speaker 2 (03:08):
Very interesting.
Where is it going to go?

Speaker 3 (03:09):
All right, Now Kay Tyler says I was not able to
originate this loan on theinvestment property due to
conflicts of interest coming tofunds, but we'd like to use this
strategy in the future with arealtor partner as the purchaser
and mortgage originator partnerperson asking as the lending
agent to maximize income tax andstrategies.

Speaker 2 (03:29):
Now I know why they're not getting married.
They're working the division ofreal estate over All right.

Speaker 3 (03:34):
To do this, it seems that most lenders will require
the realtor partner's assetsincome to be separate from the
lender partners.
It seems to me that a revocableliving trust holds all the
assets that will provide estateplanning as well as another
layer of liability privacyprotection, but it will cause
the same conflict of interestcommingling issue if we are
50-50 holders of the trust.

(03:54):
I'm sure we are missing somethings and it's certainly
possible there are ways.
There may be other strategiesthat would work better for us
we're not aware of.
Your input would be greatlyappreciated.

Speaker 2 (04:05):
Wow, I know what they're trying to do.
I'll say it in one sentence andyou respond yeah, they are
trying to have their cake andeat it too oh they, what good is
cake if you don't eat it.
I know, I know that phrase isthe worst.
It is.
It is well.
The cake that they want is oh,you're a mortgage lender, oh,
I'm a realtor.
We can both be, be on the HUDand because we're not married
and we don't commingle assets orhave a revocable living trust,

(04:28):
we can both get commissions andwe can go get lenders involved.
And lenders aren't going to seeus as a unit, they see us as
separate people for every pieceof this transaction.
Don't be offended, kay Tyler,if I'm missing this, but you
want that flexibility because hesays no commingling and we're
not connected from the banker'spoint of view or the division of
real estate's point of view.

(04:49):
But on the other hand, they'retogether and they'd love a
revocable living trust andthey're not getting married, but
they want to be together.
So that's the eat apart.
They want to have a cakeseparation for every business
plan.
Eat it.
We want to be together and notkind of, but we don't know how.

Speaker 3 (05:08):
Yeah, and let me say this for partners in general is
say, mark and I are partners, weown real estate together in
multiple LLCs, different LLCsthat own different properties.
We do not have a revocableliving trust or any trust
together.
Revocable living trust or anytrust together.
I've got a trust, mark has atrust.

Speaker 2 (05:26):
Okay, now my ownership stake in the trust
might go to my heirs, not Mark.
Okay, let's say my 50%.
What, yeah, just dropping thatnow huh.

Speaker 3 (05:39):
Okay, I told you about this.
Okay, all right, awkward, butwhat we do have is a buy sell
agreement.
Okay, that says, hey, in theevent that I die, you get the
business or, let's say, theproperty, but you're going to
cash out my heirs or my estateso you can continue on with the
business or property.
So what I think you need mosthere is some partnership

(06:02):
planning, some legal planningaround what is our relationship
going to be in terms of businesspartners?
I don't care about your otherrelationship, whatever that may
be or may become in the future,but if you're going into
business together, for anyunmarried couple and even
married couples here, let's havea real business partnership
discussion about what are theresponsibilities and the roles

(06:23):
here.
If your partner here, if shehas this LLC and it's solely in
her name, and it's expected, youare actually partners in this
property, but your name's not onanything, kay Tyler, you're
getting jack squat.
You have nothing right now.
The trust doesn't make senseunless you're married to do a
joint revocable trust.
So I think we need to unpack,like what is the actual

(06:46):
relationship here?
I think the secondary issue isthis well, I want to still get
the mortgage commissions on this.
You might need to bypass that.
I think that's short-termvision.
On this, long-term, you'retrying to build assets and grow
wealth.
You might want to think morebig picture.

Speaker 2 (07:03):
All right, kay Tyler.
Okay, I'll respond if.

Speaker 3 (07:05):
I may.

Speaker 2 (07:06):
Kay Tyler, do you love this woman?
I mean, I just I think that's.
We need a response right now,because I think that would
change a little bit of thisequation, maybe?
No, I'm just kidding, all right.
All right, I'm just kidding.
Here's I'm going to take just adifferent angle than Matt.
I just got married this lastyear and Patty and I were doing

(07:26):
business together.
Before we got married, we wereinvesting in real estate, we
were doing some businessprojects, and not being married
did give us more flexibility inthe self-directed IRA space.
Oh man, her IRA could partnerwith me, my IRA or 401k could
partner with her.
It was a wild, wild west, andso I get.
That's why I'm saying this iskind of a cake and eat it too.

(07:46):
Because, kay Tyler, when you'renot married, you're right.
Lenders, bankers, trustcompanies everybody sees you as
two distinct, separateindividuals, and even the IRS
does so.
There's some planning benefitsthere, but there's also some
drawbacks, and I would throw outthat I think you do need to
both of you get your estate plandone and then have a provision
where you take care of eachother if you die.

(08:08):
So I would presume Kurt Russelland Goldie Hawn have individual
trusts.
They're not married.
Famous story of them and theirlove affair.
They're totally in love,wonderful couple, but they have
separate estate plans and I'msure they take care of each
other.
If something were to happen tothem in their individual estate
plans, then you can go wild westpartner up, and I like what

(08:28):
Matt said too.
On that level you definitelyneed some agreements too.

Speaker 3 (08:31):
Yeah, here's a reason you may want to get married,
though.
One thing you mentioned wasREPS I think you're meaning real
estate professional status andthe realtor partner here could
get that.
The mortgage originator partnercan't.
However, if you're married, therealtor partner is going to
qualify and the mortgageoriginator partner will qualify

(08:53):
too.
You'll be combining your income, but you'll get the real estate
professional designation status, so all these rental real
estate losses will offset bothyour mortgage originator income
and realtor income.
You will only do that if you'remarried, so not that I'm trying
to push you any way or another,but the IRS does have a little
perk for you.

Speaker 2 (09:12):
Yeah, and I would say 80% of the time married filing
joint, you're going to savetaxes too.

Speaker 1 (09:15):
Yes, so I would run your tax returns both ways.

Speaker 2 (09:18):
Yeah, Okay.
Next question Boy.
We took a little more time onthat, but it really unpacked a
lot for, I think, many of ourlisteners.

Speaker 3 (09:24):
Yeah, we're billing 0.2 hours on that one Make a
note.

Speaker 2 (09:28):
Hey, tyler, you'll be getting an email with an
invoice.
You can pay via Venmo or Zelle.
Okay, now I'm just joking.
Just joking, all right.
Mr Holb says I am renting aproperty I own to my elderly mom
.
Okay, I've got some otherfamily issues going on here,
elderly mom, I've got some otherfamily issues going on here.
Renting property to yourelderly mom.
We're past Mother's Day now, soI guess he's hiking up the rent

(09:50):
.
I'm not sure.
The annual rent isapproximately 55% of fair market
value.
So he's giving her a deal andI'm concerned the IRS will view
this as a not-for-profit rental.
I have to tell you, mr Holb andI'm always transparent, I don't
know if I've ever heard the wordnot-for-profit rental phrase,

(10:13):
but anyway he says I'm worriedthe IRS is going to call this
discounted rent project anot-for-profit rental.
Could you go over the rules forclaiming expenses against a
not-for-profit rental?
Would you advise setting up therental agreement to exclude
portions of the property, saythe garage or room or bathroom?
Now you've got mom tied up inlike this space that she can't

(10:34):
she can't even use the garageman Thereby allowing for a
proportional amount of rentalexpenses to be included against
rental income and making it lookmore like a for-profit rental.
Okay, mr Holt.
And now, by the way, matt and Ihave done an entire podcast on
renting property to your parentsand doing some estate planning,
some rental tax planning, whenyou might want to take ownership

(10:59):
of the property of mom and dadsand rent it back to them so
they could qualify for Medicaidor some other things.
There are some options there.
Medicaid planning is so complex.
But, mr Holt, I would say thisand correct me if I don't know
what a not-for-profit rental isNever heard of that.
If you're collecting rentalincome, it's rental income.

(11:19):
You have a rental property, youhave rental expenses.
Just because you're charging55% of fair market value just
means you're taking in less rent.
Now, I'm presuming, with the waythis is framed, that this
property is a standalone singlefamily home.
I can't determine if you'reliving there as well, if you're

(11:42):
just renting to mom half of theproperty and you live there as
well, or someone else, or ifthis is all of mom's property.
I would suggest this.
Have a consult with one of ourtax lawyers to get this vetted
and I would say you have twooptions.
One don't worry about thispercentage of firm work, just
collect the rent.
Write off the depreciation ofthe whole place, all the

(12:03):
expenses.
See where it lands on your taxreturn.
Not knowing your situation, itcould be a good thing, you know
whatever.
Option two just treat it as agift.
Your mom is gifting you somerental income.
It's a gift and you're treatedlike a second home Because if
you're not going, to take he'sreally gifting his mom some
value.

Speaker 3 (12:21):
Yeah, that's right.
There's a discount, basically45%, let's say mom some value.

Speaker 2 (12:26):
Yeah, that's right, there's a discount basically,
yeah, 45%, let's say yeah, butif you don't want to claim it as
rental income, what mom issending?

Speaker 3 (12:32):
them has to be something.
So I would oh, okay, yeah, buthow does he claim the expense?
He would oh, okay, I'm sayingtwo ways.
Yeah, either claim the rent,claim the expenses be legit.

Speaker 2 (12:41):
Or number two, just let mom use your second home.
Take the rent mom's paying youto help cover the costs, and
that's understandable.
Hey mom, I need you to helpcover some of these costs.
Don't claim it as income.
The IRS is not going to comeafter you, oh, but you don't get
any write-offs.
So it's either gift mom's justusing this extra home of mine
until she passes whatever, orexpenses and claim the income.

Speaker 3 (13:05):
Your thoughts.
She passes whatever can orexpenses and claim the income.
Your thought.
What about an option three?
Tell me what you think aboutthis one just have her pay the
damn market value of the rent.
Take the expenses you'reprobably going to be, even with
depreciation expense.
You are going to be likelyhaving a loss, a lot of cash
flowing rentals where you'remaking money because after
depreciation which is like aphantom loss, right right,
you're not actually incurring it, it's a percent of the value of
the property.

(13:25):
Over time you have a tax loss.
So let's say you have that andthen just gift her back the
money and that's going to be thegift back.
Is that actual amount?
You just pay her back becauseor you credit later on in the
year and you can gift up to whatis it?
$17,000 a year without any gifttax consequences.

Speaker 2 (13:46):
So I don't know another way to think about it,
uh yeah, no, I do like optionthree would be for a tax
strategy, I think.
Uh, depending on what you whereyou fall with your adjusted
gross income, real estate status, this, this, that and another.
So that's why, yeah, so great,good point.

(14:08):
So get a call with one of ourattorneys because you want to
nail this, but don't worry aboutthis not-for-profit rental
thing.
Either it's going to be arental property or it's going to
be a family gig with gifting.

Speaker 3 (14:22):
So all right, cool, all right.
This is Sloan nine 20.
This is not Sloan four 20.
I love these handles.
Okay, so, sloan nine 20,.
Um says hello.
I have a 10 99 job.
I recently started training tobecome a Pilates instructor
instructor.
I'd like this to become myfull-time work once.
Established for now buyingequipment, training and other

(14:43):
expenses.
Established For now buyingequipment, training and other
expenses.
Should I start an LLC or S Corp?
What is the best tax strategy?
I will be using a home, a roomin my home, to train clients on
the reformer.
All right, sloan, this is agreat question.
Okay, all right, pilatesinstructor, you're going to be
self-employed.
Now, keep in mind you don't needan entity, an LLC or

(15:03):
corporation to be able to takean expense or a write-off for
any of this equipment you'rebuying.
I'm going to come back to thisin a moment.
We got bonus depreciationpossibly on the table here under
the current pending bill.
We'll see but you don't need anentity to do that Now.
I would do an LLC despite that,because you want to be legit.
You're going to want to havethis in the future.

(15:24):
Llc despite that, because youwant to be legit, you're going
to want to have this in thefuture and we are going to want
to add an S selection to that,possibly, depending on how much
you make at this business.
So here's what I want you toknow Get an LLC now to get a
legitimate entity.
You're going to do business Ifsomebody gets injured or
something doing Pilates.
I know you guys are doing weirdthings on Pilates.
You want some liabilityprotection, maybe things on

(15:46):
Pilates.
You want some liabilityprotection maybe.
But the other benefit to it is,once you have more than $50,000
of net income I don't know ifthis is a side hustle, you're
trying to make 10 grand.
If this is going to be a mainhustle, you're trying to make
100 grand plus.
But if you've got more than 50Knet income, you will save taxes
by having an LLC taxed as an SCorp or an an S-corporation.
The reason I'm saying do an LLCout of the gate is it's simple

(16:07):
and easy.
You don't have to do payrollreports or an S-corporation tax
return.
It'll flow onto Schedule C.
Maybe this first year you've gota lot of startup expenses.
You don't have much net incomeor anything.
There's not much taxable income.
But next year you're reallycranking.
You're operating, you've got agood clientele and you're making
more than $50K of net income,then we want to add the S

(16:28):
selection to the LLC, which nowyou do have to start doing
payroll, you do a corporate taxreturn, but if you're making
$100,000 a year net income afterexpenses, with an LLC taxed as
an S-corp, you will save about$9,000 in self-employment tax
versus having no entity or justhaving a regular old LLC.
So consider that in yoursituation.

(16:49):
Give our law firm a call.
By the way, if you've got thesetypes of questions and
scenarios, our team here at KQSLawyers will help you get this
set up.
Spend your time growing thebusiness, starting to market it,
doing your training, teaching,pilates and charging someone.
Let our team help you get thisset up and structured properly.

Speaker 2 (17:07):
I will offer a second option too.
One thing that many businessowners don't know is about the
de minimis expense accountingpolicy.
Under IRS code you can expenseup to $2,500 of any invoice for
equipment or supplies in yourbusiness without even relying on

(17:29):
depreciation strategies.
So you've got up to 2,500 youcan write off in each pop.
Now this has to be anaccounting policy in your
minutes and a statement on yourtax return.
So I'd love everything Mattsaid, but I would add get the
LLC done, get an LLC, get legit,get the EIN and in those
minutes for your LLC we put anaccountable plan in every one of

(17:51):
our minutes that has thisaccounting policy in it, so that
now you're expensing all ofthose things you're going for in
this first year or two.
You may even have a loss thefirst couple of years, which is
allowed under the hobby lossexception.
So now you're taking losses,you're buying all this killer
equipment, you're showing someincome and you're saving taxes
off your regular W-2.

(18:12):
You've got an LLC tosubstantiate it.
I think this is the gateway drugto the American dream, frankly.
So I love it.
And this is 40 millionAmericans now have a side hustle
and you, being a Pilatesstructure is part of the great
formation.
After the pandemic, people arelike damn it, I'm going to make
some extra income.
I'm going to start this littleside hobby into a business.
I love it, but I'd formalize itwith an LLC de minimis

(18:35):
accounting policy provision.
Get that accountable plan setup in your LLC.

Speaker 3 (18:39):
You're going to be doing home office deductions, oh
yeah, all these goodies, thatseparate piece of your home
you're going to use to trainclients, definitely taking home
office, I love it.
No-transcript.
A lot of other expenses you'regoing to have, of course, in the
business, so we can help youget that dialed in.
And I was just looking up whata reformer costs.
I don't know what's your guesson how much a reformer costs.

(18:59):
This is like price is right,what do you bid?

Speaker 2 (19:04):
I believe a reformer is some sort of equipment you'd
use in PLIAT.

Speaker 3 (19:08):
It's the thing you use to do Pilates.
Have you seen people do Pilates?

Speaker 2 (19:17):
do pilates?

Speaker 3 (19:18):
I have not I try to avoid.
Do you know what pilates is?
Is it like yoga?

Speaker 1 (19:21):
kind of is it like a?

Speaker 3 (19:22):
row machine kind of.
Yeah, it's like a machine,maybe like it's like yoga and on
a machine, I don't know I meanI walked by some torture
equipment at a gym the other day.
Maybe that was it okay we'regood on tax and legal stuff.
I got.
I got a little.
I felt like I knew a little.
I got a little overconfident onmy Pilates.

Speaker 2 (19:36):
I don't know.
It was cool Reformer five grand.
I don't know.

Speaker 3 (19:39):
Yeah, turns out you could get them for under $2,500.
There's different brands ofthis.
I'm sure there's like aMercedes and there's a Hyundai,
you know, or Kia, whatever, youknow, I don't know, there's a
lower entry when there's thenice stuff.

Speaker 2 (19:52):
I'm just a scrap it out guy at the gym.
In fact I went to a boxing gymfor a lot of years.
I love to just hit the weightsand all that.
I kind of breeze past all ofthose torture equipment.

Speaker 3 (20:02):
I forgot about the boxing gym where you fought a
female cop.

Speaker 2 (20:08):
Okay, we don't need to go there.
It's called sparring and shewas a very proficient female
boxer, you know.
Okay, we'll go tell that storyanother day.

Speaker 3 (20:23):
Okay Now, it did not end well.

Speaker 2 (20:26):
That's like this is a no-win situation, you don't?

Speaker 3 (20:28):
knock out a girl.
I told him I'm like what areyou getting yourself into?
If you beat her, you're goingto feel like a jerk, and if you
lose you're going to feel like awimp.
Yeah.

Speaker 2 (20:36):
It ended up with a black eye and it wasn't on her.
Okay, now, no pun intendedthere.
That was okay, all right.
Okay, here's another question.
Let's transition.
We don't need to talk aboutthat.
I can't.
I shouldn't have opened thatcan of worms, all right.
But this is a good transitionto Sloan 920.
Sloan, yeah, sloan 920.
Because, sloan, I'm going towant you to also take the home

(20:57):
office deduction, which is goingto be a space where I suspect
you're doing some of yourPilates training in home.
But I want the home officededuction.
Here's why that's the startingpoint for you, as you take
mileage to other gyms and doingpersonal training for others.
Now you're not taking the beingexcluded from the commuting

(21:18):
provision, but you can't writeoff commuting from your house to
work.
But when you have a home officeand a training space for your
Pilates business, now when youbop over to all these other gyms
and you're meeting othercustomers and clients and la la
la, now we're writing off theauto deduction.
But you have to have a startingpoint for the auto deduction.
Where is your starting point?
Your home office.
So Collins M13 asks I'm going touse the home office simplified

(21:44):
method for my tax return.
My question is I have 122square feet home office.
Times $5, which is a simplifiedmethod, that's a $610 deduction
.
Is this amount to deduct thegrand total for the year, or
should I be multiplying the 610times 12 months for a total of

(22:04):
7,320?
Appreciate your clarification,oh Collins, if we can only wish
it.
So it is only $610 for the yearwhich you're going to go.
That sucks, but, colin, this iswhy I brought up the auto
deduction.
This is one of the tricks intax law planning that the home

(22:25):
office I yeah, I want to writeoff 1500 bucks.
You can write off $5 up to 300square feet, 1500 bucks.
No depreciation reca are done,but any specific expenses for
the office like furniture,printers, cameras, lighting,
anything that's specific to theoffice is going to be a
write-off on top of that amount.
And you just pegged yourstarting point for the auto

(22:47):
deduction.
So this really is a powerfulthing to get this deduction,
even if it's only $610 for theyear.
Sorry to break that bad news toyou, but also let you know the
glass is half full.
This is a start again for yoursmall business venture.
That could become a mainventure someday, and that's it's
really exciting.
All right, you got a goodquestion, yeah.

Speaker 3 (23:10):
From Wooden Shoe.
All right when she says let'sassume, the makers of a
revocable living trust have diedand now the executor trustee
here I think is what you meantmust go through the assets
single family rentals that weretitled to land trusts and the
land trusts are now owned by theliving trust.
All right, we typically justhave LLCs here.
But I'm with you.

(23:30):
I'm with you so far, woodenShoe.
What's the best course ofaction?
Keep the single family rentalswhich provide cash flow and
reflect passive activity lossesdue to depreciation, and file a
trust tax return each year, orbe sure to divvy up all the
single family rentals to thebeneficiaries with the hope of
not filing a trust tax returnthat first year or subsequent
years.
Discussions take us all up tothe point of preparing a living

(23:54):
trust.
Inquiring minds want to knowhow to handle the aftermath in
the most expeditious waypossible to provide the best
financial outcome forbeneficiaries.
A few of us will be executorsof loved ones.
Does anyone have an interest inproviding direction?
Well, wooden Shoe, I do.
We have an interest in this.
We want to help you out.
We've also, by the way, got ourestate planning special at our
law firm, kqs Lawyers.

(24:15):
So get over there to get yourestate plan done.
If you're like man wouldn'tchoose on to something here, I'd
like to know that.
And if I plan my estate, if youdon't have an estate plan, you
do have an estate plan.
It's just a crappy one.
It's the one the governmentprovides for you.
You're going to probate court.
Your family's going to bedistressed.
You've just died and you'vegiven them this amazing
opportunity to go fight aboutyour assets because you never

(24:37):
provided a plan.
So get your fricking estateplan done.
Everyone All right Back towooden shoes, question.

Speaker 2 (24:49):
I felt like I was out there.

Speaker 3 (24:50):
Okay, cool, good job, good job, all right.
Great question, though, cause alot of people do worry.
I'm like what happens when wedo die and you can answer that
Now?
The trust.

Speaker 2 (25:00):
Okay, whoa, whoa, whoa Pray to our assets.
I love it.
We have a question today whathappens when you die?
Okay, this out.
I cracked the code and the dearnear-death experience last
night.
Yeah, did you hear about thatguy in prison just came out this

(25:21):
last week.

Speaker 3 (25:21):
It was so good.
A guy no idea where you'regoing.

Speaker 2 (25:22):
No, no, no, it's good this guy in prison okay has.

Speaker 3 (25:26):
Uh, I'm already not interested in what he thinks,
but no, no, this is good.

Speaker 2 (25:30):
Has a near-death, whatever, whatever death
experience.
Okay, he has a death experience.
Did he get shanked?
No, no, okay.

Speaker 3 (25:38):
Actually, I don't know the ailment that caused
this but he goes into Naturalcauses.
Okay, yeah, no.

Speaker 2 (25:43):
It was verified.
They went in and the paramedicsshow up in his cell, whatever.
But he was dead.
He was dead for about twominutes and they were able to
defib, whatever, bring him back.
He did not go to the pearlygates.
I'm you know, and maybe maybehe was.
You know he repented and youknow he was okay.

Speaker 1 (26:02):
Maybe peter met him and said you you know we've got
an escalator choice here.

Speaker 2 (26:06):
I don't know, yeah but here's the point he was dead
for two minutes, verified, yeah, by the paramedics, brought him
back to life.
He filed an appeal and saidI've served my life sentence.
He did.
He said I served my lifesentence.
I verifiably died.
I'm back, Let me out.

(26:28):
And they're struggling.
It is still in court becausethey're like okay, we've got to
follow the code here.
He did die.
Definition is I was like man,that was creative.

Speaker 3 (26:41):
That's a great one.
I mean, if I was the judge onthat, you've got to like tip
your hat to him.
You know, now I don't know whathe did to get there, so that
would.

Speaker 2 (26:51):
Life sentence is not a good sign.

Speaker 3 (26:52):
Yeah, you probably didn't do something great.
Yeah, but that's a great lifesentence without parole.

Speaker 2 (26:58):
Death experience for two minutes verified.
And well, what's interesting?
I was reading a case, believeit or not, last night on the
home office expense.
Where Wait a second?

Speaker 3 (27:08):
You just said, I bring a case on the home office
expense last night.
What's interesting there?

Speaker 2 (27:16):
Well, let me tell you Okay, dr Solomon, back in 1983,
appealed it Because remember hesaid Was he a dentist?
He was an anesthesiologist,okay.

Speaker 1 (27:24):
You remember the case .
This is good.

Speaker 2 (27:27):
It's a beige burner, okay.
And he's like I'm going to goto court and prove that I get to
use my home office expenseno-transcript, united States.
And they said nope, definitely,it has to be your primary place

(27:49):
of business.
And it wasn't.
But he's like but it should be.
And they said the Supreme Courtsaid you know what?
You're right, you should beable to deduct that.
But the code says it has to beyour primary place and
definitionally it is not yourprimary place to do business.
And they said if you don't likeit, change the law.

(28:13):
One year later he got hiscongressman to amend to get the
IRS to change the code and allowfor this administrative office
exemption.
But what is the point here?
The Supreme Court was bound tothe statutory wording.
It said if it is not yourprimary place of business, then
you are not allowed to take thatdeduction until the law changes
.
The same time, that night I seethis case of this guy going
died.
I officially died, according toall definitions and records and

(28:37):
according to the statute Iserved my life sentence and I'm
like wow, okay, so that's.
That was my perplexing.

Speaker 3 (28:45):
I didn't sleep last night okay, I just want to point
that out.
You think that there's somecongressman or senator that's
going to stand up for this guy?

Speaker 2 (28:51):
no, what I'm saying is the supreme court's going to
go.
The statute says you, youserved a life sentence, you died
that, so you're out.
If you don't like it,prosecutor, go change the law.
So they've got to go amend thelaw and say even if you have a
death experience, you have to bedead for at least.
But here's minutes, here's whyhere's?

Speaker 3 (29:10):
here's why I disagree .
This is Justice Matt Sorensen.
If I was on the court, it's notyou serve until death, it's you
serve for life.
He's still alive.
It's maybe his second life, butit's life period.

Speaker 2 (29:27):
Well, some people get two life sentences to serve
concurrently.
Maybe they were thinking aboutthis when they said it.
Yeah, maybe.
All right, Back to the show.

Speaker 3 (29:38):
Wooden Shoe, sorry about your question.
We got on a little tangentthere, but you know some
interesting stuff.
Okay, well worth it All.
Right, here was Wooden Shoe'squestion.
Okay, let's focus back here.
The question was about when youdie and you have assets in a

(30:00):
trust.
The trust becomes irrevocable.
Okay, let's say you and yourspouse, or you single, pass away
.
Now it's going to your heirs.
Now the trust is irrevocable.
It cannot be changed, which iswhat you want, right, because
you want everyone to have tocarry out all the wishes you had
in your trust.
Wooden shoe's question is he orshe, I don't know is what's best
if we keep the assets, theserental properties, in the trust
or we distribute them to thebeneficiaries.
Well, you should have decidedthat when you set up the trust.

(30:22):
That should be a considerationwhen setting up the trust.
Now, the smart thing to do isto focus first on the assets and
who's getting them.
Second, think of the taxconsiderations.
If you focus first on theassets and who's getting them,
let's look at the single familyrentals.
Let's say you've got a kidwho's 16.
That's going to get half ofyour estate.
You have two kids.

(30:42):
That's staying in trust.
We're not giving that youactually can't, even if they
were 18, we're not giving it tothem either.
That's going to stay in thetrust and those rental
properties will be managed bysomebody.
And, yes, you will be doing atrust tax return at higher trust
tax rates.
But when that kid becomes ofage and as you, the provisions

(31:02):
you put in the trust, maybethey're 25, they get some or
over time they will startgetting the benefits of the
trust.
So and the assets from it.
So we want to think about who'sgetting the assets first.
Now, let's say that.
So we want to think about who'sgetting the assets first.
Now let's say that the peopleinheriting this are 50 years old
, parents passed away in their80s or whatever, and these kids

(31:22):
are all.
They are obviously now grownadults and I would just say zero
reason to keep it in the trust,unless there's a creditor issue
with one of them or something,but typically an alcohol or drug
addiction or something.
Again, these would beprovisions we'd put in the trust
to protect them from gettingthe assets and keep the trust
assets.
But, assuming everything's good, most people would say just

(31:43):
distribute this outright to thebeneficiaries, let them take the
properties.
They can still keep them asrental properties.
They can sell them whateverthey want to do.
These are now their assets, butthat's a little more tax
efficient.
You generally don't want toleave assets in a trust because
you have higher trust tax rates,unless you're trying to do it
to protect the assets from thebeneficiary themselves or for

(32:04):
some creditor of the beneficiary.

Speaker 2 (32:07):
Very well stated.
Totally agree.
No amendments to the bill.
I like it Without objection.

Speaker 3 (32:11):
Without objection, please submit to the to the bill
.
All right, I like it.
I like it without objectionwithout objection.

Speaker 2 (32:15):
Please submit to the record your honor.
Okay now, uh, this is fromgunshabilla, I can't even say it
.
Nokia, nokia, baboa, anyway hey, mark, I think you got it there
.
Nokia baboa oh yeah, maybe I did.
That's right, I love nokia.
Okay, hey, mark and listener,first-time caller.
Thanks for all the knowledgeyou provide.
My question is a two-parter.

(32:36):
First, I had an S-corp I'veused oh, I think I'm going to
say have.
I have an S-corp I've used forsales consulting work in
Illinois for the past few years,but recently I've scaled it
back.
My efforts in my side hustleincome has dropped.
I am willingly spending moretime at my W-2 for the
commissions and I garner thereand heading back into the big

(32:58):
workforce.
I am considering shutting downthe S Corp completely versus
converting it back to an LLC forsomething a bit more passive.
It generates less than 40K.
What is a good criteria forthinking about whether I should
shut her down or convert it?
Number two the business I'mthinking of moving into is
Bitcoin mining, not in my ownhome, but through a reputable

(33:19):
provider.
Are there any advantages tomining the Bitcoin in the LLC or
S Corp, and do you have any taxstrategies or general advice
when it comes to mining Bitcoin,for instance, I have?
There will be repairs needed, adepreciable life of the
machines, la la, la.
Well, you're in luck becauseI'm doing some crypto mining as
we speak, literally making 32cents an hour.

(33:39):
I'm just killing it.
I'm just killing it.
No, I'm doing better.
Okay, first point I would notget rid of this S corporation.
When you said you have lessthan 40,000 a year generating
for you, that may seem like notworthwhile to keep the S corp.
I think that's great.
You're going to have a day jobwith a big fat W-2, that 40

(34:01):
grand that goes to the S corp.
We're going to be able to drivedown your reasonable comp even
further so that that 40 grand isnot subject to self-employment
tax.
Remember everybody your first$180,000 this year, $176,000,
$180,000 this year is subject to15.3% in self-employment tax
right out of the gate.
So unless your W-2 is payingyou more than $175,000 a year,

(34:24):
this $40,000 is going to takeanother 15% haircut.
Just being a plain old LLCRemember, llcs do not save tax.
So I would keep theS-Corporation for this
additional 40 grand.
The tax return for this S-Corpcould be a thousand bucks, maybe
1500 at most, but you couldsave well more than that in even
Medicare or even Obamacare ACAtax.

(34:48):
That could be coming in overand above 180 grand.
So I like the S-corp here Ifyou were going to quit your side
hustle altogether, then yeah,dissolve it, but maybe convert
it back to an LLC if you'regoing to put a rental property
in it.
But if you're going to have anyside hustle income at all at
this juncture, I'd keep it.
Let it play out a year or twoand then we'd revisit.

(35:09):
Number two mining absolutelyshould go in the S corporation,
and S corporation is going towell.
Let me say it this way MiningBitcoin or any sort of mining,
my mind is doing soul, but I getpaid in Bitcoin.
The point is it is a service,it is a ordinary income

(35:30):
generator.
So you're going to want thatBitcoin mining, whatever mining
you're doing I'll say cryptomining, any crypto mining you're
doing you're going to want tofunnel it through the S-corp.
Let it buy the CPUs and thevideo cards, everything, pay the
energy bill, the managementbill, and I think it's a great
strategy.
I haven't regretted going downthat path.

(35:51):
Let the S-corp maintain thatincome and pile it in with the
rest of your side hustle income.
Love where you're headed, gofor it.

Speaker 3 (35:59):
I love it.
No, nothing to add there.
Mark is your guy on thatquestion.
That was right up Mark's alley.
Okay, this question is fromDerek.
He says, and I haven't thoughthow to answer this one.
So here we go.
In the event of a divorce, okay, how do I protect my physical
car wash operational businessfrom my spouse?

(36:19):
No prenup, not a communityproperty state.
I would absolutely make sureher and kids were taken care of
tenfold.

Speaker 2 (36:28):
Oh, I'm sure okay that's just so hard um, tricky
question here.

Speaker 3 (36:33):
Divorce is tough um, and we've definitely advised a
lot of clients as businessowners.
Now here's the thing I don'tcare whether you're in a
community property state or not.
Um, your spouse is going tohave half a claim on the
business it's called maritalproperty.

Speaker 2 (36:46):
Yeah, so it's marital property.

Speaker 3 (36:50):
So what's going to happen is, if you do get in this
situation of divorce, she willhave a claim for 50% of the
business.
Now, typically, what mostbusiness owners will do is,
particularly if you're someonestill working and operating this
business.
This isn't like Apple stockthat you own, that you just
split up 50%.
This is like the business thatrequires you to show up every

(37:11):
day.
Typically, what's going tohappen is you will keep the
business and there will be somevalue put on the business and
you are going to pay your spousethat value of the business
through other assets you mighthave that you would otherwise
split um or you will owe herover time.
Okay, that's typically what'sgoing to happen in the event of
divorce.
Now, there's lots to benegotiated, of course, but I

(37:34):
think, quite frankly, getting areally good divorce lawyer in
this scenario would be critical,and also having a reality check
, maybe, on what's possible.
And and I mean this even Idon't want to get to trying to
avoid divorce.
That's outside of my realm ofwhat I could advise you on.
But if you do have the spiritand intent of taking care of
your spouse and and kids, Idon't know where they come in

(37:57):
the mix, or they.
They must be under age 18.
I don't know what you mean bythat, because they wouldn't be
getting assets right.
You'd typically be paying childsupport, but um, but I would
really get a good consult with adivorce lawyer.
Now, that is not something wedo.
We can help you on the businessside of things, of course, but
this is really going to get downto your state and negotiating,
and that's where the rubber isgoing to be thrown.

Speaker 2 (38:17):
Yeah, and Derek, I'll say it another way too and just
be even more direct.
And I've been through this.
You just need to go on.
I would start here and then anynews you might get this better.
I would start here and then anynews you might get, that's
better.
Don't expect it, but yeah,it'll be nice if it comes.
Everything you own, everythingyou've created, is going to be

(38:39):
marital property to begin with.
That's the assumption.
Then you're able to peel thingsout.
Maybe If it was inheritance orsomething you brought to the
marriage, it doesn't sound likeyou alluded to that at all.
So just assume the business andeverything you guys own,
retirement accounts, everythingthat's hers as well be half
yours.
Everything that's all yoursthat you have in your mindset is
going to be half hers.

(38:59):
And number two, it really doescome out two different ways.
You're going to have a spousethat's like, hey, this is cool,
I was ready for a divorce myself.
Let's do what's bestfinancially and keep the cost
down with attorneys and dowhat's best for each other and
the kids Cool, that's tends tobe the rare situation.
The other one is going to bekind of a fight and the sad part

(39:22):
is it's going to not dependwhat lawyer you choose.
It's going to depend on your,she chooses.

Speaker 3 (39:27):
Yeah.

Speaker 2 (39:28):
And if this lawyer wants to stir the pot, they will
.
I would recommend, if you'regoing to go down this path,
recognizing that right out ofthe gate and trying to ask your
spouse to cooperate as much aspossible and choose the right
type of lawyer.
What they don't realize a lotof times the spouse that chooses
the crappy fighting lawyer thatthey're paying for.

(39:50):
Half of that they are reducingthe equitable estate with every
legal fee they pay and at theend of the day, because it is
still one big pot and theselawyers will suck it dry.
So good luck.
It's really difficult.

Speaker 3 (40:05):
Yeah, the last thing I was at is you can do a
post-nuptial agreement justbecause you don't have a prenup.
There is something called apost-nuptial agreement.
If you're in a maybe you'regoing through counseling or
you're talking about thebusiness and separating things
and the end of divorce, you maywant to create a plan now with
that current spouse that youmight divorce in the future,
doing a post-nuptial agreement.

(40:26):
This is classic amongstcelebrities.
You always hear them in thenews So-and-so cheats on some
other famous so-and-so celebrity.
But they stay together.
But there's a postnuptialagreement now in place about
what happens for an impendingdivorce.

Speaker 2 (40:39):
Well, I'll choose one more question than you yourself
if you want.
So here's my last one.
This will turn it to a betternote I've got.
Randiglia is happily marriedand her and her husband had
traveled in their RV every yearfor nine to 10 months and they

(40:59):
just got an offer to sell theirhome in Louisiana.
What a blessing.
I'm truncating this longermessage a little bit.
At this time we are travelingfull-time.
My husband's job allows him towork remote.
We are loving life on thefreedoms of the open road in our
RV.
We have researched where wemight want to plant our flag and

(41:20):
establish new domicile.
She said oh, we've heard greatthings about South Dakota.
No state income tax, corporatetax, no investment tax on
earnings or capital gains tax,low sales tax.
Oh my gosh, it's amazing SouthDakota, and as RVers, we would
love to domicile there.
My question is what is the bestway to do this?

(41:41):
We have three S-Corps.
I would want to consolidatethose.
Please meet with one of our taxlawyers right away.
You're spending way too.
I don't, man.
I have 26, 20 companies,whatever.
One S-corp.
You do not need three S-corpsunless something weird is going
on.
I don't see any Main Street taxadvisors in your directory in

(42:07):
South Dakota.
Don't worry about that.
Any of you looking for a taxadvisor that speaks Mark and
Matt, get over to the MainStreet Tax Pro Network,
currently lodged atmarkjkohlercom.
We're going to be launchingmore resources for that, but it
doesn't matter if the tax pro isin South Dakota or not.
We can help anybody anywhere.
Oh, what do we do?
We like the asset protectiontoo.
We've sold our home.
La la la.

(42:27):
I'm going to try to restrictthis comment to domicile.
Many of you may want to changewhere you live.
From one of the 41 states thatimpose a state tax, there is
nine states that do not impose astate tax and a few others that
throw in some other non-tax onretirement income or investment
income, things like that.

(42:48):
South Dakota is one of thegreat states that is pretty
affordable to live in from a taxstandpoint.
The problem is you can't justsay I live there.
You can't say I got a PO box inSouth Dakota.
Now I live in South Dakota.
The laws in all the states arewhere did you live the most?
You'll say well, we're notgoing to spend time anywhere for

(43:08):
six months.
Fine, did you spend 72 dayssomewhere and everyone else was
less than 72 days?
That's your domicile.
Now you're like how are theygoing to know?
Do they have a drone over ourRV and they're tracking us?
No, but you're going to have.
It's going to be a hard time toget health insurance and
driver's licenses and passportsand the new real ID.

(43:30):
By the way, if you've tried totravel lately, you've got all of
these things that follow you.
We are in a different societynow where you can't just say I'm
a gypsy and I live nowhere buteverywhere, and so you're going
to find that just saying youlive in South Dakota without
actually buying property thereor renting some space and
spending some time in SouthDakota I've been there pheasant
hunting in some time in SouthDakota.

(43:50):
I've been there Pheasanthunting in Kimball, south Dakota
.
It's amazing.
But just for any of you outthere wanting to change your
residency for state tax purposes, you've got to actually do it.
You just can't say I'm going todo it.
This is the age old problem inCalifornia where people are like
oh, I rented a condo in Nevada,so I'm a resident of Nevada now

(44:12):
.
No, the California FranchiseTax Board will literally ping
your cell phone and just figureout that you've spent 11 months
out of the year in California.
You just have a condo overthere to try to save tax.
It's not going to fly.
So states are onto this.
Be legit.
Choose the state you want to bein.
There's eight other statesbesides South Dakota that you
might want to live in Washington, florida, Texas, tennessee, a

(44:35):
few others.
You're down in Louisiana anyway.
You're just a hop skip and ajump away from Tennessee, but
find a state where you canactually live a little bit to
substantiate where you're goingto go.

Speaker 3 (44:45):
Yeah, great, love it.
And I think you know Jeff Bezos, mark Wahlberg, a couple people
.
Bezos went from Washington toFlorida, wahlberg went from
California to Nevada and theyphysically moved.
Ok, six months in a day I'mhere.
They might.
You might have a second homesomewhere else, back where you

(45:07):
used to live because you gotfriends and family there, but
you've got to get your butt overthere and I think you got to go
over that six month in a day toestablish that over time.
Now you might be on the road atsome point later on in future
years, but I think you got toget some establishment in for
that first year where you'rebreaking free of whatever high
state tax you're coming from.

Speaker 2 (45:25):
Yeah, we teach classes in this in our Main
Street Tax Pro Network.
If any of you are a buddingaccountant and want to up your
game as a tax advisor, pleaseget to markjkohlercom right now,
where it's our platform, wherewe'll tell you about it.
But one of the classes on thisand I'll just say it quickly is
it's a two-part deal.
You have to establish residencysomewhere and you have to sever
residency somewhere, residencysomewhere, and so choosing the

(45:47):
date you sever is very importanttoo.
You're going to say I moved outof the state on this date and
you have to be able to show itlike you sold your house, you
did this, you quit your job, youchanged your driver's license,
so it's really a two-part thing.
So I like the way you said thatit's not just again saying you
did it, and that's why the sixmonths and one day of actual
physical movement is veryimportant.

Speaker 3 (46:10):
Yeah, love it.
Okay.
Last question here for me.
This is from Travis Asked somegreat questions here.
Customer of Main StreetBusiness Services.
That's our sister company wherewe do your renewals.
Your registered agent everyyear Email this in there.
But he said, is there anybenefit to putting personal
vehicles into a revocable livingtrust?
And they also do.
And then, secondly, do yourecommend a personal umbrella

(46:32):
insurance policy?
He said my attorney that set upmy revocable living trust not
us, that was your first mistake.
Travel said you know, said saidno to both because if there's
an accident, the umbrella policywould just be a target now to
go after and the car should staypersonal because if it's in the
trust they can now go after thetrust.
Florida, if it matters, okay.
I don't agree with anythingthat other attorneys said in

(46:54):
Florida.
I echo that Bless their heart,as Mark J Kohler would say Okay,
all right.

Speaker 2 (47:00):
First not that those answers.
Yeah, the answer was wrong thereasoning.

Speaker 1 (47:04):
The reasoning was about I actually agree with the
answers, but the reasoning isoff.

Speaker 3 (47:08):
Okay, first one is there any benefit to putting
personal vehicles into revocableliving trust?
Not really what typically we dowith clients.
Once we set up a trust, you'vegot to get your assets into the
trust right.
It's like your home.
We're going to deed your homeout of your name into the trust,
your LLCs or corporations.
We're going to transfer theownership of those companies
over to your trust as the owner.

(47:29):
We're going to updatebeneficiary designations Listen
to our Directed IRA podcastwhere we just went over this
last week For your insurance,for your retirement accounts,
your bank accounts.
We're going to update beneficVor the motor vehicles, whatever
it may be, in your state andtaking a death certificate and

(47:52):
being next of kin, survivingspouse, child of that person,
and they will transfer ownershipbased on you signing off on
some paperwork.
Now, the only time I wouldrecommend vehicles in a revoked
living trust is if you have,like a Rolls Royce or some very
valuable collection of carswhere you really want to make
sure that they're in the trust.

(48:12):
But even then, I don't knowthat it's necessary, because the
trust itself can say hey, andwe do this with our trust
documents.
We have an additional personalproperty document that says, hey
, anything I didn't put into thetrust I still want to follow
according to my trust's terms.
So my trustee still has sayover that Rolls-Royce if it's

(48:32):
worth 300 grand and how it'sgoing to get distributed.
And I got a minor kid now at 18, they're not going to come and
get that Rolls-Royce.
So you can still have some ofthose protections built in the
trust even though that assetisn't in there.
And the reason I would notfocus too much on the vehicle is
, again, it does not have to gothrough probate in most states.
So but your other stuff doeshave to go through probate.

Speaker 2 (48:54):
Yeah, before you answer, the next one is your
real estate yeah, before youanswer on the umbrella, I'll
just say I'm trying to find areason why I would want it in
your trust.
I wouldn't say it's going tohurt you putting it in the trust
, it's just a pain in the assyeah it, it's just a pain and
it's going to expose more ofyour assets in a car accident.
Hell.
No, a revocable living trustdoes not provide asset

(49:14):
protection.

Speaker 3 (49:15):
The revocable living trust is just the same as you.
On the title anyways, there'sno difference it doesn't hurt
you.

Speaker 2 (49:20):
It doesn't help you yeah, the one might be is if
you're single, older, somevehicles, and you want to make
it easy on this niece or nephewor someone grandchild that's
going to take care of your stuff.
If you're married again andchildren next of kin is going to
be right there, johnny, on thespot with your estate.
So just very, very rare that Iwould really want you to stress

(49:43):
about it.
Okay, umbrella policies.

Speaker 3 (49:45):
Yeah.
Do you recommend a personalumbrella policy?
My answer is typically no,because they're misunderstood
and they don't cover anythingnew.
I want to make sure everyoneunderstands what an umbrella
insurance policy is.
All an umbrella policy does isit says hey, whatever insurance
coverage you have your home,your auto policy, maybe you've
got like a landlord tenantpolicy on a rental the umbrella

(50:07):
policy comes on top of that andgives you more coverage.
It doesn't cover anything new.
Okay, I want to make sure youunderstand that.
A lot of people think anumbrella covers all these other
things that you didn't haveprotection for.
No, all an umbrella policy isis excess insurance that says
hey, if your auto policy paysout on something and let's say
you had a million dollar limitand you bought an umbrella

(50:29):
policy with two million dollars,we will cover an additional two
million.
Only if that first insurancepolicy covered it and only if
they paid out their full million, then were the umbrella policy
even come into play.
So it's barely rarely used.
A lot of people are like, yeah,but it's only a hundred dollars
a month.
Yeah, because it never coversanything.

Speaker 2 (50:49):
Yeah, I would say, do I have an umbrella policy?
Right now I'm trying to eventhink if I do somewhere, maybe
in some commercial scenarios.
But I would say this if you aregoing with a lower policy limit
auto policy type thing and thenyou can bundle it with an

(51:13):
umbrella to give you that excesscoverage and because of the
bundling I think there's somecommercials on that- yeah.
You actually could save overallwith your premium, maybe you
get a discount.

Speaker 3 (51:24):
Double check, yeah, yes, Something like that?

Speaker 2 (51:28):
Yes, something like that.
So you were able to use anumbrella policy that could
enhance a lower level typepolicy and then, by doing so,
you saved on premiums.
Maybe Some people argue well,you want an umbrella policy from
a different insurance companybecause then they come to bear,

(51:50):
and now you have two insurancecompanies fighting on your
behalf.
But again, this is the onlypeople that are usually selling
this, are the ones that areexplaining it this way, are
trying to sell you an insurancepolicy and or justify not doing
an llc or not doing qualityestate, estate and tax and asset
protection planning.
So I just I think it's moneywasted generally, and I know

(52:13):
some insurance company is goingto send me a nasty grant for
that.

Speaker 3 (52:17):
I like looking at your current policies and if you
go into a low value policy withlow coverage amounts, maybe use
an umbrella, but I don't knowwe.
I just saying we definitely seeclients use their insurance
every once in a while.
I've seen a lot of clients notget coverage on stuff.
I'm like really that wasn'tcovered.
Which is why we like LLCs,because everything's covered

(52:38):
unless you're doing fraudulentstuff, but otherwise everything
that can happen is covered.
You've got asset protection.
They're stuck at the LLC.
So the other mistake I want tomake sure people don't make is
don't buy an umbrella policyinstead of an LLC for like your
rental or your business,thinking oh, I solved the
problem.
No, you didn't.
The umbrella policy will covernothing except for the insurance
you already had in place.
In which case, why did you buythe umbrella?

(52:59):
You should have just got theLLC, because it's like an
absolute barrier.

Speaker 2 (53:03):
Yeah, I remember when I was more of an advocate of it
, when I had teenage drivers, Ihad more things going on.
You have boats, you have kidsdriving under age 18, you've got
this, you got that, and maybethere was a lack of proper
coverage in one area that didn'thave enough provided for.
The umbrella could fill it in.

(53:23):
Anyway, be careful.
You have two or three opinionson that.
Wow, what a great show today.
All right, Lots of greatquestions.

Speaker 3 (53:30):
Thanks everybody for the questions.
Get over tomainstreetbusinesspodcastcom to
submit your questions.
We're going to be revamping thewebsite, creating more of a
community feel there and vibeImproving it.
Mark and I need to update thephotos on there from like 10
years ago.
Those are terrible photos, butwe're working on it and

(53:56):
appreciate all of you submittedyour questions.
We back, of course, next weekwith another amazing main street
business podcast episode.
We'll see you then.