Escape the 1031 Trap: Create Freedom with the Deferred Sales Trust

Episode Transcript
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(00:00):
truly believe we found what's called the Netflixversion to the old blockbuster method of exit
planning. And then once you understand this, you'll never go back to the old blockbuster
1031 exchange ever again, unless you have aperfect deal lined up and then you can do that.

(00:29):
Welcome to the Generations of Wealth show. Iam your host, Derek Dombk. And you know, a
couple episodes ago, we were talking about 1031exchanges on a great way to offset or defer
capital gains. Possibly for an infinite periodof time. Well, here is another strategy and
some would even say better strategy for taxdeferral. And it's, uh, it's really awesome.

(00:53):
I'm looking forward to bringing on Brett Swartz.Before that, I really. Really, always wanna
take our time to thank you for listening tothe show, helping us grow it any way you can.
If there's ever anything I can do for you, don'thesitate to reach out, go to thegenerationsofwealth.com
to see everything we have going on, to contactus or shoot me an email directly, derrick at

(01:16):
globalgow.com. And again, thank you. So withthat, let's get started with the show. And
with no further ado, Mr. Brett Swartz, thankyou for joining us today on the Generations
of Wealth show. Welcome, welcome, welcome. Derek,pleasure to be here. Thanks for having me.
Absolutely. Would you mind giving us a littlebackground on who you are, where you come

(01:39):
from, and then we're going to talk about deferringtaxes. Yes, absolutely. Thank you so much.
So I grew up in originally from tax-a-fornia in the, in the heyday of when business was
really great and awesome to be able to do therewith real estate. and helping people develop
and build houses with my parents. And so I fellin love with real estate at a very young age.

(02:01):
And then fast forward, had a chance to go andpractice multifamily brokerage at a place called
Marcus and Milla Chap. And that's where I gotintroduced to underwriting and negotiation
and 1031 exchanges and capital gains tax referral.And basically just building wealth with not
just with the brute force of development, butwith the mind and structuring and finance and

(02:23):
all those things. And so I fell in love withthat another level within the 2008 crash, like
a lot of people happened during that time, thingsreally changed and also you have a chance to
learn a lot. So I had a chance to learn a lotduring that time period and really just see
the pain of friends, family and clients losinghalf or all of their wealth, mainly due to
the 1031 exchange and having to overpay, feelinglike they had to overpay and making poor decisions

(02:47):
because time was not on their side. And duringthis time as well, wife and I are newly married
and our first baby daughter on the way. Andso you do whatever entrepreneur real estate
wannabe does. You can get a side hustle. Myside hustle is cheesecake factory nights and
weekends. And by day I negotiate with banksand help my clients hold onto their properties
and renegotiate their tax assessments. Fastforward, I learned about a strategy that basically

(03:13):
could have avoided and prevent it all of thepain from all of these large, large multimillion
dollar exits from my clients. And it would haveeliminated the need for the 1031 exchange.
And it would have eliminated the anger, thefrustration, the, all of the things that we
as investors in real estate love to have onour side for the seller, right? We're gonna

(03:38):
have a buyer in a, in a position where theyneed to buy something. That means we get a
higher price, right? We always want to tryand make a fair and equitable deal, but Unfortunately,
1031 exchange puts people on these, these binds.so instead of being forced into these 1031
exchanges, we learned that you can use somethingthat we're going to teach you today that gives
people freedom and flexibility to unlock trulypassive income, to get time on their side,

(04:01):
to be able to diversify, but also to go backinto real estate when the market makes sense.
Because the reality is in 2008, it took aboutthree years for the bottom of the market to
actually shift in real estate. And during thattime period, we, needed a chance get out of
debt, have liquidity, have diversification. We truly believe we found what's called the
Netflix version to the old blockbuster methodof exit planning. And then once you understand

(04:26):
this, you'll never go back to the old blockbuster1031 exchange ever again, unless you have
a perfect deal lined up and then you can dothat. But otherwise our strategy works for
Bitcoin, business sales, real estate of anykind. And we can defer this tax and then invest
back into real estate or any other investmentat any time. All tax deferred. And that's
really the beauty of what we've been able tounlock with our strategy. Well, that's awesome.

(04:51):
Uh, there's a lot of different things in therethat are already getting my head spinning.
Um, a couple of episodes ago, I intervieweda man named Dave Foster and he's a 10 31 exchange
expert. And, and that was part of our show.Like, yes, that tool is fantastic. However,
the dates and deadlines and timelines have toline up. And I lived through that downturn

(05:15):
of Oh seven, oh eight and got my ass kickedas many of my listeners know. But I, as I was
losing everything, I was also watching otherpeople making those, those decisions, as you
just described, right? We, we need to exchangeinto something and they, they choose something
that they really didn't want. Um, and ultimatelya lot of them lost anyways, or they had to

(05:38):
pay the tax. Right. So, so love your background,love the opportunity to, to hear more about
the tax deferral stuff. Um, Want to clarify,you got started right before the crash, is
that right? Yeah, 2006. These are going greatfor a little while. then basically, know, you

(05:58):
know, end of a seven ish to know eight, allof it. Everything fell apart, so I went from
making a little bit of money. like nothing overnight.I always start there because people are listening
and they might be trying to get going or theybe going through a tough time. And that's how
you know 99 % of the entrepreneurs that I knowand real estate investors that I know how to
go through a season of drought and doubt. Andyou know, really called the honey badger season

(06:21):
where you're you're cutting all expenses andyou're just trying to keep keep thing. Keep
the lights on right? And that's where I wasat one point I had to borrow $5000 from my
dad just to keep know, the bills being paidand all them credit cards were maxed and our
baby were living my brother in a small condo.And that was those days, right? And that was
like a, that was a season of multiple yearsof trying to crawl on. and learn and grow

(06:47):
and but also financially flat on our back. Um,you know, now we have five kids and I guess
that's kind of the rest of the story. My wife'sbeen home full time with their kids the entire
time. I worked multiple side hustles and careersalong the way here. But now all we do is focus
on helping purpose driven entrepreneurs andinvestors build capital gains tax exit plans
to multiply freedom and impact, but also tonot have to go through all of the pain and

(07:11):
challenges when it comes to the 10 31 exchange.And by the way, I love Dave Foster. I had a
on my show as well. And I love the 1031 exchange when it serves the investor or the entrepreneur
to multiply their freedom and impact. Butwhen it doesn't, if it can become a curse,
right, it can become a detriment. And we'reseeing that happen right now with people who

(07:32):
overpaid two years ago and interest rates arenow adjusting and they 1031 exchange and
they doubled down on their profits and theydeferred their gains. But now their interest
rates are resetting and now they're losing theirproperties. So it's happening all over again.
And so we know the 1031 exchange is broken,but there's 5,000 QI companies out there banging

(07:53):
the drum of the 1031 exchange. And it's justthe old blockbuster method. Right. so, you
know, Blockbuster can still work if you wantto drive to the store and rent the movie and
return it in three days. But maybe you wantNetflix. Maybe you don't want to have to return
in three days. Maybe you don't want to haveto invest right away. Maybe you want to go
into Bitcoin at forty thousand a coin and thenit goes to a hundred thousand a coin. All tax
deferred after you sold a thirteen milliondollar car wash in San Diego right before

(08:16):
the interest rates jumped like one of my clientsdid. And also invest into hotels as the value
has dropped drastically and the dollar costaverage and put into the S &P 500 and the
Nvidia stock and iBit. and you basically workthis wealth knowledge that you have, you put
it into debt, we put into a lot of debt stuffalong the way, and we waited for the market
to shift, and now we're buying back at a discountat 20, 30 % less than what the peaks were.

(08:41):
All tax deferred, right? And that's the wholepoint. Like once you get this concept and you
understand what truly passive income can dofor you, you don't go back to the old blockbuster.
I was just kind of giggling because I'm picturinghow many people are listening to this show
right now that don't even know what blockbustervideo was. And, uh, and you're right. You're

(09:03):
a hundred percent right. Um, so how does itactually work? That's the key. Yeah, I actually
just pick a real real life deal story. Justtalking about the San Diego one. I'll say about
another deal story. It was a client of mine,Warren Catherine, and they were selling a $2.5
million apartment complex in Sacramento, California,and they had a massive gain. In fact, they
had done 1031 exchanges and they had sold aManhattan Beach duplex and had moved it up

(09:28):
into another 15 units. And this property actuallywas going pretty good. I mean, good tenants
in a great location, fully occupied. They hadproperty management in place, but the big thing
for them, Derek, was that they still had tenants,toilets, and trash. They still had those three
T's, right? And they also had these two otherT's. Now these two other T's were their twin

(09:49):
daughters. And what they were finding, theywere trading their two T's, their twin daughters,
for these three T's because their time was beingpooled in the direction of this real estate
that's worth $2.5 million, that's producingabout $120,000 NOI. Right? The gain itself

(10:10):
is massive, massive. think their basis was around,you know, three or 400,000. So in tax of four,
you're looking at, 2.5 million minus about 400,000.You do the math there. Let's just call it about
maybe about a million or so in tax. Right? Andso it's this massive capital gains tax bill.
And yet they're saying, I don't want to trade15 units, 15, you know, you time-consuming

(10:33):
units for 30 time-consuming units. And that'sthe whole concept that's broken with the 1031.
I'll just keep selling high and maybe hopefullybuying a good deal, but just keep rolling
it all over and over over again. And you todo equal or greater value, equal greater debt,
just keep doubling the units. And the wholeidea makes sense until it does. And you see
their kids are 10 years old, they're twin daughters,and they had them a little bit later in life.

(10:56):
And they're looking at this eight-year timeframe. And Warren is driving multiple hours, multiple
weeks, per month, you know, back and forth.And he's like, I'm not what am I doing? He's
like, we can retire. We can have but our incomeis 120,000 here. And so we built a exit plan
that allowed them to not only sell that assetto for all the capital gains tax, but we increase

(11:17):
their their cash flow from 120,000 to 190,000.But the biggest thing we did is we increase
their time. with their daughters, right? Andso we got them unstuck. And so that's the first
thing I want to teach everyone today is thatnumber one, you got to get really clear on
what you want. And number two, not just whatyou want, but what matters the most to you

(11:38):
about what you want. And see for Warren andKatherine, once they understood that what mattered
the most to them was their two twin daughtersand spending a maximum amount of time with
them and getting Warren unstuck, was in theway? It was the property, even though it was
a good property. And so the concept here isdon't trade what's profitable for what's priceless,

(12:00):
right? Another way to think about it is don'tlet the profitable replace the priceless. What
was priceless? Their time with our twin daughters.What was profitable? The real estate, but guess
what was even more profitable and exit planthat lets them diversify their wealth, pay
off their debt and actually increase their cashflow.And so we increased their cashflow to about
$190,000 per year. Right. We got them out ofa little bit of debt, right? We deferred all

(12:24):
of their capital gains tax, but we maximizetheir time with their daughters. so Warren
actually shares his story and Catherine on mypodcast. and on my YouTube channel and they
go through this whole concept and just likeit's so nice to be on this other side. We
didn't realize how much time and energy thatthe property really took up from us even though
we had good property management and good tenantsand it was very you know we actually enjoyed

(12:47):
you know providing a service for housing butthey go look it just it was our time to harvest
and so that's the big thing don't don't letthe profit will replace the priceless. Well
it's interesting that you talk about that storybecause The generations of wealth, our mantra
is live your vision, love your life, which is the vision for your life, spending time
with your loved ones and how important thatis versus going and making another dollar.

(13:14):
Right. So I love that part of it. Um, I mayhave missed something as I was, you know, kind
of listening to that story. How did you, thestep by step of actually deferring the tax
and putting them into these alternative investments?

(13:38):
Are you the intermediary that's holding allthe funding? Let's talk about how this works,
okay? How do we do this, right? Give me thestep by step. Step number one, we build a trust
and we combine it with an installment sale usingIRC 453. Okay, so you sit down with myself
and the tax attorney and my business partnerand CPA and we build this trust. It's kind

(14:01):
of like a qualified intermediary. It's kindof like an IRA. It's kind of like a 401k. It's
kind of like these things that we know about,but it's a different tax code and it's combining
a trust. Now it's a business trust. It's differentthan an irrevocable trust or a revocable trust.
Okay. There's a third party unrelated trustee.That's our role. We're a trustee company, right?

(14:22):
And so we build this trust and let's take Warrenand Catherine's example. It's a brand new trust.
It only does business with Warren and Catherine.And what happens is they sold their asset.
to the trust in exchange for the promissorynote, which is step number two. You sell it
to the trust, the trust issues you a promissorynote. And now simultaneously, the trust sells

(14:43):
it to the buyer. So we found a buyer, we linedit up, we negotiated the price, got it all
that, and we put option language inside of thecontract, which basically allowed this three-party
transaction. So watch this, Derek. If Warrenand Catherine sold it to the trust for 2.5
million, and the trust bought it for 2.5 million,how much gain does the trust have? Well, my

(15:06):
mathematician head says zero. Zero, you gotit. Now, if the trust itself then pays them
back over time in installments, do you see howthis is just an installment sale with the trust?
Yeah. We set the interest rate typically seven,eight, nine, 10 % kind of that range, okay?
And basically that's all we're doing. We'redoing a hundred percent seller financed deal,

(15:30):
but to the trust, not to the buyer. And whyis that? Because the collateral can be secured
against whatever we want it to be. And so thefunds hit Charles Schwab. The buyer buys it
from the trust, they're gone. They get titlefree and clear. They get everything they bargained
for, so they're out of the picture. And what'sleft is a promissory note. After closing costs,
I think it was around like 2.35 or so, and theinterest rate, I don't know, it was maybe eight

(15:55):
or nine or 10%. And so now they're getting paidback over time slowly, and then they're paying
tax slowly. And so that's it. It's as simpleas that. Now here's the key on all this. 28-year
track record, thousands and thousands and thousandsof transactions, billions and billions and
billions of assets over the years. And here'sthe key over 30 no change audits, state, federal

(16:16):
and promoter audits, all of it. No change, nofindings. But here's the other reality of
this. OK, even though it's 100 percent legalworks every single time, guess who doesn't
want to know about this, Derek? Well, yeah,the general the general public should not know
about these types of things, according to thegovernment. Well, it's not so much that as
as in I would say the government allows everyoneto look at the 10,000 pages of the tax code,

(16:39):
but really it's the real estate brokers. Andby the way, I'm a real estate broker. Okay,
I have my license. We've closed over, you know,half a billion dollars of deferred sales trust,
Delaware statutory trust, 1031 exchanges, realestate transactions. Okay, they don't want
you to know about it. Two reasons. Number one,either They don't know about it. Or if they
do, they want to keep you in the 1031 exchange.Because guess what happens when the capital

(17:00):
moves away from the 1031 world, even the 1031exchange accommodators, especially mostly don't
want you to know about it. It gets it out oftheir world and it moves it over to the other
world. And what's the other world? Well, theother world is whatever they want it to be.
It can be a business venture. They might wantto start a lending business. They might want
to do a fix and flip business like what youdo. They might want to develop apartment complexes.
They might want to put it into the S &P 500.They might want to buy some insurance. They

(17:23):
might want to put it into some Bitcoin. In otherwords, they might want to diversify and get
a well-balanced based upon their risk toleranceand their liquidity needs versus the 1031 exchange,
which keeps them 100 % in real estate, not diversified,not liquid. And if they had debt, they have
to replace that debt. And again, back to theother piece, why do people get in trouble with

(17:44):
the 1031 exchange? Number one, they overpayfor a property. Number two, they go into too
much debt. Number three, they typically do ina short timeframe, which doesn't give the real
estate market time to go to the bottom ortime to adjust, right? And so with this strategy,
we can sell, diversify, we can dollar costaverage, we can buy into different assets at

(18:05):
different times. And this is it. This is it.And so the other concept I wanna leave with
you here is that truly passive income is toyour freedom and impact. as compounding interest
to your money. So once we solve the financial,the capital gains tax, we use tax flow and
cash flow engineering to make this make sense. It unlocks a whole nother part of the world,

(18:28):
right? Where people can focus on their familymission, vision and values. They can spend
time with their family like you talked about.They can spend time on doing things that give
them joy and impact and fulfillment, right?They're no longer chasing this financial freedom
number, which Robert Kiyosaki so wisely taughtus so many years ago, but they're really looking
at a truly passive income number, which meansmy money truly works for my money. And I don't

(18:53):
have to do anything for any time or energy toswap it for money. Right. And that's the beauty
of what we've been able to create here. Andit transforms lives. It transforms entrepreneurs
lives, investors lives. most 1031 exchange commentersdon't know about it or don't want to know about

(19:13):
it. And your brokers don't want you to knowabout it because they want to keep you in the
1031. So you got to aware of that as you'relooking at this, you got to have a mindset
that says, I want what's most important tome and my family. And if what I'm saying resonates
with you, then you've got to look at our strategy.No, I love it. I have heard of this in the
past. But the reason that that I think it'sso important right now, especially as we're

(19:39):
in a changing market. And there's been a lotof people that built up quote unquote wealth,
you know, paper wealth. Over the last five years,whether they knew it or not, they bought assets.
They went up a lot. And you're right. Todayis not the same as 2007 and eight, but they're

(20:00):
in pockets. There are definitely areas thatare going down rather quickly. And I know parts
of Florida are seeing it. Parts of, you know,California and Arizona and the upper Northwest.
Um, we don't see it as much in the Midwestwhere I am, but You're right. People are going
to start making bad, bad decisions again, andtrying to do regular exchanges into properties

(20:27):
or deals that are not deals. But here's my question.
The trust itself is making payments to theseller over time. And I'm assuming that there
is all kinds of different scenarios. It's caseby case, but can the seller get all of their

(20:54):
money early if they want to, if something intheir life changes, right? They've got a $2
million gain taking that in installments thefirst Half of the question is, what's a typical
scenario? How many years do they take thoseinstallments? Or maybe there is no such thing
as typical. And the number two part of thatis if they all of a sudden have a need for

(21:18):
that chunk of money, can they get it? the answeris absolutely right. The note can be adjusted
and amended to adjust the payments, either themonthly payment, the quarterly payment, or
even lump sum payments. I'll give you a coupleof examples of this. First of all, let me also
qualify who qualifies for this, right? You needto have a million dollar net proceeds and a

(21:39):
million dollar gain, okay? This is where wesee that it makes sense, but it can be any
asset of any kind, business, Bitcoin, real estate,primary home, right? Stock, public or private
stock, any asset of any kind. It could be ahelicopter you're selling, it could be a plane,
okay? But it needs to have a million dollarnet proceeds, a million dollar gain to qualify.

(22:01):
Not that you can't use the strategy for somethingsmaller. It's just we found that the numbers
don't make sense and really don't really makea lot of sense unless you have a million dollar
net, proceed to million dollar gain. A littlecaveat after that, if you have like two assets
that you're selling in a short period of time,like a six month period of time, you can combine
two. So if you said, well, Brett, I got a housethat's worth 600,000 and it has a $500,000

(22:22):
gain. And then I have another one that's worth,you you know, 500,000, you know, or 600,000
has another $500,000 gain and I can combinethose two. Yeah. Then we can make sense of
that. if you only have, you know, a hundredthousand dollar gain or $50,000 gain, it doesn't
make sense with the structure. Just lettingyou know, we've done the number so many times.
All right. All right. So back to, back to this.So we had a deal we disclosed up in Massachusetts.

(22:46):
It was an automotive sale. Okay. For a couplethat built it from a hundred thousand in revenue
to multimillions in revenue. And it was thefirst tranches is about an $8 million exit.
Okay. And so we structured it with no paymentsfor the first two years. And this is really
powerful, Derek, right? And this is how we makethis an investment and not an expense. We'll
talk about fees here in a second, um, becausethey're in a high tax state, but they're also

(23:09):
young and they're still in their working career.They're entrepreneurs. And so they're staying
on with the company. And in fact, the only soldabout 66 % of the company and they kept 33
% rolling in. It's called the second bag ofthe apple, but they're staying on and they're
getting paid, right? So they're already in ahigh income tax state. They're staying on and
getting paid. And so they're del... the incomefrom the trust. So watch this. Although the

(23:30):
millions of dollars are in the trust, they'vegot a promissory note. It's accruing an interest,
but it hasn't been paid to them yet. And that'sbeautiful because in two or three years when
they, let's say, finally exit from the companythat bought them, then their income's gonna
drop. But guess what they can do? We can amendthe promissory note to start payments. And

(23:51):
so we call this tax flow engineering, right? Why would you wanna take extra income that
you don't need or want right away? That canbe in a tax deferral state. But the cool thing
is when you need the income in a couple yearsor six months or next month or whatever, we
can turn it on again. And so think of it likea water faucet that can be turned on and turned
off with mending the note and then. You cando that. Now, second thing is they have a place

(24:17):
in Florida that they're planning on moving fulltime to. So watch this. If you're in New York,
New Jersey, Florida or Massachusetts or California,all these high tax states, you can reestablish
a residency in like a Texas or a. South Dakotaor Florida or Nevada or whatever, right?
And then when you establish that residency,the income from the trust that pays you, it

(24:39):
is ordinary income tax on the interest paymentsthat you receive, it's important to understand
that. But if you're in that new state, it'sin that new state. income tax, which if they
have no income tax, there's no income tax. Sothat's, that's huge. It's really a big, big
deal right there. And then the next thing Iwould say is these guys are entrepreneurs.
They don't want to just be passive. Althoughwe have great investments where people are

(24:59):
making double digit returns, past performance,don't guarantee your future results. They
can also partner with the trust and do theirown deals. And so a lot of times these strategies
are very passive, meaning they think they haveto just give up all of the controls and all
of the investment decisions to all these thirdparties. And there are some controls we have
to talk about here that you to give up. Butthe thing is you can joint venture partner

(25:23):
with the trust and do your own transactions.We had a client who sold a $3 million business
in Alabama and he built over 20 units, apartmentunits in Tennessee, all tax-referred. And
the trust was that silent partner putting upthe capital. this is the beauty of this. Like
you're not stuck to be retired, but you canalso be an entrepreneur. And that's basically

(25:43):
the flexibility of how it works. I love thatbecause just knowing myself, I would, I would
have a hard time giving up all the controls.Like you said, we do have to talk about the
controls, but you know, you want to maybe gointo a different venture in your life. That's
not a hundred percent passive or how many peopledo you and I both know that, that retired and

(26:07):
a year later, they're just bored out of theirmind. Yeah. And now they've got all the time
in the world and opportunities just come tothem. They want to be able to jump back in,
but let's talk about the controls. Yeah. SoI'm with the controls. so, Number one, there's
a third party unrelated trustee. I mentionedthat before and that's our company here at
Capital Gains Tax Solutions. And so we're kindof like a qualified intermediary. We're kind

(26:29):
of like an IRA or 401k custodian, you know,such, right? And so our role is to work with
you, right? And make sure we stay within theguardrails of what the tax attorney has laid
out. By the way, the tax stream provides lifetimeaudit defense real fast. They charge about
1.5 % of the gross sales price on the one-timefee and one point on the first million. 1.25

(26:50):
on anything above that. That's a conditional.And so that's what they get paid. We get paid
as a trustee about 1.5 to 2 % on a recurringbasis on the net proceeds in the trust. But
we typically cashflow our fees, meaning thefirst 60 or so days, we're not receiving any
payment for the trustee part of it until we'vecashflowed and made that money. yeah, so the

(27:12):
trustee, that's our role. We basically arethe ones that need to approve. of investments
along with you, right? So you are the note holder,Derek, right? You are the creditor. This was
your deal. And so Derek, an example would say,Hey, I've got this fixed inflow opportunity.
Hey, Mr. Trustee, Mr. Capital Gains Tax Solutions.What do you think? I'm gonna say, great, Derek,

(27:33):
what do you have going here? This is the deal.This is the, what we're gonna pay for. Basically,
this is the mini business plan, right? Derek,think that looks pretty good to me. That fits
your risk tolerance of what you said you'rewilling to do. And this is kind of what we've
talked about in our business or investment thesis. We basically set this up prior to closing
what and how the funds, where and how the fundsare going to be invested. But if new opportunities

(27:54):
come up, it's a presenting. So it's not a demandinvestment. It's a present. And here's the
reality. What are the odds I'm going to sayno to Derek, especially on a fix and flip that
he knows how to do? That's the best thing Iwant him to do. He's going to make, he's going
no one's going to care more and be more, morefocused on it than Derek, right? Now we have
to keep some liquidity. We like to say about20%. We like to keep liquid. So if it's a $10
million exit, Derek, you know, about 2 million,a good rule of thumb, and that can be in like

(28:18):
a 30 day lending fund liquidity. We have oneof those that's paying 10%. Right. It could
be the S &P 500. It could be in a money marketaccount, right? It could be, it could be even
in like a Bitcoin ETF or something, right? Somethingthat you want to be in that you feel good about.
can, we can do that. A good rule of thumb isthat eight million can go with you into 80
% can go into another, another opportunity that'silliquid. going to take some time. So that's,

(28:41):
I'm a friendly trustee. want to do deals, butthere needs to be a separation between what's
called unilateral control, which by definitionis ownership. versus a creditor, right? Which
still has rights and protections as a bank,right? Just like if you have a home loan
and if you don't get fire insurance, guess what?The bank's gonna come and take the house because
you're putting it at risk, right? They're puttingat risk. So that is the concept here. Yeah.

(29:07):
So my clients, my clients, once they understandthat, I'm an advocate to help them find and
do deals, not someone to stop deals, right?But we have to stay within the guardrails.
Those are, those are the confines. Um, doesthat make sense on the controls? Any questions
there? No, that makes perfect sense. Um, what,what would happen? Um, and I don't know the

(29:27):
size of your operation or how many people thereare, but at some point, cause there's not a
lot of, of companies doing what you do. It'snot, which is great. Like that's a, that's
a really good thing for you. But what happensif something happens to you or your firm,
right? It's not like we just start Googling the next, um, trustee that knows what the

(29:53):
hell they're doing with us. Yeah, so a couplethings. are a couple competitors out there.
then also the tax attorneys would have a trusteein line. And I have a succession plan if something
happens to me, my brother, our COO, would bethe next in line if something happens. It's
a hit by the bus scenario, we both die in theplane crash, right? There's always going to
be a trustee to be in line. Also, outside ofthat, these are single entity trusts. They're

(30:19):
never co-mingled. Like, by the way, and it'sin 31 exchange, typically all the money's in
one big pot. of all the other people, right?And there's been lots of disasters with that.
scenario, we were never co-mingled in anyother trust account. So the safety of the deals
is really important. And we were talking a littlebit earlier about each separate trust. So how

(30:41):
does that work to make sure that, you know,money is never co-mingled? Yeah, money's never
commingled. Again, like a 1031 exchange, it'stypically all the funds are in one big exchange
accommodator. And there's been horror storiesabout that. with these individual trusts, they
never commingled funds are typically trial swab,and then invested in real estate investments

(31:03):
or business ventures, or even again, the jointventure partner with the note holder to do
a transaction or buy a deal or something likethat. And so it's diversified. You have 24
seven access to view the funds online. withyour signature or your approval. So that's
important to understand on those controls. Wealso have a third party tax preparer that does
the tax return for these are like C-corp returnsfor these trusts, full profit and loss, and

(31:29):
that gives extra transparency and accountability.And oftentimes we're also using financial advisors
for those that want to have a financial advisor.We have those that are strategic alliances,
some of the best in the country that can managethe capital or you might wanna bring in your
own and we can talk to them about that. there'sa lot of, guess, separate parties that provide

(31:50):
accountability and transparency. And I getin there like third party custodians like Charles
Schwab, the biggest in the world, right, andwhat they do. So that gives people a lot of
peace of mind when it comes to controls andtransparency and accountability. Well, as I
said, I had heard about this before. I neverexplored it heavily, but I some other friends

(32:11):
that have dabbled in it a little bit. I loveanything that is, um, not mainstream, but a
great tool. mean, just a fantastic tool. Andthe part that I really like about this the
most is you're not under duress with timelines.You can take as much time as you want. Correct

(32:32):
me if I'm wrong, but you can take as much timeas it needs to plan this out to where when
you pull the trigger, you've got all your alternativeinvestment, at least strategies or ideas in
mind. And that's key. I really think that'sthe key. That's key. mean, yeah, time horizon
is the single most important foundation toinvestment, right? Not only your time horizon

(32:57):
that you need in order to have a good returnon your money, right? How much time you take,
also... the time it takes to find and makegreat decisions like dollar cost averaging,
or just buying when real estate goes down.We knew a couple of years ago that we're probably
at the peak. Most people saw that. Now, mostdidn't predict interest rates would go where
they're at. But at the same time, if you sold,and what we did is we helped people get out,

(33:21):
and then we went into debt investments whereit was great, because debt is way up. Debt
interest rates are way up right now. We're makingsome great deals with people that need access
to capital, and so the trust can lend. we'regetting double digit returns, some as high
as 16%. It's pretty phenomenal, right? Versusa lot of these ROEs and that's another thing

(33:42):
you could, what can you do to feel like if thiscould be a good, or seed field understand
that this is a good fit for you. We'll do aROE analysis. What's your return on equity,
right? What's the value of the asset that youcould sell today minus the closing cost, right?
What's the current cash on cash return, know,of any. debt payments, right? And put a little

(34:03):
amortization into there of what it might appreciateto over the next year or so. But a lot of things
are maxed out. A lot of rents are kind of flat, right? And so it's a good time to. harvest
those gains, but don't overpay in a 1031. Ratheruse our strategy or consider it. And then let's
go into debt deals that are paying 10, 12, 15,16%. And let's get great cashflow coming in

(34:26):
because most of our clients, part of the babyboomers, they're part of the 84 to 100 trillion
that's transferring over the next 15 years.And there's about 80 baby boomers in the US
alone. And every single day, 10,000 are turning65. A lot of them just really want cash flow.
In fact, they feel you know, on paper and realestate and business, you know, rich, but they
feel cashflow light, right? And they're going,man, like all of this, like, do I just not

(34:52):
harvest this and have, you know, and not redeployit to get cashflow? And that's what, boom,
when you unlock that truly passive income number,where there's no more time, it's no more toilets,
no more trash, no more tenants, no more, youteam members that have to, you have to manage,
you can truly harvest and then exchange itfor increased cashflow. Oh gosh, it's a game

(35:12):
changer. And also leave you guys with this oneas well. Estate tax is something not to be
taken for granted. That debt tax or estate taxis above and beyond the stepped up basis. It's
above and beyond, you know, basically if you're,you know, 12, 14 million married or single,
and then about, you know, 20, 26, 28 married,although those are set to cut in half and at

(35:34):
the end of 2026. I'm gonna be aware of that. We can also eliminate that death tax with
our strategy. So this is for huge, huge exits and without any life insurance gifting or
insurance required, but for what? So thatyou can pass on a family mission, vision, values,

(35:54):
legacy, and you can be great stewards withthe wealth, right? And that's kind of really
the concept here. It's like, you've been a greatsteward and a great worker to build it, an
investor and disciplined, well, spend sometime planning, being intentional about what
life looks like over the next one, three, five,10 years with your wealth. And then let's
develop a plan that is going to unlock freedomand impact for you and your family. And that's

(36:19):
why we love it. We see the transformation forour clients and it's just very rewarding
to see the difference, night and day differencefor folks. Yeah, I've got so many other things
that are already going through my head and justdifferent opportunities. I say it on a lot
of my shows. I love doing this, this podcastbecause I get to have conversations with people

(36:42):
like you and I get my answers to my own questionsand everybody else gets to listen in. So, uh,
all of that being said, how do we get in touchwith you? How do we stay with you? I will have
a link for anybody listening to show, but, uh,I know you've got a book sitting there in front
of you on your desk and for anybody that's watchingthe video version of this. Um, yeah. Tell

(37:06):
me a little bit about that and everybody canjust go through the link, thegenerationsofwealth.com
slash gain and take it from there. Yeah, perfect.And that will take you to our website and our
website will give you access to buy the book, to download the free ebook, to... to schedule

(37:26):
a one-on-one consultation with myself or oneof my team members, here's the key, you'd
have a million dollar net proceeds, milliondollar gain, right, to qualify for the application
for the call. And this you have two assets at$500,000 that you can bind into one, that
one will make that exception here. And thenthe other thing I would say is we also have
a wealth, basically it's a truly passive incomeauditor, right, where it's gonna show these

(37:50):
like, you know, 12 or so areas. is a lot ofstuff we talked about and it gives you an
ability to rank it one to five of where you'reat with that. Like where are at with the family
mission vision values? Where are you at withyour return on equity understanding? Where
are you out there with your capital gains tax,your exit planning and your state tax? And
this is kind of like an audit. if you If youalso send an email to info at capital gains

(38:12):
tax solutions.com and just type in the wordaudit, we'll send that to you as well as another
way just to take the next step. Because I think if you don't get clear on these certain key
key metrics and these clear numbers and theseclear outcomes that you want, it's difficult
to see where I need to go from A to B. And sothat would be another step that you can take.
We have the YouTube channel, we have the podcastcapital gains tax solutions, YouTube channel

(38:34):
in the podcast. And then we have these amazing. Deal stories from our clients, testimonials
that you can hear by going to CapitalGainsTaxSolutions.comand they're going to our YouTube channel and
clicking on the success stories and you'll beable to hear them straight on. Warren and Catherine
shared their story. hear about Jeff Joaquinhas sold a $17 million business in Sacramento,

(38:56):
a billboard business and deferred his tax. Heactually went a lot of it into a Nvidia. Nvidia
has gone through the roof, right? You can hearfrom... Dave, who we saved his failed 1031
exchange, a $7.6 million multi-family propertyand deferred his tax. So you can hear all these
stories. So those are the main things. And thevery last thing I'll leave with everybody is
friends don't let friends overpay in a 1031exchange. We released the best 1031 exit plan.

(39:22):
So although I've been talking about how challengingand how sometimes poor outcomes to 1031 can
be, We don't want to restrict any of our clientsor investors from going for the 1031. In fact,
if they can find the deal, we'll give them ahigh five, but we do want to provide a backup
plan. And so we released the best 1031 exitplan, which gives you the ability to do a regular
1031 and our backup plan in case it fails orsometimes it's both. It's a mixture of one

(39:47):
and two. And so again, that's called the best1031 exit plan. All of that by going to the
website that you mentioned, Drew, Derek, I'msorry, and on your website. And then we will
have it help. Perfect. Like I said, that's thegenerations of wealth.com slash gain. We'll
have that linked over to Brett's stuff and Brett,man, I really appreciate your time and just

(40:11):
your knowledge. We've got a fairly similar amountof time in this industry. We've both seen a
lot of changes over the years. And I alwaysenjoy these conversations. So thank you very
much for, for sharing. My pleasure, Derek. Andthank you. Thank you for having me. Of course.
Of course. So until the, uh, the next episode, um, as always, please help us grow the generations

(40:35):
of wealth message. Get out there and share thiswith anybody that you feel like should, um,
should find us and hear about us. Give us allthe. All the likes and the shares and the love
on all the social medias and until the nextshow, live your vision, love your life. See
ya.

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Escape the 1031 Trap: Create Freedom with the Deferred Sales Trust